The “Spitz-Phelps” Indicator

By all accounts, the Beijing Olympics was a smashing success. NBC was happy to discover that we all needed a break from politics and beach volleyball was the perfect antidote; advertisers were pleased for the same reason; Americans were delighted to know that we can still win events and the Chinese were proud that they could win more gold than everyone else. In other words, winners abounded this August.

We all have our favorite special interest stories of the games—maybe the wrestler with the illegal immigrant parents; the weight lifter who carried a photo of his recently-deceased wife with him; or the over-the-top commentary that Bela Karoyi provided to liven up Bob Costas’ measured approach to gymnastics. For my money, Mark Spitz was my absolute favorite part of the 2008 Olympics and he did not even compete!

I can’t believe that it was thirty-six years ago that Spitz glided into my life. I remember how our house went crazy for Spitz—a Jewish guy winning in swimming! After Spitz won those seven medals, I hung a poster up on my wall, alongside the photos of two other great Jewish athletes, Sandy Koufax and Hank Greenberg. I was only seven, but I was an avid athlete who thought somehow if these guys could make it in sports, then why not a nice, Jewish girl from the suburbs? (A girl can dream, can’t she? It took another 15 years before I was done competing in sports, but I sure did have fun!)

Given my admiration of Spitz, I was happy to see that he was quite gracious as Michael Phelps surpassed him by winning eight gold medals in Beijing. Then I wondered if there could be something magical about it all with regard to the stock market. There has been the Super Bowl indicator and market predictions based on which baseball league wins the World Series, so why not an Olympic indicator?

I went back and found that in 1972, the year that Mark Spitz won, the Dow Jones Industrial Average finally crossed the 1000 mark (on Nov. 14, 1972) for the first time ever! Maybe this could mean that 2008 will finally turn around for investors and that we can put the bad news behind us. No so fast…before we draw similar conclusions to US stocks today, it should be noted that in 1972, the economy was doing well, inflation was moderate and interest rates were low. We only have one of those ingredients right now—the low interest rates. Clearly the economy is staggering and inflation, although slowing, has spiked this year.

The again, the “Spitz Effect” was short-lived. Not long after the industrial average punctured the 1000 mark, a recession occurred and the brutal bear market of 1973-74 set in, pushing the average all the way down to 577.60 in December 1974. It would be late 1982 -- a full decade after the 1000 milestone was first passed-- before the industrials rose above 1000 to stay. While it is unlikely that it will take a decade for us to recover, there are still problems to unwind in both the economy and in the stock market. I guess that the “Spitz-Phelps” indicator is not going to work any magic soon.