By DAVID MOON, Moon Capital
February 5, 2006
If you think it's
irrelevant who wins the Super Bowl this evening, you are obviously lacking a
deep understanding of stock market history.
In 1979 New York
investment adviser Robert Stovall noticed that when teams from the old NFL
(pre-NFL/AFL merger days) won the Super Bowl, the stock market seemed to do
pretty well that year. When former AFL teams won, the market didn't do so well.
Tonight's Super Bowl XL
' like Wrestlemania, Super Bowls are counted with Roman numerals ' pits the AFC
champion Pittsburgh Steelers against the Seattle Seahawks of the
So get your rabbit's foot, put a penny in your shoe, spin around three
times and say 'great goobly goo' ' because that makes as much sense as trying to
find a connection between football games and stock
You're probably much too smart to believe that the NFL controls Wall
Street. But otherwise intelligent people regularly draw conclusions about stock
prices based on completely unrelated happenings.
Every four years, half the investors in the country fear that some evil
Democrat will be elected president and the stock market will go to hell. Most of
these folks would be surprised to know that since 1926, the S&P 500 has
actually performed better during Democrats' ' not Republicans' ' residency in
the White House.
Before my left-leaning friends begin making an investment case for their
candidates in 2008, remember this: the president influences Wall Street, if at
all, only slightly more than an NFL quarterback. (That's another topic for
It's human nature to find patterns where none exist. That's why the power
of persuasion is so strong. We will easily believe something is true, contrary
to all logic, simply because one or more people tell us it's true.
Just because there is a historic positive correlation between two
variables does not mean that one of the variables has any predictive ability
about the other. Among my friends in college, the best students were the
heaviest: In my circle, the guys who weighed the most made the best grades.
There were, of course, exceptions ' a gentleman known as Fat Larry comes
to mind ' but I had more friends graduate on time with high GPAs who weighed
more than 270 pounds than didn't. Does being large increase one's intelligence?
As much as I might like to think so, of course not. I just ran around with
people who happened to be both big and smart ' correlation without
Although it's a popular pastime, it is a mistake to try to predict future
stock prices. That's almost always a loser's game.
Why? Because short-term price movement is a function of short-term human
behavior. I know my wife better than I know anyone else. We've been married
almost 21 years, but I can't predict what she's going to do this afternoon.
There is no way to predict the cumulative actions of millions of strangers, each
of whom has a different personal situation. Your odds are better at a roulette
Rather than try to predict human behavior and stock prices, investors are
better served by ignoring the actions of others and focusing on the values of
the investments they are considering. This keeps them from having to guess when
investors are going to favor large-cap or small-cap or international stocks.
Ignore other investors and do what makes sense. If little Johnny jumped
off the bridge, would you? Focus on the investments, not the people, and
certainly not on improbable ideas.
The Seattle Seahawks didn't join the NFL until after the league merger in
1970, so I'm not sure how they fit into the Super Bowl model. But just to be
safe, I'm rooting for the Steelers, an original member of the old, pre-merger
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).