As I scan the newspaper in front of me a cheeky smile start to spread across my face and before long I’m rolling on the floor in laughter. And this happens at least a few times a week – the frequency directly related to what paper I choose to pick up that morning. And I’m not talking about reading the cartoon section either.    

No my fellow investors you will be relieved to know that I too start with the “important grown-up” news on the front page. But can someone please tell me how long you are suppose to keep a straight face when the headlines (or is that punch lines) just keep coming? 

One of my favourites from the last few weeks is below. This particular extract is from the Telegraph but the most of the mainstream press picked up and reported on this in the same way.  

House prices 'could fall by further 55 per cent'

House prices may fall by a further 55 percent and there is a "very real probability" that Britain will be bankrupted, a leading investment bank has warned in a private note to clients.

The investment bank in question in this case is Numis Securities who you may be surprised (or not) to learn is an institutional stock broking business. Now I’m not aware of any previous forecasts made by Numis but to imply now, more than 18 months INTO the downturn that the housing market will fall ANOTHER 55% is nothing more than an attempt to grab headlines - one which have obviously worked.

The problem here is not Numis however but rather the willingness of the mainstream media to reprint any old press release without actually checking the facts to see if such a sensational forecast is indeed “probable”.  

But that’s just it – if you read past the headlines of the article you start to understand why neither the newspaper or for that matter Numis have to back up their statements too much. It’s because they are not actually saying anything.

Phrases such as “a very real probability”, “could fall” and “we believe it may fall” are littered through both the report and the article. In my opinion, I believe that there is a very real probability that in this case, this may be a whole lot of politician talk. You know the kind where you make a lot of noise and use a lot of big words but actually say or commit to nothing in particular.

Now I could spend the rest of this article and a few more like it talking about the media being sensationalist and the fact that many a so called story has turned out to be the product of a journalist’s thumb. Or how newspapers have a vested interest in selling more copies in order to sell more advertising. But let’s ignore the obvious shortcomings of the media for a moment and look at what we can learn from this.

I study the press because I do believe that there are some good journalists out there more interested in writing about issues they believe to be important rather than those that sell more copies. I also think headlines are a great indicator of what’s to come.

You see the majority of people take the headlines they read on face value. They believe it to be true and are therefore programmed to think and act in a specific way. So you could say that news is made, not reported. Not unlike a self-fulfilling prophecy.

Why is this useful? Well if unlike most you read behind the headlines, analyze the facts and establish that the “herd” is heading in the wrong direction you can capitalize on opportunities that others miss. You can use market conditions to your advantage by snapping up assets at knock down prices and set yourself up for life.

Now I realise that this is not an easy task. In times of uncertainty people crave the comfort of following a general consensus and it’s easy to be sucked into the herd mentality. Fear is a strong emotion; one that’s hard to control but I have learned that when emotions are used to make financial decisions the outcome is often tears.

Zig Ziglar says that "courage is not the absence of fear, it's the mastery of it." One of my earlier mentors said FEAR is simply an acronym for False Education Appearing Real. I agree with both statements.   

My granddad, a farmer for most his life would often comment that sheep herd together; eagles fly alone. I guess the only question we all need to ask ourselves when fear strikes is which one we want to be.

Wishing you health, wealth and happiness,

Mike Smuts
Property investor and MD of Smuts & Taylor.