Is 'Wolf of Wall Street' a market warning?

An analyst says mainstream interest in the film hints that stocks' bull run is over.

By MSN Money Partner Jan 23, 2014 1:14PM
Credit: © Paramount Pictures

Caption: Leonardo DiCaprio in ‘The Wolf of Wall Street’By Alex Rosenberg, CNBC

Could the success of "The Wolf of Wall Street" signal that the market is near a top?


Carter Worth, chief market technician at Oppenheimer, argues that the Oscar-nominated movie should indeed give bulls pause. After all, he said, interest in the film shows that interest in the market has gone mainstream -- an observation bolstered by measures of participation in the stock market.


"When mass media or broad media picks up on something, typically that thing is reaching an end stage," Worth said.


For him, looking at movies is a modern-day version of the classic magazine cover indicator, which holds that the market tends to do the opposite of what a cover states about it. For instance, a technical analyst who believes in the magazine cover indicator would take a bear on the cover of Forbes as a bullish sign for equities.


Today, with more eyes on films than on magazines, what might be called the "Hollywood indicator" could prove to be a better tell.


Worth points out that the track record for stocks around the release of a major movie about Wall Street has not been good. In 1987, the market crashed suddenly in October, two months before the release of "Wall Street." In 2000, "Boiler Room" was released as the market was peaking.


The most damning piece of evidence may be the timing of the first "The Wolf of Wall Street." An otherwise unrelated film by the same name, it was released in February 1929 (and was produced by Paramount, which distributed the 2013 film) -- months before the horrific crash of that year.


"There is some rhythm here, some rhyme," Worth said.


But beyond the cinematic parallels, there is evidence to suggest that retail investors -- whose actions are often taken as a contrary indicator on the direction of stocks -- are starting to get back in the market in a meaningful way.


Margin debt, an indication of investor interest, is at record levels. And retail trading volume is also jumping.


"Retail is showing a resurgence in early 2014, as trading outperformed seasonal expectations in both December and January to date, leverage or margin debt is increasing, and net new asset flows of the online brokers are robust," said Rich Repetto, an analyst who covers online brokers and execution venues for Sandler O'Neill.


In addition, U.S. household exposure to stocks is at its highest level since just before the financial crisis, according to the Federal Reserve. It is worth nothing, however, that this is attributable to the strength of a rising market rather than to massive household purchases.

Indeed, despite the reemergence of the retail investor, market experts say we have yet to reach any type of speculative frenzy.


The high margin debt is simply a function of stock's record run, according to Michael Khouw of Dash Financial.


"It is important to take into context the aggregate deposits in investors' accounts, which is also at an all-time high," he said. "If all marginable accounts had no excess buying power, that's when the bell tolls, and it isn't. . . yet."


In other words, while the aggregate level of margin debt has risen, investors aren't taking on the maximum amount of margin debt, indicating less exuberance than the headline margin debt number would seem to imply.


So to Worth's point, perhaps Main Street's interest in Wall Street topics is rising with excitement about (and retail investment in) the stock market. But that still doesn't necessarily mean that the wolf is at the door.


More from CNBC

25Comments
Jan 23, 2014 2:51PM
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The run-up will be over when the Fed stops propping it up.  Companies are finally starting to show their true colors with no REAL improvements in revenues or profits.  The previous increases in revenues and profits for most companies were done with the smoke and mirrors of accounting gimmicks and laying off employees.  There are not many accounting tricks left and almost no more employees to lay off.  Without the Fed support, the market on its own fundamentals would be at about 11,000.  Anybody who goes into the market now is truly an idiot.
Jan 23, 2014 2:30PM
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Wall street's bull run isn't over until the old lady running the fed says it's over.
Jan 23, 2014 2:35PM
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And what did the market do with the 2011 movie "Margin Call"? It was staging one of the largest run ups (almost 82-percent) since the crash in 2009. Who can possibly forget all that "soaring" and "hopium"? Who writes this crap?  
Jan 23, 2014 3:10PM
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Presidential Pardon:                                              The Movie is to long  "The Message is great"


The "Greatest Run" on Wall Street in over 30 years is about to come to an end. Due to the lack of foresight the "Presidential Party and its Members" had, but little else to count on "The fare action of an uncaring cast of members (The New York Stock Exchange)".


Our Government had but one hope in repairing a "Nation" gone wrong, "Lend Monies" to  a group of individuals, whose soul purpose is to take as much monies as they could possibly carry away and then find a way to carry away "That Much More".


Now we are seeing through the eyes of a "Stock Broker" who shows the message behind the "Wolf of Wall Street" MAKING MONEY the old fashion way. Steeling from the Poor to give to the Rich.


BUT, isn't it better to see a bunch of Wealth Fat Cats, like the "CEOs" of Wall Street getting away with theft then to watch a bunch of lazy nonproductive individuals who have stopped looking for work and are now receiving a check from our government "With no end in sight".


 That was plan "B" and is plan "B" working any better..


I advise everyone to watch  "Wolf of Wall Street" and see who ended up with "a great deal of money" and who ended up with a "desk drawer" full of paper. 


One never knows where one will receive the gift of  "Knowledge"

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Doesn't anyone watch America Greed?  The markets give a false sense of security only to have it taken away.  Keep thinking the markets aren't just like a casino and you will find yourself on the short end of gun barrel.

Jan 23, 2014 3:30PM
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All this negativity !  I certainly have to watch how rose-colored my glasses are, but come on, now.  "The sky is falling, the sky is falling !"  Look, we're above 16,000 --- we shouldn't be here.  So, if we drop 500 points over the course of a week, it's NOT the end of the world.  And, if one has the right stocks in their portfolio, one may not even see a drop in their value.  Certainly, a 500 point drop is going to affect some stocks, but see it as an opportunity. 


Look at what has dropped and see which ones have merit --- many times, a good chunk of them don't --- they just took a hit from fear.  Fear is even more dangerous than a drop in the fundamentals of a business. That's when opportunity knocks, because once the dust settles and people are licking their wounds from selling, then one needs to sort through the dust --- there's always opportunities to buy on those sizeable dips, drops, whatever one cares to call them.  It ain't the end of the world, folks --- it's opportunity time for those with some fortitude...

Jan 23, 2014 4:14PM
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Diversify, Diversify, Diversify.

Hold onto your crotch. Once the insiders start, casual players are chopped- liver (again).

Jan 23, 2014 5:08PM
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Actually the movie is pretty good portrayal of today's stock market both of which are based on greed, lies, manipulation etc.
Jan 23, 2014 2:30PM
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Weeks before the 1929 WS crash (Variety: "Wall Street Lays an Egg") papa Joe Kennedy, the founder of the clan, bailed out of the market and Hollywood with actress Gloria Swanson.  No wonder the family looked like a Ralph Lauren ad in Vanity Fair magazine during the 1930s.  In 1987 the market lost 22%  under the Reagan year.  A major bear nightmare. 
Jan 23, 2014 4:58PM
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20,000 is coming! Why not as it means nada zip!

Jan 23, 2014 3:49PM
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Presidential campaign years have been off for 5-6 years, new regulations are making some feel safer in the market and though the NYSE percentage of stocks trading over their 200-day average has been dipped below 70% for a while now and has just risen above that, so indication experience derived from pre-Obama years has become somewhat suspect and irregular and I'm not getting my hopes too far down for now.
Jan 23, 2014 4:42PM
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So are we about to enter a bear market because that mainstream movie says "bull," or are we going to continue the bull market because this mainstream article says "bear?"  The only thing that's sure is that people who make investment decisions based on factors like this aren't terribly bright. 


As far as the standard "the market is high because the Fed is pumping it up" comments that follow every financial article on this site, remember that through the whole history of the market there have been people who could explain to you why the people who are making money shouldn't be and why they should be making money even though they aren't.  Don't be one of those people.


Jan 23, 2014 5:11PM
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Same old ****. Buy/Sell that all. Market is a market buy/sell/profit taking.

You feeling sick a day then feel well again the next day.

See this up/down over and over every week.

Jan 23, 2014 2:58PM
Jan 23, 2014 4:34PM
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It's all about money, and, Christians believing that's what Jesus believed. The story of America from the get-go.
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