{+++}Here is some interesting work my hedge fund buddy is doing. Good read
Social Engagement in Investing Q3 2014
Summary: Today we launch a new product, designed to track Americans’ interest level in various forms of investing, leisure pursuits and life changing events. Our data is as big as it comes: Google Trends analysis for +130 discrete search terms from 2006 to the present day. This quarter we address the question “Why does the public not seem to care that domestic equities are at new highs?” The answer is simple. After the Financial Crisis, many individuals lost interest in traditional financial assets and channeled their attention towards investing in themselves. Google searches for “Stock market” are down 46% since January 2006; queries for “Write an app” are up 6900%. There are more Google searches in the U.S. for “Kickstarter” than “Buy a stock”. Americans are still investors, but increasingly it is in their own ideas rather than financial assets.
Note from Nick: In our never ending pursuit for novel datasets, today we offer up an extensive look at Google Trend data for a host of different investment-related search terms. We consider all types of investing – time, money, life decisions – in the mix. Jessica picks up the thread from here to answer the question “If the stock market is doing so well, why isn’t it more popular?”
A new era has arrived: George Clooney, People Magazine’s Sexiest Man Alive of 2006 (and renowned bachelor), is finally tying the knot in Italy this September. My invitation apparently got lost in the mail. Either that or George holds a grudge about that thing I said that time in Capri; it’s impossible to say which. Let’s move on.
The year 2006 may seem arbitrary, but it serves as a notable starting point when measuring the strides we have experienced since Clooney was on the cover of People. Consider the following:
1) The number of Facebook users has increased 100 times over since 2006. Facebook was just two years old, and had only 12 million users in 2006. This number jumped after the company opened membership to social media crazed teenagers (13+) during that same year. Currently, reported users exceed a whopping 1.2 billion.
2) Just two World Cups later, the average number of U.S. viewers of the tournament’s 64 matches doubled, from 2.3 million in 2006 to 4.6 million in 2014.
3) The U.S. population reached the 300 million mark in 2006. Now it is 18 million higher, or more than the entire population of Belgium.
So a lot has changed since 2006, but we wanted to know exactly what engaged the attention of Americans then and now. After all, the real Continental Divide of this period is the Financial Crisis, and that must have caused a lot of societal shifts. Thus, we took a Big Data plunge—using Google Trends—to assess the ebbs and flows of interests and behaviors over the past eight years.
While analyzing big data sources to identify behavioral trends or social sentiment is unconventional, it has recently grabbed the Fed’s attention. Mark Curtis, a visiting scholar in the Atlanta Fed’s research department, recently interviewed Hal Varian, the chief economist at Google, about the nuances of new data sources from places like Google (please see a link to this interview at the end of this piece). The interview concludes that while these sources will not replace Government statistical agencies, for example, they provide valuable insights that can act as a supplement, and in real-time to boot.
With that said, we divided measures of social engagement into six buckets: financial assets, human capital, non-traditional assets, leisure, major life changes, and politics. Below are our findings related to each category on a macro level, viewed over three time periods: January 2006-June 2014, pre-financial crisis (January 2006-October 2008), and post-financial crisis (October 2008-June 2014). We created lists of 26 typical search terms for each, and then ran both simple and trimmed mean growth rates for each across our three timeframes. The summary results are as follows:
· Interest in traditional financial assets (stocks, bonds, and mutual funds, for example) is down 19% since 2006. As capital markets reached new highs leading up to the last market crash, searches related to traditional financial assets were up 61%. Subsequent to the peak of October 2008, these searches fell by 45%.
· Interest in human capital (i.e. schooling, learning languages, getting involved in startups) has climbed 359% since 2006. Pre-financial crisis, interest related to investing in oneself was virtually flat, down 3%. Post-financial crisis, these searches rose by 33%.
· Interest in non-traditional asset classes (hedge funds, house flipping and VC, to name three examples) grew by 74% since 2006. However, much of this growth occurred before the financial crisis, when this bucket increased by 41%. Post-financial crisis, this category declined by 19%.
· Interest in major life changes (examples from our list include nursing homes, retirement and having a baby) advanced 28% since 2006. Before the financial crisis, individuals were less apt to assume major life changes, when interest was down 2%. Post-financial crisis, these searches rose by 29%.
· Interest in leisure activities (TV, Casinos, and NASCAR, for example) is up 187% since 2006. Leisure related searches increased by 16% pre-financial crisis, and grew by 39% post-financial crisis.
· Interest in politics (Hillary Clinton, Rand Paul and many others) has increased by 17% since 2006. Political related searches rose by 40% leading up to the financial crisis, most likely due to the 2008 presidential election. Since October 2008, this interest has pared by 36%.
Given the shift of interest from investing in financial assets to investing in oneself, coupled with a greater propensity to assume life changes post-financial crisis, it seems people are relying on their own human capital and individual efforts as opposed to companies in the form of stocks or bonds. In fact, “startup” and “crowdfunding” yield higher costs per click of $1.75 and $1.25, than “buy a stock” and “buy a bond”—$0.70 and $0.65—on Google AdWords.
To further explore these trends, here are our takeaways of each bucket on a micro level and how we see each item intersect. In the following, please keep in mind that our data (available in detailed tables immediately following this note) are dated January 2006-October 2008 (Pre-crisis) and October 2008-Present (Post-Crisis).
· School is out; experience is in. For example, a decline of 40% in searches related to college or graduate school pre-financial crisis deepened to -63% post-financial crisis. More specifically, searches for business school, law school, and medical school were collectively down 44% pre-financial crisis and 131% post-financial crisis. Although interest in higher education had already been falling, the financial crisis seems to have exacerbated this downward trend in pursuing higher education.
Conversely, interest in undertaking entrepreneurial ventures has surged since the financial crisis. Searches for “start a business” or “open a store” are collectively up 9% and 67% post-financial crisis versus -5% and 0% pre-financial crisis. Most alluring are the startup dreams of Silicon Valley, many attracting more demand post-financial crisis than pre-financial crisis: startup jobs (+283%, -36%), tech startup (+350%,-45%), write an app (+6900%, 0%), and how to write code (+7%, 19%).
Interest in startups and businesses has swelled, in large part, due to technology increasing the ways in which one can attract capital. Searches for “crowdfunding” were virtually flat before the financial crisis (a term first reportedly used in 2006), but skyrocketed to +8600% post financial crisis; “seed funding” jumped 5600% pre-financial crisis and is up 33% post-financial crisis. Lastly, Kickstarter was only launched in 2009: +8000% post-financial crisis.
· Interest in retirement is down 30% since 2006. This figure includes searches for “retirement planning”, “retirement communities”, “nursing homes”, and “golf community”. This is to be expected, as people are living longer, and it is therefore natural to work longer to support additional years of needed income. Further, the financial crisis was a major headwind and few can afford to retire: interest in retirement funds is down 43% since 2006 according to the Google Trend data we reviewed.
· Individuals are tuning out classic financial investments in favor of real assets. Searches to invest in real estate or one’s home have risen post-financial crisis versus pre-financial crisis: house flipping (+111% post-Crisis, -75% pre-Crisis), real estate (-30%, -43%), renovate house (+166%, -40%), and buy a house (+97%, +8%). Searches related to investing in land or buying art also increased after the financial crisis compared to before the market peak in 08: buy land (+25%, -18%) and buy art (+6%, -9%).
Unlike the financial market, which has experienced tepid investor engagement as it reaches new highs, the real estate and art markets have generated strong interest while rebounding post-Crisis.
· Social media and web-based entertainment have come to overshadow traditional leisure activities. Since 2006, Facebook (+7000%), Youtube (+9300%), and Netflix (523%) have outpaced traditional leisure activities: TV (+7%), mall (29%), movie showings (+84%). Nevertheless, people are still interested in viewing real-time professional sporting events: stadium tickets (+100%) and NASCAR (+35%) are examples here.
· Interest in life-changing events has grown by 29% post-financial crisis. Interest in changing one’s job increased post-financial crisis after falling pre-financial crisis: career change (+17% post-Crisis, -22% pre-Crisis), new job (+11%, -21%), job openings (+16%, -1%), and first job (+90%, -4%).
People are also more interested in moving after the financial crisis than before: buy a house (+103% post-Crisis, 0% pre-Crisis) and sell house (+58%, -28%). More specifically, individuals are more inclined to move abroad. The search “move abroad” spiked around the financial crash, and has been rising since (+48%).
Moreover, individuals have been more interested in making familial changes, for better or for worse, post versus pre-financial crisis: have a baby (+154% post-Crisis, +59% pre-Crisis), wedding (+21%, -23%), and divorce lawyer (+20%, -13%).
· Interest in political issues has abated by 36% post-financial crisis. Social and economic political issues most likely garnered interest leading up to the financial crisis due to the 2008 presidential election. However, these issues drew much less interest thereafter. The few political topics that continue to spur engagement are social issues: immigration reform (+740%), income inequality (+52%), and marijuana legalization (+45%).
In terms of political figures, President Obama expectedly holds the lead, up 800%. Rand Paul and John Boehner average +425% in the aggregate, and Hilary Clinton and Nancy Pelosi follow with a collective average of +96%.
On the whole, technology seems to be the underlying factor disrupting many of these categories. Starting a business is increasingly easier, as crowdfunding has broadened access to capital and advances in the internet have expanded the consumer base. Additionally, portable tech devices have disrupted entertainment as Netflix shows continue to grab market share from cable, for example. As technology caters to individual demands and needs, and enables business prospects, people have been better able to assume life changes and investments in themselves that are uncorrelated to the market. In a sense, technology has jump-started risk-taking behavior anchored in entrepreneurship, replacing the notion that investing is all about capital markets.
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