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
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
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
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.
Who Dun It?
UP AND DOWN WALL STREET
Barron’s MONDAY, NOVEMBER 27, 2006