Call it the curse of the magazine indicator. Paul Krugman’s quote on the subject is infamous: “Whom the Gods would destroy, they first put on the cover of Business Week.”
To be fair, most of the work I’ve done on the magazine cover indicator focuses on macro or sector issues: Bull or Bear Markets, specific sectors, Energy/oil, low carb/Atkins, etc. It works better with mainstream publications than with Business mags.
The ultimate example of mag cover timing was Time’s Man of the Year: Amazon CEO Jeff Bezos towards the end of 1999. I noted this in a column on contrary indicators for TheStreet.com in 2001. Time’s timing was flawless; When they bestowed that honorific on Bezos, Amazon’s stock was near its high of $113. It closed 2000 as a teen-ager — under $16. That’s an 86% decrease.
But the best interpretation of that cover was less in nailing the top in Amazon (which it did), but rather, in calling the top for the entire internet bubble — which Time did within a few months of the penultimate peak. That’s damn good timing. BTW, you can have some fun with this by reviewing the entire history of Time’s Person of the Year. Does the complete list (1927-2004) reveal a greater tendency to catch the early parts of a trend — or the opposite, namely, the tail end?
Caveat: I cannot say with confidence that it works as well for individual companies. Sure, you can find Cisco, Dell or EMC on many covers in 1999 and 2000. But these same companies, along with Intel, Micorsoft, Sun, Oracle and dozens more, were on many covers for many years — and hundreds of points — prior.
Lastly, Ed Seykota makes the astute observation that the Magazine Cover Indicator works best with "very emotionally evocative covers." Enough said . . .
UPDATE: February 16, 2005 9:31pm
What did Carly on magizne covers signify?
NYT: "No magazine loved her more than Fortune, but its embrace was fickle. "There is no question that Fortune put her on the map" with a 1998 cover article, Carol J. Loomis, Fortune’s editor at large, told CNBC on Wednesday, when Ms. Fiorina was ousted. Asked if the cover article in the current issue, which pronounced H-P’s Compaq deal a blunder, played a role in the ouster, Ms. Loomis said "I suspect that the article helped," though H-P directors said it did not."
How Big Can Apple Get?
"Back from near oblivion, Apple is setting the pace in a new digital universe where computing and entertainment merge. We asked Steve Jobs how he did it (hint: It’s the software, stupid) and what’s next."
Carly’s Nemesis: Fate or Fortune?
Katharine Q. Seelye
NYT, February 13, 2005