Political Risk Seen By Major Advertising Group

WPP Stock Falls Hard in London

By blackhedd Posted in Comments (8) / Email this page » / Leave a comment »

Here's a story that is rather parochially related to the media/branding/strategy industry. It's about the travails of WPP Group, one of the world's "Big Four" advertising organizations.

I'm pointing it out to you because of a fascinating quote by WPP's chairman, Sir Martin Sorrell, about Presidential politics in the US.


In my own businesses, I've often looked to the health of the media/branding/strategy industry as a leading indicator of future business conditions. The theory is that large companies undertake branding initiatives in advance of anticipated revenues, with about a six-month lead time.

So it got my attention when London-based WPP Group announced a putrid third quarter, with revenue growth falling well short of analysts' expectations. Their stock is getting hammered in London trading this morning.

But why would Sir Martin Sorrell, WPP Group's peripatetic CEO, set expectations for weak business conditions in 2009, well over a year away?

Because of political risk in the United States:

WPP said the recent liquidity crisis in credit markets, triggered by defaults on U.S. subprime home loans, had no effect on WPP's business so far. ``There has, as yet, been little or any effect on spending levels across the board, both functionally and geographically,'' the company said.

A ``more important concern should be the impact that any new U.S. administration will have on 2009,'' WPP said. A new government might ``be tempted to dispense any politically unpleasant medicine to the electorate, early in the potential eight-year political cycle,'' the advertiser said.

As I said, the lead time for media/branding initiatives is often about six months, so it's not surprising that current economic conditions aren't yet having an impact on WPP's revenues.

But I have to tell you, it's only on extremely rare occasions that a CEO goes out of his way to identify political risk in the United States. You expect that kind of statement with countries that are susceptible to military takeovers or socialist strongmen, but not here. Almost invariably, the political climate in the US is nothing more than a sideshow, from a business perspective.

I can only speculate on the kind of risks that Sir Martin has in mind. But I don't think he's expecting the Republican nominee to win the Presidency. Almost everyone I know who is involved in business or financial planning, takes a Democratic President as a foregone conclusion in 2009. And as a practical matter, that means Hillary Clinton.

So what kind of behavior is WPP anticipating from the next President Clinton, that will have a significant impact on the US economy, and (by extension) on media/ad spending?

My guess would be massive tax increases, onerous new regulations, and some kind of national health-insurance initiative. What's your guess?

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Political Risk Seen By Major Advertising Group 8 Comments (0 topical, 8 editorial, 0 hidden) Post a comment »

voters will make sure that Hillary (SOCIALIST) Clinton will not be President.

How cute it is that so many in the media etc are feeding the animal now however they are not the masses and their predictions will be wrong.

It was a hope and a prediction in Europe that Kerry would win and we the electorate showed them to wrong and we will again.

Freedom of Religion not Freedom from Religion

Sir Martin isn't expressing a hope for a Democratic President here. He's saying that business is going to suck in 2009 because of our election.

This is an extremely unusual statement. A CEO just doesn't stand up and blame someone else for his problems. That tends to make his shareholders call him up to say "So tell me again, creampuff, what the he*ll am I paying you for?" Especially not problems that are more than a year away.

My reading isn't that there is a hope for a Democratic President. Rather, there is a fear of a Democratic President. And your comment speaks to expectations of what the electorate will do. But don't forget that understanding consumer behavior is WPP's core business. That's why I'm so struck with this.

This way if he just does average he is a hero.
"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Business people are not in business to take more risk than what is absolutely necessary. They are in this to make money for their company, and for the stock holders. That is why people invest in their companies.

It is is only practical reality that the current political winds are being heeded and business people are preparing for it. This does not mean the results are a forgone conclusion. It just means that barring the Republicans actually delivering in some tangible way something to restore confidence that they are changing the direction of those winds, the business people know what is coming, and it is not good for business.

Wubbies World, MSgt, USAF (Retired):
public static void main(String[] args) {
System.out.println("An argument is a sequence of statements aimed at demonstrating the truth of an assertion.); }

of the US Military and massive increases in UN fees.

Wubbies World, MSgt, USAF (Retired):
public static void main(String[] args) {
System.out.println("An argument is a sequence of statements aimed at demonstrating the truth of an assertion.); }

Apart from what you mentioned, I expect a surge in access-buying via the K Street route as corporate America comes to terms with the new regime.

And Hillary is far more disciplined than Bill.

A new government might ``be tempted to dispense any politically unpleasant medicine to the electorate, early in the potential eight-year political cycle,'' the advertiser said.

Should the Hildebeast win and have a democrat congress, we will likely see:
- massive government bailouts of those 'homeowners' struggling with heavy debt due to bad decisions on mortgage loans/credit cards/equity lines of credit/general financial idiocy.
- socialized medicine within 2 years and a collapse of our health insurance industry with subsequent gov't programs.
- Huge increases in taxes for anyone making over $65000.
- The Fed more politiized than ever, with a further lowering of interest rates and the final collapse of the dollar (what will be left of it anyway). The Euro becomes the new international reserve currency. US citizens of means will shield most of thier funds overseas.
- Illegal aliens getting all government benefits and ultimately granted legality 'just for being productive members of our society'. Expect minimal petitions for citizenship and an increase in border crossings.
- Crushing new burdens placed on manufacturing, mining and power generation with Carbon taxes (to pay for medical and mortgage bailouts). This will force much of our remaining manufacturing off shore in the interests of self preservation.
- Watch for price and wage controls to 'limit' economic chaos. It will start in a small segment of the economy, but will soon spread. Obvious results.
- Reaction of Wall street, and especially the international credit markets, will be swift and harsh. The Fed will monetize the debt to pay off our debts spurring rampant inflation.

She is an elite socialist and knows only government solutions. She has never had a real job and is utterly clueless as to how things really work. Look at Venezuelan economy to see the direction we will be heading.
Before anyone says that it could not happen in the US, look at where we are today. 30 years ago would someone have thought we could be in the position we are in today? The traditional American nature that everyone counts on to keep us on course has been so diluted and filtered out by 30 years of PC, indoctrination in our education system and propaganda in the media that we have lost our fail safe mode. We have lost the critical mass of Traditional Patriotism in our citizenry that was the keel of the ship.
New Orleans ain't just in Louisianna folks.

Sorry to get all gloom and doom, but we are on the tracks for a very tough 20 years or so. It will be rough regardless of who is in the WH, but having a socialist megalomaniac will act as a misery multiplier.

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