NEW YORK, Jan. 30 (UPI) -- Put aside for a moment those textbook fundamentals because one of the most accurate gauges for predicting which way the stock market will swing in 2002 is based on the pigskin and not those price earnings ratios.
Or so history tells us.
We're referring, of course, to the Super Bowl stock market theory, which has proven right a remarkable 83 percent of the time.
The price-to-earnings ratio has always been a handy tool for securities analysis. It's easy to grasp and widely available. It offers a simple a way to find out if you're on the trail of a high-flying growth stock -- an above-average p-e -- or an undiscovered gem of a value stock -- a below-average p-e.
As stock prices have fallen and Wall Street's ability to forecast earnings has deteriorated, however, using price earnings ratios as a shortcut has become much more dangerous for the average investor.
So the investor looks to other means, like the Super Bowl sports theory.
The indicator, documented by finance professors Thomas Krueger of the University of Wisconsin-La Crosse and William Kennedy of the University of North Carolina at Charlotte, posits that when a team from the National Football Conference -- or its precursor, the National Football League, which included the AFC's Steelers, Browns, and Colts -- wins, the market will close higher at the end of the year.
If the American Football Conference wins, it's time to sell, according to the pigskin theory.
Since the first Super Bowl in 1967, NFC teams have triumphed 25 times -- and in 22 of those years, the Dow Jones Industrial Average has gained yardage.
But, the blue-chip Dow has had the penalty flag dropped and has been sacked seven of the 10 years that AFC teams took the trophy home.
Though the indicator muffed it in the years 1998 to 2000, it scored again in 2001.
The Baltimore Ravens, an original NFL team once known as the Cleveland Browns, won the Super Bowl last year. But stocks got hammered anyway.
Stocks also got sacked in 2000, when the Rams won. The 1999-98 victories by the Denver Broncos should have tackled the market, but stocks rose instead.
New England, an old AFL team, faces the St. Louis Rams in this Sunday's Super Bowl XXXVI in New Orleans. The Rams belong to the old NFL, a potential good market omen, according to the indicator.
"Still, from 1967 though 2000, the Standard & Poor's 500 index rose an average of 18.6 percent -- about twice the normal annual return -- during years when an NFL team won," said one of S&P's leading stock market analysts, Frank W. Slusser.
Slusser, a former stock market writer for United Press International, has an accuracy rate of almost 80 percent in predicting the way the stock market will perform for the remainder of the year, based on the outcome of this Sunday's game.
"The market, for example, also tends to rise when the New York Yankees win the World Series, if only because they've done so 26 times," Slusser noted.
"The indicator's good record masks some problems. During the 34 years between 1967 and 2001, the S&P rose 27 times and fell only 8 times. And the old NFL teams, which outnumber the old AFL teams, tend to win, taking 26 of the victories since the first Super Bowl," Slusser said.
The Miami Dolphins, for example, are bad for stocks. In 1973, when the team won its first Super Bowl, the S&P 500 went on to drop 14.7 percent. The next year, the S&P recorded a loss of 26.5 percent after the Dolphins beat the Minnesota Vikings.
Miami losses, by contrast, have always been good years. The S&P 500 saw double-digit gains in 1972, 1983 and 1985, when the Dolphins lost Super Bowls.
The Denver Broncos, of original AFC vintage, won the in 1998 and 1999. That, according to the Super Bowl theory, spelled trouble for stocks. But the S&P 500 saw double-digit returns in both years.
In the first Super Bowl game in 1967, NFC Green Bay beat AFC Kansas City, 35 to 10. The S&P index jumped 20.1 percent for the year.
When the AFC New York Jets overpowered the old NFC Baltimore Colts in 1969, the S&P Index dropped 11.4 percent.
In 1970 when AFC Kansas City beat NFC Minnesota, S&P only gained 0.1 percent.
Slusser's said the theory was wrong in 1990 when the NFC San Francisco topped Denver 55 to 10, the S&P Index dropped 6.56 percent for the year.
The stock market enjoyed some of its largest gains in 1975 when NFC Pittsburgh topped Minnesota, 16-6, S&P jumped 31.5 percent.
The market rallied in 19.2 percent in 1976 when Pittsburgh topped Dallas, but sank 11.5 percent in 1977 when AFC Oakland won the game.
Stock market rallies of 12.3 percent in 1979, 25.8 percent in 1980, 14.8 percent in 1982 and 17.3 percent in 1983 followed as NFC teams took the title.
The old powerhouse San Francisco 49ers of 1980s rallied the market more than 62 percent in their four trips to the winter classic during the 1980s, even though their visit in 1990, a 55 to 10 victory over Denver, resulted in a 6.56 percent decline in the market.
The market jumped 26 percent or so back in 1991 after the Giants beat Buffalo, rose 4 plus percent in 1992 after Washington beat Buffalo and few points in 1993 when Dallas won.
If the Patriots win the Super Bowl, analysts have others reasons to bet that stocks may rise anyway, in another setback for the theory.
The Federal Reserve cut interest rates 11 times in 2001 to get consumers and businesses spending again. Corporate profits are expected to rebound this spring following a five-quarter slump.
And then there's history. Stocks, which fell over the last two years, have not had three straight losing years since 1941.
But, in 1941, the market had a different whimsical indicator called "the hemline theory," which held that rising skirt lengths presage rising markets. And vice versa.
If the Super Bowl theory fails, maybe investors could consider the vaunted January effect, much studied by respected analysts of market history, who documented a clear tendency for stocks to do well in the first month of the year.
The January effect has provided a strong inducement for active stock traders to look for bargains amid the stresses of year-end tax selling in December.
Or investors could take a clue from former Dallas Coach Jimmy Johnson, who before the NFC championship playoffs in the 90s and predicted a victory over the San Francisco 49ers.
After his team defeated the 49ers he said he would not make any statements regarding the Super Bowl.
But, in 1993, Johnson used a crystal ball on a shelf inside his home to predict the outcome of the Super Bowl XXVII, when the Cowboys pounded the Buffalo Bills, 52 to 17 and the S&P Index rose 30.74 points.
Or maybe investors could turn to the advice of famed Yale University economist Robert Shiller.
Shiller told an audience at the Institute for International Research Endowments and Foundations Symposium that the recent declines in the stock market are only the beginning.
The author of the bestseller "Irrational Exuberance" remained as bearish as ever, advising institutional investors to very much limit their stock-market exposure.
"I'm predicting lousy returns in the stock market over the next 10 to 20 years," Shiller said.
But, Shiller's research is based on a historical study of price-earnings ratios relative to market valuation, in addition to various cultural and psychological factors and not a sports theory or a crystal ball.
And, as the final seconds ticked off ahead of the big event, Las Vegas Sports Consultants Senior Oddsmaker Cesar Robaina has picked the St. Louis Rams as 16-point favorites over the New England Patriots with the total set at 53 points.
"The idea is to make a price that will divide the betting action equally," Robaina said.
"We believe the general public will jump on the high-scoring Rams," he said.
The Super Bowl garners the most betting action of any single event during the year.
According to the Gaming Control Board, in 1991 there was approximately $40 million bet legally in the state of Nevada on the Super Bowl. This figure rose to over $67 million by 2001, a 69 percent increase.
Unlike the regular season, the Super Bowl attracts more money from the novice bettor.
