Professor Elam

Monday Sept 17 2012

I have enjoyed reading the posts on the Discussion site over the weekend. Some of you doubt that mood is generated within, several of you remarked that indeed the conventional wisdom that we are passively acted upon by the media. Those hints  and suggestions determine how we feel. Really?  Let's use an hypothesis to test that notion.

Socionomics has it that social mood is endogenously (internally) generated. This determines much of what happens in society. Let's take you back to the post 9/11 market low or the market low of March 2009 or the market low of December 1974 or the market low of October 1987. Pick one, in all cases the mood was uniformly negative and the media was delivering a negative drum beat. If it were true that mood was only influenced by the media, then the mood would continiue indefinitely in one direction. The markets would have gone even lower, if mood changed, perhaps to zero!  But that did not happen.

Instead once the sellers were exhausted the mood changed and the markets rallied in every instance. So our alternate hypothesis, that mood must change from within, seems to have credibility. But theories have to work both ways. 

What happened at the market tops of August 1987, March 2000 or Fall 2007?  Mood was exuberant. The NASD zoomed another 40% in less than six months from late 1999 to early 2000. CNBC went nuts over NASD 5000. If mood were only affected by external events, then the mood should have stayed positive. The Dow Average in that scenario should now be 50,000 or so. But again, that did not happen. The mood changed. 

Susan Rice, Jay Carney, Hillary Clinton,and Peggy Noonan all got it wrong again this weekend. A minor video did not cause the riots in the mid East. That was a symptom used to fan already existing anger. Indeed evidence points to a planned attack. And pointing to You Tube videos is hardly an effective foreign policy. World mood turned negative in March 2000, and continues to vacillate right to today. We are approaching another high in the markets. Already we see the manifestation of a change in mood that will bring those markets down. 

Needless to say there is much more to socionomics than just this. Mood changes happen in fractals, just like markets. There are always smaller and larger degrees of mood. Short term positive mood exists now evidenced by

bright fall colors, the desire to show off wealth via expensive watches, cars, homes, and the desire to embrace riskier investments

Longer term the seeds of social unrest are on display from Chicago to the Mid East.