Is the Media Actually Fomenting Current Market Volatility?

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.

Comments

[Steven Hansen:]

do you not think the volatility is caused by the unwinding of leveraged positions? or do you think cramer is causing this?

2008 Oct 24 05:33 AM

[romang:]

I am blaming everything on cramer. If people think that everything is going down the tubes and they are told so by someone on tv. Then they think its true. The media is just playing on the fears of people to get good ratings. Plus i just dont like cramer.

2008 Oct 24 12:17 PM

[carey_jim:]

The Buddha would agree.

He was a prince who gave up everything for a yellow robe and a begging bowl.

Maybe Warren Buffet's real formula for success is that he leads a simple life that is equivalent to wearing a yellow robe and begging for money: His life is dedicated to charity and he lives in a house that most rich people would describe as a yellow robe.

Now what could that possibly have to do with good financial advice?

2008 Oct 24 01:16 PM

[Messiahofmoola:]

What else need be said about financial media. Who by their expert comments, do nothing more than seperate investors from the their wealth.
"I am indeed sticking my neck out right here, right now," Cramer continued, "declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who's waiting for that low to be breached is in for a big disappointment and [they're] missing a great deal of upside." Cramer (market shill) July 28th,2008.

Take the jackal off the air and rest of the cheerleading incompetents at Criminal Nararators Broadcasting Network.

2008 Oct 24 03:02 PM

[Jolly_Rancher:]

Buffett reads about 6 newspaper per day. I don't think the media is whipping him around. The media whips around the weak-minded and wobbly-kneed who shouldn't be investing much less managing other people's money.

2008 Oct 25 10:37 AM

[sf94127:]

Bloomberg is the most restrained; they report w/o passion or prejudice.
The rest (the NBC's, FOX, its a soap opera).

2008 Oct 25 12:26 PM

[H.J. Huneycutt:]

The volatility is the result of several factors, but I think the sensationalist media plays a very significant role.

2008 Oct 25 04:20 PM

[User 265729:]

The media. especially CNN, CNBC, NBC, The New York Times, The Washington Post, Bloomberg, et. al., have been puppets for the Bush-Paulson farce called an economy.

Each and every time the Bush Administration wants to bump-up the markets before the close, they throw a tidbit to a media source like the Wall Street Journal and they dump it out there with little or no fact checking.

The media is doing everything they can to stop the train that is running them over. Why?

Some examples:

1. CNBC and NBC reporters and staff are partially paid, by contract, with stocks in GE. No interest to bump the markets up there, eh?

2. There are total conflicts of interests in the media with investments (eg., ABC - Disney and CNN - Time-Warner).

3. Advertising fees... As long as the media can convince you to buy worthless things, you don't really need, they get big advertising $$$$. Getting you to BUY, BUY, BUY is the blood of these parasites.

4. Media companies and Madison Avenue ARE the BUBBLE MAKERS. Wall street plays a part, sure, but look at where all the money goes. These corporate media prostitutes will do anything and sell anything they are told to sell to keep their job in front of the national camera.

People are sick of the Cramers, and everyone else on hype-networks like CNBC. Its pathetic...

If you really want to know why all of these television networks shouldn't be trusted with financial advice, let alone anything else of consequence, take a look at the PARENT COMPANIES of any of them. What is it now... the owner of U.S. News and World Report is a property developer in Boston -- no conflict of interest with the real estate bubble there... LOL!

Take a look at any of them... As they say when tracking down terrorist or drug lords... FOLLOW THE MONEY. Now, apply that to all of the media outlets and you'll find that they are nothing more or less than corporate mouthpieces for somebody or the other.

Truth is, all of their hype and pushing things like lay-aways (no less) so you'll BUY, BUY, BUY so they'll get their ADVERTISING $$$$ is making everyone seriously ill.

2008 Oct 25 05:33 PM

[Steven Towns:]

Provocative topic, Roger. You know we've got problems when even the "pros" are exhibiting such disturbing, fickle behavior/emotions. I am appreciative of the broad coverage of Street happenings in the media (tv/online), but at the same time, I'm ofen frustrated by the lack of depth. Many thanks to people like yourself that take the time to shed color on developments that may otherwise not be touched on. I don't particularly blame the media, because the various media players are just doing their so-called job. I put more blame on the people, for putting themselves at the mercy of the media and lacking even a little common sense and discipline to self-govern themselves. Fear and greed. Greed and fear. Amidst a big ponzi scheme. Buy when others are buying. Sell when others are selling. Never think by yourself, only for yourself. Actually, I kind of enjoy all the volatility. It's more exciting. And it's very telling. God bless America!

2008 Oct 25 06:23 PM

[Gregorian:]

You got a few things right! Nice analysis of how the media logic forces the editors to chose a mix of bulls and bears. On the point - and the audience listens... and they both sell and buy - frenetical changing attitudes from hour to hour.

I just recently sold of all my derivatives, and placed my bets for the long run. I will shut off all this "news" (nonsense), and let my money stay where my calculator tell them to be. "Put your portfolio in a position you can live with and just chill out." I have already done that, and have to agree.

2008 Oct 25 07:16 PM