by Gary Alexander

February 9, 2021

A year ago, Donald Trump was acquitted in his first impeachment trial, long before any American had heard the term “Covid-19.” This week, we begin a replay – his second impeachment trial, something that has never happened before. This one is about “incitement of insurrection.” Has that ever happened?

Yes, we’ve seen an incitement of insurrection to overthrow a legitimate election twice – on this date!

  • On February 9, 1825, the House of Representatives overthrew a clear election victory, casting out the dominant winner of both the popular vote and the electoral college in a clear coup d’etat. In a four-way race, Andrew Jackson was the clear winner in the election of November 1824:
  1824 Candidate   Home State   Electoral Votes   Popular Vote
  Andrew Jackson   Tennessee          99     41.4% (the legitimate winner)
  John Quincy Adams      Massachusetts          84     30.9% (the illegitimate winner)
  William H. Crawford   Georgia          41     11.2%
  Henry Clay   Kentucky          37     13.0%
  Source: Wikipedia “1824 United States Presidential Election”

Corrupt Bargain Actors of 1824 Election Image

In a backroom deal in the House, Speaker Henry Clay threw his votes to Adams in exchange for being named Secretary of State, and he lured Crawford’s voters to Adams’ side, robbing Jackson of a win.

  • On February 9, 1861, after another four-way race in 1860, before winner Abraham Lincoln could be inaugurated on March 4, fellow Kentucky-born native Jefferson Davis was named President of the Confederate States of America by the six states that had seceded from the Union after Lincoln’s win.
  1860 Candidate   Home State   Party   Electoral Votes     Popular Vote  
  Abraham Lincoln     Illinois   Republican        180     39.8%
  John C. Breckinridge     Kentucky   Southern Democratic        72     18.1%
  John Bell     Tennessee   Union / Whig        39     12.6%
  Stephen A. Douglas     Illinois   Northern Democratic        12     29.5%
  Source: Wikipedia “1824 United States Presidential Election”

Lincoln won over 50% of the electoral college votes, so there was no runoff, but his victory sent the south into rebellion. In a meeting in Montgomery, Alabama, they elected a rival President 160 years ago today.

Now there’s an insurrection!

Now that we can impeach Presidents who are out of office, how about nailing John Quincy Adams for his 1825 skullduggery? Or Kennedy and Johnson for their 1960s hijinks – or Nixon all over again?

What does this have to do with investing?  This: Don’t believe any stories about “this has never happened before” (and therefore will never happen). That is a sure sign that it has already happened, or soon will.

Investing with an Ear Full of Cider

“My father once told me, ‘One of these days in your travels, a guy is going to show you a brand-new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand-new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you’re going to wind up with an ear full of cider.’ ”

–Sky Masterson, when declining a “sure bet” offered by Nathan Detroit in Guys and Dolls (1950)

Sky Masterson Counselling Nathan Detroit Image

A group of Nobel Laureates served on the board of a hedge fund founded in 1994 called Long-Term Capital Management. These highly decorated members of LTCM’s board were Myron Scholes and Robert Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences for their “new method to determine the value of derivatives.” Put simply, they used high leverage to deliver high gains for trades within the narrow historical ranges of conservative investments like currencies and sovereign bonds.

Then, a funny thing happened in late 1997 – the Asian Currency Crisis – followed by the Russian Ruble crisis in mid-1998. All of a sudden, historic trading ranges were breached and LTCM received margin calls, which it couldn’t meet. After gaining 21% (after fees) in 1995, 43% in 1996, and 41% in 1997, LTCM lost $4.6 billion in less than four months due to its high leverage and over-exposure to Asian currencies and the Russian Ruble. The 1998 Ruble crisis morphed into a hedge fund crisis and the stock market lost 20% in short order. In September 1998, LTCM had to agree to settle with 14 major financial institutions for a $3.6 billion recapitalization supervised by the Federal Reserve – and LTCM was dissolved in 2000 (Source: Long-Term Capital Management – Wikipedia).

Something similar happened in the hedge fund world in the last two weeks, as “something that never happened before” happened, sending some high-leveraged hedge funds begging for recapitalization.

That’s what I call “investing with cider in your eye.” Somebody comes along and says, “This investment is headed for the dumpster. Come along with us and short it, on leverage, greater leverage than the total capitalization of the stock, and you’ll get rich, overnight.” As sure as you’re standing there, you’re going to end up with cider in your ear. This time it came from Reddit investors, or another hedge fund, who knows.

Will Tom Brady Save the Stock Market in 2021?

Another familiar siren song this time of year is the Super Bowl Indicator, which basically says that the market will go down in a year in which the AFC wins, and it will go up if an “old-line NFL” team wins.

Like any artificial retrofit co-incidental indicator, the “Super Bowl Indicator” worked pretty well for a long time. The Super Bowl Indicator worked for 28 of the first 31 Super Bowls, but then it started sputtering in 1998. So: If a coin comes up heads 28 of 31 times, what are the chances it will come up heads on the next toss?  The correct answer is 50%, but some will bet on the trend (heads) while others will say “tails are overdue.” The gaming industry is built on the war between “I’m due” and “I’m hot.”

Ironically, the Super Bowl indicator was launched in 1978 by New York Times reporter Leonard Koppett, who mocked silly sports statistics in a Sporting News article, “Carrying Statistics to Extremes.” For the next two decades, several mock-serious articles drank the Kool Aid, saying that some NFC team (like Washington or San Francisco) “saved investors” by pulling out last minute wins in the Super Bowl. In 1989, the staid Financial Analysts Journal stooped to ask: “Did Joe Montana Save the Stock Market?”

So, will Tom Brady save the market? Stay tuned, but don’t bet on any retro-fit stock market indicator. Since 1989, the Super Bowl Indicator is only 12-11, which in Las Vegas betting isn’t even break even.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Junk Bond Index is “Inside 400”

Sector Spotlight by Jason Bodner
The Winning Outliers vs. the Scheming Sea Otters

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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