Whispering campaigns can take flight in new media

Kathleen Parker

All it takes is one little twit. Or a tweet, as the case may be — not that the two are mutually exclusive.
In fact, it’s very likely that the person who recently started a rumor about South Carolina Gov. Nikki Haley (R) was trying to create that idiot’s delight — “buzz” — for his blog. Or whatever little virtual temple he had erected to himself.

So it goes in the ridiculous political arena in which we now find ourselves.
The rumor — that Haley was about to be indicted for tax fraud — was so delicious that other bloggers, tweeters and even some mainstream media outlets felt compelled to repeat it.
Except that it wasn’t true. Not even a little bit. Some twit apparently thought it would be fun to start a rumor and see what happened next. We all know what happens: Indictments spread like wildfire; corrections couldn’t roast a marshmallow.
The damage took only a couple of hours. And Haley, a rising star in the Republican Party and a possible vice presidential pick for Mitt Romney, is all too aware of the potential cost to her reputation. She’s been through this before. While she was running for governor, two men stepped forward to claim sexual dalliances with the married mother of two.
Obviously, South Carolinians either didn’t buy it or didn’t care. The attack was so vile and, frankly, not so credible that voters reacted by checking the box by Haley’s name. Her popularity as governor ebbs and flows as these things go, but her appeal as a national figure does not seem affected by local attacks. She’s going to be around for a long time.
Meanwhile, what Haley experienced as a target of the rumor mill should be of more general concern to everyone. The New York Times tracked the path of the Haley/tax rumor to show how quickly it traveled from a small spark in the fevered brain of a political enemy into a bonfire of inanity. It began with a blog item, then was tweeted by the Hill, a Washington political newspaper, and reported in a short article by the Daily Beast.
All of this happened March 29 between 12:52 p.m., when the blog post went online, and 1:12 p.m., when a reporter for USA Today decided to call Haley’s office and actually find out if the story was true. Give that reporter a raise! But the rumor was retweeted at 1:14 by a Washington Post reporter and later picked up by online outlets Daily Kos and the Daily Caller. By 3:29, the Drudge Report linked to the Daily Caller article featuring the headline: “Report: DOJ may indict SC Gov. Nikki Haley for tax fraud.”
The next morning, The State, South Carolina’s largest newspaper, had a front-page story. All in a day’s whisper.
What is abominably clear is that this sort of thing can happen to anyone at any time. And much worse things can be said that can’t easily be disproved. Haley extinguished this fire by releasing a letter from the Internal Revenue Service stating that there was no investigation.
But what if, instead, the rumor were that a candidate was once suspected of child abuse? “Neighbors, who ­remembered Candidate A as quiet and polite, nonetheless say they always­ ­suspected . . . ”
We used to recognize rumors for what they are, but in the era of insta-everything, rumors get to enjoy enough time in the sunlight to make an imprint on the community psyche. Most disappointing during this particular cycle was the failure of some legitimate news organizations to turn the rumor over and examine its underbelly before repeating it.
What happened to a minimum of two corroborating sources before a story is posted?
Even laymen unfamiliar with traditional journalism’s standards and procedures learned that rule from “All the President’s Men,” the movie based on Bob Woodward and Carl Bernstein’s historic Watergate investigation.
That was then. Now editors faced with dwindling subscriptions and advertising must compete with the twits who make it up as they go. But the danger of trying to keep up with twits and tweeters is that eventually you may get good at it — and no better.
Integrity of information is the one thing newspapers can promise readers that other, new media can’t deliver with the same consistency.
It isn’t only a matter of pride or even of survival of newspapers, in which I obviously have a personal interest. Ultimately, it is a matter of helping protect freedoms that will become diminished as a less-informed citizenry surrenders responsibility to titillation — and slouches inevitably toward idiocracy.

Why are stock prices rising every time new year? January optimism

If you’ve never made a New Year’s resolution, you’re in the minority: One 2006 study found that more than 80 percent of those surveyed had once promised to, say, eat, smoke or spend less after Jan. 1. Unfortunately, research also shows that 80 percent of these resolvers fail. Why do they make promises they can’t keep? It’s new year optimism — the idea that, whatever happened between February and December, things will be better in January.

We start the new year thinking that, as we become better people, our investments will perform better as well. In a recent paper in the Journal of Behavioral Finance, I connected January optimism to an overall rise in stock prices. The results were clear: Whether in boom times or in recession, bears hibernate in January, and positive-thinking bulls run free.

This “January Effect” has long been a mystery to market analysts. The market isn’t supposed to behave like another irresolute new year’s resolver. Despite being uncovered in 1942 by economist Sidney Wachtel and widely publicized after a 1976 study by professors Michael Rozeff and William Kinney, the phenomenon persists.

Two popular hypotheses try to explain these unusual returns. One is “tax-loss selling” — the notion that investors sell stocks in December to generate capital losses for their tax returns, then buy them back in January, pushing up prices temporarily. The other, “window-dressing,” contends that money managers sell risky holdings in December to make portfolios look safer when reporting to clients. After the ball drops, they buy back what they sold, pushing January prices up.

Both explanations have their supporters, but neither adequately accounts for the January Effect. Cheap stocks whose prices rose during the year are unlikely candidates to be sold for tax reasons, but they also do well in January. Meanwhile, window-dressing does not appear to occur during mid-year reporting dates. If money managers were doing this at the end of the year, they would probably do it in the middle of the year, too.

January optimism fills the gaps in these theories. I found that small stocks, such as those with market caps below $1.5 billion in the Russell 2000 Index — think Starbucks before the latte craze — were particularly predisposed to its influence. Because they are considered risky, temporarily optimistic investors bet on them at the beginning of the year. When reality sets in, these holdings get dumped.

January optimism is sentimental — and sentiment-based arguments are generally ignored by academic researchers who frown upon claims that clash with their ideas of market efficiency. In perfect markets, prices convey all available information about an equity, and no investor should consistently beat a market index such the Dow Jones Industrial Average or the S&P 500.
Follow the herd and be optimistic — purchase cheap, long-shot small stocks in December, and sell them before they tank in February.

Of course, there is no guarantee that the January Effect will continue. Then again, there’s no guarantee that those who promise to read “War and Peace,” practice yoga or call their mothers every Sunday won’t be hard at work on their resolutions 30 days from now. Odds are, however, that January optimism will wither — stock prices will fall, Tolstoy’s weighty tome will go unread, yoga mats will gather dust, and Mom will wait by the phone.
Happy New Year...2012