A CPA by way of Texas A&M and PriceWaterhouseCoopers, Karen moved on to finance at Duke Energy. At DCP Midstream, the joint venture between Duke successor Spectra and ConocoPhillips, Karen took the IR chair to spin off a limited partnership by way of a December 2005 IPO on the NYSE, and she’s been there since. Having her here at ModernIR is like winning the lottery. We’ll finally have superior leadership. Karen is a doer (and she’s super good-looking to boot).

Two other notes: I’m speaking on market structure at the Conference Board’s IR Council in New York Thursday March 11. I’ll be in Silicon Valley March 24-25. If you’d like to meet while I’m out west, I’ve got four spots left on the docket. Drop me a note.

Let’s turn to trading. Something may have changed in March. Program trading – that equity river of life comprised of the crowd’s money – is down. Yet markets are up. How can that be? If programs decline, there’s less selling along with less buying. Trading models continued apace and a supply/demand imbalance formed. It’s like a tug of war where one party lets go of the rope. By our measures in March so far, rational buying is around 6% of volume, while forms of risk-management and speculative trading make up the other 94%.

That may not be true for your stock. Traders aggressively seek anomalies. But whatever the behavior setting your price, it’s evident in market structure. Sometimes it’s a yawn. Other times, it’s eye-popping. Knowing is always cool.

Skeptics say you can’t know what’s behind trading because volume is anonymous. So is the wind. But you can tell which way it’s blowing and what affect it’s likely to have. We take all the breezes and put them together and see if the crowd is setting wind speed, or something else.

You hear all kinds of things about trading. Fifty percent is in programs. Seventy percent is high-frequency. Half the volume is ninety percent algorithmic, to take Yogi Berra’s witticism about baseball and twist it.

So what exactly is it? We can guarantee you that more than 90% of volume is affected by market-structure risk management factors. If you take 100% of your volume, there is a very good chance that 70% of it, give or take, is “high frequency trading,” or forms of arbitrage, market-making and programmed volume designed only to profit from small moves or market inefficiencies and to manage portfolio trading risk or costs. In other words, it’s not there to invest in your stock.

How does that make sense?  Some program trading is churn trading.  Some risk-management volume is, too.  But altogether, it’s mostly fast-moving and almost entirely mathematical.

Exchanges and specialists focus on your biggest market makers. Many look at block trades.  That activity matters less than you think to your price.  It’s the crowd and it’s following the trend. But who’s setting the trend?

All order flow behavior must meet the same market rules, regardless of purpose or time horizon. That alone enables us to see differences. Most activity follows the crowd – which is why most fund managers don’t outperform the market. Some volume speculates on the movement of the crowd, and other volume hedges against the possibility that the crowd is wrong. We don’t have to know who’s doing what; all we have to do is observe the interaction of all the diverse parties. Behavior, in context of rules, materializes.

And if you know the behavior behind your price and volume, you will feel a lot better about the IR chair under your behind, even if you don’t like what you see.

Only fort-two and I’m turning into a grousing old goat! I doubt many of you would disagree that I’ve sniped about the state of the markets the past few issues. There is method to my madness though. We want investor-relations professionals to be powerful, relevant, informed and cool. We believe knowing market structure is key to coolness.

But what do you do with it? One of our new trial subscribers, a big company you’d know, got its first market structure profile last week. Our systems found rational buying setting price on 2/22. We said, “Was there a reason? News?” They’d met with large institutional investors that day. That’s one use – knowing the real price from the trading and risk-management prices.

But the other crucial thing ties to my apparent glowering. We need to move Boards and management teams to learn how modern trading works and to care about equity markets – which are no place for long-term investors anymore. If everybody trades and nobody invests, in time these markets will have no capital-raising purpose.

You and I can’t change that. But your CEO can. Your Board chairman can speak up. Your independent directors have voices that matter. Right now, matter of fact, Congress is planning a big regulatory push. We’ve already observed a dropoff in rational investment in the data just since November. In some issues, volume is down by more than 40% in four months. But the amount of short-term fluid trading that owns nothing and risks nothing is higher than ever. The solution isn’t eliminating trading. Do that, and there will be no shares trading.

We need instead to revisit the purpose of equity markets. They should match growing, job-creating companies with investors willing to take chances on them. Instead, they’re where you trade stuff in minute, high-speed increments according to mathematical rules. Does that sound healthy to you? If it does, then the regulations coming down are fine.

Speaking of trading, DE Shaw runs runs the Oculus Portfolio, the Dihedral Portfolio and the Razor Portfolio. I don’t mean to pick on DE Shaw. Last week, Fidelity Capital Markets launched new algorithms called T-HAWK, Recoil and Adrenaline, which use real-time market-structure data to identify optimum execution prices. Fidelity also has Darksweep, an undisplayed liquidity aggregator hitting 40 venues. Everybody has similar tools.

Back to DE Shaw, these funds apply “mathematical techniques to identify profit opportunities arising from subtle anomalies affecting the prices of various securities,” to quote part of the firm’s quant strategies description.

It’s what works today. These things are great for ModernIR. Our business is booming. We’ve grown more in the past year than ever before. We can knock on about any door and get invited in.

What yanks my chain is the lack of substance in our equity markets and the way public companies take it without so much as a burp. If intermediaries make all the money, then the market is like insurance: overpriced and inefficient. 

So we hope the growing readership here at The Map helps management get engaged and make a difference.

As background, we’re readying a comment letter for the SEC’s Concept Release on Equity Market Structure. Exciting stuff! (We heard your groans all the way here in crispy, crunchy Denver). Really, they did a good job and it’s worth reading.

But markets are inefficient the same way air travel is today. If you want a bargain ticket you’ve got tools galore. Kayak, Vayama, CheapTickets, Travelocity, SideStep, Priceline, on it goes, plus every airline website. Sure, you’re in control and you’ve got gobs of information and technology at your disposal. If you’re nimble you can pick up a whopper of a bargain. But you can spend hours trying to track it down. You’ll pick from fewer flights and fly in packed planes.

In trading markets it’s similar. There are lots of choices but few distinctions. The markets are jammed with all kinds of jostling travelers. And what’s more, you can’t take the first deal you see if it’s not the best bid or offer. No, you must hunt through every site or send your order on.

On the surface it looks great. Little trips happen super fast and the prices are awesome. But the slick veneer hides a disturbing reality. This is no place for long-term travelers looking for comfort and wide open spaces.

All analogies break down, so let’s shift our lingo. We see dozens of examples each month showing how equity markets are inefficient. Here’s one: a client with market cap of $1.5 billion had a trade that resulted from an institution adjusting a hedge against portfolio risk. It was a couple hundred thousand shares in the closing cross for an issue that routinely trades 1.5 million shares. Over the next five days, these shares trickled and matriculated through trading desks, dragging the price down. When a party bought a chunk, the stock price jumped five percent. That in turn affected all the current market participants engaged in various trading activities, wildly altering market structure a second time.

This is why markets are dominated today by reactive trading that’s cheap, swift, small and anonymous. It might seem efficient to regulators and to the many participants making and taking liquidity. But it consigns public shares to the status of permanent short-term travelers fighting through the crowd.

It’s a lot like air travel. It’s not fun. It’s not an experience you anticipate with the warm fuzzies. If you had an alternative, you’d probably seize on it. You are treated like chattel rammed through a rule structure that seems to have your safety in mind but really drives you out of your mind.

In short, equity markets are not efficient because they reflect forced behavior that discourages staying around and which requires participants to expend great effort to meet the best price. The participants who find these conditions to their liking have thrived. Banks make little money underwriting and vast seas of it trading. Many thousands of participants chew away at tiny spreads and generate good profits.

But the public companies whose shares constitute the currents of the market cannot consider their stock a good measure of investor sentiment anymore. Most sentiment reflects reactive trading and spreads. What’s more, investors are discouraged from committing to stocks for the long term, because it’s cheaper and less risky to trade, and you get better yields on assets to boot.

Maybe we need to separate trading from investing and managing risk. They are fundamentally different pursuits. Remember how purist insurance salespeople used to say, “Why would you treat your protection from risk as your investment vehicle? That’s goofy.”

Speaking of derivatives, the dollar retreated today, and US equities rebounded. We all want it to be about investing. Commentary everywhere today polished bullishness to an economic sheen. But that won’t make it reflect reality. Money keeps buying short-term love because the direction of the dollar is like a blacksmith’s bellows on equities.

Tomorrow starts three days of expirations. We saw speculative trading spike last week, while European money returned on Feb 10. Traders had already discounted Greece’s woes and had gone searching for alpha. There are too many reasons for traders to pursue global statistical arbitrage (and regulators keep giving them more). Translating, that means it’s fun trading similar instruments in opposing fashion in different places to profit on spreads and timing, and not much fun investing in stuff.

What changes that? Funny you ask. We want to hate banks. We’d like it all to be Goldman Sachs’s fault that our economy is bloated on derivatives. Those blasted Wall Streeters and their nefarious schemes, like borrowing money at 15 basis points from the Fed, then using it to buy Treasuries paying 350 points of interest. Taking TARP cash and trading with it. Manufacturing reserves and using them to float atmospheric notional value swaps for obscene fees.

All that may be true. But banks don’t set interest rates on Fed money. Banks don’t decide, “Hey, let’s go con the Fed out of some cash.” Banks don’t determine the size of the money supply. Banks don’t write reserve rules. No, while we’re all tarring and feathering sellside CEOs, the folks spraying gasoline on everything and playing toss-the-match can be found at the Federal Reserve.

If we don’t want our stock markets to behave like roulette wheels, we must stop playing with Federal Reserve house money, which is cheap and artificial – or shall we say, derivative. Primary dealers from Barclays to BofA march as the Fed orders. Don’t think those folks who OK’d 100-cents-on-the-dollar payouts to AIG counterparties are aw-shucks hayseeds who got jobbed. They knew what they were doing. We should be asking why, rather than railing at the foot soldiers. We may not like the answer, but it’ll be true.

Speaking of money, I personally put cursor to Excel workbook and tallied 2009 earnings before non-cash items and taxes for seven of the primary dealers – the eighteen big US, European and Japanese banks commissioned by the Federal Reserve to make orderly markets in dollar-denominated US obligations – and came up with $185 billion. With a ‘b.”

From whence came these profits? Who deployed cash in the capital markets? It wasn’t institutions and individuals. The US government deployed about $3 trillion. Lord only knows how much came from other global central banks.

Lesson of the day: Governments create money. Goldman Sachs is not responsible for it. Banks work with what they’re given. If they get a gigantic mountain of cash, you can bet they’ll work with it.

If we want more investing and less trading, we might dump all that snow on the east coast atop the Federal Reserve and put the fire out. Unless Whistler offers a better deal.

Everybody’s got an opinion on why the market is yinning and yanging. We, I believe uniquely in IR, look at market structure first. That is, we see the trading data and behavior, and then from it we ask, “Why did that happen?”

Most everybody looks at what happens and infers that these are the causes for market activity. But, here’s the thing: money moves for three reasons today – investment behavior, speculation, and risk-management. It’s easy to get it wrong from the outside looking in. Thus, we think there’s greater accuracy in drawing conclusions from the evidence than in applying the evidence to your conclusion.

We saw a large rift form in the equity markets on February 2. Trading and investing activities were subordinated to risk-management flows. These are orders managed by software systems that respond to instructions and data about market risk. It may have been prompted by Greece’s problems. Perhaps American jobs data, or central bank woes in Argentina, where inflation was 17% in 2009. Maybe something else.

But that would be looking in from the outside. Inside looking out, here’s what happened: Systems executing orders for defensive reasons rose up in mass. It’s like a crack in the continental crust that squeezes out the stuff that forms mountains. Except here, it was risk-management volume – both buying and selling – that extruded from the rupture. When it ripples through nearly every issue like a fault line, you may be fairly certain it’s macroeconomic, not about your stock or story.

In fact, from the completion of monthly expirations on Jan 20, to February 4, we saw strong indications of risk management trading. It was similar to what we observed on October 1-2 last year, when the markets nearly fractured, and akin to the “healing” volumes in March and April 2009.

There are certain entry points where these volumes can be found. Among them is Goldman Sachs. When GS appears with large volume increases in 80% of issues (but you won’t see it in trading volumes), it’s a curious thing, and it affects all other behaviors. If you try to isolate whether it’s buying or selling, it’s impossible. All programs do both. So it requires seeing the activity in relation to other activities in order to understand what form of behavior has changed conditions in the markets.

Goldman isn’t alone. In fact, most times these volumes hit the markets through “sponsored access,” one of the activities that the SEC considers a gateway for exploitation. We don’t know if that’s true or not. We do know that in three different significant instances in the past twelve months, sponsored access has helped the markets heal.

We call these events “synthetic weaves” in the markets, stitching up a gash in the market structure. It leaves big question marks. Who’s behind it? Where is the money coming from? Why does it buy and sell seemingly unrelated issues en masse? Is it helpful or hiding a chasm ahead?

We can posit ideas in response, but who’s to say? We surmise, however, that economic data are secondary to the supply and pricing of currencies. And we can think of only one force with that sort capital capability.

Why does it matter? It’s a great way to clear the crowd out from around the water cooler. People quickly go quiet and start glancing at their watches when you let drop “synthetic weave in the equity markets.” Also, it helps explain why your business isn’t properly valued by trading markets.

Have you been keeping up on the intrigue in global markets? There’s the central banker in Argentina resigning after a battle with President Kirchner over use of reserve currencies. In Greece, even King Leonidas and his three hundred Spartans would find the country’s balance sheet a mighty foe. The Euro has plummeted (after our Italy trip, darn it). Australia leaves its interest rate alone after a series of raises, juicing the markets and dropping the Auzzie dollar.

This seismic activity shifts plates in other parts of the global market, IROs. It’s pretty basic to IR, actually. For instance, in the last three days of any given month we see significant window-dressing activity behind institutional trading, especially if mid-month hedging activity with options expirations is hyperactive.

That in itself isn’t new. But it’s made bigger and badder today because of intertwined trading, investment and economic markets. If a company generates revenues in multiple regions, and its shareholders also have investments in other jurisdictions, it’ll affect your stock price in some way. Risks must be smoothed and absorbed. This is today’s institutional investor’s Job Number One.

Even if we don’t totally believe it, we tend to act in investor-relations as though equity markets are vacuums where prices are set by buyers and sellers who are magically immunized against the figurative dusts and pollens plaguing every other thing on the planet. We think our stock prices go right on tying to financial results, despite the great deal of obfuscating noise, from fragmented markets, to continually fluctuating monetary supplies, to quite literally the price of tea in China, get in between. We can only sigh when we see market commentators continue blithely on, despite massive global monetary dislocation, as though the “free markets” will behave as they always did, shrugging off the seismographic chatter and rendering accurate and proper proxies of value.

So we need to take charge IROs. One key thing we can do is to get better about when we report the crucial information that informs the 25% of the audience still well-tuned to business fundamentals. When avoidable, don’t report earnings inside the last couple days of a month because that’s liable to rock risk-management metrics – especially if you do large business in other jurisdictions. Wait till the following week, when you have leeway. Don’t be in a rush to look like everybody else. Machines love uniformity of timing.

Don’t report during options expirations, because the only parties you’ll really help are speculative traders. Do it before or after. In a sense, you force investors to choose you, rather than choosing to gamble with iron condors or some other put/call tactic. Plus you give those active investors trying to keep fundamentals in the game the best chance to act on your news without being penalized by derivative hedges.

If that’s confusing, think about it this way. For matter, there’s anti-matter. For every credit, there’s an offsetting-debit. Every action on this planet and in our universe governed by the laws of these particular three dimensions produces a reaction. The same is true in trading markets (it takes two sides, every time).

So don’t think in a vacuum. Consider what impact your results will have if you were insuring the investment, not making one.

And now it’s time for après ski!

A word on last week’s panels in KC (see Dick Johnson’s write-up at his superb blog) and NYC about modern trading: Had a great time in KC and felt we effectively explained how different time horizons and purposes, combined with lots of passive market-making, affect stock prices today. In NYC, it was a bit frustrating. We started in the middle and never got out of the maze. Sometimes the magic works, sometimes it doesn’t.

Speaking of the maze, you hear the term “program trading” often. Did you know that every other purpose for owning your stock may be overwhelmed by programs? It’s important to know their effect on your stock, and what’s behind them.

The NYSE defines programs as system-driven orders in 15 or more securities totaling more than $1 million. Every Friday, there’s a blurb in the Wall Street Journal on it, and Friday January 22, it was 27.6% of volume on the Big Board, up quite a bit from the week before.

We view program trading a bit differently because markets have radically evolved since the NYSE defined program trading that way. To us, managed, multi-day, multi-stock order-execution is program trading. Stripping out the jargon, we cluster execution by its behavior, and if it’s being managed to fit volume, and it’s happening over multiple days in more than one issue, it’s program-driven. We miss some, but not much. By our measure, program trading on the Big Board averages over 50% of volume, and a bit more than that on the Nasdaq.

This river of liquidity is the lifeblood of the equity markets. It balances out mutual fund inflows and redemptions, it rebalances ETFs and asset-allocation models and pension and sovereign-wealth funds, and it tweaks portfolios according to market risk. Just a few years ago, it had the flavor of investment value. That is, data on financial performance played a big role in its behavior. Today, those things take a back seat to market risk, an eyelid-drooping term that means “what can screw up my portfolio performance today?”

The markets have changed a lot. Shares for meeting the needs of these constantly swirling programmed waters are harder to locate. There are many intermediaries, and pockets of liquidity tucked into corners, and everything is affected by everything else. Morgan Keegan executes a sell order for a conservative investor in bank stocks, and over in tech equities, the trades trigger rebalancing in leveraged ETFs.

While any little thing can affect trading now (that’s a separate discussion), and high-speed, low-cost execution cloaks some massive inefficiencies in our markets when it comes to re-locating liquidity of any size at all, everything depends on the river. If we don’t have good, healthy program trading, the risk climbs for everybody, and prices move inversely to risk.

During expirations last week, we had a massive, program-led dislocation in the markets stemming from a steep rise in the cost of portfolio insurance, reflected in the pricing of various hedges. So money sold equities to reduce risk, and bought derivatives as insurance. Result: markets crumbled by hundreds of points. This is the truth. We can see it in the data. Anything else is peripheral to risk-management right now.

And here’s what keeps Ben Bernanke up at night, we surmise: half the volume in the equity markets is dependent on program trading. Most of that volume is driven by a handful of very large banks. Liquidity is now being withdrawn from the banking system. Mortgage-backed securities auctions, which have a big impact on other asset classes including equities in programs and which are led by the same banks, are ratcheting down.

If program trading starts falling, risks rise in the markets. This is a delicate balancing act for monetarists. And of course, if something other than supply and demand or buying and selling is setting prices, then the market isn’t really free.

TRAVEL UPDATE: I’m in Kansas City today joining Joe Ratterman, CEO of BATS, and Jeff Albright, head of equity trading at Waddell & Reed, for a NIRI panel on how stocks trade. Thursday Jan 21, I’ll be at the NYC NIRI meeting with Professor Bob Schwartz of Baruch College, Jim Ross from NYSE Euronext, and Donald Bollerman of Nasdaq OMX to “demystify the markets.” See Events & Articles at modernir.com for more, and join us.

Last Friday, money moved from equities to derivatives as options expired. News perhaps influenced the shift, but on the whole, trading was a sum of reactions. These shifting sands haven’t changed much since June last year. Despite the reasons why not, we hoped for more rational enthusiasm in the New Year. Instead it’s more of the same. Money isn’t acting, it’s reacting. Market behavior is determined by other market behavior. There’s no goal to outcomes, except to adapt.

That part isn’t surprising. Capitalism is the profitable adaptation to change. Now, around the globe, the mortgage markets, the banking industry, a large portion of the automotive business, the insurance markets in substantial part, a growing portion of the health care sector, the breadth and scope of risk management, and the chief medium of exchange, the dollar, are defined by something other than profitable adaptation. What’s left is tick-by-tick trading. No wonder that’s what we’ve got.

Speaking of trading, Mary Shapiro said last week that the SEC may soon prohibit “naked access,” a somewhat voyeuristic term for renting out your courtside box seat at the equity market. It’s better termed sponsored access, because you’re using somebody else’s seat.

Shares today move at bionic speed. That renders ponderous trading moot at most times. It consigns small floor brokers and old-fashioned one-customer-at-a-time orders to the backwaters and eddies. So imagine you were on Main Street and all the big-box retailers in the suburbs emptied the town of customers. Then somebody came and said, “I’m going to run eighteen-wheelers down Main Street. I just need your store as a loading dock.” That’s sponsored access.

Sure, some sneaky forces use it. But the SEC is yet again regulating to capillaries to the harm of arteries. An example: KeyBanc Capital Markets, a full-service broker-dealer and money manager offering research and underwriting but no algorithmic trading, in October began using SunGard Assent for sponsored access, algorithmic trading and access to dark pools. Keybanc can’t compete on the trading floor. Assent gives them the access, speed, risk-management and trade-optimization tools they lack.

Assent itself is a product of market evolution. Assent was formerly Andover Brokerage, a provider of trading systems under the HammerTrade brand. We used to consider their volume proprietary day trading.

The SEC and others, including Goldman Sachs, think sponsored access might increase risks. If we have lots of it and the markets have behaved well, where’s the evidence? We have seen data that suggest to the contrary how sponsored access may have crucially forestalled a global equity retreat October 1-2 of last year. Risk-management, we observe, is often a primary purpose for sponsored access – not its biggest shortcoming. Sponsored access provides a means to move large liquidity fast and within market rules. This is essential to offsetting slippage in other asset classes when you’re managing risk.

Perhaps an exception will be granted for the Keybanc form of sponsored access. Yet, that’s the root problem at all levels – at least in the USA. We are about uniformity. That’s what “created equal” means. Our form of government is supposed to reflect uniform justice. Instead, it’s a gigantic collection of exceptions.

I’m moved to reference Section 15A-6 of the SEC Act. It’s for broker associations like FINRA, but the principle applies:

“The rules…are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information…to REMOVE IMPEDIMENTS TO AND PERFECT THE MECHANISM OF A FREE AND OPEN MARKET…to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers…or to regulate by virtue of any authority conferred by this title matters not related to the purposes of this title…”

Perhaps the SEC should return to basics. The best way is not to do, but to undo.  IR professionals and the business of forming capital and fostering creative, productive enterprises would benefit. Investors would again find equity markets a place to leave money for the long term with an expectation of a return.

Speaking of chaotic action, let’s review trading basics. We tend to think trading is buying and selling stock. To quote John Kerry, would that it were! Most trading today isn’t done for capital appreciation but to capture short-term divergence or to balance risk.

We’ll start with the big picture. The broad market-structure profile thus far in January isn’t too different from the same period in December, except volumes are up about 20%. The increase is mostly electronic market-making – think of it like transaction processors who don’t own things but simply facilitate commerce for a fee. By our measure, that’s about 36% of trading.

Who’s doing business with them? For one, speculators. These participants, which range from the largest bulge-bracket desks to the smallest introducing brokers, have driven about 33% of volume in January. Notice that it’s similar in size to the EMM segment.

Risk-management program-trading is another roughly 21%. This activity rebalances index vehicles, mutual funds, asset-allocation models, counterparty obligations and so on. The remaining 10% is active investment. There’s some crossover of course, because algorithms run close to 98% of volume today and barely any trades are old-fashioned manual entry.

Keep in mind that investors pursuing value and growth don’t trade every day. They tend to do thing in lumps and globs. Still, owning things for sustained periods is risky business now. Instead, securities are in constant motion. This is why speculative and market-making volumes are so high. Inexpensive, high-speed execution is ubiquitous because there is constant, chaotic motion of shares, driven by complex mathematical systems.

Even active money moves this way. What an investor thought yesterday about the value of a given stock may be different today. Perhaps program trading changed, causing sales traders and execution specialists to take offensive or defensive postures. There’s no stasis in the markets, unless it’s what regulators illogically and weirdly hope to achieve with “systemic risk.”

Ironically, these conditions mean market structure is easier to understand than you might think. Math is logical. Even Chaos Theory is a mathematical proposition. Things move from a state of order to a state of disorder. Molecules move apart over time to fill available space.

This matters, IROs, mostly because it’s reality. We can deny reality and continue to do the same old thing. Or we can be proactive and redefine our job and its measures.

Resolve that Twenty Ten is the year you’ll get to know your market structure and introduce your management team to your stock’s Market Structure Profile.

I grew up in the Snake River Breaks northwest of Boise. In tiny Huntington, where I quarterbacked the eight-man high-school football team, a guy ahead of me several years achieved local fame at middle linebacker for the Boise State Broncos. BSU was I-AA back then, in the Big Sky league. Last night, it was great seeing the Broncos go 14-0, beating undefeated and 4th-ranked TCU in the Fiesta Bowl. The little big sky school has come a long way.

Speaking of a long way, here we are in Twenty Ten. What to expect this year? Lots of fun, of course! For those of us hovering about the gilded IR chair, it’ll be the year you create job security for yourself by knowing your market structure. The moment you start chattering about risk-management resets, you might see the eyes of execs glazing over – but they’ll be happy to pay you to know what you’re talking about! I’d say that’s worth looking forward to.

And will we here at The Map shut up about money supply already? Nope. You’ll hear more about monetary policy, because it’s the entire – yes entire – reason that neither the IR industry nor the global economy is really, in fact, growing. You cannot claim to have a free market and at the same time manage market outcomes with monetary policy. Nobody knows the value of things, then, and that’s really bad if you’re trying to create value.

Plus, Nature constantly changes. Capitalism is profitable adaptation to change. When the whole world is fixated on keeping some unfortunate event from ever happening again – trying to stop change – we are defying not only Nature, but the very thing that fosters prosperity and a vibrant IR profession – adapting to change.

As to what happens in the markets, nobody can predict the future. Money will continue to value your stock on the basis of use, with risk managers more powerful, investors less powerful, and speculators reacting to both. We track the behavior of money because IR folks now must be purveyors of knowledge, not just voices to investors. Knowing what’s happening, even if you can’t change it, is critical to IR value.

Differing ways money uses stocks is likely to result in continued broad equity appreciation, perhaps beyond 11,000 on the Dow. But like a bungee cord, markets stretched by elastic money supplies will contract. Period. Equity markets do still reflect the value of created things. Even if risk managers continuously tweak settings and speculators arbitrage movements. If we’re not creating things, and we’re gumming the gears of adaptive change with rules and hoops and do’s and don’ts in a bid to protect ourselves from the scary unknown, our equity markets will come to reflect moribund inertia.

Moribund Inertia isn’t even a good name for a rock band. So let’s change it.