"Can Bezos Defy the Time-Cover Curse?: New York, Dec. 20 Normally it is considered an honor to be selected to grace the cover of a weekly news magazine. If, however, your metier happens to be business or finance or economics, the last place you want to be is on the cover of Time Magazine.
Call it the curse of the magazine covers. There is an entire
body of work devoted to analyzing the information on magazine
covers. The bottom line? By the time a person or a phenomenon
acquires magazine-cover status, the news is, as they say, already
``in the market.'
What, then, are we to make of Jeff Bezos' designation as
Time Magazine's Man (oops! Person) of the Year? The 35-year-old
CEO of Amazon.com Inc., an online bookseller that has transformed
itself to an anythingyouwant.com online retailer, is the fourth
youngest individual ever to be given that distinction by the
editors at Time.
Surely no one will quibble with Time's choice in honoring
someone who has been at the forefront of the Internet revolution.
That five-year-old Amazon.com hasn't earned a penny yet, nor is
it projected to until 2001 or 2002, hasn't stopped Amazon stock
from returning 83 percent this year, outpacing the high-flying
Nasdaq by more than 10 percentage points.
If history is any guide, bad times may be in store for
Amazon's stock, even though by all counts Christmas sales are
booming.
Magazine covers ``reflect the extent to which the bullish,
or bearish, news is in the public domain and has been acted
upon,' says Paul McCrae Montgomery, a money manager and market
analyst at Legg Mason Wood Walker, Inc. in Newport News,
Virginia, who has studied magazine covers going back to 1923.
``By the time something's on the cover of Time, the story is
widely shared.
Fade the Cover
Unlike Business Week and Barron's, which ``give some good
contrarian signals but also emit a lot of noise because they
cover business every week,' Time doesn't venture into the world
of finance for its cover story that often, Montgomery explains.
When it does, investors should take note. Montgomery's
comprehensive study has found that the market goes in the
direction of the cover for anywhere from one week to two months
and is 60-65 percent reliable.
One year later, the market has gone in the exact opposite
direction as that suggested by the cover more than 85 percent of
the time, Montgomery says.
Other notable examples of contrarian Time covers include
``Interest Rate Anguish' in 1982, with then-Fed chairman Paul
Volcker on the cover, along with his ubiquitous cigar. That was
right before the secular bull market in bonds took 30-year yields
from 14 percent to 4.69 percent in October 1998.
Once Bitten, Twice Wrong
``Can GM Survive?' on Nov. 9, 1992, arrived when the stock
of the No. 1 U.S. auto manufacturer was hovering near 25. One
year later, General Motors' stock was up 52 percent.
Attempting to redeem itself, Time went back to the drawing
board and produced ``Detroit Shifting into High Gear' in
December 1993.
Just about that time, GM stock shifted into reverse. One
year after the bullish magazine cover, GM was trading below 30
again.
Montgomery noted two other Time classics that ran within a
week either side of the 1929 crash. One featured Samuel Insull,
the British-born American public utilities magnate; the other
profiled Ivar Kreuger, the match king. Insull was tried three
times (and acquitted) for fraud, violation of federal bankruptcy
laws and embezzlement before fleeing the country. Kreuger shot
himself.
Time Magazine is not alone in penning big bloopers. The
editors of the Economist went out of their way in this week's
edition to apologize for some of their blunders this year in a
piece entitled ``We woz wrong.'
Crude Call
First among the cover stories that didn't turn out the way
they predicted was the March 6 cover, ``Drowning in Oil,'
predicting $5 crude. That was right before crude oil prices took
off in earnest. The price of West Texas intermediate, the
benchmark U.S. crude, averaged $12.25 in the first two months of
1999 compared with an average price of $25.30 in November and the
first 20 days of December.
The Economist is no different than other forecasters when it
comes to being victimized by one-wayitis: it went down, so it
will continue to go down. Who can forget the Wall Street
Journal's currency outlook on the Monday after the dollar slumped
to an all-time low of 79.75 yen in April 1995? Every analyst
predicted that the dollar could only go lower.
Oil has almost doubled in price since the Economist
predicted its demise. The editors do their obligatory mea culpas,
though not before offering an excuse -- Who knew that OPEC would
stick to its production cuts? -- and a bit of self-praise. After
all, the shock of $5 oil may have persuaded ministers from the
Organization of Petroleum Exporting Countries to take action.
The Economist editors were hardly contrite about their view
of the U.S. as a ``bubble economy' with a bubble stock market,
another eye-catching cover. They hold out hope that they may yet
be proved right in their forecast.
The good news for the Economist this time around is that
Time is on their side. |
