Monday Market Update – October 11

Forefront’s Monday Market Update

The world is working against you, and so is your brain

Over the past couple of weeks, we have been privy to an inside look at Facebook, thanks to whistleblower and former employee Frances Haugen’s very clear and detailed testimony. She spoke with conviction, and specificity, bringing along with her receipts to back up her claims. What we learned wasn’t anything we didn’t already know, but it did bring a lot to the forefront (see what I did there) that we have to address.

What did we learn?

We didn’t learn anything new really, but the information we were given just felt more credible and real. It came to light that the algorithm Facebook/Instagram uses to determine what they are going to show you in your newsfeed is geared towards showing you things that cause anger and outrage. Facebook realized that the engagement with the platform jumps exponentially when they can draw out the emotions of anger and outrage.

Now I ask all of you, do you have the best decision-making process while you are angry or outraged?

Anytime emotions run so hot is never a good time to make major decisions, but social media isn’t something we use sometimes. We use it all the time.  We all carry around cell phones, that with a push of an icon we can be scrolling Instagram, Facebook, Twitter, etc. immediately. We are walking around in a constant state of outrage and anger. The main street media has taken note, and started to do the same thing as Facebook. No one wants to hear about the cat being rescued anymore, we want to see the cell phone video of neighbors fighting over political lawn signs.

The Sideways Effect

In 2004 the movie Sideways was released starring Paul Giamatti, about a thin skinned and temperamental man who absolutely LOVES wine. Who doesn’t! The backstory to one of the most famous lines in the movie was that his ex-wife in the movie liked Merlot, which prompts the line “I am NOT drinking any f****** merlot!” Instead, Paul Giamatti’s character had a passion for Pinot Noir, and this leads us to The Sideways Effect. Up until this time, Merlot was the most popular, and widely purchased red wine in the USA.

A 2009 case study out of Sonoma State University found a meaningful decline in Merlot sales from January 2005 (Sideways was released in October 2004) through 2008. During that same time frame, we same sales of pinot noir increase by 16 percent! Did people really stop liking Merlot all of a sudden and immediately start to love pinot noir?

Squid Game

Like about 100 million other people, we have become engrossed in the Netflix TV show Squid Game. If you haven’t watched the show, check it out, but the most interesting part of the entire show…… the shoes.

The solid white, slip on, Vans shoes that are being worn are a classic design by Vans that had lost their popularity as time has gone on. Since Squid Game has aired on Netflix, sales of that particular shoe at Vans are up 7,800%!

Come on brain, cooperate 

Whether it is Facebook sowing outrage and anger, or movies and TV shows subconsciously changing what we drink or wear, our brain is working and formulating thoughts and biases constantly. This is not a good thing when it comes to personal finances and money management. We tend to take the word of people like Jim Cramer, and even people like Mark Cuban as gospel because we like them. We let our brain off the hook from doing any sort of critical thinking because we just blindly follow in many cases.

This is why one of the major things a good financial advisor and planner brings to the table for their clients is the act of being very deliberate when making decisions. Buying a new vacuum cleaner doesn’t require hours of brain work, but making sure the cost will bring equal value isn’t just important, but will save you from needing to buy a new vacuum in 2 years because you just bought whichever one someone told you about.

When people question the value of advisors, or just someone you trust that you can bounce ideas off of, I always make sure to point out that the media, social media, and even movies and tv shows are all working against you. Everyone has their own agenda, to get you to watch this show or that one, to click here and read this, or click there and read that. All of it is meant to create anger and outrage so we continue to engage with whatever platform we are using. The world is working against you and this has a major impact on building wealth.

So What?

So how does this impact all of you?

  • Understand that media etc. is not trying to help you make decisions. Be deliberate in your decision making process
  • Your brain can trick you, be aware of it.

Stock market calendar this week:

Columbus Day holiday. None scheduled
6:00 AM NFIB small-business index
10:00 AM Job openings
11:00 AM Median expected 3-year inflation rate
8:30 AM Consumer price index
8:30 AM Core CPI
2:00 PM FOMC minutes
8:30 AM Initial jobless claims (regular state program)
8:30 AM Continuing jobless claims (regular state program)
8:30 AM Producer price index
8:30 AM Retail sales
8:30 AM Retail sales ex-autos
8:30 AM Import price index
8:30 AM Empire state index
10:00 AM Consumer sentiment index
10:00 AM Business inventories

Most anticipated earnings for this week:

The McNamara Fallacy makes us all focus on what is easily measurable and quantifiable. One of the things we fail to ask our advisors, attorneys and accountants is “What is your decision making process.” We address exactly what our decision making process at Forefront Wealth Planning is in the latest episode of Understanding the Power of Money.
Listen to episode 15 of Understanding the Power of Money.