POLITICAL NASDAQ

This is a fascinating thesis: That the Nasdaq market movers are radical liberals whose George Soros-like hatred for Bush is influencing the movement of Nasdaq stocks. I don’t know if this is the case, but you simply must read it. Starting next week, Ms. D’Anconia will be submitting a weekly report, exclusive to To The Point, indicating the direction she perceives Nasdaq to be moving. — Jack Wheeler.

I make measurements which indicate the direction the market is moving in the Nasdaq. The data I use are very sensitive indicators of the underlying financial mood of the Nasdaq movers and shakers. I do not try to predict or explain their mood. I just have a way of separating the noise from the signal.

In general, the larger indices (DJIA, SPX etc.) follow the same motions as the Nasdaq, but they do so more sluggishly. Nasdaq is the canary in the stock market mine, in that it is more sensitive and shows motion effects more clearly than the larger indices.

The stock market is one of the most quintessential symbols of American Capitalism. Thus it was with some surprise that since last fall, I found that inflections upward seemed to happen when bad things happened to America. Over the past several months there has appeared to be a correlation between political events and the direction of the Nasdaq. It is possible that these are all just coincidences. Anecdotal evidence is hard to use scientifically. Nevertheless, there appears to be a pattern.

The common thread seems to be that whenever events went against the direction of the Liberal-Left agenda, the market went down. Whenever it appeared they were working for it, the market either stopped dropping or went up. In contrast, good economic data appeared to be about as likely to cause a drop in the market as to cause a rise. Examination of the equivalent economic data does not reveal any consistent pattern in the Nasdaq response to financial events. Economic data was not predictive of the market while politics was.

An appendix to this article chronicles a series of political events dominating the establishment media and subsequent moves up or down by the Nasdaq since the beginning of December 2003.

An example would be that on December 14th, which was a Sunday, Saddam was found looking like a scroungy rat in a hole. Overnight the market popped up as investors around the world bid up the Nasdaq. As dawn rose on New York Monday morning, December 15, the market opened and plunged about 3%, and it languished there for three days.

It is hard to find an economic downside to the capture of Saddam. There was no important economic data that day to justify the drop. It is a simpler explanation that these people populating the Nasdaq movers are Leftists.

In fact, they are not just your garden variety mild mannered Democrats. They appear to be intense ideologues best represented by the likes of Howard Dean and Ralph Nader. You might even call them Socialists. They are virulently Anti-American, anti-Capitalist and anti-Republican.

It appears that the Nasdaq market movers hate Bush more than they love money. As the political season heated up, you can see case after case of trend changes where the politics overruled the economic data. We caught Saddam in a hole and the market trend deflected down. Clark painted Bush as a warmongering nincompoop and the trend went up. The examples go on and on. George Soros isn’t the exception. He is the rule and a classic example.

This suggests that, in general, wealthy liberals put their money into the stock market while wealthy conservatives tend to reinvest theirs in their own businesses or start new ones. If you think back to your friends and acquaintances, you may notice, like me, that this pattern holds true. I have also heard from a person in the trading pit of one of the stock exchanges that she is a lone Conservative surrounded by a sea of Bush-hating Liberals.

Since you and I have such different values from these Liberal movers and shakers, our natural instincts are to think the market is going up when it is headed down. When a Republican president is elected the market shows a brief up as folks like us get in. Our natural assumption is that good news for business and America is good news for the market. To us this is “common sense.”

Thus, if following our instincts, on average we tend to be 180 degrees out of phase. Therefore, people like us tend to have a deep and well earned distrust of the stock market. We often choose to put our money into things where we have more control such as our own businesses etc.

I use my data to detect the changes as they happen. In contrast, the business media see the changes after the fact and make up a plausible (and ever changing) story to cover it. They imagine that these “investors” are rational types who are logically reacting to this or that bit of economic data.

Thus the financial media paints a rather flattering view of the investors as they rationally choose to pay attention to one bit or another of the day’s information. In reality the investors are really quite venal and irrational. They appeared to show disappointment at the capture of Saddam, and glee at the Clark testimony. They are, in effect, slitting their own “capitalist” throats.

It is possible that these people do not actually admit their schadenfreude to themselves. They may even personally attribute their financial mood to this or that bit of economic data thereby preserving their “rational” self-image and agreeing with the financial media.
When good economic numbers come out the financial media can attribute it two ways: If the market goes down, they say that good economic numbers caused the fear that the Fed would raise interest rates. If the market goes up they say the good economic numbers suggested a favorable business climate and more profits for companies.

Good economic numbers are a Rorschach test with investors and financial media seeing whatever they want in them. Just as in psychology – it is not so much what happens – it is how you interpret it that counts. A piece of economic data can be anything to the stock market.

One might be tempted to use the above to predict the stock market using political analysis. However, it is always more reliable to measure what is happening, as opposed to what should be happening. Psychology is an imprecise science. It can be hard to know what piece of news will be beaten to death in the Pogo Press, or what will really get under a Liberal’s skin. It can be clear in retrospect, but hard in practice due to vagaries of spin, other news, and even just what comes into the bureaus that makes a good video clip or still picture.

Looking back over the months, it is easier to see which turned out to be the big news stories. In making guesses of this sort, hindsight is far clearer than foresight. Therefore, I will stick with my measurements of what is, as opposed to what I hypothetically think it should be.

If there is a profound change of financial mood in these people, I know based on their instantaneous financial reaction using my very sensitive and accurate methods. But sometimes the politics happen so fast that these guys don’t know what to think. The movers and shakers in the Nasdaq are now acting like rapidly cycling manic-depressives as they respond to the news. Navigating the stock market is like sailing a ship. If the wind changes too fitfully, one is continually changing tack and it is hard to make any headway. It is easy to be blown off course.

In any case I will continue to watch the mood and report on it. In the coming weeks, I’ll let you know the changes in direction, and also what in the news that week seems to be responsible for it. It will be your window into the minds of some really wealthy and venal human beings who just happen to be occupying that consummate symbol of Capitalism: the Nasdaq.

We’ll begin the Political Nasdaq reports next week. I suggest that until the market situation settles down, just use them for entertainment and educational purposes. When and if it settles out, the profit numbers will speak for themselves.

Until then, I hope you will at least enjoy this report as yet another piece of data to help explain how the world works. If you ever want the daily or trend change as-it-happens version like Jack receives by fax, you can contact me at [email protected] and send me your fax number.

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Appendix: Political events and Nasdaq, December 2, 2003-May 11, 2004

At the start of December 2003, the Democrats started their ad blitz (12/2). They presented ads which were designed to upset and motivate the Democrat base. The market (which had been going up) turned around and dropped about 4.5%.

Then it was reported that Haliburton had overcharged millions, and Bush himself said on camera that they must pay any overcharges (12/11). The market turned around and went up about 2% in about 3 days.

On December 14th, which was a Sunday, Saddam was found looking like a scroungy rat in a hole (12/14). Overnight the market popped up as investors around the world bid up the Nasdaq. As dawn rose on New York Monday morning (12/15), the market opened and plunged about 3%, and it languished there for three days.

Then (12/18) Arnold Schwartzenegger declared California to be in a state of financial crisis and took on emergency powers. Furthermore, the Bush administration suffered a major legal setback in the case of Padilla, the attempted terrorist with legal implications for all detainees. The market got over its sulk and started up again for about a month. It continued up after New Year’s Eve passed without incident – making terrorism seem like just a bad Republican dream or ancient history. The stock market gained about 12% as the Democratic candidates continued their relentless Bush bashing in “debates.”

Then Howard Dean let loose that now famous “YeeeHawww” in the evening (1/19) thereby destroying his chances for President. The next morning (1/20) the market immediately stopped going up. That evening (1/20) George Bush made his State of the Union message and the political battle was finally joined after months of one sided Bush bashing by Democrat candidates. The market wavered and headed down.

There was a short deflection upwards (2/2) after Janet Jackson bared her breast during the Super Bowl halftime. Democrat opinion makers were unanimous in their pronouncing the Dean candidacy dead (2/3) and the market resumed dropping further down (about 6% down from the Yee Haw).

Then an unemployment report came out (2/6) which was not as good as analysts expected, thus casting doubt on the Bush economic recovery. The market turned around and went up about 3%.

John Kerry consolidated his lead and, shortly thereafter, General Clark quit his run for the Presidency (2/13) as the market stopped going up and instead went sideways. Then Howard Dean quit the race (2/18) and the market plunged again, down 4%.

Ralph Nader announced he was running (2/24) and the market abruptly turned around and went up again about 3%.

Shortly thereafter, Aristide was removed from Haiti (2/29) and the market stopped going up. The market ambled sideways for a bit as a jobless claims report appeared to indicate the recovery was stalling (3/4).

Then (3/5) the Bush ads started. Democrat donor and former stock broker Martha Stewart was convicted on all counts (3/5). The market plunged 6%. That is until the Madrid bombing (3/11) when it stopped going down and instead went sideways as the Spanish election (3/13) made it look possible that terrorism might help elect Leftists in America as it did in Spain.

Industrial production went up 0.7% (3/15) breathing new hope into the Bush economic success story. The market dropped 2%.

Then Richard Clark touted his book on 60 Minutes (3/21) showing the Bush administration to be even worse than the Democrats thought, the White House started to defend itself, and the market stopped dropping. As Richard Clark gave 9-11 Commission testimony (3/25), the market shot up and kept going up about 8%.

A very good jobs report came out (4/2) proving that the Bush economic plan was working. Ralph Nader failed to get on the Oregon ballot, wounding his run for the Presidency (4/5). The market rise abruptly ended. it wobbled sideways for about a week, until Dr. Rice’s excellent testimony (4/8) and it again dropped.

On tax day (4/15) Bin Laden was back offering a truce to the Europeans in an apparent attempt to both taunt Bush and create division between the US and Europeans in the coalition. The market went up about 2%.

It continued up as Spain recalled its troops from Iraq. However, the American economic numbers began to look very good. Greenspan said the banks were strong and deflation was no longer a concern. Durable goods orders released on (4/23) were far above estimates indicating a very strong recovery. The market trend shifted to down.

The market continued down amid a flood of bad news for the Liberals. John Kerry’s consistencies regarding medals was pointed out. An Al Queda plot in Jordan to kill 80,000 with chemical weapons was foiled, and one of the perpetrators admitted to being trained in Iraq and Afghanistan. A Madrid bomber was indited for a role in 9-11. President Bush and Cheney testified and no smoking guns were found. During this time the Nasdaq dropped about 6%.

In the middle of this (4/21) the first images of “torture” were revealed, but they looked at the time to be merely unacceptable pranks by prison guards. However, the prison story gained traction. On (5/3) the market turned around and went up, but only moderately.

The rest of the week was spent with repeated and sincere apologies by President Bush and Donald Rumsfeld until it was too much. By the end of the week even ABC News was calling for compassion for the abusers. President Bush had out-niced them in response to the “torture.” A Yale professor indicated that based on the economic numbers, Bush would win with 60% of the vote. On (5/6) the market trend shifted to down and dropped another 3%.

This drop went on until (5/11) when a confluence of surprise good news greeted the Liberals: A minority whistle blowing General (their favorite kind) testified that the prison torture was due to a “failure of leadership.” President Bush’s approval rating had dropped to 46%, and Zogby was calling Kerry the winner. The market sharply rose. A contractor in Iraq was beheaded on video in supposed retribution for the prison torture. When the video became news, the market deflected upward again.