Streetwise: Super Bowl Predictor good for kicks

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The rampant discourse over the nation's economic future took a back seat to some more important forecasts recently as fractious factions face off over whom has the superior groundhog on Groundhog Day.

Selected members of Marmota monax are yanked out of their comfortable dens to view their shadows, the purpose of being to predict the weather six weeks into the future. Staten Island Chuck is up against the powerful PR machine of Punxsutawney Phil and his 128th annual forecast. Not to be outdone, General Beauregard Lee of Georgia has to deal with Sir Walter Wally of North Carolina.

Given the level of expertise most groundhogs have with the English language, not to mention meteorology, there is probably some doubt as to scientific strength of this forecasting approach. Unfortunately, many of Wall Street's prognosticators are in the same league as your local groundhog.

For example, some promulgate with full sincerity the idea that the Super Bowl can forecast the stock market, meaning that at least two of three major market indices will rise when an original NFL team wins. However, if a team from the original AFL wins, at least two indices from among the Dow Jones industrial average, the S&P 500 and the NYSE composite index are headed downward.

Therefore, stock market bulls can root for the National Football Conference representative -- Seattle -- and against the American Football Conference's Denver.

It is interesting, in a way, that the stock market's direction has been accurately forecasted by the result of the big game 38 out of 47 times.

This so-called Super Bowl Predictor of the market, while it has an 81 percent success rate, is still more fun than fundamental, of course. Nonetheless, the accuracy is startling.

Despite its successful track record, when the Giants beat the Patriots (17--14) in 2008, the S&P careened downward by 38.49 percent and the financial crisis was off and running.

There is a modicum of statistical data that correlates market aberrations with certain calendar events. For example, there is the so-called January effect, where January stock prices supposedly forecast the markets performance for the remaining months of the year. Hmm ... the Dow is down 3.8 percent this month, the S&P is down 2.94 percent and the Nasdaq shows a negative 1.88 percent.

Before you start placing trades, consider that 20 years ago David Leinweber, a visiting economist at Caltech, determined that butter production in Bangladesh had a statistically significant correlation (an r-squared of 99 percent) with the S&P 500 index. And he still receives requests for current butter production numbers.


Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com.

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