Tuesday, May 12, 2009

Introducing the ‘animal spirits’ stock market oscillator

As a relatively new blogger, we have been judiciously restrained in our pronouncements on the stock market, the Great Casino of our highly leveraged times.  However, today we are going to reveal for the first time our “animal spirits” stock market oscillator, that uncovers the secret inner yearnings of the stock market.  And guess what?  Just as yang follows yin, and the “animal spirits” of Americans are irrationally improving according to our general confidence model, the “animal spirits” of the stock market are poised to go—absolutely berserk, if our model is correct!

Now, this result surprised us, as we are in the perma-bear camp on the long-term prospects for our beloved country that seems to be in the throes of being gutted by Wall Street oligarchs while assuming further levels of indebtedness requiring future taxation that will almost certainly provoke a second American Revolution in a decade’s time or so.

But, as we’ve said before, spring has sprung, and the stock market appears ready to blow a gasket.  Or to continue to blow a gasket, given the run-up so far.  This is shocking!  Welcome to the Eternal Bubble!  As the physicists say, the universe is just a bubble in the quantum foam, so why shouldn’t the stock market bubble on? 

This is research, not investment advice.  Trade at your own risk.  Click to enlarge.


Left axis is log(SPX), right is A, the '”animal spirits” metric.

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