Discerning news from noise

Economist and former United States Treasury Secretary Lawrence Summers, along with three colleagues, wrote a series of papers in the late 1980s on the role of “noise traders” in the stock market.

Such investors find profitable opportunities to trade stocks when “noise” surrounds a given company or industry sector that causes speculation. The noise involved may seem newsworthy to the financial press, but ultimately it has no discernible effect on the long-term prospects and value of a company’s stock.

Executives and managers in the recycling sector, like all others, make capital investment decisions that can involve millions of dollars. As in selecting stocks for a portfolio, these decisions must be made on carefully considered forecasts, not as a response to noise. Unfortunately for recyclers, the 21st century seems to have ushered in an inordinate amount of noise in several of the industry sectors most directly affecting how they conduct business.

“The 21st century seems to have ushered in an inordinate amount of noise in several of the industry sectors most directly affecting how they conduct business.”

Metals recyclers cannot miss the noise surrounding the emergence of hybrid and electric vehicles (EVs) and predictions of the imminent demise of the internal combustion engine (ICE). Recyclers of catalytic converters and lead-acid batteries and operators of auto shredding plants are among those with an abiding interest in whether the demise of ICE vehicles is looming or instead is greatly exaggerated.

Nonmetallics recyclers have been bombarded with news and noise surrounding the demonization of single-use plastics. Global concern about the widespread presence of plastic in the world’s oceans has led to governments banning and corporations eliminating some forms of plastic packaging.

The electronics recycling sector is one where technology can outpace policy. As an example, the rapid replacement of the cathode-ray tube (CRT) television and monitor caused policymakers and recyclers to shift their attentions to other segments of this market.

In the final seven months of 2019, I am going to take advantage of a sabbatical benefit offered by Recycling Today’s parent company, GIE Media, to unplug from daily deadline burdens and instead focus on longer term changes taking place in the automotive, packaging and electronics sectors.

By no means am I qualified to make conclusive forecasts to predict exactly how the future will unfold. My hope is that time spent solely on researching these issues might help me filter out some of the noise from the legitimate news.

I am inviting readers to consider some of the “noise versus news” questions they have. If divergent forecasts in your industry sector raise drastically different prospects, please write to me at btaylor@gie.net and let me know what they are. I might have some time to look into it.