Wednesday, June 06, 2007

Magazine Cover Indicator

Are you aware of the magazine cover contrary indicator?

It is the situation or occurence, that once a financial view or stock pick or property market valuation is in the 'public arena' then the contrary will occur with a reasonable short period of time.

For this example we start with this cover to the left, Business Week February 19, 2007.. Low, low, low interest rates and "why money may stay cheap longer than you think".. The graph, shown below, illustrates the point reasonably nicely. One month after the cover story, the 10 Year Treasury Note yields hits its lowest level (4.48%), and since then it has been nothing but up.

From a chartists point of view, the graph now shows a breakout to the upside indicating the market's anticipation of further rate rises for the US.




via The Big Picture where you can find the original post, other examples of the phenomenon and arguments for yields and rates to continue to rise.

I haven't time to go look, but I would bet there were banner headlines in Time, Newsweek, etc. lauding the US property market a month or so before the rally ceased.

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