Monday, June 10, 2013

The Tiger Rally

What will a US Open Win Mean For The Markets?

Much has been written about the correlation between the stock market and the performance of the professional golfer, Tiger Woods. Seriously, if you don’t believe me, check it out on the net.

The fact is some fairly serious analysts have been tracking this trend since the hard swinging phenomenon first teed it up on the PGA Tour in 1997 – carefully noting the ups and downs that have followed the trials of golf’s most notorious superstar.

I’m not exactly sure why, but I’ve been thinking a lot about this lately as I launch my newest novel … a golf-related story entitled HANGING LIES. Perhaps it’s because, on some level, my book also explores the dark sides of human behavior.

The Tiger Effect?  As the golfer-for-all-time fares on the links, so follow our personal financial fortunes. Its as simple as that … and so much more.

To compulsive chart watchers the parallels are uncanny – for the sixteen years of his professional career Tiger’s rise and fall has been a tellingly accurate barometer of what has been happening in the wider world of finance.

Perhaps you’ve heard theories of irrational correlation before. Playful post-analyses of historic stock market performance are full of them. Some hold up for a year or two. Others track nicely if you are willing to soften the curve to allow for anomalies.

The Super Bowl Effect?  The width of men’s ties? Hemlines? All of them, at one time or another have been used to try and predict the movement of the major market indices. And to some extent some have proved remarkably congruent.

I would submit, however, that no chart has been more accurate in mirroring the market over the past five years than the fortunes of one Eldrick Tont Woods, or the golfer known to most of us mortals as simply … Tiger.

The performance graphs that emulate the ebb and flow of his fortunes are not just about noting corresponding patterns in stock market volatility.  Instead, the Tiger chart seems to track much more than money – its peaks and troughs matching with eerie similarity the arc of his golf, his personal life, the failings of the financial industry, and to some extent, the entire economy itself.

(My tongue is pressed very firmly in cheek if it isn’t obvious, by the way).

I suspect if I had the right tools from Scottrade and cared to delve more deeply into the trove of statistical data collected by the Professional Golf Association, I could probably construct several remarkable overlapping charts.

T. Woods’ world ranking and the overall direction of the market before and after the financial crisis? T. Woods’ tour earnings and the movements of the S&P 500? The decline of Tiger’s personal net worth (divorce settlement included) and the corresponding increase in the national deficit? They all seem to fit neatly onto the recent five-year trend line identified.

And while no one has ever pretended that such unrelated coefficients are an accurate predictor of future market performance, it does make for some seriously fun speculation. Or, at the very least, the basis of a conspiracy theory.

Indeed, what makes the Tiger charts so compelling are not just how closely the lines rise and fall based on his accomplishments on the golf course. But rather, how closely his personal backstory corresponds with the market that he mirrors.

This notion first occurred to me as I watched my investments languish in the period of uncertainty that followed the financial crisis. Much the way Simon & Garfunkel once pined for the reappearance of Joe DiMaggio, I had a similar longing for the return of my favorite golfer.

But the true importance of Tiger’s return was brought home when I received my March, 2012 Schwab statement shortly after his first win on the comeback trail. Arnold’s tournament at Bay Hill (DJIA 12,118) yielded a nice lift.  So did his win at the Memorial a couple of months later (DJIA 12,880).

In between? Tiger’s flame out on the back nine of the 2012 Masters cost the market nearly 400 points the week after it happened. Some experts wanted to blame Spain for that pullback. But you and I know better. I’ve got the data to prove it. The rest, as they say, is history.

• 2013 Farmer’s Insurance Open (DJIA 13,895)
• 2013 WGC Cadillac (DJIA 14,397)
• 2013 Arnold Palmer Invitational (DJIA 14,512)
• 2013 Players Championship (DJIA 15,118)

Do you notice a pattern here? One that coincides nicely with Tiger’s re-ascendance to World #1?

Remarkably, these days a Tiger win can sometimes propel the market upwards by hundreds of points. Similarly, an ordinary performance can send it spiraling downwards. When he takes a couple of weeks off between events? The market flattens in anticipation of his next outing.

And what makes the phenomenon even more fascinating still are the parallels that can also be drawn between the well-documented and publicized moral failings of America’s most iconic sports figure and the past ethical lapses of the market makers themselves.

As one reflects on the events of the past five years, and the market meltdown of 2008 in particular, is the corresponding decline and resurrection of the reputation of the celebrity golfer in question and the fortunes of Wall Street’s biggest players merely coincidence?

Need I remind you of the Dow Industrial Average ahead of the Thanksgiving holiday in 2008 (DJIA 8479)? That was the fateful occasion on which Tiger crashed his Escalade outside his home in Isleworth, Florida and his wife ‘rescued’ him with a nine-iron.

Need I point out the depths that the same index plumbed in March, 2009 (DJIA 6,547) as Tiger’s reputation bottomed amid allegations of illicit relations with at least 19 women other than Elin. Can you say Perkins Family Restaurant?

But, as I said, what makes the story so compelling is how Tiger’s chart so accurately tracks our regard for Wall Street and its morally bankrupt inhabitants.

One doesn’t have to use much imagination to paint similarities between Tiger fueling up the G5 or his yacht, Privacy, and setting course for some ill-advised misadventure and comparable pursuits by some of Wall Street’s erstwhile masters of the universe.

You don’t have to think too hard to link the corruption that came from all that easy money and what it did to the man with the swoosh and the derivatives traders. Certainly, these resemblances are obvious. So, of course, are the easy parables that their recklessness inspires.

The only question seems to be chicken or egg? Was Tiger’s fall a heroic failure or a self-inflicted wound? Was he led astray by the low hanging fruit afforded by his success or was this a sought after reward for his professional accomplishments? 

Did the subprime lenders and re-packagers of the toxic assets at the root of the market collapse simply lose their way at a time when no one, it appeared, could possibly lose? Or were their intentions more fundamentally rotten?

Much has been written about the motivations of both … psychological and otherwise. Still, in the giddy excesses of the market run up in the middle portion of the first decade of the new millennium, I can’t help but wonder if many of the same suspect underpinnings weren’t there from the beginning.

Human nature being what it is, I’m inclined to believe some people just more easily succumb to the temptations of avarice and greed. Mr. Woods among them? Perhaps. The Wall Streeters? Most certainly.

So, of course, it was inevitable that they both should meet a similar fate when the walls of their lies and deception collapsed under the weight of their unsustainability.

The point of this is not to try and bring shame on arguably the greatest golfer of all time. Honestly, I love what the man does with a club in his hands. For this devoted fan, he has been a source of great guilty pleasure throughout all of his travails.

Just ask my wife. I can assure you that you most definitely don’t want to be in our house during Masters’ weekend when the rooting for and against Tiger and Phil reaches the proportions of the battle between Jehovah and Beelzebub.

But alas, I am dwelling on the negative. This story has a happy ending – or at least a happy middle -- since our hero has plenty of golf and unrealized goals still in front of him.  As with all market cycles, this story contains an inevitable bounce and a generous lift.

You need only open the sports and financial pages to witness it.

In the same way that Tiger has worked tirelessly to remake his game and his reputation, so too has the financial services community struggled mightily to get their house in order. (I won’t bother to explore Tiger’s treatment for sexual addiction and the need for Dodd Frank). But suffice to say, there are similarities.

In any case, it has not been an easy reconstruction … and not without a few untimely setbacks. But as surely as you cannot keep a prodigious talent like Tiger’s in check forever, similarly, our newly lean and mean U.S. corporations armed with especially robust earnings reports, cannot be held down in perpetuity.

Should it come as any surprise that the Dow is back (nudging all time highs at this writing)? That the S&P has piled on a gaudy 17% gain in 2013? That the NASDAQ is rolling? It almost makes me want to track Tiger’s FedEx Points standings, as well.

Personally, I’m cheering for the man. What he does on course is a feast for the eyes and a lift for the spirit (especially if you’re a long suffering TV sponsor). He might, singlehandedly, be a living breathing metaphor for the markets finally managing to get their Mojo back. Hell, maybe not just the markets -- maybe the entire economy.

Four wins before the end of May? Unprecedented. Those parallel Dow and S&P gains? Right there, of course. Tiger’s unfortunate break at the Masters? Look at the market chop and flat spot during the second week of April. Need I say more?

There was even a dip on the morning after the Memorial while the experts debated whether Mr. Woods’ poor showing would have implications in the Open two weeks hence. Investors held their breath. Fortunately, the pundits decided his 44 on Saturday was an aberration and, after a weak opening, the market surged ahead for the day.

What Tiger Woods has proven beyond a shadow of a doubt is that he is resilient … that strong underlying fundamentals cannot be suppressed indefinitely. Make no mistake. Tiger is back … and so is America.

I’m not saying that the man is admirable (though his unshakable faith in himself is quite impressive). But his example provides a fascinating illustration of the notions of descent and deliverance … of sin and redemption … the likes of which many great religions have been founded upon.

No, Tiger and Nike, winning does not take care of everything. But at least your resurrection provides proof that most Americans are good people who are willing to forgive and move on. You’re not the first celebrity to experience this. But we forget at our own peril.

I tend to think that what we have witnessed over the past five years is a learning opportunity for us all … a succession of teachable moments with the principal actor in this little morality play donning a vivid red and black costume every Sunday afternoon to remind us of our humanness.

What I pray is that Tiger has taken his experience to heart and has resolved to make himself a better man. What I hope all of us who’ve witnessed his behavior have learned or re-learned are fundamental rules about honesty, integrity and character.

And as for the Tiger Rally?

If there was ever a time in the nation’s history to come off the sidelines and join enthusiastically in the rebuilding of the American brand, it is now. It’s time to get bullish on our nation’s future, again.

And you know who to put your money on next week at Merion. Dow 17,000 or bust!

R. Bruce Walker has just released his third novel entitled HANGING LIES. It is an unabashed homage to author’s love of the game of golf and a stylish satire of the gilded lives of the country club set. It is available now in trade paper and e-book formats from all major on-line booksellers.