15 June 2010

FTSE set to rebound?

“It is not a case of choosing those [faces] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.” (John Maynard Keynes, General Theory of Employment Interest and Money, 1936).

By Keynes logic, people price shares not based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is.

With more than half of all Internet users beginning any session with a Google search and 76% of the UK online, Google Insights for Search arguably provides us with an opportunity to gage the behavourial habits of 20 million members of the British public.

Can we use Google Trends to see if the average person thinks the FTSE has reached a low? With the FTSE 100 down 3.6% across the last 12 months and 6.7% in the last three months, the resulting surge in searches for 'buy shares' in the UK in the last week suggest now may be as good a time as any to buy in.

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