Why Kim Kardashian Matters to the Stock Market
Understanding social mood as a leading indicator of risk appetites.
Can't really tell, by looking at the markets at all-time highs here in late April of 2013, but there's something that we need to see, as we always strive to see both sides of every trade. But it's important to remember that markets shape mood to a degree, even though what we're talking about right now is that the causal inferences that we all make are seemingly backwards, but to a degree, folks don't want to talk about what could go wrong when stocks are at all-time highs. Nobody wanted to talk about the housing bubble in 2006, 2007, or the looming financial crisis, for that matter.
Even though it was no great mystery when the Financial Accounting Standards Board started talking about bringing level 3 assets back on the balance sheet, it didn't take rocket science to say, wow, these financial institutions are really over-leveraged. But nobody wanted to talk about that, and it wasn't until after the first phase of the financial crisis arrived like a clap of thunder that folks - and by "folks," I mean investors, policymakers, and politicians - nobody really wanted to talk about it until it had already arrived.
So, my hope with this presentation is to maybe open our eyes a little bit to what's going on around us so we can prepare for what could happen on the horizon before it actually gets here. But to get back on point, we mapped what we called the "tricky trifecta" back then, and that's something that I'm going to talk about a little bit, because the tricky trifecta still much remains in play. The tricky trifecta, in short, is three phases of the social mood that is manifesting throughout society right now: societal acrimony, social unrest, and geopolitical conflict or strife.
Societal acrimony, we can look back at the way financial institutions were perceived, the backlash against banks coming out of the crisis, the BP (NYSE:BP) oil spill, the vernacular that we were hearing at the time, the rejection of wealth. It was pretty pervasive back in 2008, 2009.
And we saw then the second phase, the social unrest, start to manifest. The Tea Party, Occupy Wall Street. The riots we saw in Greece. The all-too-familiar shootings that we've seen in schools and movie theaters and the like. All symptoms of this social unrest that seems to be picking up in pace.
And finally, the geopolitical conflict or strife, the third phase. I don't know what that looks like, whether it's the Middle East, whether it's cyber-warfare. Unfortunately, that still is playing out, but it's something that we need to be increasingly aware of, not only as citizens, but as fathers and mothers and brothers and sisters, as we start to move forward.
And we look at what's going on within our borders, and for me personally, a couple of years ago I moved my family out of New York City because I was concerned about the forward direction of social mood. And for me, one of the events that hit home the most was the Newtown tragedy, because that could have been Anytown, USA. And it's not just Newtown that stands out; I mean, it wasn't just the one senseless act that's so horrifying. Through my lens, it's the rate and the pace at which these events have transpired since 2008.
I have a laundry list here, and I'm not going to go through each one of them because it would take up the rest of our time together. Whether it's Memphis, Tennessee, or Ft. Lauderdale, Florida, or Madison, Alabama, or Tucson, Arizona - it goes on and on. Blacksburg, Virginia; Jacksonville, Florida; Oakland, California; Aurora, Colorado, and The Dark Knight Rises - and right back to Newtown, where a gunman killed 20 children and six others at Sandy Hook.
These are not random acts of violence. These are symptoms of a much larger and pernicious disorder, in my view, The Devolution of American Social Mood. And this is in many ways a detachment from reality and an erosion of the family construct, and a marked change that we must be diligent and aware of if we ever hope to change this course.
History books will depict this period with the benefit of hindsight and an absence of emotion. But for those of us who are living it here in 2013, we must figure it out as we go, in real time, and prepare ourselves for what's to come. So, much like the Great Depression, in my opinion, this is an era. It's not an event; it's not a one-off. And we've learned all too often, whether it was 9/11 or the Boston Marathon a couple weeks ago, there is a big difference between loss and loss.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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