For the last 10 years I have been an active investor in the stock and options markets. During my time I’ve seen three significant downturns (2000, 2002 and 2008), and if there is one thing investing taught me it comes down to this – uncertainty creates fear. If Wall Street doesn’t understand where the market is headed stock indices tend to react with major volatility.
The idea that uncertainty creates fear isn’t solely confined to the financial markets; I believe this is a normal human reaction. Think about it… if an individual is uncertain about what may happen they begin to protect themselves today because they are unsure if they will be able to do so tomorrow.
Take corporate America for example…
Here we have MegoCorp, a Fortune 10 company. It turns out, due to economic conditions, MegoCorp will miss profit numbers by 10% and management is in a panic. As of a result of the confusion, different members of the senior executive team are not speaking with the same message (uncertainty) and a rumor begins – layoffs are coming. Now middle management begins to take action to “protect” their turf (fear).
Cross-divisional projects are hastily cut to save the budget of one area without giving thought to the impact of another division. Different teams begin holding information from each other due to the misguided belief they are creating a competitive advantage for their own area, and before you know it morale in MegoCorp has hit an all time low. Not only is the business now in danger, workforce productivity has dropped, which will only deepen the misfortunes the company is facing….
The MegoCorp example happens all the time, and cases exist when companies never regain their former glory after such events, but with the understanding that uncertainty creates fear, when I hear mixed messages, I begin to take notice.
Now read the following passages from a TimeOnline article “Barack Obama is warned to beware of a ‘huge threat’ from al-QaedaSecurity. Officials fear a ‘spectacular’ during the transition period”
Passage one
General Michael Hayden, director of the CIA, this week acknowledged that there were dangers during a presidential transition when new officials were coming in and getting accustomed to the challenges. But he added that no “real or artificial spike” in intercepted transmissions from terror suspects had been detected.
Passage two
Lord West of Spithead, the Home Office Security Minister, spoke recently of a “huge threat”, saying: “There is another great plot building up again and we are monitoring this.”
Passage Three
Intelligence chiefs on both sides of the Atlantic have indicated that such warnings refer more to a general sense of foreboding than fear of an imminent or specific plan.
Passage Four
“As far as we know there is nothing from the intelligence world to indicate that anything has changed dramatically in recent months to put us on alert for an attack at the moment,” a source said. The present threat level is “severe”, which is the second-highest alert status. But a senior counterterrorism official suggested last month that this should be regarded as “the severe end of severe”.
So, which is it?
Are government officials in the UK and US simply saying it’s business as usual, just be aware that anything can happen, or is there “another great plot building up again and we are monitoring this.”
Again, mixed messages are a good way of creating uncertainty, and that is exactly what security officials in the US and UK are doing. In times filled with enough fear as it is, how will such messages be interpreted by the general public and what will the collective impact be?
I’m tired of the uncertainty and fear.