OLD Media Moves

Use of "Goldilocks" in the biz press

November 26, 2006

Barron’s columnist Alan Abelson has an intriguing theory in his column in this week’s issue about the number of times the word “Goldilocks” is used in the financial press.

Goldilocks referencesAbelson wrote, “THE SIMPLE BUT ELOQUENT CHART that adorns these wordy columns was sent to us by an old friend. What it shows through the agency of a single line is the number of times the name ‘Goldilocks’ has appeared in the financial press as a description of the investment climate. The line tracing that now familiar utterance represents a four-week moving average stretching back to the mid-1990s, when the term first became part of the Street’s lexicon.

“As you can see at a glance, it has climbed sharply of late, in pace with the venerable Dow Jones Industrial Average, to an all-time peak. What does this unprecedented use of ‘Goldilocks’ show? Apart, of course, from the verbal limitations of the financial press and the old reliables who are turned to for comment because they give good quote.

“We submit that it’s a pretty accurate barometer of the speculative atmosphere. For, in one important sense, the ‘Goldilocks’ rationale — that the economy is not too hot, nor too cold, but just right — serves quite handily less as an explanation of the favorable action of the stock market than as an excuse for being bullish in the face of some obtrusive negative like excessive exuberance in the Street.

“That certainly seems a valid way to view the recent spike in the ‘Goldilocks’ count. For the economy, instead of achieving some magical equilibrium between overheated and frosty, is clearly beginning to cool and gets more vulnerable by the day to recession, as the housing collapse inexorably worsens.

“But, whatever it may say about the speculative temperature, as the chart graphically depicts, a sharp rise in ‘Goldilocks’ sentiment presages a drop in stock prices.”

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