NYTimes Business 3 Aug 2012
Bond traders, admittedly unsure at times, know their decisions can have an outsize affect on economic policy in Europe.
In times of confusion, popular consensus wins. It doesn’t matter if you are the epitome of reason or virtue or even world peace.
I wrote about this in June. About the death of the contrarian in a populist world. link. And it is mighty hard to be positive in a socialist world. Because negativity sells. Who wants to read about what you fun you had at Cirque du Soleil yesterday ? They rather read about the tragic death of your relative in some freak of nature malfunction of some healthcare policy !
And negativity begets negativity.
The Vox Populi (translated from Latin to “voice of the people”) phenomenon was reborn in the Arab Spring, the Occupy Everything movement and in all the global elections we have seen so far.
Social media has set the stage for an uprising of global scale. Even China is in the middle of a microblog craze. And little old me has a place to publish my eclectic smattering of political cum market views with readers for it too.
I have not done enough research into this but this headline strongly suggests that negativity is in fashion.
NY Times 29 Jul 2012
Obama’s Team Taking Gamble Going Negative on Mitt Rommey, of course.
Just spread the fear as thickly as you can, it will go your way as long as we have Facebook and Twitter. I wrote back in May how difficult it was to trade when in panic and mistrust. [link to Spreading the Fear to Thickly].
So, reading the article above about the handful Euro bond traders who can influence the sentiments of masses, and in turn, influence the actions of the central banks. I wonder, who is influencing who ?
“With so much leverage at its disposal, the bond market’s judgments can have the power of prophecy — that is, they can be self-fulfilling, influencing events even as traders assess them from the trading floor.
If investors and traders judge Spanish bonds to be risky because Spain’s government may default, they help make it more likely that Spain will indeed default, by raising its borrowing costs.”
Traders trading off the sentiments of the masses who are in fear of a banking system collapse because of bond prices and, thus guide the decisions of politicians.
This has become a facade for a Cirque Du Vox Populi in my opinion.
And the popular masses will never be happy. We just desperately need some leadership from leaders who are but humans, and who are increasingly sucked into the virtual world of social media.
Disclosure : I am long Facebook.