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by�Andrew BeattieClick for full photo gallery: What Makes Emerging Markets Great Investments?
The store windows are frosted with artificial snow, the eggnog is flowing, and frantic shoppers are crowding the malls – that’s right, it’s Christmas time. In keeping with the yuletide spirit, let’s take a look at the investing vocabulary that goes along with this credit card-shattering time of year.
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Santa Claus Rally
He’s bearded, he’s jolly and he’s permanently associated with Coca-Cola – yep, that’s Santa Claus. Santa’s origins are a matter of speculation, but according to popular belief, he is derived from a Dutch mythical character based on the historical figure Saint Nicholas, who supposedly gave presents to the poor. The modern-day Santa spends his time spreading cheer and promoting world peace by delivering gifts all over the globe.
In the investing world, Santa brings investors a “gift” in the form of a jump in the price of stocks, known�as the�Santa Claus rally. This rally usually occurs between Christmas and New Year’s day. There are many theories as to why this happens. Some people believe it is a result of year-end tax considerations, while others say it’s because all the market pessimists are away on holidays or because people are buying stock in anticipation of the�January effect. Those of us who believe in the magic of Christmas think the rally may be due to seasonal cheer infecting the usually dour inhabitants of�Wall Street – a true Christmas miracle.
Boston Snow Indicator
In 1942, Irving Berlin wrote a song cal! led R 20;White Christmas”, which Bing Crosby brought to life in an immensely popular recording. Since then, a snowy landscape�is the�ideal place to spend Christmas day.
The�Boston�snow indicator is a market theory that posits that a white Christmas in�Boston�will cause stock prices to climb. This is one of several dubious indicators that, while it may appear to be accurate, teaches us more about the fallibility of statistics than the behavior of the market. Other popular indicators of this sort include the�skirt-length indicator and the attention paid to the ties worn by�Alan Greenspan (the Federal Reserve Board’s�former chairman). The accuracy of the�Boston�snow indicator is perhaps best summed up by its nickname: “BS indicator.”