There is a telling chart in Alan Abelson’s column this week that might work as a basic sentiment measure: How often "Goldilocks" shows up in the Financial Press as a term.
"THE SIMPLE BUT ELOQUENT CHART that adorns these wordy
columns was sent to us by an old friend. What it shows through the agency of a
single line is the number of times the name "Goldilocks" has appeared in the
financial press as a description of the investment climate. The line tracing
that now familiar utterance represents a four-week moving average stretching
back to the mid-1990s, when the term first became part of the Street’s
lexicon.
As you can see at a glance, it has climbed sharply of late, in
pace with the venerable Dow Jones Industrial Average, to an all-time peak. What
does this unprecedented use of "Goldilocks" show? Apart, of course, from the
verbal limitations of the financial press and the old reliables who are turned
to for comment because they give good quote.We submit that it’s a pretty accurate barometer of the
speculative atmosphere. For, in one important sense, the "Goldilocks" rationale
— that the economy is not too hot, nor too cold, but just right — serves quite
handily less as an explanation of the favorable action of the stock market than
as an excuse for being bullish in the face of some obtrusive negative like
excessive exuberance in the Street.That certainly seems a valid way to view the recent spike in
the "Goldilocks" count. For the economy, instead of achieving some magical
equilibrium between overheated and frosty, is clearly beginning to cool and gets
more vulnerable by the day to recession, as the housing collapse inexorably
worsens.But, whatever it may say about the speculative temperature, as
the chart graphically depicts, a sharp rise in "Goldilocks" sentiment presages a
drop in stock prices. Our advice to investors, then: Do flinch the next time you
hear or read the word — for it’s a sharp reminder that it’s not too early to be
wary."
Barron’s source used Factiva — a resource that covers only Newspapers, Magazines and Newswires (not blogs or websites) — but there are other ways to measure this Goldilocks phenomena:
A Google Blogsearch reveals 18,668 instances of the word Goldilocks in blogs
Google Trends shows a modest uptick in search (though its hardly a helpful or common search phrase)
I’m sure there are many other ways to cross check this concept.
Any other smart ideas? Post ’em below . . .
Source:
Who Dun It?
ALAN ABELSON
UP AND DOWN WALL STREET
Barron’s MONDAY, NOVEMBER 27, 2006
http://online.barrons.com/article/SB116383896571527445.html
Does this chart take into account the 8 times in your post…? Goldilocks… Goldilocks… Goldilocks… Goldilocks… Time to Sell….
Econolicious
If the chart just counts uses of goldilocks, then it is not very useful. What you really want to know are the numbers of times it is used in the affirmative – that what we are experiencing is a ‘just right’ as opposed to discussion about ‘is this the goldilocks scenario?’.
Some of the companies that scan the web to do research on a product’s reputation can supposedly pull out positive and negative evaluations, though sarcasm is still difficult for software to appropriately categorize. [yes, goldilocks economy and everything in iraq is great – couldn’t be better…]
You need to be better analyzing if it is an endorsement or a detractor of the goldlocks scenario. Then, find a way to track links and secondary endorsements of those articles.
Look this is entirely way too biased.
What about the three bears? They deserve some play! Or the wolf, woodsman, hansel, gretal, the witch, sleeping beauty, and the dwarves. The only thing that comes even close to the sleeping beauty thing are all the references to Apples….
I think the covers of major magazines seem to work better. Show me a bull or a bear and a reference to a market on time, newsweek, business week or such and I might have something for the folks in the media are usually the last one to know.
The best indicator is usually to find an inteligent person who knows nothing of the markets and when he or she wants in or out that seems to be more of a contrary tell.
People hate real estate right now but all you guys talk about is whether we have a stock market top. I do not see overexcessive zeal in the market unless I watch CNBC and they are paid to have a knee jerk reaction to immeadiate results and will change them in a blink.
I did a little digging through actual recent blogs and news articles using the term “Goldilocks” to determine the context in which the term was used. It was a relatively small sample size but the results are not what you would expect. The news articles basically an even split between those that were bullish vs those that were bearish. But the blogs were heavily bearish leaning and most mentioned the term “Goldilocks” in a cynical or mocking manner. The details are covered in my blog entry.
There are other “memes” that would be interesting to see in a time series plot.
– “market of stocks” (It’s a market of stocks, not a stock market)
– “market is overvalued” + “market is becoming overvalued”
– “investor optimism” – “investor skepticism” (this might require some sort of normalization).
Goldilocks is a real word? I just thought Larry Kudlow had turrets syndrome. :)
Brother. What ECONOMISTA NON GRATA said. Without a context for the usage this is meaningless – this is indeed a shallow bit of reporting. And the more stuff like this I read over here to support the Bear case, the less credibility the rest of the content has. Sooner or later there will be a market pullback but in the meantime, you’ve missed a 25% rally (or worse).
http://tinyurl.com/ylap2d
Anyone who can still bear to remember 2000, should recall these terms, and anyone into trend analysis will spot the upside breakout last month of the word, “recession”, but the real tip-off is that conditio sine que non, two words made famous by crooked Y2K brokers: “go long”.
Run, Forrest, run!
http://www.cross-currents.net/charts.htm
All the more egregious trends since Fed/Treas has been cooking the books and running the printing presses on GDP since the Y2K meltdown showed the emperor has no clothes. The Pope of Mammon is nakers.
No wonder Papists are calling Mr. Muhammad Yunus a Bangladeshi terrorist, and have declared global war on Sharia Law which charges no usury.
“Your terms – microloans, Yunus, sharia law – do not have enough (Google) search volume to show graphs.”
Whiskey Tango Foxtrot!
This is a Factiva word count:
Factiva only Newspapers, Magazines and Newswires (not blogs or websites)
Whiskey tango. You’re speaking our language.
Ever been taxi surfing?
I understand that this word count is from Factiva and is based on Newspapers, magazines, and newswires. But it is probably safe to assume that by searching for news items on the web and blog sites containing the word “Goldilocks” that one should get a fairly representative sample of the context in which the term is also being used in print media. In other words, if most news artciles and blog articles on the web are using the term “Goldilocks” in a cynical or mocking manner, then it casts doubt on the conclusion of the Barron’s piece which is that the Factiva word count is a sign of irrational exuberance sweeping the country. This is basically what I found in my cursory check on the use of “Goldilocks” in web news and blogs. More details at http://zentrader13.blogspot.com/2006/11/goldilocks-redux.html
Google track “stock”, interesting…
Aaron,
Are you referring to Google Trends for the word “stock”? It is a very interesting plot. Unfortunately they update the results on a 2 month lag so right now we can only see Septembers results which unsurprisingly shows very little enthusiam toward stocks at that time.
Google trends for Insurance, Mortgage, and Loan and bathroom, kitchen, and deck.
Note the deviation from cyclicality for deck.
Alan Ableson is a caricature of himself. I find it amazing people actually read his diatribe.
Perhaps we might do a similar word serch on “housing bubble”. What would the (obvious) results suggest there?
More importantly, the dollar will be the perfect excuse for a (needed) correction this week.
‘What it shows through the agency of a single line…’
I really struggled to keep on reading after this pompous verbiage.
The comments questioning the validity of this as a contrary indicator raise some good points imo. I think a great many indicators, like sentiment itself, can be quite fickle.
Mike Mc:
Goldilocks, Moe, Larry and Curley to you.. Bravo….! Just don’t take it so personally… It’s meaningless. Any corrolation is purely coincidental and random.
I personally chart my ex wives menstrual cycle and my analisys indicates, DOW 36,000. Now if you’ll excuse me, I have some good crack to smoke…
It may have crossed our minds that this whole exercise was for fun. I mean REALLY….!
It will be a cold day in HELL when we can achieve the quality of enemies that Ableson has achieved.
Econolicious
“Goldilocks” Economy and “The Big Picture”. God Adds His Comments.
So in the spirit of misleading data, I will now show that the main use of the term “goldilocks” is associated with “The Big Picture”.
God and I have set the record straight:
http://mindquickie.blogspot.com/2006/11/goldilocks-economy-and-big-picture.html
;)
@ alexd : I have also a similar overall impression – blogs are mostly bearish (as far as they express any opinion not related to the next 2 hours…).
Best research is your personal contact to people around you. I live in Europe – people here are not bullish. Most important – they still are not in the market, not too much.
Thanks zentrader. Yes, I was talking about Google Trends, and I wasn’t paying attention to the lag. Not as interesting as I originally thought…
Hum.
Does Monday’s dip mean that Goldilocks will be making fewer public appearances this week?
Some people have been claiming that the market behavior is changing.
If so, we might be entering another “correction” period in the market. We just had a 5% correction (May 06 to June 06); could we be entering another correction? Isn’t this soon for another correction? If so, what might this look like?
In both the S&P chart and the Russell 2000 chart, I have put up weekly charts. The bull market began in late 02, but for the sake of these charts, lets begin in March 2003.
Since March 2003, we have had 5 major rallies. Their shape and extent is slighty different in the S&P vis-a-vis the ER2, but both charts show the same rallies and they begin and end at about the same times. Each rally (#2-#4) is followed by a pullback or correction of a significant portion of the rally. Rally #1 had only a minimal pullback. (We can speak of a Rally #0, considered as running from the Oct 02 to Dec, and which retraced nearly the whole rally.)
The first and strongest rally was followed by a pullback of 18% in the S&P and 36% in the ER2. The rallies 2-4 were followed in the S&P by a pullback of 56%, 70% and 71% respectively. The rallies 2-4 were followed in the ER2 were followed by pullbacks of
62%, 62% and 69% respectively.
If we suppose that this current rally is due for a rest and is subject to a larger pullback, we could make the guess that there would be a pullback in the area of about the minimum %
seen in rallies 2-4. That would be 56% in the S&P and 62% in the Russell.
That would be a pullback to about 1303 in the S&P and to about 719 in the Russell 2000.
Now, of course, for futures traders among us, having made those guesses doesn’t mean that we would insist on every point of the fall to them. We don’t really know that the market would in fact fall 100 points. We also don’t know for sure that the high was made the Wednesday before Thanksgiving.
However, the week before Thanksgiving some a bunch of high % bullish numbers in various groups or sections of market advisors and newsletters. This is sometimes associated with market tops.
Given how far we’ve come up, it seems hard to believe we’d fall to such levels as 1300 in the S&P. But the market is like a drunken sailor, and sways back and forth with alternating waves of optimism and pessimism. The market adopts a story for a while and runs with it for a few months. Then, it adopts a new and opposite story and runs with it for a few months.
The current wave of pessimism, or concern or malaise, seems to have been sparked by the sharp rise in the Euro FX, and the fall in the dollar compared to the Euro. And, that rise in the Euro FX was sparked by a better than expected report in Germany about the prospects for economic growth in Europe of all places.
The rise of the Euro FX has the potential of reigniting inflation fears and boxing in the Federal Reserve. Here’s why. Dollar falling means rising prices for oil and the other energies, and increased inflation concerns. The more the dollar falls, the less room that the Fed will have to lower interest rates, as the market has been expecting and hoping. The market earnestly hopes that the Fed will lower interest rates and reignite economic growth. If the Fed delays or seems perhaps to be delaying its lowering of interest rates, the market won’t react well to this.
I think Bernanke is talking tomorrow. What would be nice for shorts would be helpful comments about the dollar fall being unhelpful and a threat to price stability.
Some people believe we are overdue for a 10% correction in the S&P. That would be a fall of 140 points or so.
So, I think we are going to have a correction. The question is whether or not the recent high was the high, or if we come up and retest it shortly.
By the way, the news is just on CNBC. 3:08 Pm Pacific. First the market commentator said that the market sell off is an opportunity to get in to stocks you missed out on, and that
it really started on Friday when the market didn’t go up as much as people were expecting. Some spanking for that! Then, he said that dollar down v. the Euro FX meant the Fed would have less room to maneveur and the Fed might not be raising rates as fast we thought.
There is a risk of loss in all trading.