Momentum -- unmeasured and perhaps considered immeasurable

Unimpressed with the view that quantitative analysis, granular and systematic, explains or predicts almost everything; we are searching for the elements of qualitative analysis that seem to direct influence and predict results.  Earlier comments have highlighted ‘sentiment’, and we spent years elaborating the analysis of management and decision making, but in 2015 there appears another force in the mix that is seriously difficult to measure, but is everywhere – momentum.

Volatility has returned (did it ever leave) for countries, companies, institutions, and individuals; and there appear obvious opportunities and threats from the flux in economics and geopolitics and technology; yet a great deal of the explanation of the separation between the winners and losers is not in the statistics.  How do some countries continue stability despite overleveraged economics?  How to companies persist in the global marketplace when their products and services are better offered by disruptive newcomers (while others wilt)? How do some individuals and families emerge from stagnation and others regress economically in the face of similar circumstances?

For all of modern time we rely on the models of the economic man who takes available information and makes rational decisions based on some qualitative version of enlightened self-interest. Yet reviewing forensic cases tells us that there is an increasing amount of unexplainable outcomes each year since the financial crisis.  Often the underlying phenomena give ‘net effects’ so the isolation of causality is tedious.

I gave up scrubbing the quantitative numbers.  I have become firmly committed to qualitative analysis and the challenge appears in the detail – how to conduct this analysis in an efficient and systematic way? Not only the net effects, but also the noise of data that leads and lags gets me away for the numbers to the text.  Do our current web crawlers give hope?  Can we consolidate news and press and commentary to find leading and lagging indicators? Probably do not have the patience anymore to bang on the data for months or years; so my AADD (analysts’ attention deficit disorder) just says no.

The qualitative driver, under my working hypotheses, is momentum.  Over time, short of long, and company or country or individual builds (or does not build) directional momentum.  The successes feed on successes and the failures erode future successes.  Where does this judgment come from?  Yes, Virginia, I am getting back to the smell test – that famous variable that those of us who might be fossils still believe is at the heart of good analysis.

This is a lobbying effort to add momentum as a variable among many in the analysis and commentary.  The weight one gives this qualitative judgment clearly is at the hands of the smeller.