The Media’s Effect on the Stock Market and Economy
Published April 10, 2012 | 
Cnn, Msnbc, Fox News, and the other major United States news outlets have a combined audience, just in the US of over 85,000,000 viewers daily. This represents a huge populous that can be influenced into decisions on reports by these stations. In the last 6 months, it seems as though we have gone from the war in Iraq being the big news maker, to the economy, and how terrible it is being the headline grabber. So the questions are, does the US media have a direct impact on the stock market, and further more the economy as a whole? Does over reporting the negative hurt the populous even more, and will the media have a role in the recovery of this ragged economy?
Impact of the Media
Yes I do believe that the media has a semi-direct impact on the markets and the economy in general. Any media outlet will certainly look for a news story which will grab attention. Often the case is that an extreme negative or positive will attract viewers, and thus more ad revenue for the news outlets parent company. Because of this, the slightest bit of negative economic news will quickly be turned into a headline story, attracting those viewers who are driven by fear. When they see a story on CNN that almost half of Americans believe the Economy will fall into a situation similar to the Great Depression, fear from the viewers can lead to a self fulfilling prophecy. When a viewer sees a story like this, they will likely spend less money, pull their 401k stock investments, and hunker down for a bleak economic environment. This then leads to more negative news being reported and the whole cycle starting over.
What The Media Should be Doing
If instead of reporting useless polls that are likely unscientific, the media could be more responsible and only report the news in an unbiased fashion. This would likely lead to less volatile situations both when this news is positive and negative, meaning it will not have a direct impact on the economy itself.
Will the Media Play a Role in the Recovery?
Yes I think just as the media has likely created an over bleak idea about the economy and created mass panic selling, when the slightest bit of good news hits, we will likely see this go in the other direction. In fact we may have already seen this. What will happen is that a piece of good news will emerge from the rubble. The media will run with this news, creating stock markets to rise, and everyday people to spend a little more money. This in turn will create even better economic conditions that the media will jump on, and thus the cycle will reverse itself and continue in the favorable mindset. The conclusion is that the media plays a direct role in likely enlarging the economic swings that would be in place regardless.
Welcome to the New Economy
Published April 10, 2012 |
This is the New Economy. What do I mean by the New Economy? In the past, calm seas and long periods of steep recovery followed the periods of economic slowdowns. Today recoveries still occur but they’re more fragmented, shorter and less steep. Unfortunately the economy and business aren’t going to return to “the good old days” any time soon, if ever. What we see is what we’ll be getting for the foreseeable future. For up to a decade or longer volatility, uncertainty, complexity and ambiguity (VUCA) will be our constant companions. The choice is to embrace the New Economy or surrender to it.
In order to effectively embrace the New Economy you must understand the Five Key Drivers that are responsible for the “constant white water” in which businesses must now run.
1. The Economy has Become Customer-Centric. Customers today are more informed and have more options available to them for getting their wants and needs met. They are no longer passive in the buying process. Instead they are aggressively seeking alternatives, comparing offers and holding out for the best price.
Customers are also engaging vendors/stores later in the buying process because they are doing the education themselves. Big box stores like Best Buy are seeing transactions per customer drop due to strategic shopping (customers do their research and enter the store with the sole intent of buying the one product and then leaving). B2B businesses are seeing this as well as sellers become engaged later in the sales cycle because buyers do research online before contacting them.
2. Globalization. No matter how you look at it we are in a globally connected marketplace. From finances, to technology, to market demand… we are connected. When China sneezes everyone gets a cold.We, in the United States, can’t pretend that the rest of the world doesn’t exist.
Even a small business in the Midwest that doesn’t import or export anything is no longer exempt from being affected by the global marketplace. This is because a company or government from abroad has affected someone in that business’s value chain or customer base.
3. Business Volatility. Change is now a constant. As markets and customers become less predictable businesses must vigilantly check the landscape. Trends start quickly and can escalate overnight bringing with it either great threats or opportunities. This often leads to shorter life cycles of products and services. With shorter life cycles market leadership is short-lived, as is the opportunity to fully leverage the profit potential of the leadership position. Being the market leader in the past, meant years of market domination (think about IBM, Kodak, Nokia, Sears and Polaroid). In the New Economy market leadership is often measured in months. How quickly and effectively you recognize and respond to a trend is the key to success.
4. Technological Velocity. Trying to keep up to speed with the advances in technology is like trying to drink from a fire hose. The volume and speed of innovations in technology are simply becoming overwhelming. One of the biggest dilemmas with technology is that it represents a double-edge sword. Although advancements in technology bring about greater efficiency and productivity, they also cut jobs and put constant stress on organizations to continually adapt and assimilate new systems and processes.
Armed with this technology customers want information available to them at anytime and anywhere. If one company won’t offer it there are dozens more who will.
Technology is changing every aspect of our lives both at work and at home. Let me share a real-life example that highlights this concept. I was eating breakfast at a McDonald’s reading the newspaper when I noticed a 5-year-old girl giggling and pointing at me to her father. The father quickly apologized by saying, “I’m sorry about my daughter, it’s just that she has never seen anyone reading a newspaper. I always get my news on my phone.” The young father was in his twenties and had never relied on the newspaper for getting news so his daughter had never seen it.
To succeed companies must incorporate technology strategically into their organization so that they are better equipped to act in a changing marketplace. One of the biggest challenges leaders have with technology is determining which technology will actually move the business forward. Select the right technology and the company leap frogs ahead of the competition. Guess wrong and the company ends up with obsolete gadgets that become obstacles to doing business.
5. Emotions Rule. Fundamentals and psychology (i.e.emotions) drive every financial markets from Wall Street to main street and beyond. Most financial experts feel that the fundamentals for continued economic growth across the board are lacking. There’s just too much debt coupled with tightening credit and a stagnant job market necessary to drive sustained demand.
With the fundamentals breaking down (financial, housing, investment, retail, etc.) markets are being kept afloat by three basic emotions: Hope, Greed and Fear. People buy when they have hope that the “recovery” has arrived or is just around the corner. They also buy when they feel they can beat the system (the dot-com bubble, housing bubble, etc.) which is greed. Finally, they withhold purchasing when they fear that they might take a loss or make a poor purchase decision.
These three emotions impact consumers, businesses and governments alike. In the New Economy everyone’s emotions are more exposed, excitable and vulnerable. That’s why there is so much volatility and disparity in how these emotions express themselves in the marketplace.
Leaders need to understand that emotions are impacting markets far more than any time since The Great Depression. Ignoring this key principle can lead to negative and possibly devastating consequences.
In spite of all the doom and gloom on the news many companies large and small are thriving in the same market spaces that are claiming former industry leaders. What are these companies doing that allows them to step out from the pack? They recognized that the rules had changed and they adapted to the marketplace pro-actively. By embracing the dynamics of a marketplace filled with VUCA these companies have positioned themselves to favorably respond to all five of the Key Drivers of the New Economy.
The Economy – Who’s to Blame?
Published April 10, 2012 |
It’s amazing, with the economy in a slump, people losing jobs and our GDP in the dump compared to interest payments on our national debt barely showing any rebound we continue to support foreign products.
We ask, “Who’s to blame?” Take a long hard look in the mirror, and then take a look at what’s in your shopping cart. It’s only human nature to look at other people to set the blame. Unfortunately, it is all of us. We go to the store with the idea we are going to get as much as we can on as little as we can spend. However, we don’t realize, by the time we hit the checkout counter, how much we have in our basket isn’t made in the US. Why? Because we saved a dollar here and there. Did we really support our local economy? In most cases the answer is no. Sure, we bought the product from a local store, so we did support the truckers, the stockroom clerk, and the checkout people of the local mega-marts but the products we bought were manufactured in a country that pays its workers a few dollars a day. For what? We only paid a few dollars less for the products than if we had bought a product made by a US company that pays its workers anywhere from eight to ten dollars per hour. In addition, the US workers would have bought more products in the US.
It almost baffling the logic we use.
We see people spend upwards of a hundred dollars for jeans with a special label, later to split pennies when they buy other products. WE NEED TO GET REAL, PEOPLE! Regardless of what the Congress or the Senate or even the President decide to do, it’s up to US to save the economy. And we can do it one dollar at a time. The next time you go to the store, although it may be hard to find, buy the product that says it’s made in America. If you can’t find it, go to the stores that sell products that are made in America. If we continue to shop stores that promote America made products the larger chains will eventually shift their focus, it may take time, but they’re not dummies; they’re in business to stay in business.
As we force retailers to carry American Made Products, slowly we make the change. Realize that it took several years to get the economy where it is today, and without a doubt, it will take years to turn the tide, but with your support, we can re-grow the American economy.
BUY AMERICAN