Posts Tagged ‘Short sellers’

It’s not about ‘flash crashes’

May 20, 2010

Well, that kind of day in the market takes your breath away!

The Dow down 3.6%, broader indices like S&P 500, NASDAQ or Russell 3000 off even more. Not much fun today in investor relations – or capital markets as a whole. We’re officially in “correction” territory now, though not a bear market.

The analysts, pundits and politicians will have much to say. Let me just offer this perspective: Life is about the long haul, not the “flash crashes.” I would suggest three applications of a long-term view:

  • The practice of IR has less to do with today’s market price – especially when your company is caught up in a market stampede, up or down – than it has to do with your company’s performance in the next year, or two, or five. Be energized and on top of everything, but keep your eye on the horizon.
  • Investing isn’t really about the short term, either – although some fortunes are no doubt gained or lost on days like today. Investing is still about putting money to work in businesses with the knowhow and guts to create value … long-term. The lemmings are charging headlong one direction or another, but the wiser heads will survive and even thrive in the long run.
  • Regulation of the markets shouldn’t be about a “flash,” either – whether it’s the May 6 “oops” market or the May 20 “we’re really worried” sell-off. Short sellers, or even trading glitches, don’t do much permanent damage – an economy full of fear does. The focus in Washington should be on fostering an environment that encourages the capital formation that, in turn, fuels economic growth. Flogging investment bankers or hauling fat-fingered traders before Congressional committees, while entertaining, doesn’t really help anyone. Ensuring an honest, free, liquid market that enables new and existing companies to raise capital should be the focus of legislation and regulation.

We live in a world dominated by instant media, politicians and analysts eager to jump in front of a TV camera, opinions driven by Internet chatter – so we see a lot of breathless proclamations of one instant “crisis” or another.

Let’s take the long view.

© 2010 Johnson Strategic Communications Inc.