Posts filed under “Contrary Indicators”

Fox Business Channel Market Top ?

Fox_market_top_2
Last year, Dan Gross looked at what he called the rather inauspicious timing of the Fox Business Channel (FBC) launch.

Since we here at the Big Picture love contrary indicators — the weirder, the better — we paid a special notice to that column. It was diaried away to be followed up at a later date.

Well, its now a full quarter later, and guess what? The Fox Business Channel debuted on October 15, 2007. With its first quarter officially behind it, how has the market performed? 

On the last trading day before FBC debuted, the Dow closed at 14,093. Yesterday’s Dow close was 12,159.21 — 60 points shy of a 2,000 point whackage. (I don’t want to think what that is annualized!)

The psychology of this is pretty straight forward. In the depths of market lows, the despair is so thick  that many people lose the ability to make rational risk/reward analyses. Consider what we wrote back in 2003 as signs of a market bottom:

Financial Media Closings:  Financial television viewership and finance magazine subscriptions are a direct reflection of the general population’s interest in equities. At market tops, TV ratings soar, and Publishers sell lots and lots of magazines. Bottoms occur when the public is disgusted with stocks: They certainly don’t want to hear about them on TV or read about them during their leisure hours.

By May 15th, 2003, several high profile financial magazines had closed: Mutual Funds Magazine, Bloomberg Personal Finance, Worth magazine; Also shutting down was Web FN, a streaming financial news webcaster. As magazines were closing, financial television ratings were fading. Once upon a time, you could walk into any bar or restaurant to find CNBC playing on the television over the bar. Stocks had become the newest sports franchise, with fans rooting for their “teams.”

Since those halcyon days, CNBC’s viewership has slid dramatically; The N.Y. Post reported that financial channel CNNfn (a CNBC competitor) was on the verge of closing down. The station (CNNfn) ended up revamping their format, away from pure stock coverage, and towards the more broadly defined “personal finance.”

During a Bull run, the opposite occurs: People become emboldened to take chances, swing for the fences. They lose all risk aversion. Launch a 3rd (or 4th) business news channel? Why not! Its a bull market!

Examples abound. As Dan correctly observed, TV shows like The
$treet
and Bull debuted in 2000, and real estate show Hot
Properties
in the fall of 2005.

What this tells us is at extremes of good and bad, leaning against your instinct is the desired thing to do . . .

 

Source:
Did Roger Ailes Call the Market Top?
The strange timing of the Fox Business Channel launch.
By Daniel Gross
Posted Monday, Oct. 22, 2007, at 3:19 PM ET
http://www.slate.com/id/2176408/

Contrary Indicators: 2000 – 2003 Bear Market 
Barry L. Ritholtz,
Maxim Group, August 2003
http://bigpicture.typepad.com/comments/2003/09/contrary_indica.html

Download PDF file

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