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The Short-Sale of American Icons


Social mood will play a major part in this market movie.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Once upon a time you dressed so fine, you threw the bums a dime in your prime, didn't you?
--Bob Dylan

The leaders coming out of a crisis are rarely the same as those who enter it. That's true for corporate America and it applies to those high up on the societal pedestal.

In the summer of 2007, Minyanville openly asked if the fall from grace of well-known icons such as Paris Hilton, Lindsay Lohan, and Britney Spears was indicative of the shifting social mood, and by extension, whether it might be predictive for financial markets.

The notion seems silly on its face; the obsession with the whereabouts of a trio of social starlets couldn't be further removed from the inner-workings of Wall Street. We posited the question, however, as social mood and risk appetites shape financial markets, and sure enough, the tape cascaded lower a few months later.

American society is again disenfranchised. It's evident in the divide between the "haves" and "have nots," the red states and blue states, and Main Street vs. Wall Street. Moreover, the recent demise of high-profile icons-from Twinkies to Elmo to Lance Armstrong-suggests that the socionomic tide has turned anew. (See: Hostess and the GM Bailout: Why the Chevy Volt Shouldn't Exist but Twinkies Still Will.)

The Robin Hood Economy

A few years ago, Professor Peter Atwater of Minyanville offered, "As we enter the New Year, I'd recommend that folks review their investment holdings with the growing wave of populism in mind. I anticipate that the phrase, "For those to whom much has been given, much is expected," will take on new meaning." (Also read The Robin Hood Economy.)

Who would have thought that in the following years, financial services, health care, and energy would all be considered "evil"? From the bulls-eye on the back of "fat cat" bankers to tough talk on the beltway-remember when the White House vowed to keep a "boot on the neck of BP (NYSE:BP)?"-it's hard not to notice the path of the wrath.

We long ago warned of the "tricky trifecta" of societal acrimony, social unrest, and geopolitical conflict. Between Occupy Wall Street, The Tea Party, riots in Greece, and the specter of yet another war in the Middle East-not to mention the seismic shift in the European Union-it's safe to say that we're migrating across this most unfortunate spectrum.

At what point does an industrialist become a robber baron? Or a savvy speculator a profiteer? At what point does success become privilege? The answers to these questions have profound implications for the future of free-market capitalism in an intertwined finance-based global economy. And if calmer heads don't prevail, the bottom line might be the least of our concerns.

One of the great misperceptions in financial market history is that the Crash of 1929 caused The Great Depression when The Great Depression actually caused the Crash. While public psychology can be manipulated for extended periods of time, free will can never be caged and the attendant social mood will shape behavioral patterns-and by extension our financial decision-making processes.
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