Using Japanese book titles as an alternative indicator of sentiment

This article is about using Japanese book titles as an alternative indicator of sentiment.

Alternative indicators

Everyone loves alternative indicators. Having a hair shows that a man can lead an entire nation effectively, short skirts mean that economic growth is high (or “risk is on”), and shoeshine boys (perhaps CNBC anchors in today’s world) tell you when the market tops.

One of the most well-known indicators is, of course the famous (or infamous) mainstream magazine cover.

Time magazine – loved by contrarians

Possibly the most famous are the Economist’ s Drowning in Oil cover page in 1999, which marks the bottom of the bear market in oil.

If you read the actual article, you will notice that they do mention that all prices might go up, but they can only imagine that scenario with political instability. It seems to not have occurred to them at that time that demand may increase.

http://www.economist.com/node/188131

The Christmas 1974 Time magazine cover was on how bad the economy was – the “Recession’s Greetings” cover is a classic – hang it on your wall. The stock market at the time of this cover was down sharply, and if you bought around about this time you would have made a huge profit over a period of a few months.

Another one is a cover in 1982 crying about high interest rates, around about the time when the bond market was bottoming out and inflation was falling.

Alternative indicator: Book titles

Therefore, I tend to pay attention to quirky indicators, such as the overall tone of bookshelves, particularly in Japan.  Last time I checked, a few months ago, there was an abject hysteria on the bookshelves.

Yesterday I went to check again.

This is the Economics and Finance section of the bookstore:

This is the stock-related bookshelf.

Books on investing (other than translations of overseas titles): 7

*Interestingly, they had one volume of Security Analysis (top left) -I wonder how long it will sit on that shelf. If you look at the picture you can see that the investing books run out pretty quickly and we very soon run into FX books – even though they have their own separate sub-section!  Short FX publishers!

Books on trading, trend following, and related (stocks): Around 30

Books on FX: >150

Books on how to prepare your finances for when you die: Around 30 (of which, three were on how to arrange funerals and/ or coffins)

In the economics section:

Disaster books (e.g. “Can Japan survive until 2015?”): Around 10

Disaster-denying books (e.g. “Don’t believe the doomsayers”): 3

Positive books: 0

In the magazine section (on a separate shelf):   

Number of magazines on stocks: 3

Of which, those featuring financial data (such as net income): 0*

Number of magazines on FX: 4

*This means that all three of the magazines on stocks were actually just treating stocks as a variant on FX (looking at charts and the rest was plain text with basically no real figures).

Delta

The difference from a few months ago is that there has been an increase in the Disaster-Denying category, and a decrease in Disaster books, however, this has not been significant.

What has not changed is that there is evidently zero interest in stocks as investments, but huge interest in gambling. Actual gambling is illegal in Japan, but there are ways around it, such as FX and pachinko (like pinball, but you have to sit down for hours on end and waste all your money). Since I have the opportunity here to bash FX companies, who I think are, if not precisely in league with the devil himself, should at least broadly be regarded within the same category as crack dealers, I should mention that despite their nasty preying on innocent victims, Money Partners (a somewhat-popular net-net) has seen its revenues shrink over several years and it is very close to making a loss. This is, coincidently, a really bad net net to get involved in due to a. the crap such as “trade products” on their balance sheet that can make a huge difference to their valuation, a.2. their net assets (or net current assets) value is the difference between two large numbers, and more likely than not the assets part will get compressed in any number of scenarios (e.g. the market tanks, customers withdraw, they need to pay back deposits and unwind positions, resulting in more losses, etc.), b. being in a business with absolutely no competitive advantage, c. they are shrinking, and d. peddling heroin to children they give unprepared people huge leverage. End of rant.

Not surprising: dull market + disinterest = good

This is not surprising, given the abundance of stocks selling for a song (not only cigar butts, but also some good quality small companies), and while many people will be discouraged by the lack of activity in the market, it is dull markets which eventually lead to bull markets, even if, like the oil market in 1999, there is no-one on hand to tell you so (let alone an investment bank analyst).