So if you're an investor today was one hell of a day. The DOW dropped 1,000 points at one point. Financial news commentators were left with blank stares and nothing to say because they couldn't explain what had happened.
So what's going on?
I mean, we've known about the Greece scenario now for months. Was the market really factoring in 10 percent 'good news' ultimately coming out of that situation? And then when Trichet, President of the European Central Bank, gave an off-handed remarked today that buying government bonds was not discussed at the bank's Thursday meeting, everyone decided to bail on the market?
Give me a break. Greece's total debt is perhaps $400B. The market at its peak lost over a trillion dollars of equity today. You could have paid off Greece's national debt more than two times over with that money. Does this seem in anyway reasonable or logical?
Or perhaps the sell-off today was the result of some fat fingered Citi trader who hit 'b' for billions instead of 'm' for millions? No way.
What we are witnessing is the effect of public relations. Investors, the media and the world-at-large want answers when things happen or fears are excited. They want leadership and clarity.
In the absence of leadership, they will panic. I was watching Mad Money today and a caller was asking Jim Cramer what was he suppose to do now? Sell? Hold? Buy?
He went on to say that it makes him want to leave the markets for good. He even went so far as to say that after a day like today he felt like the only thing that could make it better was a 45 (an obvious reference to the Colt 45 handgun).
Cramer was stumped and did his typical side-stepping of the question.
Public confidence in government, institutions, and markets has been beaten, stabbed and starved to death over the past five years.
Why?
Yes as a result of wars, terrorist attacks, housing bubbles, etc. - all of those things were causes.
But in and of themselves they aren't enough to send people running to the hills every time there is a hiccup in the market. We've become a society that over reacts to everything.
We hyper ventilate and damn near have a heart attack. Then five days later, when whatever was driving us crazy is explained, everyone takes a deep breath, calms down and we go back to thinking the world will be fine.
It's within this context that I'm going to make a pretty bold statement. The world probably needs to triple its public relations professionals.
The reality is that in a global villiage / marketplace your audience is 6x to 12x bigger than it would have been even 20 years ago. On top of that, publics are prone to over-reacting to negative news, which increases the importance of what you say and how you say it even more.
If Trichet would have been prepped better prior to speaking with the media... if there had been enough personnel around him to have had the time to anticipate the impact of various phrases.... if he himself had been trained in public relations such that he realized the impact of his words...today's crash may never have happened.
A simple statement to the effect of "What we have in place right now will sufficiently contain the crisis. Should buying government bonds be required we are prepared to consider such action. But at present, the $140B rescue package will stabilize the situation."
Simple. The markets would have reacted by saying "Oh, ok. If things get bad you'll do whatever you have to do - including buying bonds."
Trichet's current course of action would be protected, investors would take a wait and see approach, and it would have been smooth sailing.
Instead, by only saying: "We didn't talk about bonds today." he sent a message that the market interpreted as being "We're not prepared to go so far as to buy government bonds." And voila... panic and crisis in the markets.
Interviews with the media have become more challenging. Before you could be asked "Is there a fire?" and respond "I don't see one." and everything would be fine. Now if you respond "I don't see one." the follow up question is "But there could be one right? You didn't see the last one. So is the house on fire again and you aren't telling us or don't know."
Public relations is all about establishing a clear line of communication with your publics so that misunderstandings, confusion, and all kinds of other misinformed, emotion-based reactions don't occur.
The markets crashed today because people reacted badly not only to the 'news' but to how the news was delivered. By Trichet and by the media.
In two weeks we'll see fears subside and markets return to normal. Or we'll see panic escalate and markets sell off further. The difference will probably rest in the net average of various public statements made about the state of the world by CEOs and politicians around the world.
We are living in fearful, stressful and uncertain times and we should be massively ramping up our public relations efforts. A sound, stable world requires regulations and stable markets, but it also requires timely and articulate communication.
This whip-sawing of public sentiment from fear and panic to relief and hope is predominately a function of the fact that the voice of reason is rarely being heard because people are doing a pretty bad job of communicating.
I hope tomorrow that when the ECB addresses the media that they do a good job in communicating. If they do, I think we'll begin to see the markets calm. If they come off as unclear, a sell-off will occur.
Whether it was today or Katrina or the Iraq war or WTC or the swine flu - public relations serves a valuable function in our society and we should be adding resources to this function. Situations are best handled when communication is well planned, delivered in a timely fashion and done with clarity. I don't see these standards excelling in the world today and my guess is that organizations don't have the departmental resources to achieve these standards.
That has to change.
So what's going on?
I mean, we've known about the Greece scenario now for months. Was the market really factoring in 10 percent 'good news' ultimately coming out of that situation? And then when Trichet, President of the European Central Bank, gave an off-handed remarked today that buying government bonds was not discussed at the bank's Thursday meeting, everyone decided to bail on the market?
Give me a break. Greece's total debt is perhaps $400B. The market at its peak lost over a trillion dollars of equity today. You could have paid off Greece's national debt more than two times over with that money. Does this seem in anyway reasonable or logical?
Or perhaps the sell-off today was the result of some fat fingered Citi trader who hit 'b' for billions instead of 'm' for millions? No way.
What we are witnessing is the effect of public relations. Investors, the media and the world-at-large want answers when things happen or fears are excited. They want leadership and clarity.
In the absence of leadership, they will panic. I was watching Mad Money today and a caller was asking Jim Cramer what was he suppose to do now? Sell? Hold? Buy?
He went on to say that it makes him want to leave the markets for good. He even went so far as to say that after a day like today he felt like the only thing that could make it better was a 45 (an obvious reference to the Colt 45 handgun).
Cramer was stumped and did his typical side-stepping of the question.
Public confidence in government, institutions, and markets has been beaten, stabbed and starved to death over the past five years.
Why?
Yes as a result of wars, terrorist attacks, housing bubbles, etc. - all of those things were causes.
But in and of themselves they aren't enough to send people running to the hills every time there is a hiccup in the market. We've become a society that over reacts to everything.
We hyper ventilate and damn near have a heart attack. Then five days later, when whatever was driving us crazy is explained, everyone takes a deep breath, calms down and we go back to thinking the world will be fine.
It's within this context that I'm going to make a pretty bold statement. The world probably needs to triple its public relations professionals.
The reality is that in a global villiage / marketplace your audience is 6x to 12x bigger than it would have been even 20 years ago. On top of that, publics are prone to over-reacting to negative news, which increases the importance of what you say and how you say it even more.
If Trichet would have been prepped better prior to speaking with the media... if there had been enough personnel around him to have had the time to anticipate the impact of various phrases.... if he himself had been trained in public relations such that he realized the impact of his words...today's crash may never have happened.
A simple statement to the effect of "What we have in place right now will sufficiently contain the crisis. Should buying government bonds be required we are prepared to consider such action. But at present, the $140B rescue package will stabilize the situation."
Simple. The markets would have reacted by saying "Oh, ok. If things get bad you'll do whatever you have to do - including buying bonds."
Trichet's current course of action would be protected, investors would take a wait and see approach, and it would have been smooth sailing.
Instead, by only saying: "We didn't talk about bonds today." he sent a message that the market interpreted as being "We're not prepared to go so far as to buy government bonds." And voila... panic and crisis in the markets.
Interviews with the media have become more challenging. Before you could be asked "Is there a fire?" and respond "I don't see one." and everything would be fine. Now if you respond "I don't see one." the follow up question is "But there could be one right? You didn't see the last one. So is the house on fire again and you aren't telling us or don't know."
Public relations is all about establishing a clear line of communication with your publics so that misunderstandings, confusion, and all kinds of other misinformed, emotion-based reactions don't occur.
The markets crashed today because people reacted badly not only to the 'news' but to how the news was delivered. By Trichet and by the media.
In two weeks we'll see fears subside and markets return to normal. Or we'll see panic escalate and markets sell off further. The difference will probably rest in the net average of various public statements made about the state of the world by CEOs and politicians around the world.
We are living in fearful, stressful and uncertain times and we should be massively ramping up our public relations efforts. A sound, stable world requires regulations and stable markets, but it also requires timely and articulate communication.
This whip-sawing of public sentiment from fear and panic to relief and hope is predominately a function of the fact that the voice of reason is rarely being heard because people are doing a pretty bad job of communicating.
I hope tomorrow that when the ECB addresses the media that they do a good job in communicating. If they do, I think we'll begin to see the markets calm. If they come off as unclear, a sell-off will occur.
Whether it was today or Katrina or the Iraq war or WTC or the swine flu - public relations serves a valuable function in our society and we should be adding resources to this function. Situations are best handled when communication is well planned, delivered in a timely fashion and done with clarity. I don't see these standards excelling in the world today and my guess is that organizations don't have the departmental resources to achieve these standards.
That has to change.
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