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Five Things You Need to Know: Social Mood Shift Brings Stark Changes


As a consequence of that shift many intangible assets will be re-priced.


Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:

"I put some whiskey into my whiskey."
- The Felice Brothers, "Whiskey In My Whiskey"

This nugget, from the Felice Brothers, is not advisable. Not for ordinary, decent people anyway. What horrible, disastrous turn of events would even cause a person to think to put whiskey in their whiskey in the first place?

Oh we could speculate, sure. I could catalog a long list of likely whiskey and whiskey drinkers and their self-same tragic circumstances, from ancient pious panhandlers to racetrack touts, pimps, pushers, con artists and vagrants. But at this point wouldn't it be more prudent to just forget this whole whiskey and whiskey nonsense and admit that this lead was doomed from the start?

Yes, Lord help me, for I confess. It was a nakedly brazen attempt at trickery, a reckless stab at trying to escape composing a more thoughtful, structurally sound lead. But you know what? In a sense, it worked. Here we are three paragraphs in and it's too late to do anything but get to the point:

Conventional wisdom says there is always something to buy in a bear market and sell in a bull market; just be sure you aren't putting whiskey in your whiskey.

If the long-term deflationary thesis is correct, the point of recognition will result in the simultaneous decline of virtually all financial assets. Under those circumstances, shopping for bargains among the rubble is like trying to figure out which whiskey to add to your whiskey to your whiskey. Although we may have already arrived at this point of recognition it is still a difficult concept to grasp, especially given the length and magnitude of the secular bull market in social mood and, subsequently, financial assets, that brought us to this point.

Bear markets exist to "re-adjust" and re-price inflated assets. The conventional wisdom that there is always something to buy in a bear market and sell in a bull market, is indeed grounded in a nugget of truth: manias typically conclude with one asset extremely overvalued at the expense of another asset that is extremely undervalued. But this mania has created the overvaluation of all financial assets. So what is left that is undervalued? Intangible assets; relationships, time, quietude, reflection - objects/ideas that are difficult to define and whose value deflated in the mania of accumulation of all manner of consumables and financial assets.

But now social mood is shifting. As a consequence of that shift many intangible assets will be re-priced.

Socionomics is the study of social action that expresses social moods. It is counterintuitive. Most of us believe news events and outside actions cause changes in mood. Socionomics holds that no outside forces change trends and patterns in social mood. Instead, it arises from unconscious herding impulses traced back to evolutionary origins and patterened according to the Elliott Wave principal. In fact, it is these changes in social mood that motivate social action and the interpretation of "news" and events.

This is as applicable to the stock market as it is to consumer behavior, arts and politics.

In an interview with, Robert Prechter of Elliott Wave International, Executive Director of the Socionomics Institute, uses the following chart to summarize and contrast the conventional view of social causality versus the Socionomic hypothesis of social causality.


As Prechter summarizes, "a positive mood induces people to expand businesses, dress with flair, buy happy music, make peace with others and buy stocks. A negative mood induces people to contract businesses, dress conservatively, buy morose music, fight with others and sell stocks. So social mood moves not only the stock market but other measures of social action as well."

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No positions in stocks mentioned.

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