What a wild week in the markets. Exchange volumes boggled the mind on Wednesday January 24th – and they weren’t driven by fundamental investors executing buys and sells. So let’s talk briefly about global statistical arbitrage and what it means from (or to) the comfort of your IR chair.

Have you ever wondered why on one day Asian investors cheer US Federal Reserve policy and the next, jeer it? Or why European investors one day zig with US markets and another, zag inversely against them? Market observers and 24-hour news pundits often attribute these curious, seemingly bipolar activities to juking and jiving investor sentiment: “Markets rebounded today on renewed enthusiasm over Fed policy…”

You’ve seen it, right? Well, we submit that most of the time it’s no such thing. Rather, we believe this thrashing can be attributed to global statistical arbitrage, or in the simplest of all terms, the efforts by traders to take advantage of minute speed, time-zone and informational inefficiencies at various planetary market entry points.

Why should you care, there in the IR chair? (That rhyme would work well in an official investor relations ditty.) One big reason, so you have answers when your execs and board members wonder why investors are selling shares of a business with outstanding fundamentals and economically resilient drivers.

How to arrive at the answers? Watch the NATURE of the participants in your market, whether you’re listed on the Nasdaq or the NYSE (both give you the means to do this). Note the trading activity of firms in context of global daily ups and downs. If the big Prime brokers, anonymous platforms and well-known arbitrage systems like Lime Brokerage, and ITG and Pulse Trading and on it goes, play dominating roles in your marketplace and lead your stock up and down…odds are, you’re largely a reflection of macroeconomic factors.

We’re simplifying of course. And, really, answers and knowledge can be remarkably precise, given the anonymous nature of today’s markets. Yes, it takes a little time, a bit of education…but you can increase your influence. We believe IROs have the capacity to exercise more influence now than ever.

Then sometimes, you must remind the hand-wringers that it’s best, to use what may seem a mixed metaphor, to allow smoke to clear before opening fire.

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First, let’s take a look at the markets for the initial week of December 2007. From our analysis it appeared that fundamental investors were most active December 4th, while trading lightened considerably by the 7th and carried the telltale signs of massive risk-management and hedging. For investor relations, this means real investors finally followed traders into the maw – we’ve not seen much of that in the past couple months – prompting everybody else to take out insurance on their equity positions. No fund manager wishes to be caught out in the open on a Friday nowadays.

Of course not. However, a few points are worth considering.

Part of the explanation to management for continued volatility is, to use an analogy, like a junior high classroom before the last bell of the day: everybody’s there because they have no choice. But the moment that bell sounds, it’s a rush for the exit. Take the gentle whisper down from the Fed on overnight rates. The market responded by hacking 300 points off the Dow. Summary: Market structure at large is strung as tight as a junior high classroom just before last bell.

Speaking of market structure and analogies, let’s get back to transience and investor relations. Investor relations will never be and should never be a short-term endeavor. Pick your aphorism, from “acting locally and thinking globally” (and you mathematicians don’t jeer me with Diophantine equations, please. It’s a metaphor.), to “think short-term, act long-term,” and the point is that IR must evolve to encompass views of immediate events in order to grasp the big picture on why equities behave the way they do now.

If you doggedly persist in conducting your IR program altruistically, supposing that investors will simply follow your long-term business reasoning…well, as we’ve suggested before, go private. Because today’s public equity markets are no place for you.

If, however, you’re willing to adapt and take some measure of interest in the juvenile hyperactivity (no offense anyone, I’m tying up the analogy) that seems to punctuate both contemporary societal and capital behavior, we think you’ll enjoy your job a whole lot more and feel better about happenings in the short-term to boot – which is great for sleeping well at night (and if you do, so will your CEO or CFO).

In fact, public companies now face the challenge of pushing their story out to multiple audiences through multiple platforms in order to differentiate and gain exposure. Therefore, having a digital communications strategy in place will start with the right program and leverages new communications tools that allow companies to connect with all stakeholders more frequently.

This month we go over seven KEY points that every corporation should know and follow.

1. Keep the Press Releases Flowing:

It is imperative to frequently issue updates on your company regardless if you have significant news or not. This will not only help reach new investors, increase brand name recognition and increase your search engine results but gives you a reason to reach out to existing shareholders.

But don’t let them go to waste. Ensure that every release encompasses what you are trying to say by including interactive media and exposure that elicits instantaneous response.

2. It Takes Time:

It takes time to build a proper IR campaign that reaches the right investors. Promotion through newsletters, direct mail, and broadcasts do work – if you select the right firm. But they also work much better when combined with an IR strategy that can make every news release, email blast, direct mailers, and telephone calls twice as effective.

3. Set Expectations BEFORE hiring new IR or PR Firms:

What are your IR goals? Utilizing proprietary databases of investors developed by a newsletter networks and financial media relations firms work great if you want quick volume but what’s to keep the investors from selling? Corporations often make the mistake of hiring one firm with expectations that do not match their goals. Make sure you understand what the IR/PR Firm will do for you before engaging in their services. Often times, combining the right firms will work wonders and boost results exponentially.

Find an IR strategist that can help implement the proper program and your company will begin to realize the effective benefits of these strategies.

4. Education is Paramount:

Corporations often fail to educate investors regarding their specific industry or sector. Third party reports, analyst research, and educational materials can steer new investments into your company and retain investors. It may be difficult for corporations to keep up with the copious amount of information so be sure to hire a firm that can assist you with these materials.

5. Work Your Way Up:

Do not make the mistake of hiring and paying extravagant fees to IR firms that claim they can provide instantaneous buying into your company. Ask any firm you approach to start off with something small and have them prove their system before shelling out more cash. Often times, a good IR firm should have no problems with this and may often have non-advertised programs for corporations that meet their requirements. Once you have built some trust, do not hesitate to ask if they have or know of any bigger programs that might be in line with your objectives.

6. The Power of Video – How it Works

Online video exposure ensures maximum ROI for your communications efforts. Of all the online users that have viewed an online video ad or promotion, 52% took action, 45% elicited a response, 28% looked for more information, and 16% actually bought something.

Take a look at some of the public corporations who have engaged in corporate videos and see how they trade in terms of volume and reaction to positive news. You will be surprised at how effective a TRUE video strategy can be. However, there are those who have spent thousands of dollars on corporate online video but have failed.

Before your corporation engages in new media exposure and communications, be sure to learn the strategies and opportunities available to ensure the success of your campaign.

7. No More Excuses – Be careful of IR firms that overcharge and underperform

Many IR firms cannot truly explain what it is they do and why they charge so much. Some firms charge to use their chat or forum services and some will charge to feature your corporation on their website. Be sure to understand the scope of their work before making any arrangements. With email spam and unsolicited programs still in effect, be careful when selecting a firm that may utilize these programs as they can tarnish the reputation of your company.

Companies are afraid of engaging new IR and PR firms as the costs for their goals may far exceed their budget. I have been told by too many corporations that their budget just cannot handle, for example, a strategy that includes ongoing corporate video and interactive emails.

Before you shut the door and postpone your IR initiatives, ask questions. Although there are firms that charge an arm and a leg for their services, there are others out there that have synergistically partnered with the right corporations to significantly lower their costs. You just have to find them.

Remember, a good IR or marketing firm will have other programs, contacts, or connections that can help you achieve your goals in investor-related services that are often not advertised and are reserved for their most trusted clients. Do not hesitate to ask!

With the USA out getting stuffed last week, volumes dropped by half in the sample pool.

Some things to consider. Three of Goldman’s trading desks made our Top 25 list of total issues traded, including its crossing platform and wholesale desk. Also Millennium Capital and other big derivatives desks made our Top 25 volume list. Wholesalers had nearly 9% of volume and liquidity providers had only about 15% of the total.

What does this mean for IROs? Short-term trading is very prevalent, while rotation from, say, growth to value isn’t happening. How can we be sure? If Wholesalers are buying and shelving more shares into inventory as market makers and the liquidity providers aren’t needed…elementary, Watson, buyers aren’t showing up.

On a positive note: Prime program traders were back above 30% of volume for the first time in November. Some support still came from algorithms, despite the present deplorable state of things for investors in US equity markets. We believe that there will continue to be significant algorithmic undercurrents in the US equity markets because traders can buy and sell securities in different currencies and perhaps capitalize marginally on spreads. And, at least for now, these will be run by traders, not investors. We’d prefer that it be otherwise, but as we’ve said before, algorithms are like the cash register of the equity markets – essential for transacting retail business. So we will have to be satisfied with what we’ve got.

Finally, the Wall Street Journal noted today that pension funds have been paring US holdings and will likely reduce overall allocations to US equities next year. This is something we’ve been observing and reporting to bigger clients for some time now. All the more reason to make your outreach to pension funds count. This means you have to know your market structure, so you can knock on their doors at the most opportune time. It’s not just story anymore, IROs, but market structure too, that swings the buyside pendulum.

With Thanksgiving leftovers gone (hopefully) and the holiday season upon us, let’s pick up a couple investor relations tips to help us finish out the year the best we can.

But first, we’ll answer that question smoldering like a $10 bill in the pocket of a twelve-year-old: “Did order flow last week indicate that real money was back fueling stocks?”

The short answer is no. The long answer is also no. Liquidity providers, who furnish shares to market centers instead of taking them away were almost unchanged in the ranks. The exception was the 29th and 30th, when retail and time-slice and alternative platforms were way up. This indicated that month-end activity trumped any wish to pick up bargains. In English, this means that a frantic search for liquidity to protect against downside risks reasserted itself on 11/29-30. Buying was selective and specific.

Stay with me here…this is important stuff, IROs. Two IR lessons for technical market corrections and the ends of months in algorithmically driven markets:

#1. Avoid events and news on the last day or two of trading in a month, unless you’re announcing catalyst news, like highly accretive M&A or a major contract. Why? Because you are contending with adjustments to risk-management, transition-management in portfolios, incomplete tweaks to forward buyside and sellside strategies and the possibility that any economic or geopolitical news will seriously throw all the above out of kilter. Why risk that? Wait a few days whenever you can.

#2. If technical corrections coincide with catalysts, reach out aggressively to the buyside. The silver lining of situations like last week’s where the Dow crossed the 10% down threshold and came back up on what the technicians call a “double bottom” (also a description for the result of too much food at Thanksgiving) is that ups and downs are mostly algorithmic. So, say you have big catalyst-style news. Fund managers look good capitalizing on opportunities, but look bad if they go against the tape. So make your self a “special situation” by standing out when the tape goes south. But don’t try this if you have no basis for it. You’ll waste your time on the road.

IROs, I hear you: “Tim, we don’t want to worry about this stuff. We just want to run our investor relations programs.” Well, this Friday, December 7 marks a crucial milestone in modern American history when Americans were saying the same thing about geopolitics. No, we are absolutely not saying market structure is like Pearl Harbor! But we’re suggesting that sometimes you’ve just got to deal with it.