Superb Owl and Other Stock Market Indicators

What does the outcome of this year’s big-game mean for the stock market? And what other kinds of crazy indicators to people follow to try to predict the investment markets?

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Full Transcript below:

Speaker 1 (00:07):

And welcome back to 30 Minute Money, the podcast that delivers action oriented smart money ideas and bite-sized pieces. I'm Scott Fitzgerald coming to you from Roc Vox Recording and production in downtown, not in downtown Rochester.

Speaker 2 (00:20):

Downtown Bush.

Speaker 1 (00:20):

Outside of downtown. Downtown Bushels Basin. I'll figure out where we are. Steve Wershing joining me from Focused Wealth Advisors to wrap a little bit about some things that we're either not allowed to say or we are allowed to say. I'm not quite sure how this works out. What

Speaker 2 (00:37):

Part of it is, are we not allowed to say? Yeah,

Speaker 1 (00:39):

It's the actual

Speaker 2 (00:40):

Word stock market.

Speaker 1 (00:41):

Oh yeah. The actual word of this thing that we're not supposed to say.

Speaker 2 (00:44):

Well, it's just the first thing I think. Should we risk fate and say it out loud? I think so.

Speaker 1 (00:50):

I think

Speaker 2 (00:50):

So. We're going to talk about Super Bowl. Listen to that. Copyright attorney's Super Bowl. We're going to talk about some fun stock indicators that you may hear about. This is more of a fun episode than it is a useful episode, but these are kind of fun to go through every once in a while and we're doing this because of course the Super Bowl is coming up and that is one of those stock market indicators that gets talked about this time of year. So I thought it would be a fun time to talk about it. Interesting. So here's the Super Bowl indicator. If the A FC wins the Super Bowl, it's predicted to be a down market. It's a down year for the stock market. And if the NFC wins, then the theory goes, then the stock market will have an up year. So route for San Francisco.

Speaker 1 (01:41):

Yeah, go San Francisco.

Speaker 2 (01:42):

Yeah, sorry, Taylor Swift, but we're worried about the wealth, not about your boyfriend. He'll do fine.

Speaker 1 (01:49):

Wow. So this is kind of one of those conspiracy theories things that is kind of strangely

Speaker 2 (01:57):

True. No, I don't think, it's not a conspiracy theory. I think it's just more that, oh, well, all these different things are going on in society and one gives you an insight into the other, although that's not really true. So it was noticed back in 1978, and if you went back through the whole history of the Super Bowl, then it would have a pretty impressive 75% success rate. However, if you took a look back, only at the period of time since they noticed it, since they created this indicator, not created it, but notice the indicator it's only been right 67% of the time. So it's not really that reliable. And what's more notable is that there were a couple of very specific years where it wildly led us astray, as in, for example, 2008 when the Giants won, who were part of the NFC. And the stock market in 2008 was bad on a legendary, and in fact, even in 2022 and the Rams one, it was still a bad market in a big way. So it's kind of fun to talk about, but obviously not something you want to manage your portfolio based.

Speaker 1 (03:11):

Right, right. Biggest takeaway, don't let the Super Bowl finals figure out how you invest your cash.

Speaker 2 (03:17):

Yep, exactly. Now one that's actually a lot more accurate is the January indicator and the January barometer says that as January goes, so goes the rest of the year. And that's actually even more accurate. And I think that there's some more reason to believe that. So what we find is that if we look at 1950 through 2021, the January barometer was right, 84.5% of the time. So we just had a really good January. Markets were up in January. So if we believe that indicator, then this should be a good year for the stock market. That doesn't mean it'll be smooth, but what it suggests is that it would be up, and again, I say suggests we're not going to use this for any kind of managing portfolios, but it's kind of fun to talk about. Now, one of the things that sort of tempers that a little bit is that the market itself is up 70% of the time.

(04:15):

So there's an upward bias in the stock market. So the fact that it's right 84% of the time is not as big a deal as you might think. I mean, if it were evenly distributed, if 50% of the years were up and 50% of the years were down, that would be something entirely different. But it's not. There's an upward bias in the market. Bull markets tend to last longer than bear markets. And so if you're going from 70 to 84, it's still surprisingly correct, but it's not as much as you might think. And then we have the Santa Claus rally. Now this obviously is just in the past, but the Santa Claus rally suggests that the tendency of the market is to rise in the last five trading days of the year. And that too is accurate about 80% of the time. And there are all kinds of good reasons for that apart from the fact that it's Christmas has a lot more to do with the fact that it's the end of the tax year and it's the end of the reporting year when managers are concerned about what kind of rate of return is going to be on their marketing materials next year.

(05:20):

So there's a little bit more sense that that makes, but again, it's not terribly.

Speaker 1 (05:27):

I think it's actually that Santa Claus is up there in the North Pole manipulating our finances.

Speaker 2 (05:34):

Yeah, he's got all those high speed trading machines put in on the north. That's the elves. Yes. They're

Speaker 1 (05:38):

Like minions.

Speaker 2 (05:40):

It's the Elf trading department. Now that would be interesting to see. But yeah, so Santa Claus does come to town last few days of the year. There are some broader ones that are actually kind of fun to talk about. One is the lipstick indicator, which was noticed by Leonard Lauder, who of course was the chairman of Estee Lauder, and noticed that when makeup and lipstick sales went up, the market was going down. I'm sorry, the economy was going down. And that was because when people are in tougher financial times and when they can't spend as much on beauty generally, then they'll go for the less expensive stuff. So instead of buying a new dress or something like that, well, they'll feel better about themselves by getting new lipstick or getting new makeup and yeah. Interesting. Makes a little bit of sense.

(06:44):

Again, that's kind, just kind a fun indicator on the economy. It doesn't really tell us a whole lot, but it's kind of fun to talk about. One that's related to that, that used to get talked about a lot more than it does now is the hemline indicator. And the hemline indicator suggested that as Hemlines went, so went the economy. So the shorter skirts got, the higher the hemline went, the higher the economy would go and the stock market would go. And when miniskirts came back in style, you should just sell everything and go to cash. Because what they found actually is that it actually is pretty accurate, but it is a lagging indicator, not a leading indicator. So there's not much you can do. It's actually, it enables you to say more about what hemlines are going to do based on the economy and the stock market as opposed to vice versa.

(07:34):

I would think that the waistline indicator would be, that's probably the next one. That's probably the next one that's going to come up is the waistline indicator. And then of course, closely related to that is the men's underwear index. We don't want to be sexist about this. We want to have indicators on both sides. Alan Greenspan, who used to be Chairman of the Fed, came up with that one. And this is actually kind of funny because this is a statistic that is no kidding tracked by the Bureau of Labor Statistics, and it has to do with underwear sales. And it's what it suggests is that if underwear sales go down, then it's bad for the economy because it means people are economizing, they're cutting corners, they're not replacing things that they otherwise, and I think guys worried less about this. I can wear those boxes another year, so I won't buy any more now. So the fact that we're slobs helps make this a more accurate index. I got underwear

Speaker 1 (08:28):

And it's older than you, I say to my son all the time. Exactly.

Speaker 2 (08:31):

Yeah. And what we have to be careful about is that the last measurement of that last summer was that it was on the rise. So that would not be a good thing, or actually that would be a good thing for the economy. And as we saw the end of the year, the economy was doing really well. So who knows? Maybe there's something to that, something that's actually a little bit more based on reality or that makes a little bit more actual sense in terms of economic statistics, is the cardboard box indicator and the cardboard indicator.

Speaker 1 (09:02):

Oh, you've talked about this before on previous episodes. Have

Speaker 2 (09:05):

I? Yes. You have

Speaker 1 (09:06):

Mentioned this before. So

Speaker 2 (09:07):

Yeah, the cardboard indicator suggests that you can predict the economy based on cardboard sales. And the thinking of it is pretty straightforward. The more people buy, the more they're going to need boxes to put 'em in. And these days, especially the more people buy, the more things go through Amazon, they're going to have to ship it in some kind of box. And so if people are buying more things before that shows up in corporate earnings, you're going to see box orders go up because they got to ship that stuff long before they report earnings. So if you watch cardboard,

Speaker 1 (09:39):

All joking aside, that one actually makes the most sense to me.

Speaker 2 (09:43):

Of all the ones we've talked about so far. Yeah, that one makes the most sense. Now we want to be careful about this because, or we should be on guard if we follow that because the cardboard indicator fell eight and a half percent in the third quarter of 2023, and that's the last one that we have statistics for. So that suggests that the economy may be headed downward if

Speaker 1 (10:05):

I don't buy it.

Speaker 2 (10:07):

You couldn't have, because they wouldn't have had anything to ship it to you in,

Speaker 1 (10:10):

Hey, hey, he's here all week. Try this deal.

Speaker 2 (10:14):

Tip your waitress. Another one that's kind of interesting, and this is sort of like we will put this in the folder that's labeled self-fulfilling prophecy, and that's the R word index, which is the likelihood of a recession is directly and proportionally related to how many times the word recession shows up in the New York Times. And it makes a lot of sense because sometimes recessions have to do with external things, and sometimes it's because we just think there's going to be

Speaker 1 (10:47):

A recession. It's a mindset thing, right? Yeah.

Speaker 2 (10:48):

It's a self-fulfilling prophecy. So the more we talk about a recession, the more likely it is that it's going to happen. So that's another index that you can watch. This is another one that's a little bit like the cardboard index. And it's the champagne index. And the interesting thing about this is it's probably the most accurate of all the ones we're going to talk about. It's shockingly accurate actually. And the logic of it is pretty straightforward. If people are feeling better about stuff and if people are feeling good about their prospects, it's more likely that they'll buy champagne to celebrate stuff with. And over the course of years, that's actually been not a bad indicator for how the economy is going to do. And if that's true, we should also be careful of that because as of the end of 23, the champagne index was down 8.2%. Sales of champagne over the course of the end of 2023 we're down 8.2% compared to a year earlier. So

Speaker 1 (11:46):

Does it get specific bottles of DOM or Ripple or

Speaker 2 (11:50):

I don't know. I don't know people

Speaker 1 (11:53):

Buying a lot of bad champagne. I don't know if that's a good thing.

Speaker 2 (11:56):

I would love to talk about the Ripple index if I could, but they haven't developed it yet. Another one, and this is probably a slower moving one, but there's also the RV index, which is very similar to cardboard and champagne because an RV is a great big, huge expense. They're not cheap vehicles. And if you feel confident, and if you've got money in the bank and if you've got resources, then it's more likely that if you're inclined to do that kind of thing that you would buy an RV and you're not that sure about your prospects, it's a lot less likely that you would spend 60 to a hundred thousand dollars on a vehicle. So that one too actually tracks along with the economy pretty closely.

Speaker 1 (12:39):

So I joke around with my wife a lot about what we're going to do in retirement. One of 'em was buy a houseboat live on a houseboat. Another one was, I said, this last one was, we're going to buy an RV and six months out of the year we're going to travel the country and living in the rv. And she said, that's the only retirement idea that you've had that I actually like.

Speaker 2 (13:00):

Oh, well that's

Speaker 1 (13:01):

Good. So I got an RV coming.

Speaker 2 (13:03):

Okay, that's great. Well, if you and a hundred thousand of your friends do the same thing, that's good news for the economy. There

Speaker 1 (13:10):

You go. No champagne though.

Speaker 2 (13:12):

Yeah. Well, when you get the rv, you're going to have to celebrate somehow, and I

Speaker 1 (13:16):

Can't buy underwear for the next five years.

Speaker 2 (13:18):

Well, I'm not even going to pursue that conversation. That's one I don't want going out over the AirWave. So we're going to leave that one right there. There you go. Thank you very much. So anyway, so this is all in good fun. This is not suggestive that you should make any of your financial decisions or portfolio decisions based on any of these things, but they are kind of fun to talk about every once in a while, just because it can be humorous to see what kinds of absurd lengths people will go to try to find justifications for what's happening in the financial world.

Speaker 3 (13:53):

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Speaker 1 (15:19):

Alright, interesting episode to say the least. What's your 30 minute action item go? Nine ERs. There you go. That'll do it for us. Another episode of 30 Minute Money. Of course, it's three zero minute dot money. You can find us on all the podcast platforms and please like, subscribe and share 'em with your friends. We'll be back next time on 30 Minute Money. Thanks.