Who doesn't remember that Happy Days episode when Fonzie tackles his galeophobia by jumping over a penned shark on water skis? Will he make it, or will he be leather-jacketed chum? Tune in to see!
Hence, "Jump the Shark" entered our lexicon. A sitcom has "jumped the shark" when, in a last, desperate bid for relevancy, script writers scramble for a sensational storyline to boost ratings, e.g., a new family member (adopted or newborn, sometimes twins), a new pet, a vacation to Hawaii (e.g., the Brady Bunch and the evil tiki), or Ted McGinley joins the cast (http://www.jumptheshark.com/forum/Ted-Mcginley/22).
Investor concerns can similarly jump the shark. That's not to say it can't resurge later under a new guise or different circumstances—some investor concerns are destined to be perennial favorites. But we note investor fears, particularly ones as universal as subprime is right now, tend to hit an almost absurdist fevered pitch and then fade from headlines entirely.
While today's headlines squeal the subprime crisis must immediately and irreversibly tank the market and the economy (an assertion we disagree with—subprime's relatively too small—see "Fed Focus", it's helpful to consider what other market concerns have recently jumped the shark.
1. High gas prices. The summertime standard "High Gas Price/Price Gouging/Stagflation" headlines are curiously missing—displaced by the current subprime saga. Our view: Gas prices historically have no correlation with stock prices. Higher gas prices aren't a market threat.
2. Rising long-term interest rates. This was a huge concern not two months ago, when pundits caterwauled rising long-term interest rates were proof positive the bull market was over. Since, long-term rates are down considerably from their highs, yet, oddly, it garners little media mention. Our view: Even at their recent highs, long-term interest rates globally have been and remain benign.
3. Bird flu. Investors had bird flu fever just this past April, but the media's been mum since. (Presumably, a lack of widespread death and mayhem at the hands of a bird flu pandemic chased this one out of the headlines.) Our view: Historically, markets haven't been much impacted by even the deadliest of pandemics. (See "A Pandemic of Fear")
4. Yen carry trade. Remember how unwinding Yen carry trades were supposed to melt the market just this past March? Didn't happen. Our view: We didn't think it would, as we said in "Carry Trading Tirade".
5. Income gap. This was a huge story at the beginning of the year! What happened? People got tired of it, we suppose. Our view: Patent nonsense. (For another view, read "Gap Schmap").
Other concerns that have jumped the shark but are destined to return are: a weak dollar, the trade deficit, the budget deficit, over-indebted consumers, and outsourcing. All misplaced market fears that flare up, dominate headlines for a few weeks or months, and then fade away—replaced by the next hot thing.
Has subprime jumped the shark? We're not sure, but it shows sign of morphing:
Next Victim of Mortgage Mass: Auto Sales
By Chris Isidore, CNNMoney.com
This article surmises auto sales might slow because of subprime. We hear subprime lending also causes global warming and isn't a friend to animals. What else? Apparently, this:
Bonuses on Wall Street Threatened by Credit Crunch
By Jenny Strasburg and Christine Harper, Bloomberg
If the new angle is we should bemoan the subprime crisis because investment bankers' bonuses (normally, much-reviled by the media) might be up only 10% this year, this concern may be in its dying throes.
When the next hot thing hits newsstands (saber rattling from North Korea or Iran, perhaps) ask: Is this a legitimate concern? Does it have the power to move markets? How has the market responded historically to similar concerns? Is this just another sensational fear that will hog headlines and then fade away, with no media mea culpa regarding their rabble rousing? That line of questioning can help you see markets more clearly and reduce costly investing errors by focusing your attention away from the noise to what truly moves markets.
So next week, on a Very Special MarketMinder . . . the staff learns a certain friend is engaging in dangerous, protectionist behavior. Guest starring Nancy Reagan.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.