[This classic Fribble was originally published on Oct. 31, 2000. Enjoy!] That "Boo!" you hear in October could be coming from the local haunted house... or the nearest brokerage house.
October is a scary month for the stock market. This is anniversary time for the crashes of '29 and '87. Nine of the 20 biggest one-day percentage drops in the Dow occurred in October, the first full month of fall. Those drops don't include this decade's steepest one-day slide, which happened on October 27, 1997, eerily close to Halloween.
Some may blame this phenomenon on investor hangover after a summer rally, or year-end mutual fund shenanigans, or what money manager Martin Zweig called "the back-to-reality blahs, when days off are fewer and the work load increases."
But you have to wonder: Does the market get spooked? We know stocks' performance in October isn't normal, but is it paranormal?
Could Halloween have more to do with the market other than the annual $2.5 billion it generates for the likes of Hershey (NYSE: HSY), Coast Dental Services (Nasdaq: CDEN), and Service Corp. Intl. (NYSE: SRV)?
Perhaps exhuming the origins of Halloween and its customs will reveal why October gives stocks the shivers.
Halloween began with the Celts, who, before moving to Boston to play basketball, lived throughout Europe as early as 1500 B.C. The leaders of the Celts were the Druids, priests who are now most famous for arranging large, Flintstone-esqe rock circles without the help of cranes, organized labor, or Fred's boulder-dozing dinosaur.
Halloween descended from the Celtic celebration of Samhain, which, when pronounced correctly, rhymes with "cow in" (phonetically it's "SOW-in"). This fire festival was significant because it marked the end of the harvest and the beginning of the new year. On October 31, according to Celtic tradition, the barrier between the worlds of the dead and the living was the thinnest. Lest old acquaintance be forgot, the living could communicate with their departed relatives in the land of eternal youth and happiness, Tir nan Og.
But what does all this have to do with the stock market?
For the Celts, Samhain was when everyone relaxed and let down their infrequently washed hair. As explained by Philip Carr-Gomm (and he should know, because he's the Chosen Chief of the Order of Bards, Ovates, and Druids), "The Celts knew that there had to be a time when order and structure were abolished, when chaos could reign. Time was abolished and people did crazy things."
Though we no longer wear robes to fire festivals (darn it), perhaps Mr. Market's behavior around Halloween shows that things haven't changed all that much. That becomes even more apparent when you look at Celtic activities popular around the end of October.
For example, strange divination practices abounded. One such ritual, called "aipple dooking," involved submerging your head in a bucket of water and apples, and once you snared an apple and came up for air, the next name you'd hear would be your future spouse. (Warning: If you're trying this at home, make sure to mute the TV during Jerry Springer and pro wrestling.) Of course, this is where we get today's Halloween tradition of spouses dooking it out, oops, I mean bobbing for apples.
Another divination ritual involved sneaking into a garden and uprooting a stalk of kale. The condition of the stalk corresponded to the traits of one's future mate: firm and healthy (a rich and attractive spouse), flimsy and crooked (a poor and, well, "loyal" spouse), or short and fat, with a bizarre growth at the top (a Teletubby). Though arbitrary, the kale method is preferable to the herring method, which required a woman to eat the entire fish (bones and all), without drinking or speaking, and go to bed backward. In the middle of the night, an image of her husband-to-be would appear to bring her a drink, presumably Listerine.
Such rituals seem ridiculous. Yet hordes of modern investors, trying to foresee the market's next move, employ their own versions of tea leaves and Tarot cards: Andrew's Pitchfork, odd lot short interest, Bollinger Bands, candlesticks, ultimate oscillator, STIX, TRIX, bull trap, the Super Bowl effect, etc. These are real techniques that you can learn about on any day trading or gambling addiction website.
Perhaps October's gloominess can be blamed on the spirits of old stalk-yankers and fish-gnawers making a Halloween visit to further encourage the false prophets of profit. (It should be noted that, besides apples, the most common fruits used in divination rituals were -- and in no way am I commenting on the sanity of fortune tellers or day traders -- nuts.)
October is also the time for shapeshifters and changelings. Many of the fanged and furry folks we associate with Halloween -- vampires, werewolves, Michael Jackson -- are notorious for morphing and moonlit (not to mention moonwalking) makeovers. The nature of many of these shapeshifters is to seemingly offer a treat, but instead bestow a nasty trick. Here are some changelings from Celtic country that you should perhaps be aware of:
Each-Uisge: A creature that takes the form of a horse to lure riders. Once mounted, the human is affixed to the horse, which rides into the water to drown and eat its victim. This is the possible root of such phrases as "taken for a ride," "a horse of a different color," and "gee, your hair tastes terrific."
Baobhan Sith (The White Women): While in the shape of beautiful women, these creatures entice men to dance, then suck their blood. From this came such popular dances as the Fango, the Lindy Drop, the Charleston Chew, and the Apoplectic Slide.
Boston Market: Also known as Boston Chicken and Chapter 11 Chicken, this bird lured investors when it went public in 1993, flying 110% on its first day of trading. But beware: Its ability to bloat receivables and expand beyond control hatched a stock that once traded at $41 1/2, but eventually was kicked off the OTC Bulletin Board. Its last trading price: a poultry $0.29. (You can read more about this horrific tale in this Fool on the Hill column.)
Knowing that Boston Market declared in October 1998, one can't help but wonder if this is the time of year that changeling stocks turn into pumpkins, the revelation of their true natures adding to market woes.
Yes, October seems to give investors more tricks than treats. But just as Halloween is followed by Christmas, every dip in the Dow has been followed by new highs. For investors wondering if they should hold on through the October gloom, I offer this advice: Just dook it.
[This classic Fribble was originally published on Oct. 31, 2000. Enjoy!]
That "Boo!" you hear in October could be coming from the local haunted house... or the nearest brokerage house.