Over reliance on social media and the internet leads to poor financial, investment, and trading decisions

Trading and investing used to be a solitary endeavor…
Success in trading and speculating in the internet age requires us to be fiercely independent and free of confirmation bias. Most people will never be able to succeed.

Back in the mid 1990’s, when I set out to really learn to successfully trade and speculate, the internet was just in its infancy. There were no such things as YouTube, Facebook, or Google. Yahoo was the major player and there were very few financial charlatans and even less alt-financial websites like Zero Hedge. I received my masters degree in 1992 and back then I never even heard of the internet, let alone used it.

When I started out trading while working at Nasdaq, I relied on services like Bridge, Bloomberg, and Factset. While these providers dispensed enormous amounts of data, it was up to me to figure it all out. There were no self-proclaimed experts on YouTube or the social media platforms. I learned how to trade by reading books. I mastered the intricacies of the marketplace by direct observation. While traders often shared their opinions and thoughts with their peers, trading and speculating ultimately was thought of as an independent study.

One of the books I studied from over 20 years ago.

In the beginning, most of my research took place during the weekends. I would take the subway to my office and spend full days parsing market and stock information, while at night I would walk to the coffee shop and read books about fundamental and technical analysis. I relied on my own wits and abilities to forge ahead. Since the internet was just getting up to speed, there were few bloggers and showmen on the web to turn to for “help”.

…But not anymore
In the internet age, most alt-financial followers who try to learn to trade end up taking the easy way out by relying on other personalities who are there to exploit.

When I was starting out, there were no disingenuous shills on an ubiquitous media platform like Martin Armstrong, Zero Hedge, KWN, Sovereign Man, Daily Reckoning, Nomi Prins, GATA, Max Keiser, or RT to intentionally confuse, misdirect, and scare people into money-losing outcomes. All these people have something to sell. They exploit their followers and are great at it.

In addition, there are hundreds of self-proclaimed experts who populate YouTube with their trading advice. Unfortunately, most are trying to upsell a service or rely on advertisements. I get it; it is much easier to rely on someone else, because it takes a lot of work and sacrifice to become a good trader or investor. It takes an independent and objective mind and lots of study, and the influences of the internet are just too strong for most people to ignore.

I didn’t have to concern myself with Facebook’s propagation of social proof and confirmation bias. Most of the time, I only shared my findings and trades with 2-3 other people in direct communication and email. I eventually became successful enough to quit my job. That was back in 2001.

Most starting out now will continue to lose money, because they no longer take the time to independently learn the art of trading and speculating. They are too busy relying on other “experts” on the web and YouTube.

Trading is ultimately an individual pursuit and when a person is wrapped up trying to learn some one else’s trading techniques and programs, they end up spending too much time trying to interpret what someone else is saying and miss the opportunity to build their own strategies. We need to adapt to our personalities. Have faith, but understand that trading and investing depends on the person in the mirror; not some charlatan or salesman on the web, regardless of how personable they may be.

Okay, enough said on this. Let’s move on.

Most social media users are poorer because of it

Anyone who says that social media is a net benefit is deluding him or herself; unless, of course, he is one of the few that use it to exploit others.

You’re not going to like this.

Millennials spend more time on social media than older generations: People ages 25-34 spend 141 minutes per day on it, versus 105 for the 35-44 set. And that could be hurting both their finances and mental health.

Indeed, nearly half of millennials (49%) say that their spending habits have been influenced by the photos and experiences their friends share on social media, compared with only about one-third of Americans in general, according to a data survey of more than 1,000 Americans by financial firm Charles Schwab.

The dark reason so many millennials are miserable and broke – MarketWatch, May 14th

What gets me is that people admit to spending about 141 minutes a day on social media. The true numbers on these surveys are probably much higher.

Other surveys have uncovered similar trends: Roughly two in three millennials think that social media has a negative impact on their financial well-being, according to a 2018 survey of more than 2,000 millennials from financial firm Fidelity.

Data released in 2018 by mobile bank firm Varo Money found that 53% of millennials admit to buying something they saw advertised on social media.

And a 2018 survey from Allianz Life shows that more than half of millennials (57%, versus just 28% of Gen Xers and 7% of boomers) say they’ve spent money they hadn’t planned to because of something they saw on social media.

The dark reason so many millennials are miserable and broke – MarketWatch, May 14th

The internet and social media are turning the world into a debt sharecropper plantation. With the web, less effort goes into research, while it encourages adverse financial behavior

According to the article, not only can social media wreak havoc on our finances, it can also hurt our mental health. Younger adults who use social media a lot are at a higher risk of depression, and people who use many different social media sites are at higher risk for anxiety and depression. What’s more, the more time people spend on social media, the more likely it is they feel socially isolated — with people who spend more than two hours swiping through social media sites nearly doubling their risk of feeling socially isolated.

Just look at how the boom/bust cycles in most asset classes are speeding up and have become much more frequent. We may think that having instant access to information creates normal markets, but the advent of the internet has brought irrationality. It has engendered the overconfidence bias in the least talented and reaffirms our confirmation biases. Income and net worth disparities have widened in step with the evolution of the world wide web. This is not a coincidence.

I look at asset markets such as real estate, stocks, cryptos, gold, etc., and have to believe that the internet has played a role in this insanity. For every person that profits, many more lose, because those who profit, profit big.

Most successful, financially-free traders I know live simple lives and do not spend all that much money supporting a lifestyle. Many think that successful traders and investors have to live in expensive houses and drive fancy cars, but my experience has been quite different. I view money as a necessary tool and if I were being pressured to spend to keep up I would be out of business. Successful traders and investors can control their spending, so they can build up an income-generating balance sheet as they get older.

If I were a social media junkie, I would be a lot poorer as the urge to conform is powerful. I know I am not immune to these pitfalls, which is why I deleted my Facebook account in 2013 after I started investing in real estate again. If more people are getting poorer, perhaps they need to turn off social media and break free of its bondage. Social proof leads to perpetual poverty and social media turns most of its users into sharecroppers on a debt plantation.