This paper appeared in the journal Technological Forecasting & Social Change:
Sunspots, GDP and the stock market (View paper PDF)
by: Theodore Modis
Abstract
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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I see new opportunities for investment.
Leif:
Theoretically; You can induce the formation of a sunspot?
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.
I was laughing at this post, then my brother brought this to my attention:
A PUETZ ECLIPSE CRASH WINDOW JUST OPENED
“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.”
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.
http://www.montgomerycap.com/documents/HemlinesandSunspots.pdf
“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”.
http://www.montgomerycap.com/documents/Hemlines.pdf
http://www.montgomerycap.com/documents/85-Brain.PDF
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!)
HAHA!
John D.
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….
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.
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!
Chris
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.
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?
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.
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.
Anthony,
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
Also, here NASA has been very careless with the second graph…
http://climate.jpl.nasa.gov/keyIndicators/index.cfm#CarbonDioxide
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.
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!
Ecotretas
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.
Hmmm, maybe NASA could use this to help improve their sunspot projections…
Surely it would be an improvement.
[…] More here at a great science (and global-warming-debunking) site –Watts Up With That? […]
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.
[…] market news by wattsupwiththat Dow Jones Open 11/04/08 – Stock Market Report […]
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.
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”.
CO2 emission growth is related to dji growth
http://home.casema.nl/errenwijlens/co2/co2sres.gif
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.