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Social Mood and the Market


A different type of risk for the market

What does it say that I was (again) vilified on the MarketWatch message boards for proactively offering that the hedge fund industry compensatory structure will meaningfully shift and those rooting for an outright evisceration should be careful for what they wish (as hedge funds have assumed much of the intermediary functionality traditionally reserved for broker-dealers)?

I usually sidestep the boards but sometimes sniff them for anecdotal evidence regarding the state of the social mood. While it represents a small slice of society, my gut sense proved true; there is a lot of hate and anger towards all things Wall Street.

I suppose stepping down from a high profile perch at the height of my career and devoting my efforts (and life savings) to effecting positive change through financial understanding wasn't enough. This isn't about me and I'm not taking it personally; seriously, narcissism aside, there is actually a point to be made here.

We often say you can learn a lot just by watching.

We've also said social mood and risk appetites shape financial markets.

Yesterday we noted the similarities between now and December 2006.

Short-term trading aside (as we sit at a multitude of technical inflection points)--and with a respectful nod to the credit markets and the (perception of) government backstops--there is a bigger story here; the socioeconomic manifestation of the financial crisis, phase two if you will.

I don't know how to quantify this evolution nor to I profess to guess the timing. In terms of foresight and proactive preparedness, however, I'm not sure I've ever had more lucidity with regards to my thought process.

And yes, that includes 2003 when I said we should all buy metals and energy, short tech and financials and open a taco stand on the beach in Costa Rica.

Would you like some Tabasco sauce on that?


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