Wed Sept 6 2017

In the syllabus I mention that the study of how endogenously generated social mood results in social events is the center of my research interest.

Follow the links in the syllabus for an introduction or click here for an introduction to the basics of the theory.

Coventional wisdom has it that humans are  passive creatures, totally motivated by external events. The news is favorable, job creation is up for example, people are happy.

Negative news on the other hand would have you believe that this results in negative mod.

Socionomics turns this idea on its head.  Mood instead is generated internally. Hence as the Dow Industrials climbed to 22,000, the movie La La Land became a hit.

And it happens again and again. When the DJIA first hit 1,000 in the mid 1960s the Academy Award winners were My Fair Lady and the Sound fo Music, two upbeat musicals.

In the Depression people turned to Horror movies, the first Dracula, Frankenstein, and Wolf Man appeared.  Gangster movies like Public Enemy were popular. All the repeated during the bear market of  1973-74 when the Godfather and the Exorcist were wildly popular.

 

In 2008 Batman the Dark Knight, set records bringing in some $500+ million in a few months. 

I have been expecting a high in the DJIA in this time frame, see The Market Perspecctive weblog. Yesterday the DJIA fell about 230 points. That does not reverse the trend but,

what is social mood suggesting about consumer tastes?

See page B9 in today’s WSJ. With the DJIA possibly topping and down 200+ yesterday, the next big movie hit is

IT

S King’s 1489 page horror story.

Warner is trying to make it into two movies , hmm recall Puzo’s Godfather became two movies as well, given its length.

Here is the amazon summary

They were seven teenagers when they first stumbled upon the horror. Now they were grown-up men and women who had gone out into the big world to gain success and happiness. But none of them could withstand the force that drew them back to Derry, Maine to face the nightmare without an end, and the evil without a name. What was it? Read It and find out…if you dare!

The if you dare comment reminds me of the billing of the Exorcist, the most terrifying movie ever made

The initial trailer for the movie garnered 197 million global views, on its FIRST DAY

Gee do is this a repeat of sentiment turn like with Batman, The Dark Knight in 2008 which earned $500 M at box office?

on the heels of Lego Batman this is a socioomic 

turn on a dime

I don't think I could make it thru 1,489 pages of the book. But it will be interesting to follow box office records for this movie.

 

Weekend Sept 3 2017

Never Mind the Price,

Where’s the Gasoline

LONDON—Gasoline futures continued to soar Friday morning, as the after-effects of Hurricane Harvey heralded potentially fundamental long-term shifts in global oil and gas markets.

The price of Nymex reformulated gasoline blendstock for September—the benchmark contract—was up nearly 14%, at $2.1470 a gallon, following eight days of gains that have driven prices up to two-year highs.

Since Harvey made landfall a week ago, the storm, which has since weakened to a tropical depression, has crippled more than 20% of U.S. refining capacity, resulting in a nationwide petroleum shortage that has seen gas prices spike across the globe.

Wall Street Journal, Friday, September 1

Last week we noted the media was predicting higher crude oil prices due to refinery closings. We took the opposite tack noting that crude oil prices fell 20% after Hurricane Katrina hit New Orleans. Indeed, last Monday, crude oil prices fell $1.65. So how would the media explain that one? Oh, since the refineries were closed, purchases of crude oil dropped and therefore the price of crude dropped. There was no mention of their failed forecast.

But the article misses the real point here. Already in San Antonio, it matters not what the posted price of gasoline is. Indeed station signs indicate $2.59, a big jump form $2.00 last week. But no matter the posted price, there is no gasoline available. Panic set in yesterday with a ‘run on gasoline supply.’

Those of us that lived through the early 1970s embargo know what to expect next. Now a panic of availability has set in. Eventually when gasoline supplies arrive, one can expect they will be quickly drained from the stations into individual autos exhausting supply once again.   One can only speculate how many deliveries would be required before the panic subsides. Here is yet another example of the herding of social mood in the short term.

This will no doubt lead to what I will term a Lost Week. Automobile companies bought large city trolley car lines and closed them long ago. Riding a bus might work for a short distance but across miles and miles of a large city is not realistic. So, we will be faced with many simply unable to get to work, school, or anywhere else requiring more than a bicycle ride.

This will cause a ‘dent’ in productivity and output for the Gross Domestic Product of Texas this quarter.

And what is the market reaction to all this? All but one of my 21 liquid pipeline stocks traded to the upside yesterday. Enbridge Energy Partners ahs fallen from $24 to just under $14. IN the last three days it has soared to $15.23, rising above all its 34 day Moving Average. Alerian MLP the ETF for liquid pipelines jumped 2.66% Thursday. Shares of natural gas pipelines are also moving up.

We are still patiently waiting a bottom for the entire energy complex. The best indicator is the percent of stocks in bullish formation. That indicator has bounced at 30%, no up to 34.38. Clearly we need a close over 50% to move to a bullish position.

The energy service ETF, XES, has not turned up, yet. It has returned to the same low price level last seen at the February 2016 bottom in oil prices.   We have numerous other technical indicators which suggest the low should arrive in the next couple of months.

One of the most sensitive indicators is the price of Transocean RIG, the big offshore driller. That stock has fallen from $16 at the start of the year, just bouncing off $7.50 to close Thursday at $8.16. As noted here previously, RIG is trading at 20% of book value. It would be impossible to duplicate the offshore assets RIG possesses. This is the embodiment of what Warren Buffet refers to as a moat around the company making entry by another firm near impossible. This column is not about making individual stock recommendations but RIG at 20% of book value looks inviting to me.

Markets in general are shrugging off Hurricane Harvey, world exchanges trading to the upside.

For now expect a Texas slow down. Our sun belt economy based on individual automobiles for transportation, is literally out of gas.

 

Friday Sept 1 2017

The movie business is famous for both spectacular success and failure.   But really it is not so difficult if  one takes a socionomic view of where the mood is and respond in kind. Or as Wayne Gretzky put it

 

I skate to where the puck is going to be, not where it has been

 

I would rather bet on say five movies with a ten million dollar budget than one with a $50 M budget.  Our story today is just how Burt Reynolds and Clint Eastwood did just that back in the late 1970s. Congressional response to the energy embargo of 1972 was a national speed limit of 55 mph, simply a tax on the time of those who lived in the vast expanse of western and southern states rather than say Washington DC.

And then along came the Citizen Band Radio craze. People bought these things and exchanged information on air about where Smokey (the highway patrol) was likely to be using radar.   Actually this was all a terrible idea which only caused deranged lower opinion of police officers.

Social Mood bottomed in December of 1974 when the DJIA hit 577.  Rocky was the movie of the 1975, the perfect story of a loser who became a winner as America also picked itself up off the mat from the riots of the late 1960s. Watergate, the first energy embargo, gas lines, losing in Viet Nam, inflation, well it was a depressing period of negative mood from 1966 to 1982. Anyway things had improved enough by 1977 to have the perfect movie parody of a hapless Sheriff chasing the ever too clever fox played by then box office star Burt Reynolds. Reynolds got real life then gal friend Sally Field to co star and then country western singing star Jerry Reed. Click above for the theme song. And there were plenty of tire spin shots of the soon to be popular Pontiac Trans AM.

Results for Smokey and the Bandit, 1977

 

Box Office

Smokey And the Bandit II 1980

Box Office

OH and at the same time a female producer was getting into the same genre with films like this

 

 

Foul Play grossed $44 million and I am guessing cost less than ten million