Social Mood Illustrated by the support the Fed Gets in The Media

Social Mood, as defined by the Socionomics Institute, is the engine of social action:
Social mood waxes and wanes positively and negatively. A positive social mood is associated with a host of social phenomena, such as bull markets, bright colors, short skirts, re-election of incumbents, peace, and deregulation. A negative social mood is also associated with a host of social phenomena, such as bear markets, dark colors, falling hemlines, rejection of incumbents, discord, and regulation. 
A subtle but important point: Although social mood governs social events, it fluctuates independently of such events. In other words, wherever mood goes, events will follow. But, the events themselves have no impact on the direction of social mood; there is no feedback loop. If social mood governs social events, what governs social mood? Answer: The Wave Principle.
With this in mind, look at the following chart: It shows the S&P 500 since early 2010. As you can see, in early October 2011, the S&P 500 was making a one-year low, while in Feb 2012, we are at near a multi-year high:

Now, look at the two following reports, one from early October 2011 and the other one from Feb 2012:

Fed Ridiculed Over Prices People Pay Begets Lip Service to Beef (Oct 14th)
Bernanke-Led Economy Proves Critics Clueless About Fed Policies (Feb 8th)
This yet again shows that at the bottoms of social mood (and hence equity markets) people are dismissive and unsupportive of the Government and their hordes of destructive central planners, and that at peaks of social mood (as measured by tops in equity markets) people are at the exact opposite of the scale. These gyrations can happen in a matter of just 4 months, as shown above.

Here are the quotes:
Oct. 14 (Bloomberg) — Federal Reserve policy makers are giving commodity prices their due. 
[...] Policy makers were “out of touch with the public and politicians,” Feroli said in an interview from his New York office. “Given that the Fed is an increasingly visible public institution, it had to adjust its communications accordingly.”
[...] The communications change comes after the Fed’s November decision to embark on a second round of asset purchases sparked the harshest political backlash in three decades. 
[...] There’s a “disconnect” between the Fed’s recent comments on oil and its historical view that core inflation, stripped of volatile energy and food costs, is the best measure of price stability, said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
“The Fed’s communications are trying to talk down people’s inflation expectations and reinforce that talk by pointing to the lower commodity prices,” Silvia said. “For a lot of professional people like me, it’s like ‘Okay, fine, you want to talk about that, but that’s not what you had to say two years ago when gas prices were rising.’”
Feb. 8 (Bloomberg) -- The numbers are proving Federal Reserve Chairman Ben S. Bernanke’s critics wrong. 
More than a year after Republicans from House Speaker John Boehner of Ohio to presidential candidate Ron Paul of Texas warned that the Fed’s second round of asset purchases risked a sharp acceleration in prices, the surge has failed to materialize. The personal-consumption-expenditures price index rose 2.4 percent for the 12 months ending in December, near the central bank’s 2 percent target. 
[...] Even though the economy is showing signs of strengthening and inflation appears in check, Republicans Mitt Romney and Newt Gingrich, who also are running for president, have said they wouldn’t keep Bernanke, 58, when his second four-year term as Fed chairman expires on Jan. 31, 2014. Gingrich said in September that Bernanke was “the most inflationary, dangerous and power-centered chairman” in the central bank’s history. 
“The criticism about the Fed being inflationary is not fact-based,” said Mark Gertler, an economics professor at New York University who has co-written research with Bernanke. “In terms of an inflation record, the facts are the Fed has been as close to impeccable as you can possibly get.”
The good news is that Bernanke's peak is past us now — he was the Person of the Year 2009 for Time magazine — and it seems that the mood is still negative enough to get him out of the office provided Obama is also ousted.


Tiho said...

Weren't you telling me how you were going to short Oil back in early November when it hit $100 a barrel. How did that go? LOL, another top call.

What about when you bought Silver and than closed it after a few days. Here we are getting ready to break the 200 MA on the upside... another top call.

I hope you are still holding the Euro and bought that out of money call at $1.40 like I told you to do. We are at $1.33 now, so only 7 more cents to go. Dollar is toast in coming weeks...

Always a pleasure to come back and "review" your super calls pej *cheeky smile*

PEJ said...

About Oil:
oil is at 105 now, 3 months later. Nothing to be so happy about it.
First, I didn't short it.
Second of all, you have probably lost money by holding it due to the contango effect.
Finally, it's worth sharing ideas, even if I do not act on them. I don't see any problem with it.

Finally, yes, I still have my Euros. We are at 1.34. Not bad, but 1.40 options would still be out of the money. My 1.26 options are deep in the money. I'm happy with them.

Tiho said...

First, you shad you were thinking about shorting Oil... my point is why short a bull market? that is NOT an idea, that is a rookie mistake.

Second, I never bought Oil, nor does it say anywhere on my blog that I did buy it at any point in time. I do however hold an opinion on it and I think it is going much much much higher in years form now. Probably above $200 if not more...

Third, hold those Euros, you'll actually make some money. The Dollar is in a downtrend. Owning an OTM $1.40 option would have made you so so much more money when it gets into money, that is my point, because Euro will go much higher than $1.40!

Tiho said...

p.s. Oil is actually close to $110 and Brent, which is more of a true Oil price is actually at $124.

But hey, not that you would know anything about supply and demand and why that is...

pej said...

I think oil is a nice short at this level, and so is the whole of the commodity complex.

And your over bullishness on the EURO makes me suspicious.

pej said...

Looks like you've been a great contrarian indicator mate.