No Ghosts This Halloween

The Old Dog and I were perched on bar stools in a dingy pub off Dalal Street.
“You look sad,” he said. “Burnt your fingers on some dud?”
“That I could live with, Old Dog. What happened is I sold all my stocks. At a loss. And then the bloody market shot through the roof. This is all your fault.”

 

“Whoa! Why are you trying to pin this one on me?”
“Remember your spiel about how there is a season for everything, including shares? And how it was a good idea to sell out before May? Something about hollow weenies.”
“Ah. You mean the Halloween Indicator?”

“Yeah. And a load of horse manure that turned out to be!”
He shook his head reproachfully. “It’s true, my boy. The six months from November have always been good for stock markets around the world. And May to October has been loss-inducing. That’s why we say, ‘Sell in May, Go Away.’ And don’t come back until you have placated the ghosts and the skeletons on October 31.”

“You’re making this up, Old Dog!”

“Perish the thought. Research published in the American Economic Review confirmed this. The study covered market behaviour in 37 countries between 1970 and 1998, and found that the Halloween Indicator held true in 36 of them.”
“But, but, but,” I spluttered, “Why didn’t it work this year?”
The Old Dog called for a refill. He sipped appreciatively. “Let’s decode it,” he said, and he pulled up a wad of paper napkins and began to doodle.

 

 

He looked up from his little masterpieces. “In a word, my boy, people were tired of all the pessimism and the gloom.  They jumped on any little positive news that came their way.
“Things are better now, but be careful. Don’t get too bullish.  Stay with the blue chips and less volatile stocks. For your mutual funds, stick to the large cap funds. Debt funds as a cushion aren’t a bad idea

And no penny stocks!”

 

He looked meaningfully at his empty glass.
I bought him another.