The next few months should be interesting. Markets have been making new all-time highs, and September Vogue 2016 has called it FASHION'S FANTASTIC FEARLESS FALL.
Has September Vogue ever used FEARLESS as a cover line?
Believe it or not, it did . . . in 2007.
No one ever knows the precise direction of the stock market. Perhaps fall will be so fearless as to be fantastic. But since the message of this issue reflects the plethora of fearless sentiment elsewhere, maybe it's time for caution once again, just as it was in 2014 and 2015.
Given this year's redux of 2007, our immediate objective is to determine just how fearless is FEARLESS.
What Is Socionomics?
Socionomics, pioneered by Robert Prechter, is the study of social mood and its influence on social events. It is the inspiration for this work.
Socionomics contends that waves of social mood affect the character of events -- as opposed to events affecting mood.
By studying such causality, social mood therefore can function as a leading indicator.
Prechter sums it up this way: "When people feel bold and frisky, they buy stocks and wear more revealing clothes. When they feel threatened and conservative, they sell stocks and wear more concealing clothes. It is that simple."
This work is also indebted to the late Paul Macrae Montgomery who developed the Magazine Cover Indicator. Montgomery felt that by the time a trend made the cover of a major magazine the trend was ready to peak. FANTASTIC FEARLESS FALL would likely have him on high alert.
September Vogue 2016 Overview
For the second year in a row, September Vogue's ad pages have gone unreported.
Last year a fashion blog counted by hand all 615 of them, revealing a decline of 15% versus 2007's peak of 727.
This year, no such luck. There were however 121 front-of-book ads, a very healthy number indicating that advertisers are still paying for prestige position.
Advertising being a leading indicator, the silence regarding overall ad pages is concerning, and its omission may be a doubly important message.
September Vogue 2016 also saw notable shifts in ad placement.
Gone was Ralph Lauren's ever-present white-themed "Romance" fragrance campaign from the inside front cover which was replaced by six pages of BRIGHT RED (Rouge, the New Lipstick by Dior).
Gone were the years of value-conscious Target ads from the back cover and replaced by upscale Gucci.
For some reason Ralph Lauren Romance is now Tender Romance, possibly softening its name after its stock price softened 40% from its November 2015 high to its February low. It also ran further back in the magazine, though still front-of-book.
Once again Twitter was nowhere to be found while Instagram monopolized the conversation.
Since 2014's Instagirls cover, TWTR fell 49% as Instagram's parent company FB rallied 45%, causing TheStreet.com to opine that "Twitter Is Finally Starting to Wake Up to Reality and Consider Selling Itself."
Back to the cover for a second.
As cool as it was to see Fashion's Fantastic Fearless Fall, it was nearly dwarfed by DREAM SEASON above it. More on this later.
And let's face it: Kendall Jenner is a lot more than just the cover girl. Anna Wintour's editor's letter explains why:
"Every generation gets a model who reflects her era, and at the moment Kendall embodies ours like no other."
As we'll see, September Vogue 2016 is also a mirror of the moment.
September Vogue 2015 Recap
Last year's edition warned that the REBOOT predicted by September Vogue 2014 was not over. It did not disappoint.
The S&P 500 tracked last year's chart below almost perfectly. It fell to 1867, rallied to 2116, and cratered to 1810. Ironically, it rallied almost to the exact location indicated on the chart.
Once again at record highs, just as in 2007, September Vogue was fearless.
With the exception of Marketwatch.com chiming in with The Great Reset Of 2016, there has not yet been a REBOOT sighting other than London Mayor Boris Johnson's Brexit speech: "There is every cause for optimism; a Britain rebooted, reset, renewed and able to engage with the whole world."
Analysis & Commentary
So, was September Vogue bold and frisky or feeling threatened and conservative? And what are the socionomic implications of FEARLESS?
Kendall Jenner wasn't wearing anything beneath the gold accents and pink ribbon detail of that Gucci pantsuit jacket on the cover, and looked like she was getting ready to flash us.
Elsewhere, Saint Laurent felt confident enough not to feature any clothes whatsoever, just page after page of skin and various iterations of friskiness.
Ditto Ballenciaga which featured what appeared to be a man draped ghost-like in a sheet. Again, no clothing, just the boldness of showing nothing.
Forget subdued fall colors. Color was everywhere. So much so that the Generation K cover line could have meant Kaleidoscope. Color Cacophony on page 730 summed this up well, as did Prada.
The mirroring didn't end there. It quickly became apparent, as alluded to in Anna's editor's letter, that September Vogue 2016 was not only mirroring the moment in fashion, but a moment in time.
Much of this year's analysis is therefore focused on the myriad connections between the reflections.
For example, the feature fashion well was titled Winds Of Change, which mirrored a recent forecast by Jim Paulsen of Wells Capital Management for a "Cascade Of Change."
Interestingly, Clinique used Change Agent as a headline.
And though much less concentrated than 2014, bits of accidental subtext (subconscious, unintended communication at odds with intent) once again mirrored Wall Street.
A great example was Gucci's back cover . . . [street sounds] . . . featuring a half-asleep model on a curb post.
Gold's prominence throughout the issue likely mirrors the recent gold rally along with record speculative longs betting it will continue (more fearlessness).
Speaking of gold, it was interesting to note that Michael Kors, whose gold-themed ad campaigns preceded the recent gold rally by a few years, has now moved to silver, the more speculative and volatile precious metal. Take note.
Moving on, it's one thing when fashion is bold and frisky. It's quite another when governments are.
Military style was prominent which might reflect rising authoritarianism, as well as the increasingly bold behavior evidenced by recent naval skirmishes with Iran, diplomatic snubs by China, increasingly erratic nuclear behavior by North Korea, accusations of Russian hacking, and exceedingly blunt comments by the President of the Philippines toward the US President.
Major General was a fashion feature with subtitles such as The Red Coats Are Coming, Marching Orders, Attention!, Changing Of The Guard, Storming The Beach, Chain Of Command, and To The Barricades.
The military theme was ironically reflected by the appearance of Pomp & Circumstance on page 772, the title of the popular graduation march which biographer Basil Maine once described as "the naïve assumption that the splendid show of military pageantry—"Pomp"—has no connection with the drabness and terror—"Circumstance"—of actual warfare."
The naïve assumption that pomp has no connection to circumstance, that fearlessness is without consequence, is what makes DREAM SEASON such a powerful socionomic message.
Nor was Dream Season's Fearless Fall confined to the cover of September Vogue.
It was reflective of the shared mental state -- social mood -- at this moment in time.
It was reflective of a real estate market where once again house flipping is all the rage, where reality TV stars now teach "How to get started flipping houses" around the country.
It was also reflective of Aspen's first-ever sustained nosedive in real estate, where a real estate broker noted that he didn't see that "nonchalance or cavalier attitude any more.”
Cavalier nonchalance while dropping $5-6 million on a townhouse does not happen at market troughs. It happens when the illusion exists that prices only go up.
We are susceptible to illusion when we stop using reason.
In this sense, Shape Shifter on page 171 and Shape Shifting on 698 should be a wake up call to snap out of it.
In Celtic mythology, shapeshifting was a form of "glamour" -- the ability of certain faeries to create illusions, often in order to deceive and fool humans.
Strongly trending markets can create the illusion of continued easy gains as Greater Fool theory takes over until a sudden loss of confidence causes prices to tumble.
Ironically, Lady Gaga's latest single is "Perfect Illusion."
Adding to the dream-like illusion is a laundry list of indications of extreme social mood:
-- as markets broke out to record highs in July, Marketwatch wrote "How to get started buying stocks" soon followed by "Just like 1999? Three reasons this stock market is different"
-- reminiscent of Shaquille O'neal starting a real estate fund in 2006, Kobe Bryant just launched a $100 million investment fund
-- CNBC just launched a new media show called BINGE
Edible gold is back, notable for its popularity in Toyko in 1989 when the Nikkei was at record highs and restaurants were topping their sushi with edible gold leaf. Now it's everywhere:
-- the $200 hot dog with edible gold flakes for National Hot Dog Day
-- 24K gold-infused olive oil
-- gold-infused skincare products
-- gold-dipped business cards
-- 24K gold Air Jordan sneakers
-- Nissan gold leaf EV cars
Generation KAnd so we come to Dream Season's ultimate illusion:
THE FACE THAT LAUNCHED A BILLION LIKES
This might have been September Vogue's jump the shark moment. It might also represent a high-water mark for the Instagirl thing now that the Wall Street Journal recently reported that teens are actively saying no to social media.
Just like eyeballs during the dot-com era, no one knows whether likes equal money.
Vogue's social media embrace may turn out to be the tail wagging the dog, hoping that a model's online presence translates to the bottom line . . . readership and revenue.
The good news, according to Forbes' 2016 Highest Paid Models List, is that Instagram followers do translate into dollars for Instagirls, who are rapidly closing in on top-earner Gisele Bündchen, thought by some to be the last true supermodel.
The larger question is whether followers translate into dollars for the magazines and brands who are lavishing such attention. Since it costs nothing to follow and nothing to like, does today's social media audience translate to financial success or just popularity?
Perhaps the silence on ad pages is evidence of an unwelcomed answer.
The new modeling paradigm based on followers and likes is also suspiciously reflective of today's financial markets being increasingly "cornered" by corporate buybacks while foreign central banks purchase corporate bonds, sovereign bonds, covered bonds, stocks, ETFs, and currencies (estimated by Deutsche Bank at over $180 billion per month).
By the way, this is not capitalism.
Vogue's leadership position -- actually the entire fashion industry -- is in danger of a tectonic shift from that which anoints to that which simply provides a venue in order to become anointed itself.
But there's another reason why the current obsession with Generation K may be the perfect illusion: they sound like mavericks.
At the top of her career, Instagirl Cara Delevingne recently quit modeling.
And page 672's article on Kendall Jenner by Jonathan Van Meter was extremely revealing.
Think you've got first-world problems? Try digesting this as a teen: "My dad taught me [how to drive a stick] when I was sixteen in her Porsche."
At age 18, Kendall bought her own home in Westwood, way on the other side of Topanga and the 405, "as a way to announce her independence from the Kardashians in Calabasas."
She also drives a '57 Corvette Stingray convertible.
Let that Vette sink in for a moment. Here's a girl who can drive any car she wants, anything in the world, and drives a very rare, vintage American muscle car.
The folks at Corvette's Bowling Green, Kentucky headquarters should be all over this. It's a brand manager's dream come true. Until she buys a different car.
Generation K might be a lot more independent and unpredictable than previously thought. Just when advertisers figured out The Facebook, Instagram became hot. Now it's Snapchat. Soon it will be something else.
Each platform requires entirely different tactics for ad agencies, creative departments, and media buyers.
Another sticky topic echoed in the Kendall article was that of celebrity capital, and do social media stars burn through it faster than others by being too *accessible.*
We'll let the suits worry about that for now.
The suits might also worry that the maverick thing isn't confined to Generation K but could be mirroring a larger trend:
The Burberry Artisans, The Unprocessed Life on page 608, the breastfeeding cover of September Vogue Brazil, "The benefits of buying antiques over new furniture" in Vogue Living Australia all point away from perpetual social life online and toward a more authentic, hands on, centered realness offline.
Fantastic Fearless Markets
Fearless is not just a cover line that echoes 2007.
It's an aspect of social mood that directly mirrors the current state of the markets, regardless what anyone says about it being the most hated bull market in history.
Facts beg to differ:
-- Gluskin Sheff + Associates recently noted the largest net speculative long position in S&P 500 futures since 2013
-- S&P 500 SPY call option open interest all-time record high
-- NASDAQ Composite speculative long record high
-- VIX volatility futures largest short position ever (basically the largest bet ever that volatility will remain low and markets will keep heading higher)
-- Goldman Sachs' Hedge Fund net futures positioning data recently indicated that hedge funds are "all in" to the long side
-- Goldman also noted recently: "The median stock in the index trades at the 99th percentile of historical valuation on most metrics"
-- The most recent S&P 500 forward P/E multiple reported by Birinyi Associates was 18.52x which ranks in the 95th percentile relative to the last 40 years
-- The Crestmont P/E of 27.5 ranks in the 96th percentile above its average arithmetic mean and the 98th percentile of its historical data series going back to 1870
-- At the July breakout to all-time highs, the S&P 500 was 2.5 standard deviations away from its historical median price-to-sales ratio, exceeding the excessive valuations of both 2000 and 2007
|Source : Ned Davis Research, S&P Capital IQ Compustat|
Investors are either fearlessly optimistic that earnings and sales will suddenly begin to grow robustly, or under the illusion that investing at valuations well above historical norms will yield long-term gains.
They've also been buying with vast amounts of margin debt.
The next two charts show 2016's current set up as identical to market peaks in 2000 and 2007 -- negative divergence. Note how investors' account deficits actually began to ease before the final peaks in the market (blue line):
The Socionomic Implications Of September Vogue
It's well known that beekeepers tend their bees on sunny days when the bees are in a good mood.
Anglers know that solunar tables pinpoint when fish are in the mood to bite.
And the Federal Reserve knows that targeting asset prices can create a bold and frisky mood.
It's called the wealth effect.
The Fed has done their best to use experimental monetary policy to engineer a dream season of perpetual spring in the markets.
As more and more investors and money managers believe that the Fed will not let the markets fall, fearlessness ensues, otherwise known as greed.
Exogenous meddling -- stimulus -- creates the illusion that the winds of change have ceased to blow.
Illusions often end abruptly.
Because social mood is primarily endogenous, it ultimately needs no outside stimulus. It can be unpredictable.
It means we're all essentially mavericks.
It means the markets are ultimately in control.
And central planners regard this with displeasure.
Perhaps there is good reason then for The Most Hated Bull Market Of All Time narrative.
Perhaps it's not a bull market at all.
This chart by Stifel Nicolaus simply excludes prices changes occurring the day of + the day before each Fed meeting since 1997 to show how Fed policy helped "create" the bull market.
Note the blue line.
|Source: Stifel Nicolaus|
Welcome to Dream Season's Fearless Fall: a Cacophony of Change and Illusion
"At last, however, the more prudent began to see that this folly could not last for ever. Rich people no longer bought the flowers to keep them in their gardens, but to sell them again at cent per cent profit. It was seen that somebody must lose fearfully in the end. As this conviction spread, prices fell, and never rose again. Confidence was destroyed, and a universal panic seized upon the dealers."
Charles Mackay, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, 1841
Given the extreme nature of September Vogue's social mood cues, this year's market implications require one to be nimble as the cacophony reaches a crescendo.
Central planners can be unpredictable too.
Consider this regarding Kendall Jenner's flasher pose: the thing about flashing is that it's over in a second -- about as long as it took the Dow Jones Industrial Average and the NASDAQ Composite to fail after their recent breakouts to record highs . . . the Dow undercutting its prior 2015 high not once, but seven times, and the Nasdaq doing so 13 times.
On Friday September 9th, the S&P 500 confirmed the Dow and Nasdaq by also closing below its 2015 high, taking back 44 trading days in a matter of hours as this edition was being finished.
Regardless of what September Vogue 2016 may or may not suggest, the market's pattern and structure can still lead to higher highs unless 1991.68 breaks, otherwise a test of the 1750-1800 area could occur.
Should the market find its footing and move higher as shown below, literally in a Fantastic Fearless Fall, the S&P could possibly target 2200-2300 (or higher if it chooses to subdivide).
Special thanks to Robert Prechter for pioneering the science of socionomics and for the inspiration, without which very little of this would be possible; to the Socionomics Institute for continued excellence; and to the late Paul Macrae Montgomery for the inspiration of his Magazine Cover Indicator. May he rest in peace.
The Socionomic Implications Of September Vogue: 2011
The Socionomic Implications Of September Vogue: 2012
The Socionomic Implications Of September Vogue: 2013
The Socionomic Implications Of September Vogue: 2014
The Socionomic Implications Of September Vogue: 2015
P.S. Had no idea what all the kittens meant.