Originally Posted by redbopeep
Thinking about bull and bear markets? How about a bull market of the simple things in life?
This article was written by Kevin Depew 11/18/2008 on a blog (Minyanville).
The particular blog carries a lot of advertising, however I've used Depew's writings as a credible source of timely financial news and trends related to the markets--similar to the Wall Street Journal, Bloomberg, CNBC or other large commercial sources of market related news. I must admit the advertising is overwhelming along the sides of the article
so I've pasted the text here.
The article's text:
"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.
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 Socionomics.net, 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.
link to chart
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."
I have been following this idea very closely for many years now and believe there are many quite visible signs illustrating the going shift in social mood from peak positive to more negative. Below are a few of the more recent signposts suggestive of a very deep and important shift in social mood.
Consumer Culture & the Death of Luxury
"The great, secret and special American guilt of owning nothing, noting at all, in the one land where ownership and virtue are one. Guilt that lay crouched behind every billboard which gave each man his commandments; for each man here had failed the billboards all down the line."
- Nelson Algren, "The Man with the Golden Arm"
There's nothing new about challenges to consumerism. Nelson Algren's fiction, much of it written in the 1940s and 1950s, consistently challenged accepted ideas about consumption and social norms while painting harrowing portraits of individuals society would rather pretend did not exist. Social mood determines how much, if any, of those anti-consumption messages and views are embraced and endorsed by the crowd.
Take a recent article from the New York Times, "In Hard Times, No More Fancy Pants." The article is chronicling the recent change in attitudes toward displays of wealth, opulence and glamour. "There’s a shift to get away from glitz,” [restaurant designer Orit] Kaufman said. “I’m almost starting to feel that luxury is a dirty word.”
Could there be a fashion accessory that has been more of a beneficiary of lingering bullish sentiment and the remnants of positive social mood than Crocs (CROX) footwear? The bright colors, the apparently state-of-the-art construction materials. So why has the company seen its stock collapse from $74 to less than $1 per share?
During periods of peak positive social mood, fashion is dominated by bright colors, flamboyant and even skimpy attire. Few fashion trends capture as much of those traits as Crocs footwear. However, unfortunately for Crocs, the race is now on to see if they can shift gears and survive long enough to catch up to the transition in social mood.
A transition to a negative social mood will entail a shift away from bright colors in fashion, more austere color schemes and even anti-fashion.
Look for 2009 to be a dark, apocalyptic year for films. Because films take time to greenlight and produce they can provide stark evidence of social mood appetites. It is no accident that Will Smith's "I Am Legend," a remake of the dark apocalyptic Charlton Heston film, "The Omega Man," appeared just as the subprime debacle and credit crisis began unfolding,
Coming up in 2009 are two even darker films, "2012" about the end of the world, and "The Road," based on Cormac McCarthy's grim, post-apocalyptic book of the same name. From the increasing popularity and intensity of torture-related horror films to content featuring cynical, dark and brooding themes, the shift in social mood has created a larger appetite for media reflecting underlying negative trends.
Food/Beverages and Consumables
Forbes called it "Bottlemania." BusinessWeek recently thrust the issue into it's so-called "Debate Room,": "Bottled Water IS a Big Drain, Pro or Con?" New York City Mayor Michael Bloomberg intends to co-sponsor a resolution to prohibit city spending on bottled water. Meanwhile, Americans drank more than 30,000,000,000 bottles of single-serve water last year. What's going on here? After all, the bottled water industry is, technically, 30 years old. Suddenly, bottled water is a ripoff? A waste? Or worse, dangerous? What changed?
One thing. Social mood.
Make no mistake, there is nothing wrong with tap water, and there never has been. As the BusinessWeek article points out, we pay up to 4,000 times more for bottled water than tap water, and more than three times what we pay for gasoline; all this for water that is far less regulated and which frequently tests worse than tap water in both taste and purity. Pepsi's (PEP) Aquafina label bottled water is actually tap water. So is Coca-Cola's (KO) Dasani bottled water.
So why do we suddenly care now? Simple, as social mood continues to darken and turn against symbols of excessive wealth and consumption, the former icons of bull market glee and prosperity begin to tarnish in the public eye.
There is absolutely nothing wrong with bottled water other than its cost over tap water. For 30 years it's been fine to pay for the convenience and fashionable appearance of water in a bottle. Now, however, it's something to rail against as mood shifts. Social mood will seek to portray this as a war against waste and excessive cost, but it's actually grounded in the psychological need to vilify the old signs of overconsumption in order to accept the reality of cutting back. The acceptance of that reality is easier if we are able to manufacture something "wrong" with that which is just beyond our economic reach.
So sit back with a tall glass of refreshing tap water and enjoy the rush to disassociate from yet another fading idol of the bull market.