Media manipulation: can’t stop it, but that doesn’t mean you have to fall for it

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You might find on this website, if you’re curious enough, some substantial and dare I say unhinged railing at poor media messaging, or manipulated media messaging. It’s pathetic – the railing, not the media – because it is what it is and there’s no use complaining about it. The smart thing to do is just to understand how it works, catalogue that info, and then do anything but read the news.

 

Through previous experience in a “corporate communications” setting, I learned the group had two functions: one, to provide upbeat company messages to insiders, and second to provide upbeat company messages to outsiders. Two totally different things. Internal communications are uninteresting and inconsequential, so to hell with wasting time on that, but the external part is somewhat more fascinating.

 

The art of external communications is a bit like good magician-ship, distracting the audience so that it looks in a certain direction while you get the pigeon out of your pants, or whatever. You want people to look the other way, usually by dangling something shiny or mesmerizing while no one notices the dirty work. A few interesting examples can currently be found in the media.
First, it’s worth noting that external communications need to be considered as two separate things; reporting as required by regulatory agencies, and the free for all of self promotion. Regulatory reporting, or That Which Cannot Be Avoided (financial statements and other required disclosure), is printed on boring paper, with boring fonts, few charts or colors, and is made to look as much like wallpaper as possible. Corporate executives grit their teeth and sign off on these publications (after much wrangling with auditors as to what must be disclosed) and issue them in as unobtrusive a way as possible, while still meeting securities regulations.

 

The self-promotional world of Investor Relations presentations, however, is another beast entirely. Prefaced by a 1-4 page disclaimer from lawyers, IR presentations are free to soar like home made airplanes, all majestic and proudly-constructed and as reliable as 50 year old Italian sports cars. But they often do the trick of impressing investors; after reading a well-produced example a typical investor will be as star-struck by management as a teenage boy is by Olivia Wilde.

 

The sad reality though is that what the teenage boy would like to do with Olivia Wilde is what often gets done to the investor by management. Not always, of course, but it is not unusual to go through glowing, professionally slick IR presentations that radiate sheer greatness, and within weeks the company is headed for receivership. US shale producers in various stages of bankruptcy provide excellent examples. Several went down shouting about how their wells were outperforming the last, costs are down, production is increasing, blah blah, then boom they’re dead. Like Nassim Taleb’s famous turkey analogy, everything was going great until the day it was executed.

 

Other entities simply use the media to their advantage. Governments are masters at this. A particular fascination in the media is where interest rates and inflation are heading, because financial news outside of earnings season is really boring and interest rate fluctuations are a good reason to do a lot of arm flapping about peripheral stories (will the housing market collapse with a quarter point rate hike? Will fixed income equities crash? Will there be one rate hike or two? Endless breathless jibber jabber ensues…).

 

The government believes however that inflation is driven by people’s expectations, rather than current actions; this notion is directly lifted from economic textbooks (correspondingly lifted along with the daffy definitions of inflation that are at the heart of the bullshit topic (inflation as seen in the news is infinitely adjusted, strips out volatile items, doesn’t include housing costs, etc. etc.)). So endless subtle messages show up in the news through various members of the Federal Reserve board (who sets US interest rates). The purpose of the continual messaging is to shape people’s expectations about future interest rates and inflation. These jugheads pop up at conferences around the country, dropping hints that rates may increase later this year, or maybe not, depending on the data. The media regurgitates every word as some sort of clue as to future monetary policy, despite the fact that the banker in question never says anything remotely concrete. poop on Donald trump sorry that was my daughter commandeering my keyboard but anyways where was I now that I have the keyboard back…

 

There is no point in making indignant waves about these practices in hopes of changing them; they simply work too well in the existing business/media infrastructure. The entire investment banking industry should be replaced by a single spreadsheet with 4 columns – those who need money, those who have money, and contact numbers – but that’s not going to happen either. All that we can do is become aware of how things actually work, and then feel comfortably able to dismiss most current financial news events as nonsense.

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