S&P 500, NASDAQ, DOW: Possibility of a Market Correction: Guest Post by Virginia Wirasnik

 Market corrections are unavoidable aspects of the stock market that although sound scary, may be a “sigh of relief”. A market correction is a decline of 10% or less that occurs in the stock market in a short period of time. When the stock market is increasing, as it has been recently, the prospect of potential profits may be too enticing for investors and eventually lead to stocks rising above their actual value.  The correction acts as a breath of fresh air for the market and allows for a return to stability.

The rally of the market currently has some wondering if a correction is in our near future and if it is, are investors ready? According to Alan Valdes they are. Valdes, the director of floor operations at DME Securities stated, "The Fed's pumping $85 billion a month into the market so there's no way for it to go down, but everyone's got their finger on the trigger because they don't know when this is going to turn." (CNBC) As you can see in the chart to the right, the DOW has reached all time highs, breaking 2007 records. In the past, whenever all three indexes have been on an upswing and excelled past their one-year peak line there has been a slight correction. Investors recognize this and understand the correlation between market highs and the necessity of a pullback therefore leaving them waiting for the inevitable.

Nouriel Roubini, the economist who called the crisis in 2006, expects the market to slow down in the second half of 2013. “I think that the market is going to be surprised by how much the U.S. is going to slow down, even compared to last year,” Roubini said, indicating the market could correct “somehow” and lead investors to be disappointed. (Market Watch Blog) Contrary to Roubini, Kenny Polcari, floor director of XYZ, believes there will be a 5 or 6 percent pullback. However, the pullback will be met with real demands, suggesting 2013 will still end high.

Trader: Market correction may be coming

It is difficult to project what the market will do in the future and is best left to the professionals, however, here is my prediction: there will be a correction within the next three months around 4 to 6 percent and it will be the most rapid correction in history. The previous shortest correction lasted only 15 trading days in July of 1950.

If you are an investor, my advice is to listen to a reputable investor’s wise words. Warren Buffet stated "Be fearful when others are greedy and greedy when others are fearful."

Tweet me your opinion and/or predictions, @jennaraz and make sure to hashtag #marketcorrection. 

Guest post: Activism by Jorja Marcil

The Internet and social media have enabled millions to realize and build relationships. People can now easily connect around common interests and causes. Activism organizations have found great benefit from the broad audiences the Internet has made possible. Now, public relations professionals must realize the increasing power of activism organizations. Corporations should not ignore activism voices; instead, public relations professionals must help corporations build relationships with the activist organizations.

I have begun to research the conversations about activism and public relations by utilizing Google Alerts. The initial results have not provided me with many conversations regarding public relations and activism. However, the results have proven that activist voices are everywhere. Many of the results discussed the activist actions regarding Susan G. Komen for the Cure and Planned Parenthood. One article described the actions of activists following the funding announcement as a “virtual firestorm.” Examples of activist movement forces prove that public relations professionals should embrace communication with activist groups or their corporations could suffer. Historically, activists have been viewed as enemies of corporations and public relations professionals. Now, publics demand that corporations be socially responsible and act for the benefit of all, requiring public relations professionals to communicate the responsible actions of corporations with activists and other publics. There is no doubt that the relationship between activism and public relations has changed and will continue to change in the years to come. Corporations must embrace this change and the public relations activist.

For more conversations on activism and public relations please interact with me on my blog!

What is public relations? Students define public relations. Part 2.

Here is the second group of students from Principles and Theories of Public Relations class answering the question of what public relations is. Here is their definition of public relations.

Can you say: PEE! ARR! Say: PEE! ARR!

What is public relations? Students define public relations. Part 1.

Students in my Principles and Theories of Public Relations class were asked to create a user-friendly explanation of what public relations is. This explanation was to be aimed at a person who has no clue about public relations rather than at an expert or a public relations scholar.

This is what the first group came up with: 

How Investor Relations Contributes to the Corporate Bottom Line

I just published another scholarly article focusing on investor relations: How Investor Relations Contributes to the Corporate Bottom Line. The article reviews academic and professional literature on investor relations contributions and claims that there are four major ways in which investor relations’s contribution can be evaluated:

1. Share price

2. Trading volume

3. Analyst coverage

4. Relationships with the financial community

Then, the study subjected these four theoretical contributions to the scrutiny by the investor relations professionals through the so-called Delphi panel methodology (a method initially developed by the U.S. military to evaluate dangers of the potential USSR attack!).

The results indicated that derived-from-the-literature contributions do not always meet the reality test and must be specified.

Share price largely depends on the performance rather than on investor relations efforts, however, investor relations can help that share price be “fair” – in other words, reflecting the actual value of the company rather than “the higher the better.”

High trading volume or lower trading volume can be equally bad for the company – so, it is more important to look at the efficiency of the market in a stock and broadness of the shareholder base.

Similar situation is with the analysts coverage – not just only good or only bad, but rather its accuracy and uniformity.

Finally, building relationship is a measure difficult to quantify, yet fully supported by the professionals. Investor relations officers, however, must look into costs and benefits of various relationships – hedge fund vs pension fund or private shareholder vs institutional investors.

The full article is published in the Journal of Public Relations Research, 2011, Volume 23, Issue 3, pp.302-324, and is available at the journal web site (although it might require subscription in some cases – then, contact me!)

What does it take to be an investor relations officer?

I have recently received an email from a corporate treasurer in an Ukrainian company who asked me about a possibility of a career in investor relations. I think the answers might be interesting to other students and professionals who are considering a career in investor relations as well. So, I kept his original questions with my answers - I just removed the names. Of course, other IR professionals can correct my responses if their experiences were different from mine.

1) What value does financial education/experience in financial industry has for building career in IR?

Tremendous value. Without good understanding of finance it is impossible to be a successful IR practitioner. Also, much of your audience will be financial analysts and professional investors – so, it helps to be able to speak their language. However, in addition to finance, investor relations officers need a good understanding of the way company makes money: know key business processes, key technologies, key R&D strengths, key people, etc. This non-financial information is also very important for investors.

2) What professional experience will be of most value for pursuing career in IR?

People come to IR from various backgrounds – finance is probably the most common; communications/public relations is second, but there are also chemists, engineers, computer scientists, etc. I personally started as a financial analyst, then became mergers & acquisitions specialist, and that led me to IR.

3) What IR services could be provided to a public company by an independent IR consultant? What value can I create as an IR consultant? Is it possible to have an independent practice?

I am less qualified here – I have never been an independent consultant. However, my research shows that although most IR professionals at corporations come from the financial side, most of IR professionals at agencies are communication/public relations specialists. This can suggest that services IR consultancies often provide are related to the communication side of things. Often agencies also do research, perception studies, develop targeting lists for new investors, etc. Finally, I would guess some international IR functions can be outsourced to an agency/consultant. For example, back when I was an investor relations officer, I created ADR/GDR program for the company through the Bank of New York and then worked on listing these securities in Germany, U.K., and USA as well as doing roadshows all over the world to tell the company’s story. Perhaps, some companies might wish to outsource that.

4) What knowledge is of crucial importance for an independent IR consultant and where to obtain it?

I think the uniform advice is before you go independent, work for somebody else. Join an IR agency and try it there – then, you will know what you need and where to get it!

5) What is your opinion about the future demand for IR services in emerging markets like Ukraine?

I think it will be growing in the emerging markets – I do not know much about Ukraine but China, India, and Brazil will probably have many companies looking for an IPO. It is a great way to raise money but it is also a certain status symbol for a company. Just today, Yandex (Russian leading search engine) had an IPO on NASDAQ and did extremely well. It remains seen how it will keep up with all the regulatory demands now.

6) Is IR more about finance or PR?

My view is that IR is right in the middle between finance and PR – both skill sets are equally important for the practice.

End of the semester: Students report results of their campaigns

In the Campaigns class, students have to conduct two campaigns: one for a client and one for themselves. The campaign for a client is a group project and is based on client's objectives. The personal campaign is an individual project that aims to create a professional online presence for students with the ultimate goal of securing a job offer upon graduation.

Here is one student reporting on the results of the group campaign project for a client:


Here is another student talking about what he learned in his personal campaign:

Students-experts

New semester, new students... This time students of the capstone Campaigns class have a challenging assignment of becoming experts in some field of public relations, marketing, corporate communications, etc. and talk about this field online. However, they are not going to be graded based on how many posts they blog or how many tweets they send, but on the actual conversations they engage in with the online community.

I know at least one already picked investor relations!!!

Graduate research class. Blog posts.

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Master of Arts in Investor Relations: The first major in investor relations

I talked earlier that investor relations is a rare subject on college campuses – departments of finance often view it as a communication function, while departments of public relations or corporate communication view it as a financial function. Accounting professors rarely devote any significant attention to investor relations, while management professors give investor relations an occasional mention usually related to issues of ethics or corporate governance.

As a result, standalone courses in investor relations are almost non-existent in regular college programs. Investor relations is usually taught in professional certificate programs, occasionally in master’s level programs.
However, at a recent PRSA conference, I discovered that there is now a complete investor relations program. Yes, yes, not just a course, but investor relations major! It is not an undergraduate program, however. It is a Master of Arts in Investor Relations program, MAIR.

The location of this Master’s program also surprised me – I could expect something like that in the New York area with so many publicly traded companies located there. Maybe even in Washington, DC. But the program is actually offered at the University of San Francisco.

The MAIR program description emphasizes the interdisciplinary nature of investor relations: “The graduate program combines a strong foundation of financial, marketing and legal expertise with the sophisticated public relations skills required in client relationships.”

The program, however, is not part of a Business School or a Communication School. It looks like it is housed in the College of Arts and Science. Not sure what to make of it...

The list of classes students will need to take during one year to earn their Master’s in IR is very impressive and seems to cover all the necessary topics:
• Financial Accounting
• Financial Markets
• Investor Relations and the Investment Process
• Macroeconomics for Finance
• The Practice of Investor Relations
• Communications for Investor Relations
• Corporate Finance
• Corporate Governance and Investor Relations
• Writing for Investor Relations
• Equity Valuation
• Fixed Income Valuation
• Marketing Your Company
• Disclosure and the Regulatory Process
• Derivatives
• Alternative Investments
• Investor Relations Capstone
• Investor Relations Internship (optional)

The faculty list of the program is full of adjunct professors. In other words, the program uses professionals to teach most of the courses – this approach has its pluses and minuses, of courses, but in investor relations there is no other choice – there are literally a couple of professors who teach and conduct research in investor relations. There are only three full time professors listed on the program homepage – with their research interests seemingly focused on economics rather than investor relations.

Anyway, congratulations to the University of San Francisco! It is very exciting news and I wish you success with this program. In fact, I will be in San Francisco next week for the National Communication Association conference. If I have time, maybe I will stop by the USF campus to take a few pictures of the birthplace of the first Master’s program in investor relations.

Graduate research class. Week 10 blog posts.

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Graduate research class. Week 9 blog posts.

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Undergraduate research class. Week 9 blog posts.

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Graduate research class. Week 8 blog posts.

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Undergraduate research class. Week 8 blog posts.

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Graduate research class. Week 7 blog posts.

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Undergraduate research class. Week 7 blog posts.

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Graduate research class. Week 6 blog posts.

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Undergraduate research class. Week 6 blog posts.

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Graduate research class. Week 5 blog posts.

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