Don’t Look for Patterns
From Barrons this weekend:
“Everyone, even the little old lady in Peoria, knows about the Super Bowl indicator and its uncanny ability to predict the stock market. But for the benefit of the tourist from Mars who’s just passing through and hasn’t had time to bone up on such exotica, we’ll whistle up a brief exegesis. The National Football League is divided into two parts: the National Football Conference (NFC) and the American Football Conference (AFC). The survivors in each conference of an interminable stretch of playoffs meet in the fabled Super Bowl. Got that so far? (We’re talking to you, the funny-looking green guy with the antenna coming out of the sides of his head.) Okay. If the NFC team wins, the stock market is destined to go up that year. If the AFC team wins, the stock market’s a goner. This indicator has been right 30 out of 38 years, which betters by far the record of any Wall Street strategist or even someone who knows something about the market. We’re deeply indebted to the excellent Richard Bernstein of Merrill Lynch for the revelation that there’s another, little known Super Bowl-stock market indicator (Richard, in turn, says he’s indebted to National Public Radio for the info) that turns on animal versus human mascots. There have been 25 Super Bowls in which teams with human mascots have contested against teams with animal mascots and, we’re pleased to say, the humans have emerged victorious in 18 of those games. (If a team ever called itself the “Traders,” as in brokerage house traders, we’d be at a loss to say which category it fell into.) Richard, obviously a mathematician, used both indicators to gauge the prospects for the stock market this year. The teams vying for supremacy are the New England Patriots, the AFC champs, and their NFC opponents, the Philadelphia Eagles. He figures that based on the human/animal rule, there’s a 72% chance the Patriots beat the Eagles. If that happens there’s a 79% chance, according to the original Super Bowl indicator, that the stock market declines in 2005. Combining both indicators in some mysterious fashion which he does not disclose, Richard divines a 57% chance that the market will wind up the year lower. While we’re at it, we might as well toss in the January indicator, which holds that as goes January, so goes the year as a whole for the stock market. There has been a lot of ink spilled on why that ain’t necessarily so. But a very savvy friend of ours points out that in each of the past 13 post-election years, January has, indeed, been a forerunner of the stock market’s action, up and down. In case you’ve forgotten, January 2005 was a downer.”
These articles are fun, but they serve little purpose. Remember the Washington Redskins indicator for the U.S. Presidential election?
http://www. snopes.com/politics/ballot/redskins.asp
“Our desire to understand and assert some control over the world around us is often manifested by our attempts to find predictive signs that enable us to prognosticate events–even Vote when there is no seeming connection between predictor and event. Sometimes one natural phenomenon supposedly forecasts another, as in the belief that a groundhog’s seeing his shadow on February 2 portends another six weeks of winter. In other instances the linkage is between affairs of mankind, as in the superstition that the winner of football’s Super Bowl augurs that year’s stock market performance (or vice-versa).” Snopes.com
