Recent business news has been abuzz about small investors cashing out of their mutual funds to the tune of $33.12 billion. Depending on who you listened to, this allegedly reflected either a loss in faith in the economy, dire cash needs by small investors, or a return to the 1960’s era markets where individual investors were basically non-existent. But everyone agreed this was a significant economic event.
This story started with Graham Bowley in the NY Times over the weekend and snowballed until it was making the rounds on most of the news networks yesterday. MS-NBC’s Dylan Ratigan devoted a whole segment to the “crisis” on Tuesday’s show. This might have been some crack reporting except for the fact that Bowley turns out to have been impressively wrong.
Felix Salmon actually bothered to recheck the facts, and it turns out that while Bowley was essentially right about the retreat from domestic mutual funds, he neglected to look at Exchange Traded Funds (ETFs) or international mutual funds which grew suspiciously at a little short of $40 billion over the same period.
So the news really turns out to be that people reinvested in ETFs with more flexibility and lower cost structures than mutual funds and divested into more global portfolios. Or perhaps it was seniors continuing to draw on their 401k mutual funds while younger working investors placed their money in ETFs. Either way, that seems pretty darned sensible of them. Sorry folks, no crisis to see here. Please go back about your business.
The problem here is that the “crisis” was covered with great fanfare. That will not be true of this news. Rather, it will buried if mentioned at all. The result being the meme about people fleeing the stock market will stick despite there being no truth to it.
Perhaps Bowley made an innocent mistake in his initial report. But that doesn’t excuse all those who ran with the story. What’s supposed to distinguish bloggers from professional journalists is that journalists are expected to double check the facts. They are trusted to be correct. Yet increasingly that is not the case. Whether it is just over eagerness to report a breaking story in a world of ridiculously rapid news cycles, or if it’s a more deliberate attempt to sensationalize the news for the sake of ratings, it amounts to malpractice.
In other professions there are dire consequences for malpractice. Whether you’re a lawyer, a doctor, or an engineer malpractice can result in people being hurt. Journalists should be held to these same high standards. People make decisions based on information provided by journalists. Decisions that influence public policy and ultimately all our lives. That is no less impactful than malpractice in other professions.
This is a small example, but it’s indicative of a more endemic problem. If journalists want to be valued and trusted, they need to step up to the plate, do the hard work, and get us the real truth we so desperately need.