How Super Bowl LI Affects Your Portfolio!

How Super Bowl LI Affects Your Portfolio!

According to the Super Bowl Indicator, established by Leonard Koppett in 1978,  if a pre-merger NFL team won the game, the market closed higher for the year. If an old AFL team won (now the AFC), the market closed the year in the red.  Should you divest your portfolio should the Patriots win tonight?

However, the Super Bowl Indicator has a strong track record of correctly predicting the performance of the Dow Jones Industrial Average and the S&P500.  Strangely enough, the data that I calculated from 1975 shows that the indicator is correct about 80% of the time! 

Anthony Munifo_Millennail Economist
Looking at history, there is a 70% probability that an old NFL team wins the Super Bowl and there is a 74% chance that the market rises in a year. Given these probabilities, by simple chance the Super Bowl Indicator should be correct about 60% of the time. This is estimated by calculating the statistical likelihood of the two circumstances in which the indicator will be correct: (1) NFL wins and market goes up; and (2) AFL wins and market goes down.”
— The Street

This is a perfect example of how a random statistical correlation is not necessary and sufficient to justify the claim of causation, a common mistake made by economists and people in general.

Just a reminder to stop believing things that you don't understand. Seek the truth for yourself! 

Just another Thing That Matters!

Shadow Banking: The system itself is a systemic risk

Shadow Banking: The system itself is a systemic risk

Economists Make Mistakes, Everybody Has Those Days

Economists Make Mistakes, Everybody Has Those Days