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Personal finance blogs vs. mainstream media

Posted by admin on July 20, 2009 in editorials, Investment Information

Weakonomics recently took to task a  television personality for disparaging personal finance blogs and bloggers. His post highlights one of the tensions of our web 2.0 world: the divide between bloggers and the mainstream media. Earlier in the spring, a sports blogger made some wild accusations about a baseball player using performance enhancing drugs; many members of the sports media used this opportunity to throw the entire sports blogging world under the bus. A recent spat between a Globe and Mail political blogger and a columnist from the Montreal Gazette resulted in the latter calling the former’s opinion not worthy, in part, since he was a blogger (she did this on her own blog undercutting her own argument).

Are the opinions and information provided by blogs better or worse than mainstream media? Who can you trust for helping you make your decisions?

The answer cannot be framed as an either or question. Sports and political blogs have a different dynamic than personal finance blogs; they are generally rooted in access to the source which can breed an old boys network. The beat reporters for the New York Yankees baseball club are notorious for covering up for the excesses of its stars from Babe Ruth forward; after all, the team can simply deny you access to the club-house or to players if you report on the well-known debauchery of spoiled young athletes with lots of money. So, the beat reporter becomes part of the team rather than a true insider-outsider and can view anyone not in the circle, like bloggers, with suspicion.

Personal finance blogs exist within a regulatory framework of equal access to all. A CEO cannot give an exclusive interview to a reporter on some secret of their company that is material to the company’s fortunes without making that information publicly available to all, lest they break securities laws (the founders of Google found this out early when they went public). Thus, the asymmetry of information (not opinion) is not as great in the personal finance context.

This lack of relative asymmetry of information is probably why mainstream media are beginning to use good bloggers as references (see below for a possible reason why). Jonathan Chevreau and Larry MacDonald, writers for mainstream media, do cite bloggers as sources on occasion. It is hard to process so much information by yourself.

Where the asymmetry does occur is the mainstream media’s access to resources. Mainstream media have research staff, editors and reach of hundreds of thousands, which makes getting expert opinions easier. Whether the opinions provided are worth anything is really in the eye of the beholder. Fact-checkers and researchers can also weed out most wrong information which is an often cited, and correct, issue with some blogs.  With access to editors as well, the presentation tends to be a lot more polished as well.

However, bloggers do have a certain advantage over reporters. Many bloggers tend not to suffer from glass tower syndrome, whether literally or the editorial leanings of large congolermates who own media outlets, and, with a keen eye of observation on their daily lives, can report on many things that mainstream media cannot. For example, I have been told that the banks have begun to do well by resorting to the Wal-Mart model of having their suppliers de facto finance their business. Many service providers for banks are now being paid on 60-100 day terms and being grounded down on their fees. The law of intended consequences is that by doing this small and medium sized business have less than ideal cash flow statements which makes lending to small businesses harder, caused, in part, by the banks themselves.

What are we to make of all of this? Attacking the medium, in and of itself, is lazy analysis. I would suggest instead that people fused information from both sources to make an informed PERSONAL finance decision. For example, Rob Carrick and I both recently wrote about investing in ETFs against the back-drop of the sheer amount of  EFTs being sold. Rob’s excellent article tackles subjects mine does not and vice versa. I would suggest reading both and then deciding accordingly on how to proceed if you are assembling an ETF portfolio.

Having said that, I have enjoyed Rob’s articles because he is primarily a provider of information and not a peddler of opinion (I have never spoken to Rob before). Blogs and mainstream media alike which are nothing more than soapboxes for opinions should be viewed with a critical contextual eye. After all, the opinions and recommendations being provided are based upon the particular context of the opinion-maker and not the reader. Thus, just because some television personality believes you should buy Australian 10 year government bonds, does not necessarily mean it is right for you.

As one blogger once wrote, personal finance is 90% personal and 10% finance. At the end of the day, all media and blogs should be doing is conveying information. It is still up to you to (i) verify the information; (ii) process it and act in accordance to your life.

While the medium of blogging has changed the dynamic of personal finance somewhat, with due respect to people falling all over themselves about Web 2.0, the basics of creating a household budget has existed since the advent of money. Thus, apply the same critical analytical eye to personal finance decision-making regardless of where you get the information. While blogging has certain increased the amount of information available, you still have one context to apply that information to- your own life.

Best of luck.