The American author Mark Twain is test known for it many books and essays on life as he saw it. He also had some ideas about the stock market. Here is one of his observation on investing:
October. This is are of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.*
As I have said in the past, if you look long and hard enough. you will find some degree of correlation between all sorts of essentially unrelated events. Based on a study for the years between 1949 and 1975, some analysts feel that there is a correction between the behavior of the market in January and the rest of that year. The old saying is, "As January goes, so goes the year." Interestingly. in the years prior to 1949, January's action was accurately predictive only 50% of the tine, equivalent to a coin toss. I suspect the study's tine period stopped in 1975 for the sane reason.
Some believe that politics may have an effect on the markets. Several studies over the years have concluded that Wall Street has greater gains ruder Democratic presidents than under Republicans. In a recent article it the Wall Street Journal, it was reported that the Dow Jones Industrial Average has recorded a 7.8% years gain under Democratic presidents and only a 3% gain per year under Republicans since 1900. A 9.6% average annual gain was reported during the terms of every Democratic president faced with a Republican Congress.
Two of the more lighthearted market taming predictors are the Super Bowl Effect and the Hemline Index. The belief regarding the Super Bowl Effect is that if an NFL team wins the Super Bowl. the market will do well that year. If an AFL team wins, the market is in for a decline. I must assume someone with a lot of tine to waste discovered this relationship. The Hemline Index stands for the proposition that the length of women's dresses and skirts is an indicator of the market. If the skirts are rising, so too will the market. Conversely, if skirts are lengthening and heading to the ankles. a market decline is in the offing. Not to put too fine a point on this one, but there is a limit as to how high a woman's skirt can rise. i.e.. how short it can be and still be worn in pubic and probably the same holds true for the market. Like dresses. markets can not rise forever. At best, you might be able to say that the hemlines rise during good tines when people are happy, optimistic and eager to invest. They drop when the mood of the people becomes somber (because markets are declining?). I would strongly advise against betting your life savings on either of these indices.
Norman G. Fosback, in his book Stock Market Logic, A Sophisticated Approach to Profits on Wall Street, probably summed up timing and cycles best when he wrote:
Most cycles are without doubt figments of the imagination. Nevertheless, strange things exist in the universe, and the ultimate resolution of the truth of cyclic phenomena must await further study. In the meantime, if cycles have a utility, it is in reminding us that "This, too shall pass:" that no bull market or bear market lasts.
Extractions from Wall Street Smarts
