Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...
Here’s a question: What does Main Street care more about: The stock market? Real estate? Unemployment?
Answer: The stock market.
When Wall Street and the financial system collapsed in October, 2008 a big question was, “Where are the suicides?” Where were the people flinging themselves out of windows onto Wall Street, as supposedly happened in the last Great Crash, in October, 1929. At that time, right after the crash that caused the Great Depression of the 1930s, Will Rogers said, “When Wall Street took that tailspin, you had to stand in line to get a window to drop out of.”
It turns out that the worry was accurate. But the suicides didn’t happen on Wall Street. Most likely they occurred on Main Street.
Statistics on suicides are flimsy (family members often don’t report suicides as cause of death) but after the stock market collapse of October, 2008 and until the day the stock market rebounded in March, 2009, evidence supplied by Google Trends suggests that there was a sharp increase in interest in people curious about how they could kill themselves. The bulk of these requests were coming not from Wall Street but from places ranging from Wisconsin to Utah as Main Street America dealt with the ramifications of falling 401ks, increased distance to retirement, and underwater mortgages.
Type in a phrase at Google Trends and Google returns a chart showing the popularity of that phrase over time. For instance, type in “Tiger Woods” and you see a somewhat steady line over the years until the end of 2009 when there is an enormous spike up when the Tiger sex scandal broke. Google Trends has also been useful in tracking down outbreaks of potential pandemics. Google Flutrends is used by the Center for Disease Control to identify regional outbreaks of flu based on how people are searching on common flu symptoms.
Typing in the phrase “suicide methods” results in the chart seen here. Steady as she goes in 2007 and early 2008 and then a spike up beginning in October, 2008 that only subsides back down to “normal” in March, 2009.
In other words, from the time of the Lehman Brothers collapse and the beginning of the financial collapse, until the absolute bottom of the market when the S&P 500 reached as low as 666 (a number that nobody would believe if it were fiction, but that was the low). From the moment the market began to recover (and it has soared over 50% since March, 2009) interest in the phrase “suicide methods” sharply diminished.
Interesting to note that the popularity of the phrase is only correlated with the stock market decline and NOT the housing market decline which began at the end of 2006.
Nor is it correlated with the sharp spike in unemployment that has occurred since late 2008. While unemployment continued to reach new highs, the interest in “suicide methods” declined exactly with the rise in the stock market beginning March 2009. While people’s net worth is often tied closely to the value of their houses, it turns out their self worth more closely approximates the size of their stock market portfolios. When that falters, their world view is shaken.
So where were the bodies flying out of windows on Wall Street?
It turns out that the phrase “suicide methods” was most popular not on Wall Street but Main Street. The states where the phrase was most popular were Wisconsin, Iowa, Nevada, New Hampshire.
Many pundits suggest that in a collapse like we experienced in October, 2008, the government should let the chips fall where they may. Let the S&P 500 fall as low as possible to clean things up. Let it fall to 400 or 300 or even lower, despite the fact that it may have been government policies that caused the mess in the first place.
But the bailouts, in plugging the holes in the financial system and allowing the stock market to stabilize and recover, (even if the “Plunge Protection Team” had to man their battle stations to temporarily prop things up) had a direct effect on human toll that was being felt on Main Street.
Read more from Altucher on his blogThe Altucher Confidential