The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 85

Sunspots

When I first encountered folks trying to predict future events based on sunspots, I thought they were nuts. I still do, but now I'm convinced that someday, when scientists know lots more than they do now, they will make amazing predictions with sunspots. I became convinced when I learned that the bulk of the crazies are serious NASA scientists. But let's start at the beginning.

Sunspots are visible blemishes on the sun's surface. Astronomers have recorded their number and size since the 1700s. They fashioned their findings into an index calibrating an overall sunspot “number.” Interestingly, sunspots recur in rather regular 11-year cycles. This chart shows sunspot “numbers” from 1755 to 1978.

As science buffs passed the good word to investors, amazing coincidences were noticed. The three largest stock market disasters (1836–1843, 1872–1878, 1929–1932) were immediately preceded by peaks in sunspot activity. So were more minor, but still gut-wrenching drops like 1907 (see Chart 32), 1937, and 1969. So sunspots gained a following.

Of course, there have been many declines that didn't fit into the 11-year solar pattern and some significant sunspot peaks that weren't followed by a decline in stock prices. So sunspot worshipers were quickly labeled as freaks—as they probably deserved to be. Of course, the freaks continue, as measured by several recent books like Thomas Reider's Sun Spots, Stars and the Stock Market.

When modern scientists stepped into the picture, they ...