Tuesday, March 06, 2007

Having Fun with "Fear & Greed"

There is an interesting quote in Warren Buffet's annual shareholder letter this week - "Be fearful when others are greedy, and be greedy when others are fearful."

Buffet makes this point specifically in relation to the insurance industry, but says it reflects his investment thesis in general.

It's interesting to think about how this maps against some of the great tools now freely available online for tracking trends (I've found them really useful over the years tracking brand buzz).

This is how Nielsen's Blogpulse sees it in the last 6 months: with big spikes for "fear" in the last week and back in September 2006 and a pretty flat, consistent and level buzz for "greed".

Nielsen tracks the blogosphere, which clearly has its own idiosyncrasies and subjectivity while Google Trends tracks apparently more objective sources with search and news.

The patterns are dissimilar, though with Google it seems that fear is decreasing - maybe the bloggers are more paranoid :)

Getting back to Buffet, does the stock market tell us anything - is it more or less objective than search, news or the blogosphere?

Looking at the dips in the NASDAQ and DOW composites in 2006 and in recent weeks it seems there is some correlation.

The publicly available versions of these tools are still fairly immature, but you can really start to have a lot of fun trend plotting.

How oftern do you use these tools? What more could they do and what do you think, not just in relation to fear, greed and the markets - but how Buffet's theory maps to the state of the Web market today.

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At 3/07/2007 07:05:00 pm, Anonymous Rahul Dighe said...

only thing i can say to this is that correlation doesn't equate causation.

At 3/07/2007 10:49:00 pm, Blogger Saul said...

agree rahul - but the pictures are pretty :)

At 3/08/2007 02:22:00 am, Anonymous alan patrick said...


I think these tools will be used more and more going forward, especially by interactive media and advertising. We are in the process of designing a metatool in this space btw :)


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