People Hear What They Want To Hear And Disregard The Rest… People Talking Without Speaking… People Hearing Without Listening

By: Kent Engelke | Capitol Securities

Who is the biggest disruptor? Is it the social media companies whose slogan is to “move fast and break things” or is it President Trump who is upsetting the world order? As noted many times, the electorate of western democracies is demanding a change from the status quo. Is President Trump just an extension of the social media mandate of breaking things and “doing no harm?”

Some might argue the president is doing harm but as already noted, the electorate feels as though they have already been harmed and want change.

Speaking of change, 30 years ago, the mantra in the investment business community was to find a company whose fundamentals are improving and whose ownership is lacking. Lessor owned value companies had greater odds of outsized gains.

Thirty years later, the mega-sized technology companies whose ownership and capitalization defies expectations and whose motto is about breaking things and doing no harm, are the ones most believed to be the pathways to riches. [Note: The ‘do no harm’ thing is suspect given the gazillion of businesses that failed because of an unleveled playing field, the result of regulatory fiat, an environment that is perhaps changing today.]

The advent of social media has made the media a free for all. If anyone, named or anonymous, foreign or domestic, paid or not, sane or crazy, honest or crooked can be a news source with an unlimited distribution potential, there is no way to rein in disinformation. In this kind of marketplace, anything goes because everyone competes for attention on the same terms.

The microtargeting of political messages to specific voters is no different than the microtargeting of ads to sell widgets. This microtargeting is extremely efficient given the voluntary disclosure of private information via social media.

Facebook and Microsoft are now calling for regulation. As noted many times, this is the first time I am aware that the leaders of any industry are calling for government regulatory intervention.

Facebook states 72% of US adults receive their news from social media, an unedited source that is not required to uphold journalistic standards because the government does not consider Facebook or any other social media site as a “publisher.”

Many times the lyrics from a Simon and Garfunkel song are echoing when I am reading some “press accounts”… “People hear what they want to hear and disregard the rest… People talking without speaking; People hearing without listening…”

Simplistically speaking, the ageless phenomenon of “confirmation basis” can become so overwhelming because of social media; information can be obtained to support almost any position.

How does the above impact the markets? I believe we are in a nascent tectonic monetary, geopolitical and macroeconomic change that will impact the investing dynamics. For at least ten years, growth has vastly outperformed value. Passive management via ETFs/indexing has outperformed active management by the greatest amount on record.

The social media narrative supports the investing status quo but the only constant in life is change. Change will occur when all least expect it, the immediate catalyst not known until it has long passed.

What will happen this week, a week whose trading volumes are expected to wane as the Labor Day holiday approaches?

Last night the foreign markets were up. London was closed for a holiday, Paris was up 0.38%, and Frankfurt was up 0.42%. China was up 1.89%, Japan was up 0.88% and Hang Sang was up 2.17%.

The Dow should open nominally higher ahead of an apparent breakthrough on NAFTA. The 10-year is off 3/32 to yield 2.83%.

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