Doug Magowan spends his days poring over financial numbers. Today he offers us, tongue firmly in cheek, a new way to get rich quick. All you have to do is following the sports page.
The Super Bowl Indicator (SBI) says that stocks will be up in years where a team from the original NFL wins the super bowl, and down when a team that began its life in the upstart AFL wins. The SBI was discovered by Leonard Koppett in 1977, and first described in an issue of The Sporting News.
It was a perfect 11 for 11 before it was first published, and dismissed by most as a fluke after it was published. The funny thing is that it continued to be right. Over the next 20 years, it was right 18 times. It reached a status that it could not be ignored.
Until 1998, when something went dramatically wrong.
Had you invested $1,000 in the S&P 500 index on December 31, 1966, you would have had $36,300 dollars at the end of 1997. But had you timed the market, long in the years the SBI said to go long, and short the other years; you would have been sitting on $90,000.
But, when the SBI went bad, it was horrendous. Not only did it miss, but the years it missed were some of the more dramatic moves of the market. Had you followed the SBI, you would have missed the last years of the dot-com boom, and jumped in just in time for the collapse. You would have been short the market for much of the 2000’s and back in just in time to watch the banks implode.
The loss of the Super Bowl Indicator has sent us financial analysts to plum deep into the sports page to find the next market indicator. I stumbled on this one in September of last year. As an avid fan of the San Francisco Giants and a professional watcher of the markets, I began with why a good day on the trading floor seemed to coincide with a good day on the baseball diamond. It was time to put the numbers to the test.
There was an uncanny relationship between the Giants place in the chase for the NL West Division and the performance of the Dow Jones industrial average. In the picture, the orange line represents the distance behind the 1st place team (negative numbers), or the distance ahead of the second place team in the division (positive numbers). The black line is the DJIA, scaled to fit this chart.
I didn’t have a good idea how to fit the post season into this framework, but the Giants won the World Series and the market has been nothing but up ever since.
I haven’t yet worked out whether the Giants drive the market or if the market helps the Giants to drive the ball. Pitchers and catchers report February 14th. More data is to come.
For those of you who say this is a fluke, I have my T-Stats and P-Stats. No way is this just a chance. And, if it is, don’t rain on my sunshine!
Have you tried applying it to other teams? Perhaps to the bigger named teams? And see if it carries over from year to year?
I’m not sold yet, but it is an interesting correlation.
I want to retire comfortably, so a fluke or not, GO GIANTS!!!
The problem is, Doug, that this is baseball stats you’re relying on.
The SBI was always believable because “everyone” knows the stock market is controlled by the Trilateral Commission and a key football play has always been a “lateral”, thus that word provided the badly needed proof text to confirm the theory.
Now I’m looking for similar ways to authenticate your GvDJIA index. Maybe “triples” or “triple plays”? I don’t know. We need more data. Go Giants.
Doug you have the makings of a great “consensus” climate scientist.