A look at the Dow Jones Industrial Average and Sunspots

This paper appeared in the journal Technological Forecasting & Social Change:

Sunspots, GDP and the stock market (View paper PDF)

by: Theodore Modis


A correlation has been observed between the US GDP and the number of sunspots as well as between the Dow Jones Industrial Average and the number of sunspots. The data cover 80 years of history. The observed correlations permit forecasts for the GDP and for the stock market in America with a future horizon of 10 years. Both being above their long-term trend they are forecasted to go over a peak around Jun-2008.


The paper concludes:

…..If one accepts that there must be some correlation between GDP growth and stock-market growth as displayed in Fig. 5, then one cannot use the lack of scientific proof as an argument against the existence of correlation between the stock market and sunspots (Fig. 2), or between GDP and sunspots (Fig. 4). On the other hand, if these correlations are real, then we can venture long-range forecasts for the DJIA and the GDP….

….The levels forecasted here for the DJIA of 13908 in mid 2008 and 7919 in early 2014….

While there may be some correlation between sunspots and the DJIA and GDP, there’s also much larger drivers, such as panic and bad loans in the banking industry. Sir William Herschel discovered a correlation between wheat prices and sunspots. In 1801 he published two papers that, in part because of Herschel’s reputation as England’s  “Kings Astronmer”, effectively launched the field of solar influences on Earth’s weather. It is in the first of these papers that Herschel discusses an anticorrelation between the price of wheat and the number of sunspots visible on the Sun.

So, I suppose DJIA/GDP links aren’t that far fetched. I remember well when Carl Sagan said in his famous 1980’s PBS special COSMOS that “we are all made of star-stuff”. Thus is doesn’t seem that unplausible that the ebb and flow of our existence continues to be linked to our nearest star.

h/t to Paul Biggs

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November 4, 2008 7:01 am

And to think I’ve wasted all that time reading P&Ls…

November 4, 2008 7:03 am

I bet Leif will have a comment or two on this…
REPLY: I’m sure he will, but hey, we all need something to take our minds of the election for a momente or two. 😉 – Anthony

November 4, 2008 7:10 am

correlation is not necessarily causation…

Arthur Glass
November 4, 2008 7:15 am

I hope Leif Svalgaard shares his thoughts on this, although I can readily imagine his reaction.

November 4, 2008 7:30 am

Oh puh-lease! What unrelieved tosh. This baloney resurfaces at regular intervals. I recall it getting a lot of credulous press ago when Principal Trust in Canada failed.

November 4, 2008 7:32 am

That was meant to read “…years ago…”

Pamela Gray
November 4, 2008 7:34 am

I have a hunch that in this complicated world of cycles, we could find that some simple bug somewhere has an 11 year cycle. Or that some animal has an 11 year cycle. Or a plant. Or productivity in a class of students in some town somewhere. It kind of reminds me of the old saying about hidden code. If you look hard enough, you will find the word “Devil” spelled out in a nondescript sentence with every 11th letter in a nondescript novel on every 11th page. Do you really think this is predictive correlation and not just pure dumb luck?

Patrick Henry
November 4, 2008 7:34 am

About the same level of statistical confidence as temperature reconstructions used by the IPCC.

November 4, 2008 7:37 am

The most interesting thing about this correlation is that the stock markets cycle preceeds the solar cycle. Does the market’s fall over the last two months “prove” we are headed for a Dalton or Maunder Minimum? Maybe the term for investment bankers as “Masters of the Universe” is more than just hyperboli.

Pamela Gray
November 4, 2008 7:48 am


M. Jeff
November 4, 2008 7:55 am

Surprisingly there does not seem to be a correlation with April 1st.
… Received 6 May 2007; accepted 13 June 2007 …

Steve M.
November 4, 2008 7:59 am

Oh yeah, I needed an article like this today!!!! I’ve seen some nice graphs of GDP and temperature that matched up nicely. I’m glad most posters see this for what it is.
REPLY: Like I said…we all needed something to take our minds off the election. 😉
– Anthony

Bern Bray
November 4, 2008 8:00 am

This just proves that sunspots are where the BS from the financial analysts has hit the sun and temporarily quenched it.
Since the DJIA leads sunspots, you should be able to calculate the speed of BS through a vacuum. Interestingly, the speed of BS through air seems to be much faster.

Pierre Gosselin
November 4, 2008 8:03 am

This DJIA-sunspot correlation is as ridiculous as the CO2-GW correlation.
Try to find one investment banker who’ll buy into this.
If Leif comments on this, then it means he has lots of idle time on his hands.

Pamela Gray
November 4, 2008 8:05 am

Check out the blue dot cameras for Cabbage Hill above Pendleton:
Apparently, this snow storm is highly correlated with the sunspot flares we have been experiencing. And with a time lag to boot.

jack mosevich
November 4, 2008 8:10 am

See: http://www.frbatlanta.org/filelegacydocs/wp0305b.pdf
It gas biological explainations for influences on moods and market reactions

Frank Ravizza
November 4, 2008 8:11 am

It looks like changes in suns spots lags about 5 years behind the DJIA. The only possible interpretation is the DOW controls the sun, and since the sun controls global warming, therefore the DOW controls global warming.

November 4, 2008 8:13 am

Bern is funny. Amusing visuals.
You know you’re having a bad day when potty language and the guilty chuckle it elicits – are your high point.
It’s like you said Anthony –
Anything to get our minds off the tsunami that is just off shore.
What were they playing while the Titanic was sinking . . . . ?

November 4, 2008 8:13 am

I believe George Box said, “Essentially, all models are wrong, but some are useful.” I think this model falls into the “not so useful” category! Very funny, Anthony!

November 4, 2008 8:26 am

Striped Bass. That’s the predictor, right there.
They run on a 12yr cycle…and have been on the down slope since about 2000.
so that ties into warming cycles, GDP, stock market, and one other important factor for many of us…HAIR LOSS.

November 4, 2008 8:27 am

And yes…we needed this post :*)

Ed Scott
November 4, 2008 8:33 am

Telling the truth about climate change has become a revolutionary act
“Being an objectivist means never having to take responsibility for your actions.” The cliché about models is garbage in garbage out (GIGO), but the issues are who put the garbage in and who decided what happened to the garbage while it was in the model and then how was the garbage used once it was out?
“If you put tomfoolery into a computer, nothing comes out of it but tomfoolery. But this tomfoolery, having passed through a very expensive machine, is somehow ennobled and no one dares criticize it.” – Paul Gallois
The IPCC climate model is the sole source of evidence that human CO2 is causing climate change yet it is being used to create completely unnecessary taxes, policies and hardships.
Many factors contribute to the formation and spread of collective delusions and hysterical illness: the mass media; rumors; extraordinary anxiety or excitement; cultural beliefs and stereotypes; the social and political context; and reinforcing actions by authorities such as politicians, or institutions of social control such as the police or military. Episodes are also distinguishable by the redefinition of mundane objects, events, and circumstances and reflect a rapidly spreading folk belief which contributes to an emerging definition of the situation.” – Bartholomew and Goode
“And given that virtually no research into possible natural explanations for global warming has been performed, it is time for scientific objectivity and integrity to be restored to the field of global warming research.” – Roy Spencer in his testimony before the US Senate EPW Committee

Retired Engineer
November 4, 2008 8:34 am

The real question is the speed of BS through the media. That appears to be nearly infinite. The badder the science, the faster it goes.
If the length of women’s skirts relates to the Dow, as does the winner of the World Series (someone ‘proved’ that once), then it all ties into sunspots.
Sunspots Rule! But what if we don’t have any? Back to the tea leaves…

P Folkens
November 4, 2008 8:45 am

On its face the correlation of market and GDP seems silly, but there may be something there, though not directly. The market anticipates the trend by about 6 months. If other metrics indicate some condition in the future, the market anticipates that and moves ahead of fact. So, let’s say it looks as though there will be colder weather in the spring delaying spring plantings. The overall production would be expected to be lower and prices might rise. Speculators would raise prices ahead of the fact. The colder spring might be actually caused to some degree by reduced solar activity, but the speculators make their moves on anticipated crop production and “market forces,” while ignorant of solar activity.

November 4, 2008 8:54 am

have you guys seen this article?
it’s interesting that we may be beginning an energy rationing scheme just when we need plentiful, inexpensive energy the most. really sad…

Patrick Henry
November 4, 2008 9:05 am

“Autism prevalence rates for school-aged children in California, Oregon and Washington in 2005 were positively related to the amount of precipitation these counties received from 1987 through 2001,”
Global warming causes increased rainfall. Increased rainfall causes autism. The logical conclusion being that autism and other mental incapacities cause people to vote for candidates who promise to reduce CO2 by 80%.

November 4, 2008 9:09 am

Mark (07:03:54) :
I bet Leif will have a comment or two on this…
Arthur Glass (07:15:56) :
I hope Leif Svalgaard shares his thoughts on this, although I can readily imagine his reaction.
Pierre Gosselin (08:03:34) :
If Leif comments on this, then it means he has lots of idle time on his hands.

I don’t have much time right now 🙂
I do get regularly emails from persons that want my latest and greatest solar data because they are contemplating some investments. Perhaps I should ask for their help instead in predicting solar activity…

November 4, 2008 9:17 am

We don’t need more sunspots. We need more cowbell.
We gotta have more cowbell!

Ed Scott
November 4, 2008 9:18 am

Rebuttal to O’Bama’s “cap-and trade” to bankrupt the coal industry and to “skyrocket” energy prices. Use incentives instead of “tax-and-destroy.”
Newt still in the “carbon” camp.
Newt on incentives versus punitive fines

November 4, 2008 9:23 am

It appears that the responses to this are negative, to say the least. But it interested me because I have a book called “Sunspots and their Effects”, published in 1937 by McGraw Hill. The author was Harlan T. Stetson, of MIT. It details the correlation of sunspot variations on the DJ during the Depression, as well as correlations with other phenomena, including weather, mass human behavior, vintage wine quality, tree ring growth, etc. If sunspot activity affects tree ring growth, how can the latter be used to measure past temperatures? The author describes how they measured the total heat input from the sun 70 years ago (avge. 1.94 Calories per square centimeter), and the ultraviolet content of the sunshine. Charles G. Abbott, then of the Smithsonian Institute, claimed that the variation in solar heat was as much as 4%!

Jean Martin
November 4, 2008 9:26 am

Hi from France !
It seems that T. Modis ignores the results published in Nature (2 papers) by the renowned English economist and logician, William Stanley Jevons. Jevons found a rather similar correlation. He used “Herschellian” arguments:
“In 1875 and 1878, Jevons read two papers before the British Association which expounded his famous “sunspot theory” of the business cycle. Digging through mountains of statistics of economic and meteorological data, Jevons argued that there was a connection between the timing of commercial crises and the solar cycle. The basic chain of events was that variations in sunspots affect the power of the sun’s rays, influencing the bountifulness of harvests and thus the price of corn which, in turn, affected business confidence and gave rise to commercial crises. Jevons changed his story several times (e.g. he replaced his European harvest-price-crisis logic with an Indian harvest-imports-crisis channel). ”
ref : http://cepa.newschool.edu/het/profiles/jevons.htm

November 4, 2008 9:55 am

The climate sunspot connection does this? Let’s see:
Magnus theorem.
After a period of good harvests the agricultural business declines. Wealthy young cowboy’s moves into the cities where they spend their money which flowes into the stock market.
But soon the cowboys are poor again, and when a natural reaction to every boosted market, a decline, sets in. The boys are forced to move back to their farms which starts to flourish under a steadily brighter sun.
And so on.

Richard deSousa
November 4, 2008 9:58 am

Oh oh… so this is all in fun…. but, if the sun stays spotless and we enter a Dalton or Maunder Minimum will the stock market tank? Hehe… just kidding 😉

November 4, 2008 10:05 am

I’m sure that anybody calculating the same-time correlation coefficient between these two will find they’re not correlated.

Tim L
November 4, 2008 10:07 am

Thanks Anthony,
I know it is meant as a joke, but
if the earth is more productive when hotter
then the lag of the djia is correctly hi
after the fact. the ups and downs that do not correspond
to spots is just noise.
I believe that everything has a cycle to it of one form or another.
when these cycles come together can be fantastic or horrendous.
going down to bus stop to get three year old off from the bus. LOL

November 4, 2008 10:10 am

I believe it was H.G.Wells made the ‘star stuff’ observation.
REPLY: Yes originally, but Sagan repeated it. – Anthony

November 4, 2008 10:11 am

The DJI would seem to be contradictory to classical economics and solar climate driven change. During warm periods the price of agricultural products fall as land becomes more productive. As the population grows so does the need for mineral resources in the form of metals and timber to take advantage of the new conditions. When the warm period ends so we get the reverse, High food prices as less land becomes arable. With the diminishing food resource comes social conflict leading to wars. Plows are turned swords and the abundant mineral resources become less important as the population plummets.
These periods are known the dark ages.

Bill Marsh
November 4, 2008 10:43 am

speaking of SunSpots. The current Sunspot started as a Cycle 24. Looking at its present state, is it possible for a Cycle 24 to split into a Cycle 24 & Cycle 23 spot?

November 4, 2008 10:44 am

It’s the Bilderburgers, I tell you!! They truly ARE the masters of the universe!
I can finally add something to the conversation, since I’m only a learner here, not one of the smart ones here. Great site, great commenters here too. I’ve learned a lot in the last year or so I’ve been coming here.

Mike McMillan
November 4, 2008 10:45 am

Roy (07:30:02) :
Oh puh-lease! What unrelieved tosh. This baloney resurfaces at regular intervals.
But do these intervals correspond with sunspot numbers?

Robert Bateman
November 4, 2008 10:52 am

If this is an argument about whether society is affected by weather, you’ll get no argument out of me. Mood, confidence, outlook, dispostion any way you slice it.
REPLY: Well, its not my total argument, just some light reading on day filled with contradictions, uncertainty, and predictions. – Anthony

November 4, 2008 10:53 am

Leif can’t reply now. He is speculating on stock markets like crazy.

Bill Marsh
November 4, 2008 10:59 am

Roy (07:30:02) :
Oh puh-lease! What unrelieved tosh. This baloney resurfaces at regular intervals.
But do these intervals correspond with sunspot numbers?
This surfaces along with the NFC/AFC Superbowl winners and the Stock Market. I wonder if we should carry the NFC wins and the market finishes up correlation through to sunspots and solar cycles?

November 4, 2008 11:08 am

RE: AEGeneral (09:17:22)

Ted Annonson
November 4, 2008 11:22 am

If this works, All solar scientists should become millionairs shortly.

Leon Brozyna
November 4, 2008 11:25 am

Hmmmm — and if the Livingston & Penn prediction is valid then I guess we can expect the DJI to really tank along with the economy. See, the sun really does have an effect, just not on the weather. Next thing you know we’ll get a new cabinet position — Dept. of Astrology — to guide economic decision making.

November 4, 2008 11:25 am

Bill Marsh (10:43:18) :
The current Sunspot started as a Cycle 24. Looking at its present state, is it possible for a Cycle 24 to split into a Cycle 24 & Cycle 23 spot?
No, once a SC24, it will stay a SC24. It is quite common for the spots within a group [or were there actually two close SC24 groups] to move around a bit, messing up the cycle signature.

November 4, 2008 11:32 am

As we know from the Livingston/Penn paper, we will run into the next Maunder minimum in 2015, right after the end of the second term of the new president. The seventy year Maunder minimum will then correspond to a depression of 70 years, no more ups and downs of the Dow Jones, just downs. Thus it will be the next president who will lead the people away from the fleshpots of Egypt, away from the fleshpots of evil, into 70 years of hardship where the people will be cleansed of all sins. After those 70 years, the people will find the land where milk and honey flows. Amen.

November 4, 2008 12:04 pm

Very funny:
Of course: this model can be completed.
Aries, Taurus, Gemini, Cancer, Leo, Virgo, Libra,
Scorpius, Ophiuchus, Sagittarius, Capricornus and Aquarius.
A small adjustment;
Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune, and Pluto;
Another adjustment:
Pluto … is a planet?
And the Moon?

Ellie In Belfast
November 4, 2008 12:12 pm

Leif Svalgaard (09:09:34) :
“I do get regularly emails from persons that want my latest and greatest solar data because they are contemplating some investments. Perhaps I should ask for their help instead in predicting solar activity…”
Leif, you should ask for a small return on any profits, a bit like one of one of those ‘no win no fee’ lawyers 😉
Of course it is those who come back for a second hit of data that are the interesting ones.

Vincent Guerrini Jr
November 4, 2008 12:16 pm

This recent work shows no link between methane and human activity
This is really one huge nail in the coffin of AGW

Robert Wood
November 4, 2008 12:22 pm

Roy, I think this is published as a lighthearted whimsy.

Robert Wood
November 4, 2008 12:23 pm

BTW There are two small sunspots, 1007.

November 4, 2008 12:29 pm

To Leif Svalgaard (11:25:45),
Would there be an advantage in measuring the sunspot area instead of the number of sunspots?

matt v.
November 4, 2008 12:56 pm

Another interesting table. I hope you can reproduce this ?
1904-1909 1905 1902-1904
1916-1919 1917 1918-1919
1926-1929 1928 1929-1933
1937-1939 1937 1937-1938
1947-1949 1947 1945-1947,1949
1956-1960 1957 1957-1958,1960
1960 not true recess.
1968-1970 1968 1969-1970,1974-1975
1979-1982 1979 1980,1981-1982 ,
1989-1991 1989 1990-1991
2000-2002 2000 2001
2009-2012 est 2010 estimate 2008- 2010 est

Michael of Brisbane
November 4, 2008 1:34 pm

I think we should send all this data to Michael Mann and get him to produce another hockey stick. You know the one – the DJIA causes an increase in sunspots which leads to global warming. Al Gore can then make another movie blaming the (man made) DJIA for all the woes of the planet and governments can introduce a new punitive tax on the DJIA to keep it low and reduce sunspots. If the DJIA is doing all this to us we have just got to fix it and a tax will be a good way to start.

Ed Scott
November 4, 2008 1:36 pm

Leif Svalgaard (09:09:34) :
“Perhaps I should ask for their help instead in predicting solar activity…”
I predict that the Sun’s behavior will continue to be controlled by the Natural Laws of the Universe until….
I hope this has been of some help. I have not used a computer model to make this prediction and therefore the prediction is subject to human error and not subject to erroneous data input or computer error. 🙂

matt v.
November 4, 2008 1:41 pm

I have simplified the table to show only the SOLAR CYCLE PEAK PERIOD YEARS followed by the US RECESSION YEARS [MAJOR]. There seems to be an approx. 10-11 year cycle for both? Similar to the business cycle that economists talk about?
1904-1909 [1902-1904]
1916-1919 [1918-1919]
1926-1929 [1929-1933]
1937-1939 [1937-1938]
1947-1949 [1945-1947,1949]
1956-1960 [1957-1958, 1960]
1968-1970 [1969-1970]
1979-1982 [1980,1981-1982]
1989-1991 [1990-1991]
2000-2002 [2001]
2011-2012 [FUT?]

Steve Berry
November 4, 2008 1:49 pm

OT. Updated Central England Temperature. October anomaly almost 1 degree C down. http://hadobs.metoffice.com/hadcet/cet_info_mean.html

November 4, 2008 1:55 pm

This is not as outlandish as it may sound.
Markets are driven by sentiment – optimism versus pessimism to you and I. To a degree the sentiment is driven by real economic factors, but to a significant extent it has no rational basis.
Not only does sentiment drive the markets, it also drives the real economy, which in turn drives the markets. More pessimism = less investment and consumer purchasing.
We know the weather affects peoples moods by a substantial amount. Suicide rates go up with rain and cold weather and fall when it’s sunny.
All that’s needed is a mechanism for solar cycles to effect the weather – Svensmark’s clouds? – and we have a causal mechanism for sunspots influencing the DJIA.

November 4, 2008 2:44 pm

The logic behind the sun activity and the effect of the harvest on the economy and market confidence makes sense but… more and more farmers are using greenhouses to grow food. Wouldn’t the effect of the sun on the business cycle get smaller and smaller? And, talking about greenhouses… if it was a fact that CO2 is heating up the planet, according to IPCC’s science the sun should not have any impact on the GDP… only if you heavily modify the above graph (and getting a hockey stick in there) and add in insanely high forcing factor , that could maybe make it all plausible.

F Rasmin
November 4, 2008 2:50 pm

Perhaps an even more fascinating study can be seen here in,
Juckett, D.A., Rosenberg, B (1993). Correlation of human longevity oscillations with sunspot cycles. Radiat, Res. 133 (3). 312-320. After reading this paper, posters can try to see how long they have!

November 4, 2008 2:55 pm

Another. A brief story about the sun;
>>>>The encroaching winter means less power is Phoenix’s solar panels<<<<

Ellie In Belfast
November 4, 2008 3:03 pm

Meanwhile the latest from the UK govenment (if you really want to laugh…or cry with us)
Pet owners face code of practice
The best bit is the comments at the bottom.

Burch Seymour
November 4, 2008 3:04 pm

Sort of reminds me of my friend in college who made a Hertz to Cycles/Second conversion graph (on log paper) and handed it in to his physics prof asking for extra credit. As I recall, he did not get any 🙂

November 4, 2008 3:41 pm

Greenhouses do not work for grains and grass because of scale, the latter fuel our protein sources and the former fuel people. All our grains are grasses and it takes a lot of solar energy, proper growing season, and the right temps to make a lot of grass.
In developing economies, ag production trumps ALL other things. And the developed economies are tied to the non-developed ones.
Marginal supply and marginal demand set prices and determine the future of economies, both developed and not. Change at the margin redistributes resources and this drives margins elsewhere.

November 4, 2008 4:04 pm

Ray, high(er) value crops are grown in greenhouses. Florida tomato growers are being put out of business by competition from Mexican tomatoes.

November 4, 2008 4:18 pm

F Rasmin (14:50:40) :
Perhaps an even more fascinating study can be seen here in,
Juckett, D.A., Rosenberg, B (1993). Correlation of human longevity oscillations with sunspot cycles. Radiat, Res. 133 (3). 312-320. After reading this paper, posters can try to see how long they have!
I died 2 weeks ago!!

November 4, 2008 4:25 pm

It’s interesting to see how people who are clearly very open-minded when it comes to departing from the consensus in one domain may not initially be receptive to the possibility of surprising findings in another domain.
Jevons, despite being one of the three inventors of marginal utility, a foundation of modern economics, was roundly laughed at for his theories of a link between sunspots and the business cycle. He certainly failed to establish the right kind of connection between sunspots and crop prices (his initial idea of a possible causal link), but subsequent researchers Garcia-Matta and Shaffner published a paper in the Quarterly Journal of Economics (1934) confirming the link between business and sunspot cycles (although it seems agriculture had nothing to do with it).
Mor recently, the Foundation for the Study of Cycles (established by Edward Dewey, amongst others) has regularly published research since the 50s on the relationship between life on earth and solar/terrestrial geomagnetic phenomena. One of their stranger findings is that via some kind of entrainment, cycles of similar periodicity turn together regardless of whether there is an obvious causal link between the phenomena.
I trained as an economist and have been a macroeconomic investor for some years now, and you would be shocked at the number of serious people deploying considerable capital who pay at least some attention to this kind of work. Of course they are not on CNBC shooting their mouths off – investors tend to be a conservative bunch, and why give away an edge in such a competitive world. Those who know generally don’t talk very much. But you’ll notice one or two people dropping hints – Jim Simmons, Robert Prechter, Marc Faber and Hugh Hendry amongst others.
The root problem is that although with experience one can identify pricings that are out of line with respect to the fundamentals, identifying the timing is tough. The most important variable in figuring out asset markets and the economy is the state of animal spirits; economists have thrown up their hands at the idea of developing a theory of irrationality and so it is not surprising their forecasts are universally horrible over time.
The thing is that just because the state of confidence does not suit itself to analysis via traditional tools does not mean that it is completely random and that it is not susceptible to understanding and prediction via other techniques. In my view solar activity does exert a profound influence on animal spirits/irrational exuberance and thus on the economy and asset markets. Panics and credit cycles are just some of the ways that these swings in animal spirits can manifest in human behaviour.
So feel free to laugh at this stuff. I really don’t care. Luckily in my field one doesn’t need to persuade others of the truth of a theory to be effective and successful. But you’re throwing away the opportunity to deepen your understanding of the universe as well as the economy and financial markets.

November 4, 2008 4:43 pm

Someone said:
“Correlation isnt necessarily causation” and is true. But as investment manager I dont care what is the cause but only profiting with the facts. And in fact, even looking to PLs, as another one said early, I notice this year to interestings things. The majors pullbacks in DJIA that we had this year coincides with sunspots and the lack of that fenomenum, sunspots, coincides with the fall of the markets. As I learned with my experience, I dont care the nature of the method that I use to invest, as the profits come with.
This year, one of worst years in my career, because the volatility, I saved my portfolio using… The lack of sunspots. And I profited with them when they came. At this moment, for example, I have 90% of allocation in long stocks because… I notice sunspots in the picture. 😉 After that sunpot vanishes I will hedge with short postions. 🙂
I dont care what the academics learn and teach at business schools. What they learn and teach in their books. I only want to use things that is working well with good risk control and management. And this year is working well. I check every day this blog ( Thanks Anthony) the sun. And every day give me one more insigth about tomorrows action in the markets.
Looks bizarre? Perhaps. Is the same bizarre that people uses PLs and balance sheets and they dont understand nothing when the market doesnt follow that beautiful numbers in the balance sheets. Or that managers that uses a lot of mamboo jamboo that they call Financial Calculus and they loose their hair in the market or they are underperformers.
I use everything to invest in the market. Everything. Sunspots, moon phases (I use an alternative method of displaying mensal bars with the moon phases thar are very interesting ;-)), mason geometry, etc. And, yes, I use also Balance Sheets, macroeconomic data and, of course, Financial Calculus. But, to survive, during my career, I never said No to using “esotheric” methods or bizarre technics to perform in the market. Im happy to know that a lot of suckers only uses conventional methodes. They loose and I won. The game is negative sum, isnt that so? ahhahahahah
Kind regards,

November 4, 2008 4:44 pm

With the coming global cooling, we should invest in grains… their price will soar as the demand will increase and the production will drop.

November 4, 2008 5:12 pm

This is brilliant! I love it. There is also a correlation between my bowel movements and the DJIA 😀
I wrote about this exact topic when I was going to school for my econ major. I guarantee you that people are reading this blog right now and believing that we need to alter the sun spots so that we can protect our economy!
Here’s something else to ponder… Before the DJIA was created, was the sun producing any sun spots!!?!! LOL

November 4, 2008 5:19 pm

lol, nice one

November 4, 2008 5:26 pm

Mark (12:29:03) :
Would there be an advantage in measuring the sunspot area instead of the number of sunspots?
Not really. We actually measure both. One can generally compute one from the other. The conversion formula is R = q * A^0.775, where R is sunspot number and A is sunspot area [in millionth of the disk] and q at present is 0.35 . Before 1946, the constant q was lower, 0.30.

November 4, 2008 5:29 pm

Kom drop me an email – heraclituso at gmail.com

November 4, 2008 5:50 pm

I see new opportunities for investment.
Theoretically; You can induce the formation of a sunspot?

John D.
November 4, 2008 6:20 pm

Also, and perhaps more importantly, there is an even stronger correlation between the Dow, as well as GNP, and length of women’s skirt hemlines. This is the correlation that draws my attention! Correlation and causation are not always related..regardless of interest.
John D.

November 4, 2008 7:17 pm

I was laughing at this post, then my brother brought this to my attention:
“Steve Puetz discovered that almost all of the largest stock market crashes in history have occurred around the time of a full moon within six weeks before or after a solar eclipse.”

Pamela Gray
November 4, 2008 7:33 pm

Oh. Now yur talkin to the redhead! Born in July. Full bred crab of an Irish woman. I howl at the moon just like my dog Jake does. I am drawn to me Irish ways and if I had a million bucks, I so would get my ears done so that they are pointy, just like an elf. At 4’11” (which is a stretch), that would freak out just the kind of people I love to freak out when I let my hair down and party.

November 4, 2008 11:13 pm

“In summary, during the 20th century, there was a correspondence among four, superficially unrelated variables from the living and the non-living universe; namely, women’s fashion, stock prices, sunspots and certain measures of geomagnetism (magnetic u). During the previous two centuries there was a correspondence among at least three of these four variables; viz., women’s fashion, sunspots and geo-magnetism. The correlation stock prices may or may not have had in earlier times is still under investigation. The discovery of these multiple correlations is, we believe, of profound significance. It does not mean that changes in fashion and changes in stock prices are _caused_ by sunspots, as some enthusiasts have maintained. However, it does suggest that all of these disparate phenomena, in the living and non-living universe alike, maybe causally related to some much more fundamental attribute of the cosmos. And it thereby offers the hope that if we can predict one of these phenomena effectively, we will gain an insight into the operational dynamics of the others”.

John D.
November 5, 2008 12:24 am

Thanks for the citation Heraclitus!!
I heard about this years ago, as it was mentioned in a biostatistics course…now I have a link to the “Published Paper”..
(I should have read previous posts more closely; and I thought I was being original!)
John D.

Bobby Lane
November 5, 2008 2:22 am

I have also discovered that there is a correlation between how long I stay on the Internet, reading such sites as this, and when I go to bed. I wonder….

November 5, 2008 3:53 am

Heraclitus I thought yours was an excellent post! I too notice how people who are good skeptics in one area can still rush to laugh at… other areas “funny ideas”… but I catch myself falling short too…
Science here: there does seem to be a strong correlation between UPSWING (? both the steepness of graph and the length of time in that steepness) and Dow Jones. I think that correlation is highly suggestive. I wonder if a clever graph plotter here could plot graphs along these lines at WFT and tell us? I think we’d find an even higher correlation. And BTW what are the r and r^2 values? I presume they can be calculated from the data available – not being a statistician myself.

Chris Wright
November 5, 2008 3:59 am

The stock markets have been enjoying a bounce recently. The FTSE100 is now 20% up from its 2008 low. And guess what? There have been visible spots on the sun for the last few days. If the sun goes blank again I suggest you sell – fast!

Robert Bateman
November 5, 2008 5:50 am

We should invest in permanent storage. Somewhere like a pyramid, or the dark side of Mercury, or deep frozen under Mars South Polar Cap and even Antarctica.
Anywhere the worm will not follow.
Ray (16:44:52) :
With the coming global cooling, we should invest in grains… their price will soar as the demand will increase and the production will drop.

Arthur Glass
November 5, 2008 7:50 am

There’s a little black spot on the sun today.
Think I’ll be a day trader and get in on the play.
What about the S&P 500, a much broader measure of the market?

Arthur Glass
November 5, 2008 8:09 am

Here is a correlation that has worked without exception for decades: if the Washington Redskins lose their last home game before a Presidential election, the incumbent party loses the White House.
The ‘skins lost to the Steelers on Sunday.
But one classically eerie correlation was apparently broken by Ronald Reagan. I mean the Zero-year Curse. Beginning with William Henry Harrison, who was elected President in 1840 and died one month into office, every President elected in a zero year died in office (not necessarily in the zero-year term: 1860: Lincoln; 1880, Garfield; 1900, McKinley; 1920, Harding; 1940, Roosevelt; 1960, Kennedy.
The only President to die in office who was not elected in a zero year was Zachary Taylor, who was elected in 1848 and died in…1850!
Ronald Reagan was elected in 1980, and was shot and seriously wounded in 1981, the bullet missing his heart by a matter of millimeters. Reagan did, of course, survive through two full terms; and since Bush. who was elected in 2000 has only two months to go, apparently the curse has been lifted.

November 5, 2008 11:00 am

A guy named Hirschleifer (sp?) at Ohio State has done some behavioral finance work that ties stock prices to weather in NY & Chicago, where markets are located. People are happier and more optimistic on nice sunny days, so they buy more. At least that’s how I remember the theory working — I haven’t looked at it since grad school.
So is it that wacky that sunspot cycles, which presumably affect weather, also affect stock prices? I think not. People are funny animals and do lots of odd things.
Does this graph or this paper necessarily prove anything? No, of course not. But the idea is at least plausible to me.

Mike Bryant
November 5, 2008 12:43 pm

This is off topic, but very interesting. For the first time in the history of the Mauna Loa CO2 monthly records the October number is larger than the August number. You don’t suppose that Dr. Tan is having computer problems again, do you?
Mike Bryant

Mike Bryant
November 5, 2008 12:58 pm

Also, here NASA has been very careless with the second graph…
If you hover over the last point in the second graph, you can see it is September Mauna Loa. Look at the number for June. Mauna Loa has it at almost 389 PPM, Nasa has that June number plotted at about 387 PPM… the graphs appear to be blatant propaganda.

November 5, 2008 2:56 pm

Mike & Anthony,
It seems it has been the highest monthly rise in the average trend since the beginning of the CO2 measurements. Must be because temperatures are going down!

November 5, 2008 3:26 pm

This is too funny… in fact it is pathetically funny that all those claiming global warming all stop short with the data from 2007. Looks like for them we will just jump to 2009. Sorry folks, there is no 2008 on record… but looks like there won’t be any 2009, or 2010, or 2011 or…. until it starts heating up again.

November 5, 2008 4:18 pm

Hmmm, maybe NASA could use this to help improve their sunspot projections…
Surely it would be an improvement.

November 5, 2008 7:04 pm

[…] More here at a great science (and global-warming-debunking) site –Watts Up With That? […]

November 5, 2008 7:22 pm

The posts on this site are getting more entertaining by the day. I loved the thread on Obama wanting to bankrupt the coal power plants. Would the United Mine Workers of America, the union that represents coal miners, really endorse a candidate that would eliminate most of their jobs? Would the Coal Miners’ Political Action Committee really vote unanimously to support a candidate who would eliminate their jobs? The willingness of people to believe even the most implausible claims in order to maintain their fantasy is fascinating. And amusing.

November 5, 2008 10:11 pm

[…] market news by wattsupwiththat Dow Jones Open 11/04/08 – Stock Market Report […]

Hugo M
November 6, 2008 4:29 am

Whoever types “geomagnetic index” into http://www.pubmed.org will quickly get a bunch of medical and biological publications looking into effects of solar activity on human physiology. Among these, there is evidence, that the rate of epileptic seizures seems to be related to solar activity levels. (An epileptic seizure can be seen as a consequence of an individual inability to contain the dysbalance of excitatatory and inhibitory neuronal activity.)
Our brain, built from some 10^11 neurons and interconnected by 10^14 synapses, is known to be very sensitive to quickly changing, strong magnetic fields (by means of locally induced eddy currents — such you can artificially trigger seizures.) To a much less extend, there are certainly also effects from weak alternating fields. It’s therefore not unthinkable that the mean human arousal/aggression level is somehow connected to solar activity too.

Bill P
November 6, 2008 12:24 pm

Pamela Gray (19:33:47) That is just a little scary.
As for investment based on solar, I’ll cast a tentative vote for P Folkens’ interpretation. If it’s true, then by the time each solar max arrives, the price is “baked in the cake”, as they say. Whether the oven actually had any heat may be irrelevant. Such, I think, are the futures markets.
I tried (a little half-heartedly) to get a closer look at historical wheat prices a few years ago as we were entering the solar minimum. I found out that the Chicago Mercantile exchange requires a mebership fee that I wasn’t interested in paying. So I contented myself with keeping my money and just following the headlines. If I recall the sequence of affairs from memory:
Wheat commodities futures started climbing seriously about 2006. The spike by last year was substantial, perhaps a doubling from the lows(?), and the downturn just as dramatic. It has been suggested above that (if you’re only interested in investing) it isn’t necessary to make sense of the how many bushels of wheat per acre were actually being harvested, because it’s human emotion that drives stocks, not empirical reality. Actually, here in Colorado, the 2007 wheat harvest was a bumper crop, so large that, due to a shortage of railcars, the crop couldn’t be hauled away to eastern markets for months. Grain silos full, it just sat (and may yet be sitting) out on the tarmac. But elsewhere in the world it seemed there were a preponderance of famine stories:
“grains stocks fall to 57 days of consumption” http://www.earth-policy.org/Indicators/Grain/2006.htm
“grains at 30-year lows” http://envirostats.info/2007/12/20/0636/
A lot of the stories I read at the time attributed grain failures (especially in Africa) to drought, whereas we had had logged record snowfalls in most of Colorado’s major drainages. So, what is the effect of a solar minimum or maximum? (I continue to read here with baited breath.)
A point about the former citation: A policymaker, bureaucrat, journalist, politician – all these people are inclined to irrational behaviors (and perhaps ulterior motives) as readlily as a blog-reading nobody, such as myself, and if he wanted to affect world food stores, or prices, he might be inclined to talk up the famine and shortages to suit his benevolent / selfish purposes.
I also realize that it is rash to base any predictions – including future food stores – on a single event or summary of events, such as the world food shortage of 2006. It would be equally rash to predict grand solar maxima or minima on similar history.
But, it would seem, if you see no connection between sun and our investments, then you still are faced with the question of whether the sun can affect the climate. And as long as someone is able to answer, “Yes, it can”, and is willing to parse the tables, charts and graphs…
Then you can bet we’ll soon be off again on the next cycle of speculations.
Personal disclaimer: I have no stock at this time in sunspot or grain “futures”.

Hans Erren
November 6, 2008 2:55 pm

CO2 emission growth is related to dji growth

November 6, 2008 5:40 pm

Try plotting the Dow against the rate of change of sunspots (rather than deviation from trend).
Also try looking at the level of daily sunspots against the level of daily dow and look at what happens to price as sunspots turn up. There is a lot to be said for starting with the raw data and eyeballing it.
It’s funny – most non-medical people wouldn’t dream of having an opinion about brain surgery but when it comes to other highly-competitive fields where experience and familiarity with the data is important (and rare), everyone is happy to come right out with a strong view. It’s one of those topics that is more than occasionally about the conversation than about learning what’s true.
Wheat data going back centuries is available on the net – quite easy to find via google. (Often priced in silver – you can convert to pounds sterling if you prefer).
Gann says there is a seven year low to low price cycle in corn – that might be something to explore.
There are plenty of older books written on the relationship between famines and the solar cycle. It was a problem of more pressing concern to previous (and perhaps again to future) generations than has been our recent experience. Solar minimums and solar maximums can create vulnerabilities, for different reasons.
I would encourage anyone interested in pursuing investigation of solar and related cyclical phenomena as as manifested on earth to take a look at Dewey’s book on Cycles, and the work of the Foundation for the Study of Cycles. They have been publishing on this topic since the early 50s, and it would be a shame to reinvent the wheel unnecessarily.

November 6, 2008 9:10 pm

lolgasm @ this

Robert Bateman
November 6, 2008 10:23 pm

The price of corn spiked in July on errant reports of the massive flooding causing huge shortfalls. Until economic investigators from Pricneton went out and checked the silos in the Midwest where it was stored. There, they found that last year’s crops were so abundant that even after all the feed corn and ethanol corn orders were filled, the silos were still stuffed to the gills with the excess.
Speculation, pure & greedy was the only explanation.

November 7, 2008 5:29 am

If the correlation were more consistent I might give it a go, but the intervals are out of phase in spots almost as much as they nearly in phase in others.
Also the data here are a bit spotty in demonstrating cause & effect. We’d want GDP trend data. And frankly unless we can succinctly key solar cycles to seasonal variations (crop levels and/or heating fuel use), to GDP to the DJIA, we have a pretty weak case.
It makes some sense that agrarian societies would be keyed on significant solar minima due to general changes in climate, but those are different from the typical 11-year solar cycle.
The only trends that really matter are the long-term trends, and on that note, did anyone notice that Keenlyside released another paper that further explicates a continued 10-year plateau/cooling in global temperatures? He’s now blaming the concordance of the PDO with the AMO (or MAO) or something. After that the paper concludes that temperatures will then shoot up to play catch up with all that extra, new & clumpy CO2 added since 1999 ^H^H^H^H 1985.
(for you young’un’s who never worked on ASCII greenscreen *nix & VMS terminals, ^H was a backspace… however on some misconfigured terminals the ^H actual data on the host would be stored as a “^H” character pair with the previous data unredacted … which lead to sometimes embarrassing moments in memo writing)

November 7, 2008 2:52 pm

Interesting remarks, indeed. There is somewhere – haven’t the link anymore –
a work, found on the economic branch of a university in Europe, where they compared
wheat prices in England and solar cycles since 1260.
Re: DJIA and solar cycles, it’s not that easy: When looking, sometimes there is a trough – on high level – at solar cycle peak (exhaustion?). Because, the best DJIA increases are
on strong solar cycle up phases (beginning 1/3 of whole cycle).
Too, it may count, if we are in a more financial oriented cycle,
or a more commodities oriented cycle.
The crash of ’29 was pretty near the solar cycle peak then (Using 12 month centered mean).
Same to the 2000 peak.
The top of Gold and Silver in ’80 was pretty near to that peak (again using 12 month centered means)
The cra

Hans Erren
November 7, 2008 5:18 pm

dow jones and CO2 emissions I made a new graph
see my dutch blog

Bill P
November 7, 2008 9:32 pm

…a work, found on the economic branch of a university in Europe, where they compared wheat prices in England and solar cycles since 1260.

The Great Wave, David Hackett Fischer, Oxford University Press, 1996, has some relevant material. On page 50 of the book (linked below) is an interesting graph gleaned from James Thorold Rogers’ price series, as it appeared in Rogers’ History of Agricultural Prices in England
Fischer himself does not make the link to solar cycles. In fact, he issues the following caveate to readers in his introduction: “…the movements we are studying are waves – not cycles. To repeat: not cycles, but waves.”
Fischer is mostly concerned with four major waves of economic history. I am chiefly interested in one of these, the Medieval price revolution, which commenced circa 1180 to 1230, with surging populations, greater personal wealth, ascendancy of great political and military forces, and building projects, such as Cathedrals. Much of the source material he has assembled to support his “waves” theory recreates the grain harvests of the periods.
The graph on p. 50 shows departures of wheat prices from the decenial mean, between the years of 1260 to 1356, during the so-called Wolf Solar Minimum, and it is striking. For about 100 years, there are alternating negative and positive price excursions, with a complete cycle completed every 10 – 12 years. In other words, grain prices spiked every 10 – 12 years. The excursions from the mean grew higher and higher, til, around 1316 – 17, when they reached about 200% of the price averages of the previous 50 years.
I’m no statistician, but I’ve watched enough of the CA demonstrations to see that a “cyclical” (or any other) appearance can be an “artifact” of its creator or manner of creation. Perhaps someone better at this than I can point out whether in this case, the business of decennial averaging manufactures this tendency.
What I do know, is the historical evidence of a climatic downturn that “peaked” around this time. Sir William Chester Jordan, in his The Great Famine, characterizes the unremittingly bad weather – cold, wet and raining at all the right times to prevent in subsistence planting, and the ensuing period when “no bird could be heard to sing”. There are many other references to the cold of the Wolf minimum, and its catastrophic effects on Europe.

November 12, 2008 3:28 am

From: http://en.wikipedia.org/wiki/William_Stanley_Jevons
In a relatively minor work, “Commercial Crises and Sun Spots”,[4] Jevons analyzed business cycles, proposing that crises in the economy might not be random events, but might be based on discernible prior causes. To clarify the concept, he presented a statistical study relating business cycles with sunspots. His reasoning was that sunspots affected the weather, which, in turn, affected crops. Crops changes could then be expected to cause economic changes.
-end quote
This is the same Jevons of Jevons Paradox – he found that increases in coal use efficiency resulted in MORE coal being used, not less. Something I point out to folks when they say we can cut back our oil usage by using more efficient cars…
Also from the wiki:
In The Coal Question, Jevons covered a breadth of concepts on energy depletion that have recently been revisited by writers covering the subject of peak oil. For example, Jevons explained that improving energy efficiency typically reduced energy costs and thereby increased rather than decreased energy use, an effect now known as Jevons paradox.
-end quote
So it would seem that energy policy, weather cycles, sunspots, and economic performance have been seen as linked for quite some time…
FWIW, Jevons invented a ‘logic piano’, an early form of mechanical computer. He took the very long colonial records of grain production in India and correlated it with the sun spot cycles. He didn’t just make up an idea, he started from the data and looked for a correlation. One only hopes he didn’t do it with a ‘logic piano model’ 😉
I find the sun spot / stock market correlation to be very plausible. If everything gets a double dose of snow this year, you can bet that natural gas company stocks will be going up. A lot. (APA, XTO, CHK, UNG) If crops fail from cold and wet, watch DBA and JJG along with ADM. And don’t forget the cold remedies from MRK, PFE, JNJ, et. al. Who sells snow plows and road salt? 😉 Oh, and don’t forget MTN for the ski business. But I’d steer clear of the insurance companies (due to losses…) and the swim suit makers. And beer makers would have to pay more for barley! Damn!

November 12, 2008 4:41 am

From a slightly more shamanic than scientific perspective – there is a parallel between some thinking on climate change and this discussion on cycles of human mental activity – both carry orthodox assumptions about the ‘internal’ nature of changes – in climate, ocean cycles according to the orthodox, are internally generated variability (not connected to solar cycles – despite the wealth of studies suggesting a link); similarly, few observers consider human consciousness as other than ‘internal’ either to individual humans, or to the ‘Earth’ as a collective phenomenon (but still constrained to humans). Very few explorers of the nature of consciousness (outside of the realms of science) would agree with that separation (yogis, shamans, astrologers) and if scientists could really take on the implications of modern physics – they would look much further afield for the origins of the cycles and evolution in human consciousness – realising that at the deeper levels of reality that consciousness inhabits, distance and time are illusions of the measuring mind. The sun is closer than we think.

Robert Bateman
November 12, 2008 7:48 pm

Now there’s an age-old human paradox:
If mankind feels colder this year, is it really colder if the thermometer says otherwise?

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