Is the Media Actually Fomenting Current Market Volatility?

by: Roger Ehrenberg

Without question, we live in a society where media plays a huge role in shaping our perceptions and tastes, whether we like it or not. We are constantly bombarded with explicit and implicit forms of marketing, branding and messaging, and it effects the way we feel about things and our decision-making.

Now if one applies this effect to the current financial crisis, and the importance of consumer and business sentiment in driving financial markets, it may well be that the media is playing a larger role in fomenting the historic levels of market volatility we've witnessed over the past 30 days, more than anyone could have imagined.

Every day, whether you are watching CNBC, CNN, Fox Business News or the online equivalents, there are countless numbers of talking heads discussing their views with passion and intensity. "This is an historic buying opportunity; market value to replacement cost has never been lower in the (name the industry) sector." Or perhaps "The Apocalypse is upon us; Government debt will rise until it consumes us all, devaluing currencies and spurring the Second Coming of the Great Depression."

Media is motivated to evoke a reaction. A strong reaction. They want people to pay attention, right? So what do they do? Sew the seeds of conflict.

Just having a bunch of bears makes no sense. A bunch of perma-bulls is even worse. Gotta add some of both to the mix. And keep doing it to fill the dead space, again and again and again.

So by its nature, Big Media has created a kind of "volatility news cycle," one that is sufficiently exciting to get people to watch, but which can cause people's emotions to run all over the map. And viewers are particularly vulnerable to this tacit manipulation as never before, mostly because they are scared that their collective financial well-being is getting flushed down the toilet before their eyes.

I've had myriad discussions with money managers over the past several weeks. People whom I've always believed to be level-headed, stable, cool-handed money managers are acting in truly bizarre ways. One day they're depressed. The next day they're hopeful. The following day I need to keep them away from the razor blades. Up, down, up, down. Is it the front page of the Wall Street Journal, CNBC or the markets themselves that are giving them fits? I really don't know. But I'm sure the news coverage isn't helping.

Maybe we should all be like Warren Buffett and put the papers down, turn the TVs and computers off and relax for a bit. Put your portfolio in a position you can live with and just chill out. Because few mortals can take advantage of today's wickedly uncertain markets. And if for no other reason, think of the savings on antacids, therapists, chiropractors and palm readers of just backing away from the news cycle. This could be reason enough to take a time out.