The Time Magazine Cover Indicator

“All economic movements, by their very nature, are motivated by crowd psychology.” — Financier Bernard Baruch

Originated by the late Paul Macrae Montgomery; The Time Magazine Cover Indicator serves as a contrarian signal, which essentially tells us whether some investment theme has reached a crescendo.  The rationale follows that by the time a company’s success or failure reaches the cover page of a major publication, the company is so well known that it is reflected fully in the current stock price.

The findings of three University of Richmond professors published in their study “Are Cover Stories Effective Contrarian Indicators” prove as much. Their research examined Business Week, Fortune, and Forbes, and found a correlation between the cover of the publication and the performance of a stock.Their findings indicate that positive stories generally indicate that the stock’s price performance has topped out. Negative stories often come right at the time of a turnaround.

The study confirms that it is better to bet against journalists than alongside them. 

Business Week’s August 13, 1979 “The Death of Equities” cover claimed investors – burned by years of bad returns in the 1970s – turned their back on stocks for good. That was just before the market launched into an 18-year rally.


Times’ “Home Sweet Home” cover story in June 2005 called the very top of the housing market. Newsweek’s April 2010 cover declared “America’s Back!” right before the Dow plunged from 11,200 to about 9,500.


However, rather than blame all of our investment woes on journalists, it would be more constructive for us to recognize what Montgomery realized long ago.  “Standard economic theories overlooked the human factor in markets.

“When we speak of thing’s having value, we are referring to the human desire for that particular thing at that particular time.  Value is thus a quality appertaining not to external materiality, but rather to internal, immaterial mental states.”

Tops and bottoms in any market are a creation of extreme market psychology. “The basic principles of human neurophysiology are so similar, that if we become uncomfortable enough to significantly change our market position, it is virtually certain that a number of other people are doing precisely the same thing at precisely the same time, thereby creating a temporary turning point in bond prices and interest rates.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s