Selection Bias, Magazine Cover edition



“Magazine covers, especially the Economist, are wonderful contrary indicators.”



Um, not exactly: Some Magazine covers, when seen with the benefit of hindsight, turn out to have marked the exact top or bottom of a price movement. But most of the time, business magazine covers are just that — the front page/cover of a printed business publication.

Before I go into details about why the Economist cover above is NOT a contrary indicator, let’s consider Paul Macrae Montgomery, the person who invented the magazine cover indicator. As we discussed back in in 2014’s Misunderstanding the Magazine Cover Indicator, Montgomery had observed that when mass-market magazines deem something significant enough to put it on their cover, that concern had mostly run its course. Regardless, most of the cover theme was already reflected in market prices:

“As Montgomery described it, there are three primary rules for the classic magazine-cover indicator. First, it must be a mainstream — not business — publication that put a specific object on its cover. Second, we are looking for a well-understood concept that is reaching a climax. And third, there must have been significant asset-price gains leading up to the cover.”

His thinking was that by the time the editors of Time find out about some hot investing trend, it is all over but the crying.

Why didn’t Montgomery believe this applied to business publications?

Most of the time, consumer magazines do not bother with investing or economic concerns. If they have noticed what the stocks or inflation or real estate are doing, it must really be late in the cycle. Business mags, on the other hand, have a different topic on their cover every month or week. The sheer volume means that some will be a top or bottom by dumb luck, but most won’t be. I would suggest that the examples so many people use is a heady brew of randomness, hindsight bias, and narrative fallacy.

Consider these business magazine covers:

A bullish $TSLA cover was January 22, 2020 . . .

…was 734.3% ago — making it not a great contrary indicator.


Barron’s cover on “Apple Golden Moment” could easily have been taken as a bearish signal on December 25, 2017

…that’s 217% ago and over a trillion dollars in market cap ago.


The brown December 13, 2018 Businessweek cover “Rhymes with Bitcoin” confounds everybody

…Did you take that as a contrary signal and bought? Well, hopefully, you have a strong stomach because Bitcoin fell another 83.3% lower the next 12 months; it did not regain its price the of the day BW published until around December 2020 — 3 full years later. Today, Bitcoin is double the price it was when Rhymes with Bitcoin came out.


If you bought on this The great American slowdown in The Economist…

… on April 10th, 2008, then you got slaughtered over the ensuing year.


The BW cover “It’s A Low, Low, Low, Low-Rate World” came out in 2007. . .
…if you sold your bonds cause you thought it meant rates were going higher, you missed an epic rally in the bond market that lasted another 15 years. What would you give to own 10-Year Treasury bonds yielding 4%? today? That was the yield when this came out.


If one bear on the cover is bullish, what do you make of (count ’em) 37 Bears!? Uber bullish, right?…
…Well, that was August 27, 2015, so yes, it was.



This is a topic I have been playing with for 20 years, and I have come to the conclusion that it is far more nuanced and less clear-cut than many believe.

Beware of those hindsight-biased seers, who cherry-pick a few after the fact covers, and make claims that are unsubstantiated by history and data.

There are even more examples to peruse after the jump




Dow 30,000 & the Magazine Cover Indicator (January 22, 2020)

What Market Signals Are in Magazine Covers? (December 28, 2017)

Misunderstanding the Magazine Cover Indicator  (October 27, 2014)

RIP Paul Macrae Montgomery, originator of Magazine Cover Indicator (September 10, 2014)

Magazine Cover Indicators



Other magazine cove indicator discussions:
Uh-Oh: NYT’s Front Page Cover Indicator (January 26, 2013)

Magazine Cover Indicator: New York “End of Wall Street” (February 6, 2012)

Uh Oh: Barron’s Cover — Best Bond Funds (July 13, 2012)

Uh-Oh: Economist Cover “Can it be…the recovery?” (March 18, 2012)

NYT Sunday Business: Magazine Cover Indicator? (January 1, 2012)

Uh-Oh: Gold on the Cover of NYT Magazine ? (May 15, 2011)

Uh-Oh: Facebook’s Zuckerberg is Time Man of the Year (December 17, 2010)

Contrary Indicator: New York Mag’s Optimism Cover? (November 15, 2010)

Uh-Oh: Barron’s Cover “Bye Bye Bear” (October 31, 2010)

Tale Of Home Prices Told Through Covers Of TIME (September 14, 2010)

Time Cover: New Sheriffs of Wall Street (May 13, 2010)

Newsweek Cover: Contrary vs. Contrary Indicator ? (April 15, 2010)

Magazine Cover Revisted July 30, 2009

Portfolio Cover: After the Fall (November 13, 2008)

Barron’s Magazine Cover . . . (October 13, 2008)

Uh-Oh: Economist Cover on Oil (June 3, 2008)

Understanding Contrary Indicators (May 31, 2008)

Bear vs Bull 1962 (May 30, 2008)

Economist Cover: The Great American Slowdown (April 16, 2008)

Breaking the Business Week Cover Curse? (November 21, 2007)

Magazine Cover Indicator: Time Magazine GOP Top Tick (April 26, 2007)

The NYT, Magazine Cover Indicator, and Mean Reversion (August 19, 2007)

It’s A Low, Low, Low, Low Medium-Rate World (June 9, 2007)

Uh-Oh: It’s A Low, Low, Low, Low-Rate World (February 12, 2007)

The Single Company Magazine Cover Indicator (March 20, 2006)

Uh-Oh: The Economist Cover (May 25, 2006)

Uh-Oh: Apple on the Cover of Time (October 16, 2005)

uh-oh: Time Magazine on Housing (June 6, 2005)

WANTED: August 13, 1979 Business Week (February 28, 2005)

Uh-Oh: Apple on the Cover of Fortune (February 13, 2005)

Uh-oh Fortune’s cover: Real Estate Gold Rush (May 20, 2005)

New Coke vs Time Magazine Marketing Blunders (April 25, 2005)

Uh-Oh: Apple on the Cover of Fortune (February 13, 2005)

The Magazine Cover Indicator Strikes Again! (March 24, 2005)

Uh oh: Forbes Cover Screams “Tech is Back!” (February 5, 2004)

Howard Dean and the magazine cover indicator (August 6, 2003)

Contrary Indicator: The Donald! (February 3, 2004)


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