Confidence: What Google has to tell us

Throughout my reading of the financial news of the last two years, I have come across two main themes again and again:
-The subprime crisis and its aftermath
-The rising of Google, possibly the most scrutinized company of our time

A lot of people agree that the subprime mess stems from the irrational exuberance of markets, which has successively led the markets up, down, and up again.
The recovery from the March lows may only be due to confidence gaining ground.

I believe one reason we have trouble understanding and taming these "animal spirits" is reductionism. Can we consider the confidence surveys we follow with great attention to be relevant when they only consider a sample of the population and are limited to a single country? In our complex and interlinked economy, can we consider confidence to have territorial frontiers?

This is where Google and its worldwide presence comes into play. The ubiquity of the "Don't be evil" company could turn out to provide us with a great tool to assess Global Confidence, a worldwide prediction market without the biases and reductionism of traditional (and costly) surveys.

A lot of talks has taken place lastly on the different scenarios we
should expect.
Google can help us compare, through the search occurrences and
apparitions in Google News of the different terms, were we stand.




Not surprisingly, we observe a good fit between search occurrences and apparition in the news.
Now, assuming that the search volume index represents the global opinion and News reference volume the experts opinion, the global and experts thinking seem correlated.

Therefore, the recent increase in news articles mentioning a double dip recession could reach a Tipping Point, moment when the fear of a
 W shaped recovery could feed in the global opinion and entail a self fulfilling prophecy.

If, we are truly living a Confidence based recovery, the only thing we have to hope for is hope itself.

Confidence is also greatly influenced by people that, following Malcom Gladwell's definition, we should define as Mavens.
Example Investors Figures of these Mavens would include Warren Buffet, Bill Gross, Marc Faber and R.Prechter. These "information specialist are the people that "we rely upon to connect us with new information" and have the capacity to "start word to mouth epidemics".
Once again, the growing pessimism of these Mavens (Bill Gross' last newsletter expresses fear of Bubbles, for those who missed it) could feed into our global confidence Google Index.

The Google Search Volume for "Market Bubble" is currently reaching yearly highs.




No Indicator can predict how the markets will react.
Ironically, Google has been one of the pioneers in implementing a prediction markets for employees to assess variables as the company's future growth, on the assumptions that the higher the employees' confidence, the more they would strive to drive the future growth.

Google, with its worldwide presence and use, could turn out to be a great tool for trend analysis.
Maybe Google is the End of the World as we know it, but the picture it has to show us could be the World as we should know it.