Ritholtz: Magazine covers should mean nothing to investors

Barry Ritholtz of Bloomberg View writes that the recent Barron’s cover story on Apple means nothing for investors.

Ritholtz writes, “Magazine covers are the ultimate anecdote — it is too easy to cherry pick the ones that are memorable, and even easier to forget all the rest that had no special significance. This is a topic I have been tracking for 20 years; I have yet to see a comprehensive analysis of every magazine cover ever produced. Instead, the tendency is toward a combination of selective perception and hindsight bias. This is an especially pernicious way of fooling ourselves into believing something of great weight is occurring when in fact something of quite limited significance has happened.

“This is important. Why? Because separating reality from silliness is the key to making better-informed and more intelligent investment decisions. No less an authority than Bridgewater Associates chief Ray Dalio advocates that all investors become ‘hyperrealists’; risking capital based on a fundamentally false understanding of reality is dangerous and expensive.

“Which leads us to the general confusion that big splashy magazine covers create for wannabe contrarians.”

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