Is 95% of what you read in the financial press “either wrong or irrelevant?”

Question

From a Cato Institute article by Steve Hanke¹ (emphasis added):

Most press reports about Zimbabwe’s fantastic hyperinflation are off the mark – way off the mark. Even our most trusted news sources fail to get the facts right. This confirms the “95 Percent Rule”: 95 percent of what you read in the financial press is either wrong or irrelevant.

Is the 95 percent rule accurate? In other words, is "95 percent of what you read in the financial press is either wrong or irrelevant?"

Note: Steve Hanke certainly seems to believe that inflation for some countries is higher than actually reported (e.g. the Zimbabwe article I cited, this tweet regarding Sudan from 9 hours ago, and this tweet regarding Argentina from 11 hours ago). This may or may not influence his opinions about the financial press. This question has nothing to do with whether inflation (or hyperinflation) is incorrectly reported.

¹Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore

But this belongs on Skeptics! No, it doesn't.

Answer 1

If this is understood as "irrelevant to investment decisions", then it is plausible because publicly released news is immediately (in less than a second) incorporated into asset prices, according to the efficient market hypothesis. Thus (unless you are one of the big guns of Wall Street trading at light speed) by the time you read that a country or a company is doing well or poorly, it is too late for this to give you any insight on what you should buy or sell. The 5% that is relevant could be relatively timeless commentary on asset allocation, minimizing fees and taxes, etc.

Answer 2

While only the author of that statement can tell you exactly what was meant, I would relate it to a seemingly similar argument made by Nassim Nicholas Taleb in "Fooled by Randomness" that it's pointless to pay attention to the daily (or hourly) updates on what is happening in the news or markets. His assertion is that it's mostly noise and statements from the press like "the markets moved up 1% on jobs numbers" are purely conjecture because there is no way that the daily, (hourly, minute-to-minute) news cycle has empirical knowledge of why the markets moved one way or another.

On a side note, this specific article appears to prove it's own point. Essentially it says: "the Economist is wrong, look at this table created by me, see?" Even if you assume the author's numbers are better, look at how many zeros there are in the last two figures. The precision on this is really low and when you compound imprecise numbers they get much more imprecise. In other words, the article states that the author's analysis leading to an obviously imprecise figure is 'right' and that some other body's analysis is 'wrong'. But at this level of imprecision and lack of reliable information, the meaning of 'wrong' or 'right' is a fuzzy concept. And either of rates of inflation means that the currency is in a death-spiral. The difference (as large as it is) has no practical implications. You aren't going to decide to buy Zimbabwe dollars because you used the IMF numbers.

Answer 3

My observations is that it's worse. My broker's computer feeds me news articles on financial markets, predictive indications in various industries, etc. They are 100% bad data for investment.

This bears repeating, not one of the articles supposedly selected specifically for me was of any use at all. I could have made more money taking the opposite action as would be encouraged by the financial news I received. The only reason I did not do so is I do not dabble in shorting stock.

I have a plan, and I know where I need to be in 20 years, and I'm having no trouble getting there, and my plan doesn't involving reacting to the news in the obvious ways. I look for when the market moves and the predicted benefit from the general headlines by my own analysis are in opposition to each other. Then I profit. Obviously to do this, I must understand the industries I invest in.