The Role of Financial Blogs – Part 2

Financial blogs are expanding in significance.  The number is increasing and so is the readership.  This is a trend that is early in its development, so there is fluidity in the definition of the group and the role of blogs versus mainstream media.

At "A Dash" we are writing a book, one page at a time.  The audience for the book will be the individual investor, most of whom have not yet returned to the stock market.  As they do, they will naturally consider various financial websites, including the most popular blogs.

How will these new readers navigate this crowded and growing space?  We hope to develop a readers’ guide to various sites, describing what to expect from each.

In our first article on this subject we examined what we called an "outside" perspective.  This viewpoint seemed rather unusual, confusing the "pseudo blogs" of mainstream sites with the creative efforts of independent writers.  It also attributed higher standards to material written by journalists, even when they lacked specific expertise and were writing multiple daily updates.

A Good Discussion

There were a number of perceptive comments to the original article, emphasizing several major themes.  We wish to highlight three specific responses.

The Blogging Meritocracy.  At the Daily Options Report Adam Warner points out that writing as a journalist does not provide any assurance of additional insight, and maybe not greater accuracy.  He writes, in part, as follows:

This whole "journalists are great and truthful and credible" and
bloggers are "dangerous" is really just generalized blather. A better
approach is to look at both as a meritocracy. Some journalists do great
work and are always worth a read or a listen. Some are not. Same with
bloggers. They need to earn your trust. But if they have passed that
hurdle, there’s no particular reason a blogger is less qualified than
some certified mainstream reporter.

This is an excellent point.  We read Adam’s work precisely because we cannot find anything like it in the MSM.  Regular journalists either lack his experience, especially with options, or are unwilling to engage crucial issues in a specific (and entertaining) fashion.  It is no coincidence that this involves a fair-minded analysis of the actual arguments and recommendations of others.  Readers should check out the entire article.

The Journalism CredentialCommenter Zach, responding to our original article, brings a unique perspective — that of a journalist who is sophisticated in evaluating the current crop of blogs.  Zach points out that journalists have biases, as do bloggers.  He makes good distinctions between regular articles and similar entries disguised as blogs.  Importantly, he points out that when journalists work faster, fact-checking is not as careful.  Like Adam Warner,  Zach is willing to name names, discussing the specific work of Jim Jubak as an example.  Like us, Zach enjoys reading Jubak’s work, but he points out some risks for individual investors.  (We hope that Zach will send us an email.  Perhaps he will further elaborate some of these themes, although the original comment does a very nice job.)

The Individual Responsibility.  The Learning Curve, places responsibility on the reader to understand the source and to read critically.  Muckdog always cuts to the chase, highlighting key issues in a sensible and readily understood fashion.  He writes as follows:

My thoughts on financial blogs?  Info-tainment.  I believe everyone has
to find their own way through the financial maze.  I don’t think anyone
is going to get rich following hot stock tips from a blog.  I tend to
read blogs that are more general and high-level.  How I apply (or don’t
apply) those concepts or thoughts depends on my interpretation and
style.  And if the blog throws in some humor and wit, it quickly
becomes a favorite.


All three of our example commenters place responsibility on the reader.  We agree, especially with the comments warning against looking for "hot tips."  But there is a problem.

It is fine to admonish readers to "do their homework", but is this advice really practical?  Most readers lack the time and skills to do their own fact checking.  They lack the methodological training to evaluate research studies and economic analysis.  They are easily swayed by the optical illusion of deceptively crafted charts and analogies to some carefully selected past time period.

Collectively, the financial blogging community should help in this process.  Authors should make clear their credentials, even if remaining anonymous.  They should assist readers in determining how their expertise relates to the subject at hand.

It should also be the role of some financial blogs to help the reader with the task of critical thinking and analysis.  This means that bloggers must be willing to engage one another in an honorable fashion.  It is easier for a thoughtful reader to spot potential biases in the open light of fair debate than if left completely to his own devices.

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  • The Financial Philosopher September 11, 2007  

    I believe Herbert Simon sums up the effects of the proliferation of blogs best(although he said it over 30 years ago):
    “… in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.”
    My solution is for information consumers “allocate” their attention by constructing a “blog portfolio” in the same manner as allocating their investment assets. Feel free to take a look at the following link…

  • Tim September 11, 2007  

    Dang, Jeff, I was hoping for a mention. Just kidding! Great post. I find too much of mainstream and blog information focused on the same information. I have narrowed my daily reading down to a few: this blog, Adam as mentioned, Jeff Matthews, T at Investing from the Right, Random Roger, Rich Karlgaard. These tend to be big picture guys with interesting perspectives. My research tends to be nuts and bolts of quarterly reports in lesser known companies. I hope I can bring some of that across on my blog. I do follow links from the blog above looking for a new nugget of information one of them may have highlighted that will help me. Thanks again.

  • Jeff Miller September 11, 2007  

    Financial Philosopher —
    I am delighted to see a citation to Herbert Simon, little studied or understood by market participants. Everyone would benefit by viewing actions of government as the result of organizational behavior, as well as the insight you quote.
    I strongly agree with your approach to reading blogs and urge readers to follow your links. I am not persuaded by your conclusions, but readers can follow your method and find their own choices.
    One of our missions is to guide readers to the best sites, so I will be citing your post as I develop this theme.
    Meanwhile, we might pursue the nuances via email or a conversation.
    Thanks for your helpful comment and link.

  • Jeff Miller September 11, 2007  

    Thanks for describing your approach. I am delighted that you find this work valuable.
    I hope that readers will be checking out your analysis regularly, as I am doing!

  • David J Phillips September 12, 2007  

    You ended your posting with the following comment: “It is easier for a thoughtful reader to spot potential biases in the open light of fair debate than if left completely to his own devices.”
    This sentiment–in of itself–sheds light on an additional benefit that some bloggers can offer to readers: Those of us with the “the methodological training to evaluate research studies and economic analysis” can offer third-party analysis of equities (or other markets) w/o the inherent biases often seen coming from ‘professional’ analysts working on Wall Street–pitching BUY recommendations on stocks that their firms have investment banking relationships with–or are looking to develop monied-relations with!
    Some of us [qualified] to blog on the aforementioned subject post because of our love of the market and/or passion for the writing craft — and not for the $$$$$$$$$.
    David J Phillips, Publisher

  • RB September 15, 2007  

    Today, while I was re-installing software on my computer, I noticed the Encyclopedia Britannica CD that I bought a few years ago. While growing up, the many volumes of the Britannica in a bookshelf were a status symbol in many households. I did not bother re-installing because I always go to wikipedia or google these days. I’ll still keep my Britannica CD handy though.