Is this the best-kept secret in finance?

Historians, in their quest to make sense of the past, refer to two types of source material. Primary sources are those artefacts, diaries or documents created more or less at the same time as the events they depict. Secondary sources, as their name implies, are somewhat second-hand; they refer to books or articles written subsequently, including those written by journalists after the fact. For historians, primary sources attract a degree of kudos and authenticity. Secondary sources, not so much. Primary sources are closer to the pure experience; secondary sources are tainted by at least some degree of reflection and inevitable bias.

The financial markets offer only one real source of objective, non-negotiable news, for want of a better word. The primary – and for that matter the only – source of ‘truth’ in financial markets is the price itself, the price of a security as agreed between a buying and a selling party in voluntary exchange. Everything else is, if you’ll pardon the inadvertent pun, speculation.


At a time when the source and veracity of news itself is subject to heated debate, not least online, the limitations of, and the notorious blind alleys created by, the financial media have long been a topic of discussion for engaged investors. Thomas Schuster of the Institute for Communication and Media Studies at Leipzig University has written probably the most damning indictment of the failings of financial media:

“The media select, they interpret, they emotionalize and they create facts. The media not only reduce reality by lowering information density. They focus reality by accumulating information where “actually” none exists. A typical stock market report looks like this: Stock X increased because… Index Y crashed due to… Prices Z continue to rise after… Most of these explanations are post-hoc rationalizations. An artificial logic is created, based on a simplistic understanding of the markets, which implies that there are simple explanations for most price movements; that price movements follow rules which then lead to systematic patterns; and of course that the news disseminated by the media decisively contribute to the emergence of price movements.”

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