Presenting The 'Indifference' Indicator...

Tyler Durden's picture

Few would argue that markets are almost entirely apathetic to even the worst and most negative of headlines in this post-crisis world. As we noted earlier, it seems we are 'shell-shocked' at a 'recovery' that UBS describes as 'not exactly an uplifting experience' – global growth went straight from 'collapse' to 'mid cycle' without ever enjoying the healing properties normally associated with a one to two year recovery process. For economists, one interesting question is whether this 'new normal' is unduly influencing economic sentiment. We would somewhat expect traders/managers to be behaving in an increasingly agitated manner; jumping at sudden noises, overreacting to shifts in economic data and generally exhibiting signs of stress, economic hysteria, and volatility. In reality, both consumers and businesses have become quite blasé about the economy. Sentiment is actually a lot less volatile than the economic circumstances would normally suggest it should be, and so (via UBS) we present 'The Indifference Indicator' to track just how 'subdued' regions have become.


Via UBS' Paul Donovan: The barometer of blasé

To test whether consumers and businesses are more inclined to overreact to economic events we have compiled a blasé barometer. This is a relatively simple process. We take the three year standard deviation of a sentiment index, and we compare it to the three year standard deviation of a pertinent economic variable. For example, we could compare the volatility of US consumer sentiment with the volatility of real consumer spending growth. (We use consumer spending growth to match the dynamic nature of the sentiment index).


If sentiment volatility is rising relative to the volatility of the underlying variable that would indicate that the consumer (or business) is tending to overreact to changes in the economy. If the volatility of sentiment is declining relative to the volatility of economic data, that indicates that the consumer is becoming immune to tales of economic disaster – or at least is not prone to overreact. This does not tell us anything about the level of confidence, or whether confidence is helpful in predicting the underlying economic data – what is surveyed here is merely whether there is an overreaction or calmness on the part of economic agents at this stage of the cycle.

The results

The following charts detail some of the results that we have compiled. For the most part there is little inclination to overreact. Consumers and businesses tended to panic in response the crisis, or at least reacted in a far more volatile manner than the underlying data would normally dictate. Now, however, there is an inclination to be far calmer. Indeed for many of the manufacturing surveys, sentiment is the calmest it has historically been in the face of economic trends, with the indices at or near all time lows. The exception is the German consumer, who seems to be inclined to react more strongly to economic data swings than is the case elsewhere, and to react more strongly than has tended to be the case historically.

The German consumer is modeled using a general climate indicator. It may well be that the insecurities of the Euro zone, and the way in which these have been reported in the German media, have encouraged a more volatile attitude from consumers. Similarly the very recent increase in the tendency to overreact from US consumers and manufacturers alike may reflect the intensity of media reporting on economic issues in the run up to the presidential election, rather than the economic reality of cyclical data.






It would seem that by the magic of central-planning we have indeed become much less agitated by the day-to-day dismal reality that lies just beneath the surface should you choose to swallow the red pill... or maybe, just maybe, the fiscal cliff is the awakening.


Source: UBS

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Cognitive Dissonance's picture

The opposite of anger is not joy, but rather apathy.

Anger and joy are both strong emotions and convey emotional involvement. Apathy conveys the opposite state of emotion and often (but not always) indicates a controlled and fearfully passive mind.

The Limerick King's picture



This crises has led to despair

I turned from a bull to a bear

What once I thought great

Would make me irate

But now I just simply don't care!


PUD's picture

Just need a bigger shock is all. Like more heroin in a vein. It will come and the ole panic will be better than ever!

Cursive's picture

People have been conditioned to accept economic malaise.  The average person is not happy with their economic condition (high levels of consumer and student debt bear this out), but when the government money tree has been dropping bills everywhere, everyday, complacency about financial disaster begins to take hold.  There's very little social stigma with default, too.

dwdollar's picture

They're mind control games only work so long as everyone's belly is full. During a food crisis, no amount of propaganda, drugs, fear, and HAARP resonance will keep the hordes from rising.

Hubbs's picture

Gee Tyler, do I hear sour grapes because the SHTF event has not occurred depite 3 years of build up at your site?

(Just kidding)


The government has got the dumbing and numbing of the masses down to a science, even if it has left us with out a pot to piss in, only a whirling fan to await for impact.

ZerOhead's picture

The new five-year study of more than 2,200 adults claims to have found a link between obesity and the decline in a person's cognitive function.

Doomed I say...

A Lunatic's picture

People have crisis fatigue.

AynRandFan's picture

Volatility won't return until something bad actually happens.

LongSoupLine's picture

"Crisis?...what crisis?" - average American (see: x-factor watching, SNAP program using, Obama phone owning, GM driving asshole lemming)

HD's picture

People will acclimate to just about anything.

"Keep calm and carry on" as the bombers fly over each night. Recovery is just a few decades away...

Frank N. Beans's picture

the 'Indifference' Indicator...

who cares


_ConanTheLibertarian_'s picture

BOOO!!! There, fixed it for ya.

woggie's picture

the beast is on the gobble and all that matters is we're all headed for it's belly

SheepDog-One's picture

Theyve got the turkeys right where they want them, all tamed and sleepy and not suspecting a thing. 'The FED's got my back, nothin can go wrong'....yea.

razorthin's picture

A major factor on the non-enthusiams side is there are no deals to be had because prices were never allowed to properly adjust. On the non-panic side, the world still thinks the central banks has its back.  This indicator just reflects stagflation until it turns into depression once again when cost-cutting is overtaken by declining demand.

earleflorida's picture


charts... everywhere's a chart,

do this, see that,... 

can't you read the lines,

and the chart says... read between the lines !

fuu's picture

and the chart said long lined squiggly averages need not apply.

orangegeek's picture

Indifference factor?  Socialism has arrived.

Sokhmate's picture

Want the best 'inddifference indicator'? Number of comments on this thread.

earleflorida's picture

it seems the `indifference' indicator, has flat-lined...

IamtheREALmario's picture

It is not really a "market" per se ... (n its current incarnation, the atock thingie is something else ... but how to define and and what to call it?!?