A Gore-y Correction Correlation

Congratulations are in order to Mr. Al Gore, inventor of the internet and former Vice President, for winning an Oscar in the "best documentary" category for his film denouncing humanity for it's carbon burning ways in "An Inconvenient Truth".

And almost…almost!…did Mr. Gore announce his candidacy for President in 2008 during the program. But he (mercifully) withheld. Without doubt, his popularity surged on that Sunday evening in Hollywood, and so did his perceived prospects to become (again) the next Democratic candidate for President. After all, hanging out with Leo and Clooney on the most globally watched broadcast of the year is sure to do wonders for anyone's image, right?

And most would be content to leave it at that. But we noticed a very peculiar feature about Mr. Gore's prospects to be President—every time he sees a surge in popularity the global stock markets tank!

In the second half of May 2006, global markets took a dive to the tune of about 12%. Coincidentally, within that exact period the price on a security of Mr. Gore's chances to be President rocketed upwards over 130%!* Have a look at the chart below and see it for yourself.

To wit, as the Oscar parties wound down on Sunday night leading into Monday morning, stocks entered yet another corrective phase as the global equity markets had their worst week since that very same period in May 2006! And, not surprisingly, in that exact same period the price of one share of Mr. Gore's chances to become President blasted off another +100%.

Most people thought it would be a cold day in Hades before Mr. Gore had any chance of attaining the Presidency. When that expectation was called into question, stock owners got jittery. And why not? Long has Mr. Gore been a king-size version of the socializing forces that drive the likes of the somewhat shorter and stouter Robert B. Reich and analogous brethren. It's been a gory week for markets; coincident with a Gore-y surge in popularity. Coincidence? Thems are the facts.

Of course, we're at least half-jesting that Mr. Gore's Oscar win is the catalyst for the recent global equity sell off. But it underscores the importance of politics for stock investors—a successful investor is always aware of the current geopolitical situation. A potential leader of the free world with a historically left-leaning social agenda like Mr. Gore (or someone similar) is a spooky thing for stocks, and well worth keeping an eye on, silly as it might seem. But remember, the idea that an actor from California could be President was also a silly notion at one time also.

Mr. Gore received a standing ovation for his commentary about the need to act immediately on global warming. No matter your opinion on the matter, it's fair to say the issue of global warming has reached a fever pitch (pun intended) in the court of public opinion, and the prospect of harmful regulation that could impede trade and general commerce throughout the globe is looking more like a viable possibility.

The Oscar situation also underscores the absurdity of trying to pinpoint one specific reason for a movement in stocks at any given time. Every single day there are billions of things happening in the global markets with millions of participants—all of which play a role in stocks' overall direction. The best we can say about the current market environment is that the move has been psychological—if anything, the fundamentals and economics of the global scene today are stronger than before the Oscars. Psychological moves are usually short, sharp, steep, and scary—and gone almost as soon as they arrive. (Like May and June of 2006, for example.)

Then again, this year also marked the first time Marty Scorsese won an Oscar for directing. Many thought hell would freeze over before that ever happened too. So, maybe we're all wrong about this and it's actually the beginning of a Scorsese-driven bear market.

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* Source: Intrade is an online securities market that tracks the outcome of various political and sporting outcomes. Between a range of 0 and 100, a security predicting, say, the percentage chance Al Gore will become the Democratic nominee for '08 President is traded on an open market. The higher the security goes, the greater the chances of him succeeding, according to the market's participants. Currently, Mr. Gore has surged to 3rd place behind Hillary Clinton and Barack Obama.