The Media, U.S. Credit Risk, and Stock Reaction

As you may know, S&P downgraded its outlook of U.S. debt from "neutral" to "negative" and said that the possibility of downgrading U.S. debt in the next two years was "over 1/3rd likely." The media immediately ran with this and looked at the (slight) market fall and said that the markets were reacting to S&P's announcement.

I remember when I first started investing I would read news articles such this one from CNN http://money.cnn.com/2011/04/18/news/economy/us_credit_rating_outlook_lowered/index.htm

from which I grab the following quote

"On Wall Street, investors reacted to the news by pushing share prices down sharply. The Dow Jones industrial average sank more than 200 points in the first half-hour of trading"

I used to think that reading news articles like these would keep me informed as an investor. I've come to realize that the media is full of crap most of the time. I was asking my friend and advisor Krishna Chodavarapu about his take on the market slide, and he said that if the market were truly worried about the slide in U.S. credit ratings, that treasuries should have collapsed (they would be cheaper because they were riskier). I did a search and found that he was not alone in his analysis.

http://fidelityfinancegroup.com/news/mortgages/30932-mark-hulbert-baffling-bonds-defy-expectations

Essentially bonds became MORE expensive (their yields went down) the day the ratings outlook changed , which doesn't make any sense since a riskier investment should have a higher yield. I think its really scary that news sources such as CNN can be so blatantly wrong, especially since their analysis of the market can easily be verified by using common sense and looking at the goddamn securities that should be affected. Makes you wonder what other things they're completely off base on, and if all news outlets aren't just howling monkeys hammering nonsense on typewriters. The scariest part is that most of us say that we're "informed" based off of what we read from these outlets. Goddamn.