A week ago, the AMP's chief strategist and chief economist, Dr Shane Oliver, re-examined the Wall of Worry that confronts markets and investors.

This week he wonders if the Wall is being made higher by the information overload for markets and investors.

It is self-evident there is a long worry list for investors right now.

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There are fears Greece will bring down Europe and lead to another Lehman event.

The US economy has slowed, QE2 is ending and US politicians are squabbling about increasing the US Government's debt ceiling.

In China and the emerging world there are worries policies to slow inflation will cause a hard landing.

Australia has its own overlay of worries around further interest rate hikes, the strong $A and uncertainty around Government policy, notably the carbon tax. Natural disasters such as floods, earthquakes, tornados, volcanic ash, etc, have only added to the sense of unease.

This is all driving investor fear and trepidation.

One financial planner observed to me last week he had never before felt such a sense of fear on the part of clients.

And a client recently asked me whether relationships and analysis based on the past are of any relevance in a world of more frequent natural disasters.

While these worries are real, all this has me wondering whether 24 hour news cycles, combined with the information avalanche we are now being smothered with, has actually improved the lot of investors?

Or has it just made investors more fearful, short sighted and jittery?

In short, has it led investors to a short term focus which is not in their long term financial interest?

Has the world become worse?

There is no doubt the GFC has left the world with a hangover in the form of excessive debt levels and extreme monetary policy settings in advanced countries, excessively easy monetary conditions in emerging countries, a greater reliance on the more volatile emerging world and increasing business regulation.

This is resulting in shorter, more volatile cycles and an increase in the importance of asset allocation.

At the same time, talk of looming physical crisis - egg, "peak oil", food shortages, resource depletion, global warming, etc are only adding to the sense of unease.

This has not been helped this year by a run of natural disasters - floods, earthquakes, tornados, volcanic ash, etc.

But has the world really changed?

The global economy has been through difficult phases in the past, such as in the 1970s. And we got over it.

The last century has been full of disasters and catastrophes.

Here's a sample: 1906 San Francisco earthquake; 1907 US financial panic; WWI; 1918 Spanish flu pandemic (up to 50 million killed); The Great Depression; WW2; Korean War; 1957 flu pandemic; 1960 credit crunch; Cuban missile crisis; Vietnam War; 1968 flu pandemic; 1973 OPEC oil embargo; Watergate; Iranian revolution/second oil crisis; Latin American debt crisis; Chernobyl nuclear disaster; October 1987 share crash; First Gulf War; Japanese bubble economy collapse; US Savings and Loan crisis; Second Gulf War; Asian crisis; Tech wreck; 9/11 terrorist attacks; Lehman Brothers collapse.

Australia has regularly been hit by droughts, floods (the 1974 Brisbane floods were actually worse than this year), cyclones and bushfires and the world has regularly seen a whole range of natural disasters.

And yet despite this litany of disasters and periodic cyclical swings up and down, since 1900 Australian shares have returned 11.8% per annum (or 7.7% pa after inflation), which is double the 5.9% return from bonds over the same period (and cash which returned 5.3% pa from 1926).

And if you are worried the world is about to hit some sort of limit in terms of growth, population, resources or the environment, after which will come some sort of "great disruption", bear in mind such prognostications have been regularly made over the last two hundred years.

Thomas Malthus, Paul Ehrlich in the 1960s, the Club of Room report on the Limits to Growth in 1972, etc.

Such Malthusian analyses dramatically underestimate resources, the role of price increases in driving change & the role of technological progress in facilitating it and heading off disaster.

Maybe the world has become more problematic, but I doubt it. When I think of what my parents went through (Great Depression, lost infant siblings on both sides, numerous wars and severe post war recessions) I find it very hard to agree life is harder today than it was when they were growing up and raising my sister and myself.

Or are we suffering from information overload?

While not to deny the current list of worries, one wonders whether the communications revolution we are now going through is making them seem a whole lot worse than they really are.

Thanks to the information technology and communications revolution, we are now bombarded by economic and financial news on a continuous basis.

Whether it's on the TV via regular finance updates, numerous news and finance channels, websites and blogs, twitter on a smart phone, it's hard to escape.

The trouble is much of this is noise - random moves in economic data more due to statistical aberrations than fundamental swings in the economy, second order economic data of no real significance, gyrations in share prices and currencies that reflect swings in sentiment on the day, and in Australia's case constant chatter about interest rates.

Much of this reflects opinions and commentary.

And of course bad news sells better than good, which is why for example we hear so much about Greece, which is less than 2% of the European economy, than Germany, which is doing fantastically well and is 20%.

Much of this is just a soap opera, but it seems so much is going on and it's all invariably bad.

One could be forgiven for thinking we are now in a constant state of economic crisis.

Too much economic and financial information was the subject of an excellent article by former Reserve Bank Governor Ian Macfarlane in the Australian Financial Review (June 6, 2011).

Is this helping us?

As Macfarlane asked, one can wonder whether all this extra information is actually helping us become better investors.

Somehow I agree with him and doubt it is.

In theory the improved flow of and access to economic and financial information should be making for better, more efficient investment markets.

However, this is doubtful.

Academic economists focus on two types of market efficiency.

The first relates to the speed with which new information is reflected in prices for shares, currencies etc and the second is whether it is done so in a rational way.

On the first it's likely we have made great strides as the democratisation of information has seen financial prices reflect new information very quickly.

But there is little evidence that all the extra information is resulting in more rational pricing in shares and currencies.

Asset bubbles and busts are as common as ever.

Share markets are as volatile as ever - the next chart shows the volatility in US and Australian shares is pretty much in the same range it has been over the last century.

(In fact it's odd how constrained volatility was in the relatively information starved pre 1930s.)

Most importantly, there is no evidence all the extra information is leading to consistently higher returns for investors.

In fact, ever since there has been a lot of talk about the information revolution - i.e. since the late 1990s, the US and global shares have just spun their wheels!

In fact at the individual investor level it's likely the increased flow of information may be making investors worse off.

As Ian Macfarlane alludes to, based on behavioural finance research - and as I am hearing from plenty of ordinary investors right now - the constant information bombardment is likely making investors excessively cautious, which means they are less likely to take risks which will ultimately mean lower long term returns.

From an economy wide perspective there is a real danger that to the extent increased economic and financial information is leading to a greater short term focus, it is also boosting short term "speculation" relative to medium to longer term "investment".

This in turn is likely to be negative for the economy.

As John Maynard Keynes once observed,

"when enterprise becomes the bubble on a whirlpool of speculation... [and] the stock market takes on the attitude of a casino; the job [of capitalism] is likely to be ill-done."

Related to this, I wonder whether the Reserve Bank has made the obsession with interest rates even worse in Australia with almost weekly communiqués (post meeting statements, minutes, speeches etc) adding to the sense of permanent crisis in Australia.

Surely we were doing perfectly well without all this extra news on interest rates?

So what should investors do?

Against this backdrop there are three things investors should do.

First, turn the volume down on the "news" front, i.e. consume less of it. Second, adopt a long term strategy and stick to it.

Sure, the environment we are now in has increased the importance of asset allocation - but this is best left to experts and those who really put the time in.

Most individual investors will end up getting it wrong so the best approach is to agree a long term strategy and stick to it.

Finally, for those with a bit of spare cash the best approach is to "buy in gloom". In other words, follow the advice of Warren Buffet when he said "get greedy when everyone panics, panic when everyone gets greedy".

With shares down but short term risks of further falls remaining, perhaps the best way to do this is to average in over the next three or four months.

It's not all terrible

Finally for those prepared to look beyond current worries and for positives, it's worth noting there are actually quite a few:

International cooperation is on the rise - egg the Libyan intervention (contrast with the dithering regarding Bosnia) and the global decision to release oil reserves.

Since their highs earlier this year world oil and raw food prices have fallen 15 to 20%. This will take pressure off inflation and household budgets.

The Japanese economy is rebounding from the earthquake, which should reverse the negative global supply chain impact of the last few months.

Chinese Premier Wen Jiaboa has expressed confidence inflation will be firmly under control and there are technical signs Chinese shares may be bottoming.

Global monetary conditions remain very easy.

The US Federal Reserve appears to have been successful in heading off the deflation threat of a year ago. This is great news considering the pernicious impact entrenched deflation would have had.

Shares are as cheap as they were at the end of the last major correction mid last year.

Emerging countries are now more than 50% of global economic activity and have a strong growth potential.

Australia is going through the biggest mining boom in our history.

While this is causing pain for parts of the economy, we are nevertheless seeing a huge boost to national income and the massive degree of mining investment augurs well for future growth.

Finally, everyone seems bearish - this may sound perverse, but it's often a positive sign.

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