Sunday, February 1, 2004

See Super Bowl, check stocks


The market seems to prefer the old NFL

By John Byczkowski
The Cincinnati Enquirer

New England Patriots fans have a dilemma: If their team wins the Super Bowl today, they might live out their retirement years eating dog food in the cold.

That's just history. Out of 37 Super Bowls, 10 have been won by teams from the old American Football League, like the Patriots. In six of those years, the stock market dropped. Of the 27 years when the championship has been by a team from the National Football Conference - the old NFL - the market has gone up in 23 of them.

So, if you care anything about your future, cheer for the NFC's Carolina Panthers. It's stupid, it's senseless, and yet, it's uncanny.

Should investors put any money on this? "Oh, no," said Sam Stovall, chief investment strategist at Standard & Poor's in New York. "It's certainly something that's fun to talk about, and to point to, but it doesn't necessarily fit into a strategy."

He should know. His father Robert, a 50-year Wall Street veteran, popularized the Super Bowl indicator when he began tracking it in 1979. Sam knows that interest rates and inflation and profits are more important to stock prices than touchdowns, but the link remains. It was wrong four years in a row, from 1998 to 2001, but it's been correct again the last two years.

"It's my financial Frankenstein. I can't get rid of it," said the elder Stovall, now with Wood Asset Management in Sarasota, Fla. "Every year I say, 'Let's just forget about this thing,' then I get phone calls and people start to put it in the paper, and I figure if I don't follow it, some other character's going to come along and say he created it."

The theory takes a little bit of explaining, because of football history. In 1970, the American Football League was merged into the National Football League. The old AFL, with the Browns, Colts and Steelers from the NFL, became the NFL's American Football Conference. The remaining old NFL teams became the National Football Conference.

The theory says the stock market rises in years when the Super Bowl is won by a team from the NFC, or old NFL. When an AFC/old AFL team wins, the market drops.

Out of 37 years, the Super Bowl indicator has been right 30 times against the Dow Jones Industrial Average, 29 times against the S&P 500 Index and 28 times against the NYSE Composite Index. Against the S&P 500, the indicator was correct 13 years in a row, from 1971 to 1983.

The late Leonard Koppett, a New York Times sportswriter who's in both the baseball and basketball halls of fame, first picked up on the trend in 1975. In 1979, Stovall, a Louisville native, added the Super Bowl indicator to a basket of a dozen things he used to predict the market, and he's been the voice of the indicator ever since.

Though it makes no sense whatsoever, the Super Bowl has outlived almost all the other indicators. For years, Stovall used the "General Motors bellwether," which said where GM stock goes, so goes the rest of the market. But that fell apart as foreign automakers have risen and GM's dividend policies became less consistent.

Then, for a while, he used baseball batting averages as a predictor, in reverse: When batters' averages went down, the market went up. "My theory was they didn't have to work so hard, they didn't have to hang in tight against a curve ball, if they were making money in the stock market," he said. That lost traction in the 1970s.

"These things come and go, but the Super Bowl indicator" - correct almost 80 percent of the time over 37 years - "is very hard to ignore," he said.

Not that he'd ever put serious money on it, but there's no doubt he's benefited from it and the attention it gets every year.

"It's been a big help to me," said Stovall, a frequent guest on Louis Rukeyser's Wall Street TV show. "I am 77 years old, I'm a World War II veteran, and there are not many of us running around making a good living, and the media's been a big help to me.

"People used to kid me for spending time talking to the media and writing columns and going on TV and so forth, but those guys are all retired, but I'm still chugging along and enjoying myself and helping my clients and doing business and making money. I'm having a good time."

Stovall says it helps that the indicator is biased to the bullish side, because there are 19 NFC/old NFL teams and 13 AFC/old AFL teams. That fits because the market goes up more often than it goes down, reflecting population and economic growth.

The theory's been bent around a little to accommodate changes in the league. The Tampa Bay Buccaneers, for instance, played their first game in 1975 in the NFC, so they're neither an old NFL nor old AFL team. As an NFC team, they won the Super Bowl last year, and the market went up, so the predictor holds.

The AFC's Baltimore Ravens are considered an old NFL team because they were the old-NFL Cleveland Browns until 1996. The Ravens won the Super Bowl in 2002, and the market fell, so Baltimore-by-way-of-Cleveland was wrong that year.

It's almost painful to think what it means if the Super Bowl is ever won by the Seattle Seahawks, a post-merger expansion team that moved from the AFC to the NFC in 2001. Stovall will cross that bridge when he comes to it.

"I certainly wouldn't put serious money on the market" based on who wins the Super Bowl, he said. "I don't take it seriously. I feel better when it's in a buy mode rather than a sell mode."

Stovall continues to work on new indicators.

"I'm interested in currency fluctuations," he said. "I have tabulations you can get from anyplace. When the dollar starts to look shaky, which it did about ..."

Yawn.

Isn't there something else out there, like when blondes win the best-actress Oscar?

"I'm not that smart," he said. "I have to have the data, I have to have the record before I can call it a theory that's of any use to anybody."

Like the Super Bowl indicator.

E-mail johnb@enquirer.com




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