I thoroughly enjoyed Randall Forsyth's "Up & Down Wall Street" column in Barron's this weekend. As a socionomist, there is nothing better than seeing the popular business media give a shout-out to Paul Montgomery and his magazine cover "indicator" -- in this case, look at last Friday's TIME magazine cover featuring the Wall Street bull complete with a party hat and confetti alongside the article title "How Wall Street Won."
Needless to say, Forsyth and Montgomery both saw the Time cover as a reason to be cautious.
Just for fun, though, I thought it might be interesting to see what the story selection by Barron's itself said about current investor confidence. And given how important I believe the confidence of the ultra-rich is to our asset-value-driven market, I decided to focus specifically on the articles in this week's Penta supplement -- "Trusted Advice for Families With Assets of $5 Million or More."
To cut to the chase, let's just say the the commentary in Barron's on this week's TIME magazine cover is the media equivalent of the pot calling the kettle black.
This week's Penta is filled with cautionary story topics and quotes. For example, the cover article in Penta offers "Seeking Higher Returns: Wealthy families, suddenly more interested in asset appreciation than protection, are moving out of cash and into riskier investments such as European and emerging market stocks, global macro hedge funds, and illiquid private equity."
Then there was the story on Steven Schwarzman's new $300 million Rhodes-like program, in which Schwarzman "calmly" states that Blackstone ( BX ) "has virtually all the doors open" in China that it needs, and that he has "easier ways to open doors than by putting $100 million on the table."
And speaking of putting $100 million on the table, this week's Penta also included "The Flying Mansion: When the only thing that will do is your own home and office in the sky." And I loved the lead line in the article: "For some, a Gulfstream just won't do. These demanding travelers require something like Air Force One, with room to stretch out, walk around, even work out." And for between $70 million and $110 million, you, too, can purchase -- leasing is so 1990s -- your own BizJet.
And if you are looking for an inaugural flight idea for your new BizJet, Penta offers "My Lambo Lap: Lamborghini's fun day of amateur course-driving." Per Penta, the newest Aventado -- the open-top 700 LP-4 Roadster -- has a V12 engine and seven-speed transmission, and will set you back $445,000."
Of course, this week's Penta also included the "required" articles on over-the-top jewelry and watches. When you've got it, flaunt it. And let's just say that this week's selections of over-the top "Mad Max Watches" (the real title -- not my exaggeration) and Ottoman-era gold cuffs are hardly a subtle understatement. And I particularly liked this week's concluding advice on purchasing antique jewelry: "The thing about gold jewelry is just holding it in your hand... Buy the best of what you can afford. Because as you learn more, your eye will only get better."
As a socionomist, I loved the implicit extrapolation in confidence: If you can spend a lot now, just imagine how much more you will be able to spend in the future.
This week's Penta also included an article entitled "Protect IPO Windfalls With a Trust." While IPOs by their nature tend to occur at peak levels of market confidence, when editors can insert the word "windfall" and no one even blinks, something big is happening.
Finally -- and speaking of big things happening -- my favorite line of all from this week's Penta was contained in the "Hollywood's Banker" article on City National Bank in Los Angeles. In the story, the author notes, "Some [City National] clients are so interested in real-estate investing that they have considered making it a full-time job. Recently, three separate clients approached the bank with plans to switch careers and put all of their future money and efforts into real-estate investments -- a field in which none of them had any serious experience."
As I wrote in Moods and Markets , "Peaks are a vortex. But what few truly appreciate is that those who join last are most often the most naÃ¯ve. They join not because they understand the underlying risks of the business (which at the top would be perceived by others to be nonexistent anyway) but because they see nothing but opportunity and because everyone else joined; rather than looking out the windshield, they use their rearview mirror to see what they think is ahead. They buy based on a "proven" track record and the confidence exhibited by others around them."
Looking at this week's Penta, there is an enormous amount of "confidence exhibited by others" at the ultra-high end. From their purchases to their investment strategies, to their tax and charitable giving, the elite are all but oozing overconfidence.
Can the markets go higher? Always. As a socionomist, though, I'd offer that this week's Penta may be an even more important indicator than Time magazine. From a confidence perspective, America is a tale of two cities: there are those with and those without financial assets. While there are those who believe that the market top won't be in until retail participates, I wouldn't be so sure.
From what I see not only in Penta, but more broadly, the ultra-elite are peaking in confidence. Without a sudden boost in low- and middle-income confidence, there could be a more than a little turbulence for the new BizJet crowd.
"Peter Atwater brilliantly provides a framework for understanding both the socioeconomic hubris that led to the great credit bubble of the past decade and the dark social-psychological hangover that has resulted from its collapse. In so doing, he offers an invaluable guide to what promises to be a very difficult and turbulent period ahead as we experience what he calls the 'me, here, and now' behavioral tendencies of the post-crash world." -Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation