Social Mood Conference  |  Socionomics Foundation
By Peter Atwater | Excerpted from the August 2011 Socionomist

Originally published under the title “Post-Crash Reality: Gimme Shelter”


[Ed: In this article, financial commentator Peter Atwater explains that as a deflationary mindset grows, the American housing market metamorphoses from “investment” to “good.” Here is an excerpt of Atwater’s August 2011 article.]

In their landmark 2007 paper, “The Financial/Economic Dichotomy in Social Behavioral Dynamics: The Socionomic Perspective,” Robert Prechter and Wayne Parker noted that some economic goods can come to be viewed as investments. They cited as examples tulips in Holland in the 1630s and Beanie Babies in the 1990s. They also noted that at the time they wrote their paper, homes in the U.S. and elsewhere had “metamorphosed from economic goods into vehicles for speculation as people buy them to ‘flip’ and trade options on their purchase.” Prechter and Parker wrote:

When an item is generally viewed as a good to be used, it has a certain value because individuals know how to value it over time for their own purposes. When an item is generally viewed as an investment, it has an uncertain value because individuals do not know how it will be valued over time by others. … [In the first case, it] is an economic good to any person who buys it to use or enjoy. … [In the second case, it] is a financial asset to a person who buys it with the expectation of re-selling later it at a higher price; he does not know its future value to other people [who likewise will be speculating on it], and he pays a price that may or may not turn out to be useful in the financial context of uncertain value.1

TV shows such as “Flip That House” helped prove that at its peak in 2006/2007, the U.S. housing market had moved beyond providing utility to become a full-fledged speculative bubble. A house was not so much a home as a key to future financial rewards.

More recently, a friend in the high-end home-building industry observed that fancy woodworking has been pushed aside for “instant” hot water and variable-speed furnace fans. His point was that ostentatious luxury, or boundless aspiration, is being replaced by cost-conscious utility—even at the upper end of the market. As Prechter and Parker’s paper alluded, the housing market is changing from an investment market back to a market for a utilitarian good. …

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Read this two-page article to discover what Atwater has to say regarding emerging trends in the rental and new single-family housing markets once mood turns negative at smaller degrees.

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Socionomics InstituteThe Socionomist is a monthly online magazine designed to help readers see and capitalize on the waves of social mood that contantly occur throughout the world. It is published by the Socionomics Institute, Robert R. Prechter, president; Matt Lampert, editor-in-chief; Alyssa Hayden, editor; Alan Hall and Chuck Thompson, staff writers; Dave Allman and Pete Kendall, editorial direction; Chuck Thompson, production; Ben Hall, proofreader.

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Most economists, historians and sociologists presume that events determine society’s mood. But socionomics hypothesizes the opposite: that social mood regulates the character of social events. The events of history—such as investment booms and busts, political events, macroeconomic trends and even peace and war—are the products of a naturally occurring pattern of social-mood fluctuation. Such events, therefore, are not randomly distributed, as is commonly believed, but are in fact probabilistically predictable. Socionomics also posits that the stock market is the best available meter of a society’s aggregate mood, that news is irrelevant to social mood, and that financial and economic decision-making are fundamentally different in that financial decisions are motivated by the herding impulse while economic choices are guided by supply and demand. For more information about socionomic theory, see (1) the text, The Wave Principle of Human Social Behavior © 1999, by Robert Prechter; (2) the introductory documentary History's Hidden Engine; (3) the video Toward a New Science of Social Prediction, Prechter’s 2004 speech before the London School of Economics in which he presents evidence to support his socionomic hypothesis; and (4) the Socionomics Institute’s website, www.socionomics.net. At no time will the Socionomics Institute make specific recommendations about a course of action for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended.

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