“Go Yield!”

Every new day of 2008 seems to bring more doom and more gloom, but for all of the foreboding of doom, destruction and further corporate deviance, it seems that the American people have become increasingly indifferent to the media. Americans seem to be unable to cope with the glut of bad news– instead they simply are willing to let Congress’s feeble criticism of the financial industry take precedence over finding a solution by forcing those involved to explain the mechanics and structure of their structured finance products. Furthermore, while it seems that many Americans are excited [1] for the 2008 election , we still are unable to remember the events that happened just last week. President Bush’s incompetence has simply become an after-note, even as acclaimed film-maker Oliver Stone has put out a sarcastic biopic [2] that depicts the life of the president. The war in Iraq has become a triviality in an election where we focus more on the amount of money that Sarah Palin spends on her RNC-sponsored, un-Alaskan wardrobe [3] than we are on the issues themselves. Even Mahmoud Ahmadinejad and Hugo Chavez have failed to stir American emotions, as they watch their power and fortunes plunge with every increase in the U.S. dollar and reduction in the market price of their black gold. Perhaps the homogeneity and standardization that securitization has imposed upon financial structure has trickled down to the real economy, making Joe the Plumber, Rupert Murdoch and Larry Page clogs in this non-descript, corporate machine that we call the United States of America.

This homeomorphism, of sorts, has led me to consider a somewhat positive portion of the real American economy – the bond market. While most of us have heard about the dramatic deterioration in the Dow Jones Industrial Average, few have realized that the bond market has had a far worse year especially in the developing world, where most of their economy growth is fostered by the sales of debt. Surprisingly enough, the American bond market has been rather resistant to these global problems, as banks are forced to put their formerly-liquid assets in the U.S. dollars, as per the government’s bailout plan. In fact, California sold a record amount last week [4]. Add in the dramatic increase in money markets (as individual investors pull their money out of the financial system) and you have a recipe for success, at least in the realm of the treasury and treasury-related bond markets. So in honor of this (relatively) positive news, the phrase I decided to analyze for this week is:

“Go Yield!”

I looked at various words that have showed up in the news that have a neutral and/or positive connotation, in order to find news that is interesting enough to seduce even the most indifferent members of the American public. The conversion of the phrase to an acronym yields the following terms that are ripe for analysis:

* G – GLONASS, an acronym for Global'naya Navigatsionnaya Sputnikovaya Sistema or Global Navigation System (Science)

* O – OPEC, an acronym for the Organization of Petroleum Exporting Countries (Business)

* Y – Yahoo! (Technology)

* I – Iceland (World News)

* E – Escapist/Escapism (Art/Life)

* L – Late-Night comics

* D – Diwali (Holidays)

The rationale behind the word selection is week was based on a purely logical basis – I selected various words from disjoint sections of the news (as highlighted above) and then attempted to connect them. All of the words above were chosen simply because they seem rather boring on the surface, even though they are involved in various current events. The American public’s indifference towards Russia’s burgeoning superpower status is the focus of my first topic, GLONASS.

One of the relatively new technologies that many of us take for granted nowadays is the Global Positioning Systems or GPS. However, unbeknownst to many an American citizen, all of the GPS satellites in orbit are owned and operated by the U.S., as GPS is simply the extension of U.S. Department of Defense experiment from the 1960s. Naturally, other countries that are active in space are rather scared of using our navigation satellites for sensitive government usage and are thus creating their own versions of GPS. The system that has the most promise and is the closest to completion is the Global'naya Navigatsionnaya Sputnikovaya Sistema (GLONASS) of Russia. Intuitively, this makes a lot of sense, as Russia has the most experience in space right after the U.S. This week, Russian President Vladimir Putin received one of the first GLONASS receivers – to keep tabs on his dog [5], a black Labrador named Connie. In honor of Connie’s newfound inability to run away from Putin (although, I suppose it’s impossible to run away from Putin once you’re on the inside – see: Boris Berezovsky), I decided to look and see how much people care about GLONASS. From Google Trends, we see that most of the searches took place in late-2007 and late-2006, when the first GLONASS satellites were launched. Unsurprisingly, Russians were by and large the predominant querents of GLONASS on Google; however, let’s look at what happened in the last thirty days to see what effect Connie has had on GLONASS queries.

Ah, America! Apparently, we are a cynophilist, dog-loving nation that cares about a challenge to our status as the world’s last remaining super-power only when the aggressor (in this case, Russia) has a love for dogs. As it turns out, all of the queries about GLONASS in the past month were from the United States, with a spike in searches for GLONASS that outweighed the change in news that mentioned GLONASS by approximately two to one. All I can really say about this is that Americans may not care about a “Russkie” satellite that could interfere with the U.S.’s planned missile defense system, but we most definitely care about the dogs that are influenced by such a satellite system!

If we look at the phrase “going to the dogs” in a far less cheery way, we most likely will arrive at a description of the mood of the “poor” Middle Eastern businessmen who are lamenting the precipitous fall in the price of oil. The leaders of OPEC, the Organization of Petroleum Exporting Countries called an emergency meeting on October 24 to discuss ways to stem their “losses” due to oils prices that have fallen over 50 percent in four months. It is interesting to note that Dubai and Abu Dhabi and their respective extravagant architectural spectacles were funded by oil priced between $20 and $40. Now why do I find OPEC to be an interesting topic of analysis? Well, since oil prices are of central importance to the American consumer, it would be interesting to see whether or not there is some sort of periodicity within the searches and news that Google indexes [6]. And apparently, my hunch was correct, as we notice that there are collections of spikes that roughly correspond to the dates of OPEC meetings. While this isn’t very enlightening, it is interesting to note that there wasn’t much of a spike in the amount of news about OPEC changing its quotas until 2008, when the price of a barrel of oil increased by 100 percent and subsequently fell by 50 percent. I decided to look at the Google Trends data by individual year (2004 to 2008) and as a whole, because month-to-month fluctuations would depend on the scheduling of an OPEC meeting, whereas year-to-year fluctuations would be more aligned with the general market sentiment toward oil prices.

If we look at the net search data for the years 2004 to2008, we see that Indonesia was the country with the most queries to its record. Most likely this is because Indonesia decided to pull out of OPEC in May 2008, in an attempt to preserve its oil supplies for domestic usage, instead of letting Indonesian traders sell-off the country’s reserves to the major oil consumers at then record prices. Interestingly enough, the U.S. was not particularly interested in oil prices over the whole range of years from 2004 to 2008, even though there was a dramatic rise in oil prices (over 300 percent) over this time period. I suspect this is because few Americans (and indeed, few members of the American media) see OPEC’s quotas as a minor influence on oil price, especially when OPEC’s influence is compared to that of commodity traders. However, in the rest of the world, where oil quotas are much more important in the regulation of basic utilities and government subsidies, we see a marked interest in OPEC’s actions. In looking at the trends over the years between and including 2004 and 2008, I noticed that there was a general trend to see a marked increase in search queries for OPEC toward the end of the year that is balanced by a steep decrease during the first few months of the year. Indonesia, Thailand and India queried the most about OPEC, while the US barely made it into the top ten nations that searched for “OPEC.” However, I did notice something interesting about OPEC queries from the United States: Washington DC led all US cities in queries about OPEC, with Houston, Texas coming in at a close second. Now the appearance of Houston on the top ten list of cities that queried about OPEC shouldn’t surprise anyone as Houston is the home to oil-giants Exxon and Schlumberger. However, I was surprised to see DC on the list, as one would expect commodity traders from New York, London and Hong Kong to be the most interested in OPEC’s moves. Perhaps this gives some credence to my assertion that the American public (and subsequently, America’s bankers) doesn’t seem to believe that OPEC has much leverage over oil pricing.

Now pricing oil is a relative task, as there are few market participants, a major cartel controlling over 40% of the world’s oil and little that the consumer can do on an individual basis to change oil prices. However, pricing a company is a very prickly prospect, as one never really knows how much various assets within a company are actually worth, at any given instant. Microsoft, the world’s most hated, yet most popular software company, surely learned this the hard way when they went after Yahoo!, the world’s second most popular search engine. Now, while the takeover “news” started as a series of on-and-off rumors about closed door meetings between the two companies until last week, Microsoft has publically refused to consider Yahoo! a valuable business acquisition – at least at the price Yahoo! CEO Jerry Yang wanted ($37 per share). My oh my, how times have changed, as last week, Microsoft CEO Steve Ballmer implied that a Microsoft-Yahoo merger still made sense to him, fiscally. It may be wise for me to mention that Jerry Yang is considered to be a “renegade” CEO by many of those in fiscal power, simply because he thinks with regard to computer science as opposed to finance when he makes decisions. As with all relatively benign news about mergers and acquisitions, the statements by Ballmer sent the “rational” markets into a scramble to revalue Yahoo! as malignantly as possible. Now let’s see what insight Google Trends can provide in discovering how these merger rumors have translated into fluctuations in searches and/or news about Yahoo! and Microsoft.

Interestingly enough, I noticed that one could use secondary words (i.e. such as searching for the fragment, “Yahoo Microsoft” instead of “Yahoo”) to act as “filters” for an initial search. While this may not seem surprising to many of you, the search algorithms that Google employs tend to take the set of words inputted into a search query and gives each word typed in a search query the same worth. Since Google Trends is most likely built with a similar non-Zermelo ordering (Check out http://en.wikipedia.org/wiki/Axiomatic_set_theory [7] for an explanation of why I refer to an ordered search as a Zermelo ordering) and will therefore weight each word in a query of many words with equal regard. However, this does not occur, as we get markedly different graphs for the query, “Yahoo Microsoft,” than we do for the query “Yahoo.” Sadly, the only way to explain this is to use math, but don’t worry, I’ll try to make it short and pain-free. Essentially, what I discovered is that the search engine within Google Trends “composes” the results it retrieves for multiple word queries, similar to a composition of functions, as opposed to concatenating the results from each word. What this means is that the graphs that are outputting by Google Trends are created by restricting the values that the algorithm counts for the graph to values that are related to the second word. In this example this means that the graph looks for searches and news articles that only contain both the words Microsoft and Yahoo as opposed to the set of searches that contain the word Microsoft and searches that contain the word Microsoft. This really helps affirm many of the statements I make, with regard to a “many word system”, as we are looking at the data that contains all of the words in a given query. Now onto the [8] http://www.google.com/trends?q=yahoo+microsoft&ctab=0&geo=all&date=ytd&s... [9]!

One sees that the level of searches for the queries, “Yahoo” and “Yahoo!” have been roughly linear with time, when looking at any time period that is indexed by Google Trends. There are a couple stipulations that I must mention before I continue with my “hand-wavy” analysis, namely:

o We are looking at searches for the word Yahoo on Google. Contradiction, anyone?

o Google News is a meta-search engine that simply indexes published news/opinion articles – this means that we have a more mathematically unbiased sample of news article as opposed to more biased results from the searches

Even with these large, gaping holes that will encompass any statements derived from Google Trends about Yahoo!, I will continue on with my analysis, for the sake of intellectual completeness. Now let’s restrict ourselves to results from the past year (as Microsoft offered to buy Yahoo! for $33 a share on February 1, 2008). We see that between the queries, “Yahoo” and “Yahoo!” there is little difference in the number of searches. This means that we can tentatively neglect the effect of people simply searching for the word “Yahoo” as opposed to the company “Yahoo!” Therefore, we can now look at direct comparisons of the queries “Yahoo” and “Yahoo Microsoft” with fewer doubts about their validity.

From Google Trends, one sees that the rough pattern in number of news articles that mention both Yahoo and Microsoft is roughly the same in both queries; however, it is the comparison of searches that really holds the key. The shape of the graph that defines search trends for “Yahoo” is flat whereas there is a huge change in number of searches with the Microsoft query. Why might this be? If we take a look at the locations that were most interested in searching for “Yahoo,” we see that Paris, Malaysia and Richardson, Texas are the places most interested in “Yahoo.” As it turns out, Yahoo! has large research facilities in Richardson, Texas and Paris, France, which explains the large interest from both of those cities. However, Yahoo! has nary a visible presence in Malaysia, a point well illustrated by this fact: Yahoo! does not have a local Yahoo! page in Malay. Now to help us interpret this oddity, let’s look at the results from “Yahoo Microsoft”.

This query yields one rather interesting result – most of the searches for “Yahoo Microsoft” are from Bangalore, India. This shouldn’t really be a surprise as most US IT companies have outsourced to Bangalore, which is the heart of India’s “Silicon Valley.” I suppose that most of the people who work for Yahoo’s equivalent of Google Labs should be expected to worry about their futures at Microsoft, which tends to focus much more on product development, as opposed to research. However, these results are much more predictable, as we see that the number of queries for “Yahoo Microsoft” increased significantly around the time of Microsoft’s tendered offer. However, I still cannot explain the huge number of queries from Malaysia, outside of a very weak assertion that states that any Yahoo/Microsoft merger would lead to outsourcing to Malaysia, as Malaysia is slowly becoming a valuable outsourcing partner due to its relatively strong currency - the ringgit. I guess it’s a better name than that of the Vietnamese dong?

While many Asian currencies have finally displayed their strengths in the global economy (some for the first time since the Asian market crash of 1997), currencies that were once considered the bullions of the wealthy are suddenly becoming worthless. The Icelandic Króna was once the symbol of an inflation-resistant currency that gave Hedge Fund-like returns for a fraction of the price. This thought is clearly no more, as the Króna has inflated (relative to a market basket of currencies) by 500% in the past two weeks. This is because the Icelandic government has had to bail out ALL of the country’s banks, so that while we think we have it bad here with our defaulting investment banks and insurance companies, we still have the majority of our wealth in relatively safe hands. This extreme bailout may lead to the Icelandic government defaulting on all its debentures. Debentures are essentially bonds that the Icelandic government underwrites in order to get money for public works projects. In order to entice buyers, the government promises to pay some interest rate to the bondholder for essentially lending his or her money to the government. In the case of a default, the Icelandic government would be unable to pay back either the principle (the amount the government borrowed) or the interest or both. I know this may be familiar to many of you, but I am including these definitions for reasons of mathematical and logical completeness. Now let’s see whether the world cares about Iceland.

As it turns out, the only news of interest, before the Icelandic currency crisis, was when “Chess legend Bobby Fischer head[ed] for Iceland.” Sadly, there isn’t too much data here to work with. Thus we can concentrate on the past thirty days or roughly the duration of the Icelandic currency crisis. Since I’m on a US-centric theme today we can start by looking at results from the US - there were few if any searches from the world’s (supposedly only) superpower, even though a significant number of the news stories written about Iceland’s near-default originated in the US. Although American may not care about the country that invented 24-hour golf (soon to be Sarah Palin’s main hobby, as it is beginning to look unlikely that she will hold any political office for more than 3-4 more years) many of the top ten locations that searched for Iceland were small, wealthy towns in the United Kingdom. As I mentioned earlier, some considered Iceland to be the “Switzerland of Inflation” and put much of their wealth in Iceland’s banking system. Perhaps that’s why people in towns such as Poplar, UK, Edinburgh, UK and Thames Ditton, UK were curious as to what the state of Iceland was in the past month?

Escaping from Iceland’s fragile economy may have been a trivial transaction for those involved the banking systems of the UK, but what about an escape from reality for the rest of us? There is much debate within economic circles as to whether an economic hardship increases or decreases escapist-like behavior, such as playing video games, watching movies or binge drinking (when you’re age 40). The driving force behind an hypothetical increase in escapist behavior, as expressed by Tim Pollak and Marc Babej [10], is that people are unwilling to compromise their self-image even if their economic stature is crumbling. As Pollak and Babej put it, “fiscal sobriety doesn't always mean literal sobriety” which implies that consumers tend to, “seek solace in affordable entertainment” such as alcohol, movies and other cheap thrills. On the other hand one in a pedagogical frame of mind may argue that life in a positive economic environment is really an escape from reality, as consumers tend to overvalue the positives of the economy and trivialize the negative happenings in the world. Therefore, the real escapism (and the activities that go along with escapism) takes place when we are in a positive economic state. Note that the general mood and candor of the media is a rough estimate of whether people are overvaluing positive and/or negative economic news. This means that we can use Google Trends to take a stab at whether an economic downturn increases or decreases escapist-like behavior, by comparing the relative economic news and tone of the media to the amount of interest in escapism.

A quick search on Trends for the word “escapism” [11] depicts a very telling picture of when and why people are looking for escapes. From Trends, we see that the only time that there was a significant spike in the amount of news that contained the word escapism was in late-2008, when the average American realized what kind of pitfall the American economy had encountered. However, this sharp increase in news with the word “escapism” was followed by an acute decrease in “escapism” news, which implies that the media tended to have a neutral sentiment towards escapism. This isolated spike in “escapism” news cannot tell us anything, unless we look at the trends in searches for the word escapism. Although there were quite a few momentum shifts, with regard to the levels of interest in the word “escapism” from 2005 to 2007, Trends depicts a steady increase in the number of searches for the word escapism in the second half of 2008. This increase culminated with a pronounced spike in searches for the word escapism in late-September/early-October, around the time the news about “escapism” tapered off. What can we interpret from this? Well, as the media tended to be rather neutral about the subject, we can propose that the increase in searches for “escapism” implies that in the current economic slowdown, people are tending to look for cheap getaways. Google Trends shows that there exists a similar pattern for the queries, “escapist,” “escape,” and “escapade.” Interestingly enough, none of these queries had similar geographic data. Apparently the word escapade is more interesting in France, Belgium and the UK, while citizens of Ireland, Norway and Canada enjoy looking for the word escapist and people from Singapore, Australia and the Czech Republic are connoisseurs of escapism. For some reason, I feel like the word escapade implicitly connotes an aristocratic European couple running off to Ibiza for a week, so the results from the word escapade make sense. However, what surprised me the most was the lack of representation of the United States in any of these queries. The only explanation that I can come up with for this is that Americans are simply working too hard [12] for them to even consider looking for escapes. Yes that was a jab at you and your summer reveries, Sarkozy.

For all of his faults and peculiarities, Nicolas Sarkozy still doesn’t even come close to the perfect caricature that is John McCain. Since John McCain won the Republican nomination, he has been battered, bruised, beaten and bloodied by late-night comedians [13]. And it’s not like only a few comedians are bashing McCain, everyone from Bill Maher: http://www.youtube.com/watch?v=x2OUJ8ZUTiI [14]

to David Letterman [15] and Jay Leno [16] have been acting as an “equal-opportunity haters” of John McCain. According the Yahoo! News article, it’s gotten to the point where even the RNC seems apathetic towards the digs against McCain. From these shards of information, I set out to see what the relationship between the media’s wise-cracks about McCain and how people responded to these jokes. I decided to search for the following phrases on Google Trends:

* McCain Maher

* McCain Letterman

* McCain Leno

As it turns out, not many people seem to like Bill Maher’s jokes about John McCain, as Google Trends only shows a 20-25 fold increase in searches for “McCain Maher” since the beginning of 2008. Now, you may be wondering how a 20-25 fold increase could be considered insignificant. I considered this result insignificant for two reasons:

1. The results for the other two searches yielded far greater increases

2. There is no regional data for the “McCain Maher” query

Now for the less trivial results – the queries, “McCain Letterman” and “McCain Leno” both had over 100 fold increases in interest (when compared to the mean interest over 2004-2008). Furthermore, these increases have been rather consistent, which implies that the American public has been going back for more servings of this, “McCain humor.” If we look at the geographic data, however, we stumble upon a rather interesting finding. The query, “McCain Leno” apparently only originates in New York City, whereas the query, “McCain Letterman” seems to originate from various battleground states. Examples of places that had a marked interest in “McCain Letterman” are (in order from greatest interest to less interest):

+ Reston, Virginia

+ Portland, Oregon

+ Washington DC

+ St. Louis, Missouri

+ Denver, Colorado

+ Seattle, Washington

+ Minneapolis, Minnesota

The cities of St. Louis, Minneapolis, Denver and Reston are all located in battleground states that are considered a toss-up for the November election. I believe that John McCain’s mistake of not going on Letterman’s nightly program in September led to this marked increase in searches for the apparent “feud” between Letterman and McCain. Furthermore, this marked increase in interest in “McCain Letterman” seems to be concentrated in areas where voters are undecided and are helping to rationalize their decisions by looking at how the “funny men” of the media treat one of the presidential candidates. Who would have ever thought that simply turning down David Letterman could have been McCain’s biggest mistake during this election?

So what did we learn this week, outside of the fact that America loves dogs, hates commodity traders (but is indifferent to OPEC) and all-in-all tends to ignore crises? Well, we learned that America is one of the most optimistic places on Earth and that we display our optimism through poignant indifference!