The Chicken Little News Cycle.

August 29, 2011

Stay Inside. Stay Safe.

"This one just didn't measure up--according to the hype."
"We remember the little boy who cried wolf, that's what I worry about."
"Some of the shots I saw of reporters talking about localized flooding and then sticking their boots into a pool of water... To me, that's not localized flooding, that's just continuing the hype."
"And stop calling it a hurricane when it's not a hurricane."
-Joe Allbaugh, former director of FEMA, on CNBC, 9.29.11

. . .
The television reporter gazed intensely into the camera, courageously explaining that--while the viewer could not see it, the rain was painful on his face.
"We are in, right now, the right eye wall, no doubt about that... there you see the surf," he said breathlessly. "That tells a story right there."
He stumbled. Pushed to and fro by apparently ferocious wind gusts.
Across the screen's bottom come the words, "Breaking News: Irene Batters Long Island." Soon replaced by, "Stay inside, stay safe."
In the background, bystanders chatted, ambling about the ocean front. Goofing around, people waved at the camera. A bicycle rider traversed the screen.
The Story of Chicken Little begins with an acorn falling on Chicken Little's head. So scared is Chicken Little about the sky's inevitable fall, she determines to tell the king.
In route to the palace, she passes friends with whom she shares her bad news. Sick with fear, they join her quest. The group spreads hysteria throughout the countryside, until they run into Foxy Loxy who, promising to lead them to the king, diverts them to his den where the group meets an unplanned, ignoble end.
While there are many morals to this story, the one I convey to my sons is this: always think for yourself. Buying into the hysterical opinions of the majority can lead to unforeseen problems.
These last five days, we all watched anxiously as Chicken Little, Henny Penny, Ducky Lucky and their ilk manned the outposts of the apocalypse. Speaking breathlessly into microphones bearing the letters CNN, FOX, ABC, CBS and NBC, these excited critters explained the financial, political, cultural and meteorological impact of Hurricane Irene.
Hollywood movies and their scenes of ecological disaster replayed endlessly across our imaginations as populations across the eastern seaboard evacuated ahead of certain annihilation.
In the end, the damage up and down the coast was grave. But the downgraded Tropical Storm Irene fell far short of the catastrophic hopes of our mediatocracy. The disappointment was palpable.
Welcome to the Chicken Little Media Age.
People once received their news from the daily newspaper and the evening network news. Following their news distillation, people went about their days in perfectly healthy and productive ways.
In fact, the nation incurred its most dynamic period of economic growth before the inception of 1700 cable television channels, 985 satellite television channels, 200 satellite radio channels, four national newspapers, three local newspapers, four local broadcast networks, 18 local radio stations, hundreds of established internet-based news outlets, hundreds of thousands of blogs, and a dozen popular newswire companies. Each operating 24 hours a day, seven days a week, ad infinitum.
Each individual news organization employing staffers, editors, reporters, writers, gaffers, producers, technicians, executives, managers, camera people, secretaries, designers, sales people, ad infinitum.
When your grandfather took in the news, it was exactly that--news. An event that required a bit of back story, a dose of analysis, and the opportunity for you to digest everything and draw a conclusion.
That was then.
Today's omnipresent, all-encompassing media leviathan works under a new auspice. One that requires it to take today's happenings (once known as The News) and enhance these happenings into full-blown events. Blurbs become novels. Home video turn into feature length epic films. Lessons into doctorate-level dissertations.
Your grandmother tuned into the news. Today, you cannot escape it.
War, famine, pestilence, business, politics, economics, sports and the weather. All day, every day. And when that's not enough, don't fret. God forbid you be forced to serve as the protagonist in the unfolding drama of your life.
Instead, Bravo let's you participate in the lives of those who actually have one. The Kardashians. Hiltons. Chefs. Flippers. Pawn shop brokers. Tow truck owners. Cops. Flops. Addicts. Athletes. And the Osbournes.
How can you be expected to have a life when you're so busy learning about the lives of others?
One begins to understand how the media spends a week serving up the devastating potentialities of an eventual tropical storm when one realizes the magnitude of time, salaries and advertising revenue which must be justified and accounted for each and every week.
Why hit singles every day when Hurricane Irene lets you clear the bases with one seven-day swing of the bat?
And who else loves it? Politicians. Control the news, control the world!
No less an authority than Howard Kurtz points out that politicians and the media enjoy a symbiotic relationship during impending disasters. Both groups can leverage such events to make rain, be it with constituents or advertisers. But, these can quickly turn against the rainmaker when an agenda, beyond that of public service, is exposed.
When NBC's Matt Lauer jump starts your day with references to the oncoming depression barrelling down upon your economic well being like an out of control train, of course you'll tune into NBC's Dateline that night to learn more about this nightmare turned reality!
We live in an age when "Stay inside, stay safe" is media speak for "Stay inside, watch more TV."
No wonder we're so terrified. Chicken Little said the sky is falling. And she has proof! Can't leave the house. Better hoard cash. Postpone that trip. Cancel that birthday party. Delay that break pad replacement. Lower junior's tuition bill. Skip that restaurant. Ban those movie rentals. Adjust that anniversary celebration. Ratchet up the fear level.
Batten down the hatches, boy, we're under siege!
Until we're not. Because the storm arrived and was nothing like what Chicken Little claimed it would be. Only, it's too late. You spent so much time watching news broadcasts, analysis and replays that you failed to follow the most interesting narrative of all. Your life.
. . .
Following its 15% correction, the market regained its footing last week, rising 4.74%. Currently, the S&P 500 rests like a bird on a perch at the crucial 1200 point. What's next?
The most important piece of economic data this week will be Friday's Non-Farm Payroll numbers. After all of the sour news these last few weeks (some real, some manufactured), we expect a bad number.
Increasingly, we've seen much of the economic data come out as flat to negative. And flat, in an recovering economy, may as well be negative. It is growth this economy needs. Not water treading, sideways moving status quofullness.
IMF head Christine Lagarde depressed the Jackson Hole symposium crowd when she unequivocally stated that the global financial system is still in precarious shape despite four years of pumping money into it, and that monetary policy is unable to help.
Most poignantly, the former French Central Bank Chief said that "There are no easy solutions, but that does not mean there are no solutions."
Hopefully, political leaders took note.
There was an interesting tidbit to arise from last week's spin cycle.
The Obama administration is considering the idea of permitting homeowners with government-backed mortgages to reduce their interest rates to today's low levels even though they lack the sufficient home equity required to do so. This could produce a huge boost to consumer balance sheets if it passes Congress.
This savvy act of fiscal generosity could serve as a much needed jolt to the economy's most needy arenas: the housing market, banks, consumers and retailers. This could have been done a couple of years ago. But, better late than never.
Unconventional monetary strategies have had their day. Printing money, that is, quantitative easing, has had limited benefits. Time to try something else. Especially if that something goes flows into the main vein of the American economy--consumer's wallets.
Watch for this market to test S&P 1200. If it closes higher for a week, then a push higher to the 1260 mark is not out of the question. If not, and the economic data continue to pour forth in cold spurts, then we could be in for a chilly fall. Stay tuned.

Securities offered through Dempsey Lord Smith LLC – Dempsey Lord Smith LLC, Rome, GA Member FINRA / SIPC / MSRB.

Advisory Services offered through Dempsey Lord Smith, LLC, an SEC Registered Investment Advisor. Clearing through and accounts held at Charles Schwab & Co., Inc.

Dempsey Lord Smith, LLC nor Hyde Park Wealth Advisors LLC provides tax or legal advice and you should consult your accountant and/or attorney if considering an investment of this type. Hyde Park Wealth Advisors LLC is not controlled by or a subsidiary of Dempsey Lord Smith LLC. Investing in Alternative Investments come with a variety of risks that could result in a complete loss of principal investment.

Alternative Investments offered as private placement securities are offered only to qualified accredited investors via confidential private placement memorandum. Income and returns are not guaranteed and there are no assurances investments will meet their stated objectives.

© 2024 Hyde Park Wealth Advisors. All Rights Reserved