January 2009 Stock Market Update

To no one’s surprise, all of the major stock market averages ended January down for the month.  This has drawn out the media to file their annual (when the market is down in January) stories about how sometimes January being up or down can predict how the year goes as well.

This is about as accurate as which conference wins the Superbowl, the AFC or NFC, predicting how the stock market will perform for the year.  That is, not accurate at all.

The flaw in both is a fundamental misunderstanding of the nature of mathematics and statistics.  Just because something is true 75% of the time in no way makes it a reliable predictor of anything, and yet, here we are.

I’ll write up an article on this later, but for now just keep in mind that smart investing is about facts, not old wives tales, and arthritic knees predicting the weather.  Watch the numbers, not the headlines.

By the way, don’t expect February to be any better, but after that…well, we’ll just have to watch the numbers.

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