Streetwise

Lauren Rudd

Sunday, February 2, 2014

Groundhogs and the Super Bowl

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 who 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, who holds “honorary doctorates” from the University of Georgia and Georgia State in "Weather Prognostication," has to deal with Sir Walter Wally of North Carolina.

By way of full disclosure, the fine folks at the University of Georgia tersely informed me a couple of years ago that an honorary degree was serious business. They said I should not have added credence to the idea that academic recognition of such magnitude had actually been bestowed by a hallowed university on a groundhog. Therefore, let me make it clear; I did not mean to imply that Beauregard had actually been awarded such an honor. After all, it was not on his Curriculum vitae.

And consider the alterations necessary to fit old Beauregard with the obligatory academic robe, not to mention the stitches his handler would require. Yet, the appropriate robe and hood would certainly be necessary dress for Beauregard to stand shoulder to shin with his pedagogic colleagues. 

Meanwhile, desirous of taking advantage of the ground swell of groundhog controversy but with no groundhog of its own to roust after having previously banned winter, Florida at one time decided to “borrow” one. To that end, Florida devised an ad campaign indicating that Punxsutawney Phil had exited stage right in search of warmer digs. However, Phil's handlers were not amused, muttering something about, “trademark violation,” and the promotion died an early death, unlike 128 year old Punxsutawney Phil.

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 index 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, it is still just 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.

Yet, there is a modicum of statistical data that correlates market aberrations with certain calendar events. For example, 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.