Market Structure Map

Helping IROs understand short-term market structure to maintain long-term peace of mind.

Dec 3-7—Is IR Becoming Transient Like Trading?

Answer: of course not. However…

Let's first take the pulse of the markets this inaugural week past of December 2007. It appeared to us that fundamental investors were most active December 4th, while trading lightened considerably by the 7th and carried the telltale signs of massive risk-management and hedging. IR folks, this means real investors finally followed traders into the maw—we've not seen much of that in the past couple months—prompting everybody else to take out insurance on their equity positions. No fund manager wishes to be caught shirtless on a Friday nowadays.

So IROs, part of your explanation to management for continued volatility is, to use an analogy, like a junior high classroom before the last bell of the day: everybody's there because they have no choice. But the moment that bell sounds, it's pandemonium to the exit. Take today's gentle whisper down from the Fed on overnight rates. The market responded by hacking 300 points off the Dow. Summary: Market structure at large is strung as tight as a…yup, junior high classroom just before last bell.

Speaking of market structure and analogies, let's get back to transience and investor relations. IR will never be and should never be a short-term endeavor. Pick your aphorism, from "acting locally and thinking globally" (and you mathematicians don't jeer me with Diophantine equations, please. It's a metaphor.), to "think short-term, act long-term," and the point is that IR must evolve to encompass views of immediate events in order to grasp the big picture on why equities behave the way they do now.

If you doggedly persist in conducting your IR program altruistically, supposing that investors will simply follow your long-term business reasoning…well, as we've suggested before, go private. Because today's public equity markets are no place for you.

If, however, you're willing to adapt and take some measure of interest in the juvenile hyperactivity (no offense anyone, I'm tying up the analogy) that seems to punctuate both contemporary societal and capital behavior, we think you'll enjoy your job a whole lot more and feel better about happenings in the short-term to boot—which is great for sleeping well at night (and if you do, so will your CEO or CFO).

 

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Market Structure Map

Our weekly Market Structure Map provides unique insights — free — on trading markets, with an exclusive focus on helping investor-relations professionals keep cool in the IR chair.

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