As a long time news reader and markets participant, there is little question that media has an impact on market sentiment which, in turn, has an impact on asset prices. I have historically thought of the media complex as being designed to report news and break stories, with an emphasis on information dissemination and analysis. Market responses are then based upon new information ferreted out and reported by the media, in addition to data collection and proprietary research done by investors. But the media of today seems so much different, not satisfied with merely reporting since all manner of real-time media is beating traditional reporting to the punch. And there appears to be a relatively small number of thought-leading analysts who don’t merely report but think, contextualize and predict. There is a dynamism and intellectual curiosity to this kind of reporting that is fresh, timely and value-added, but is sadly the exception and not the norm. Which leaves the rest of media, seemingly unsatisfied with merely reporting the news but instead hell-bent on creating the news.
Bradford Cross at Measuring Measures has been on a riff about this phenomenon for some time. Warren Buffett railed early and often against the biases of business reporting, preferring to shun such publications and to rely on his judgment and analysis for his investment decisions. There have been myriad stories over the past several months about the resurgence of technology investing, but a recent story in the Wall Street Journal titled Investors Get in a Lather Over Tech simply highlights the point of media creating its own frenzy.
Wall Street, facing a raft of regulation and slower growth ahead, has relatively little to get excited about these days. But financiers and investors alike are casting their gaze back to Silicon Valley, in what is shaping up as an echo of the dot-com craze that minted millionaires on both coasts over a decade ago.
Really? Funny, I’m kind of in the middle of it and I’m not experiencing anything remotely like what the writers are talking about. Is the Facebook phenomenon somewhat out of hand? Yes. Supply and demand is out of whack, leading to rapidly upward-spiraling prices akin to a short squeeze. Because a number of high-profile, very successful (read: profitable) technology companies are still pre-IPO (think Facebook, Zynga and Groupon, to name a few), there simply isn’t enough available supply to meet investor demand. And with the advent of private markets, e.g., SecondMarket, this supply/demand imbalance is seen on a regular basis as the prices of the “hottest” pre-IPO companies get bid up month after month. Once the IPO calendar builds and those companies that should be public do go public (and, mind you, they WILL go public), their values will come to reflect their prospects as supply rises to meet demand. This will be a healthy and natural evolution of more broadly monetizing the success of companies that have experienced meteoric growth over the past decade. But are we in a bubble akin to what we experienced in the late 1990s? Please. Even the gain in public techs has been a function of narrow leadership (read: Apple). There are no metrics to justify such a view, yet we consistently read about this theme in mainstream media.
Telling people we’re in a tech bubble makes many feel stupid. If there is such a bubble, then why don’t I own anything benefiting from this bubble? Retail will groan. Only the rich people are benefiting from the bubble, right? Only those “rich” people who are angel investors and own all those shares of Facebook and Twitter, right? Have we read a few stories about this? Oh, yes. Countless stories in this vein. Which means it’s perfect timing for the emergence of retail vehicles to invest in private company shares, fully leveraging the media circus around the second technology renaissance and how we should be investing our 401ks and IRAs in angel deals. You think this is a bubble? THAT will be a bubble, South Seas / Tulip Bulb style. This is a manifestation of media creating a frenzy. Their portrayal of reality is so out of step with objective reality as to be laughable.
Remember when the reporting of the facts with incisive commentary broadly distributed drove frenzy? Today we have an economical reporting of the facts coupled with visual tools based upon Huff’s principles of Lying with Statistics and splashy headlines manufacturing frenzy. Where does news end and entertainment begin? I have no idea. The real news is blocking out noise and listening to your own voice as informed by the trusted and thoughtful content you choose to ingest. Spend a little time each day surveying the landscape, then go away. Too much time spent awash in mainstream entertainment, er, I mean media, is sure to breed anxiety and myopia. And worse still, it is often divorced from reality.