Episode 404: If You Understand Market History, You Are Bound to Profit From It
On this week's Stansberry Investor Hour, Dan and Corey welcome Jeffrey Hirsch to the show. Jeffrey is the editor-in-chief of the Stock Trader's Almanac – a book that has been published annually since 1967 and that analyzes stock trends, patterns, and cycles. He is also the editor of the Almanac Investor newsletter, which releases monthly and provides strategic investment advice.
Jeffrey kicks off the show by describing how he got his start interpreting data and how he eventually ended up working on the Almanac. That leads to a discussion about what has changed in the Almanac over the decades versus what has stayed the same – in terms of both human behavior and content. Jeffrey also talks about President Donald Trump shaking things up, what has happened historically in postelection years, and where he believes the market could go from here...
I'm not convinced that we're going worst-case [scenario] right now. We're still looking at that election gap on a technical basis that we're testing right now.
Next, Jeffrey reviews the basics of risk control that all the best investors follow and which fundamentals his team looks at to evaluate stocks. He also explains what traders usually get wrong about the moving average convergence divergence ("MACD") indicator and the Santa Claus rally. Moving to the topic of seasonality, Jeffrey explores the flaws in the traditional "sell in May and go away" adage, what the "Christmas in July" phenomenon is, and how market patterns changed after 1949. He notes...
[The] one-year seasonal pattern from 1901 to 1949 versus 1949 forward... it's like the reverse [of "sell in May"]. It's like, buy in May. Because it was a whole different economy driven by farming and agriculture. All the money was flowing into the economy with the buying of fertilizer and seed and hiring people... And then [the market] sort of peaks at harvest time in late September. That flips [after 1949] with the military industrial complex.
Finally, Jeffrey discusses what led his father, Yale Hirsch, to originally publish the Almanac and how a background in music can help investors recognize historical cycles and patterns. He then finishes with his opinion on 5,700 being an important level for the S&P 500 Index and gives tips on how you can fight against confirmation bias...
Whether it's risk controls, stops, or whatever it is, you've got to ask yourself... "What happens if I'm wrong?"
Click here or on the image below to watch the video interview with Jeffrey right now. For the full audio episode, click here.
(Additional past episodes are located here.)
This Week's Guest
Jeffrey Hirsch is editor-in-chief of the Stock Trader's Almanac, editor of the Almanac Investor newsletter, president of the Hirsch Organization, and CEO of Hirsch Holdings. He's also an author, having published The Little Book of Stock Market Cycles and Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It. Jeffrey got his start in finance in 1990 as a market analyst and historian. Since then, he has appeared on CNBC, Bloomberg, CNN, and Fox Business, among others.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.
Corey McLaughlin: And I'm Corey McLachlan, editor of the Stansberry Daily Digest. Today we talk with Jeffrey Hirsch, editor of the Stock Trader's Almanac.
Dan Ferris: Jeffrey has quite a story to tell about the Stock Trader's Almanac and about all the market history that he's researched since he was a kid working with his father. So, let's do it. Let's talk with Jeffrey Hirsch. Let's do it right now.
Corey McLaughlin: For the last 25 years, Dan Ferris has predicted nearly every financial and political crisis in America, including the collapse of Lehman Brothers in 2008 and the peak of the Nasdaq in 2021. Now, he has a new major announcement about a crisis that could soon threaten the U.S. economy and could soon bankrupt millions of citizens. As he puts it, there is something happening in this country, something much bigger than you may yet realize, and millions are about to be blindsided unless they take the right steps now. Find out what's coming and how to protect your portfolio by going to www.americandarkday.com and sign up for his free report. The last time the U.S. economy looked like this, stocks didn't move for 16 years and many investors lost 80% of their wealth. Learn the steps you can take right away to protect and potentially grow your holdings many times over at www.americandarkday.com.
Dan Ferris: All right. Jeffrey Hirsch, welcome to the show, sir. Thanks for being here.
Jeffrey Hirsch: Great to be with you. Thanks for the invite, guys.
Dan Ferris: Yeah. You do something that is really cool in creating this Stock Trader's Almanac. Have you always been all your life just sort of a data fiend like this? I mean, has this always been the direction for you?
Jeffrey Hirsch: No, but I was kind of born into this. My father started the Almanac back in the '60s. So, it was kind of like osmosis or child by something − by birth or association. So, yeah, I worked with him over the years in middle and high school – running numbers, not like a bookie, but we used to do the calculations for the Almanac with the Barron's lab pages and a little ruler and a red pen, a piece of graph paper, and an adding machine. I used to ship out the books. I used to look at charts over dad's shoulders. But I was trying to make my own path. And then, back in 1989, my friend said, "Jeff, what are you doing? Go work for your father." So, I said, "All right."
But luckily there was a click there. I mean, the man, the legend had a mind and an iconic way of thinking like nobody else. I mean, that's why the Almanac has been around for as long as I have. It's the same age as me. But when I got in there with him, we had our moments − but there was some things that happened that I saw I thought like him a little bit. And there was one day, one moment – I forget exactly what the seasonality or analysis was, but there was a group of us around a conference table, some of the other writers or analysts, and [Yale Hirsch] was making the point and nobody else got it. And I got what he was saying. So, that was kind of where it clicked. But yeah, I'm kind of a sticker for details and numbers. I'm a little obsessive about stuff. But it's kind of genetic.
Dan Ferris: Yeah. That's interesting because I asked you that question, you said no, and then I feel like everything you said after that was "yes."
Jeffrey Hirsch: Well, I guess it was because I kind of wanted to – like, make your own mark, like every person does. And then you end up – I'm going to get asked now are my sons going to follow and be the third generation? They might. We have discussions. I'm not pushing it. One of them is going to be 20, the other one's 17. So, we'll see. Let them see the world a little bit before they come back. But we talk about the market and history and things like that, so it's possible.
Dan Ferris: OK. But it doesn't sound like they work with you as closely as you described working with your father. Is that accurate?
Jeffrey Hirsch: No, not as much. Because, I think it's more [that] the world's different and there's so much more of – I mean, what we used to do by hand is [now] the click of the button or a couple of little codes. So, my business partners programmed all the stuff that we used to do on graph paper and – well, I ended up converting it to Excel for DOS back in the early '90s and then Windows 3.1. And then it's beyond my math capabilities. My algebra is not as strong. But no, they're not as – I mean, they're there. They've been to events with me. They've stood in exhibit halls and schmoozed and talked about it, but not quite as involved, no.
Dan Ferris: It's really incredible that this thing is still around.
Jeffrey Hirsch: It's a testament.
Dan Ferris: Yeah. Yeah, it's valuable. A lot of people want it. And they want it year after year after year, for decades and decades. That's our dream in the business that we're in. You want subscribers that just can't get enough of you for decades and decades.
Jeffrey Hirsch: That's right.
Dan Ferris: So, good on you for being able to keep doing it.
Jeffrey Hirsch: Thank you.
Dan Ferris: I mean, it must have changed. The Almanac must have changed in some way over the years. You described how the process, of course, is now automated where it was manual in the beginning, but what about the content? Are you doing anything differently? Are you – what's different about it?
Jeffrey Hirsch: Well, I mean, less has changed than you'd think. I mean, it's amazing. Back in '69, my father had a page on October being this month where bear markets bottom. It's the "bear killer." That hasn't changed. There's a lot of stuff that hasn't changed. It's basically changed as much as human behavior has changed. There's been some shifts. We have something called the Indicator Graveyard, the September Reverse Barometer, and a few other things go in there. Some of the best days of the month, the monthly five-day bulge. But the format, the layout − yeah, there's been some stylistic tweaks here and there, but there's still the weekly diary pages.
I mean, the monthly almanacs, some of the things have shifted a little bit. We've got the mid-month spike that kind of came in with the payroll deductions coming in every couple of weeks and going right into the IRAs and 401(k)s, and fund managers use it − but a lot's remained the same. We still celebrate all the holidays that we all as a society celebrate. We still pay our bills monthly. We still start the week – I mean, crypto and some of the 24/7 trading is changing things a little bit. But I mean, if you look at the half-hourly trading patterns in the back of the book, one of the things I was saying that I used to do the calculations with for my father and for the book – that 2:30 Eastern time low, the rally, the close, the sort of intraday trading patterns have stayed the same.
So, we've updated things. I mean, postelection years have been a lot better since '85. But look at what's going on right now. I mean, President Trump is coming in and really shaking things up like we haven't seen before, at least in my lifetime, and it's the start of creating that sort of old school postelection-year pattern where the first quarter is kind of weak. Quite weak. I mean, we're looking at a potential correction. So, a lot has stayed the same. It's kind of like Zeppelin: The market remains the same. Human behavior remains the same.
Dan Ferris: I'm glad you said that. I'm a huge Zeppelin fan. So, recently, just last couple of posts on X, I noticed you – one of them was on February 26: "Beware The Ides Of March. Rather turbulent in recent years with wild fluctuations and large gains and losses, March has been taking some mean end-of-quarter hits. Post-election years open strong then fade mid-month. Recent years trend lower…" But then you sound a little more bullish a couple days later, March 1: "Trading day bullish, DJIA up 51x in 75 years."
Jeffrey Hirsch: That's just history. That's not me sounding bullish. That's just pointing out that that trading day has that history.
Dan Ferris: I see.
Jeffrey Hirsch: And it didn't really – we had some news events that – I'll use a pun – trumped the –
Dan Ferris: It sure did. Trumped the long-term historical term there.
Jeffrey Hirsch: Pun intended.
Dan Ferris: Yeah. Yep. Yeah, there's a lot trumping of long-term historical trends going on right now.
Corey McLaughlin: Yeah.
Jeffrey Hirsch: Yeah, I mean, things are getting shaken up. But you look at page 28 in the Stock Trader's Almanac and it talks about postelection years performance by party. And back in the '60s – the '50s, '60s, and '70s, Republicans would come in and really change things quickly and there's a history of weakness in postelection years under Republican administrations. And when incumbent parties are ousted, like we had last year, the postelection tends to be weaker. It's also kind of transformed into sort of a midterm election year, pre-election year where they're trying to gear things up so that they don't lose as much in the House and Senate as they might normally in a midterm election year. So, it's a new world right now with what's going on, but it's also kind of typical postelection-year behavior where a new administration is coming in and making changes.
Dan Ferris: Right. And as you pointed out – well, you reminded me that – of a very popular observation, that the market has tended, over the decades, to perform better during Democratic administrations than Republican ones. And maybe we're getting a bit of an explanation as to why that might be.
Jeffrey Hirsch: That's some of it. The actual real political alignment for good market performances, Republican congresses generally preside over the better market gains. The best combination has been a Democratic president and Republican congress. We have a page on that in the '25 Almanac. But the margins are pretty thin right now. The Republican House is battling amongst themselves. It's pretty thin. And the full united, unified government is not necessarily the greatest thing. All-Republican has been better than all-Democrat but this is a different thing right here. We're seeing a real change in policy. I'm not convinced that President Trump isn't a follower of the four-year cycle and he's really trying to take care of stuff fast so he can come back in, bottom things out or at least shake things out quickly. It's also, you know, he's on a short timeline with basically two years to get things done until the midterm elections. So, he's kind of coming out like he said he was going to. And we're tracking it. It's an inflection point. Honor your stops, stick to the plan, and don't try to second guess this. I mean, let the market be your guide and be your barometer.
But speaking of barometers, we had a positive January barometer this year. That's one of the things that Yale invented in '72. That's good sign. It doesn't mean we're not getting a correction, which we're kind of on the cusp of as we're chatting.
Dan Ferris: Yeah, interesting. I was actually going to ask you about the January effect, whether or not it's real. I've got a whole book on the shelf that says it is, but lately I've heard otherwise.
Jeffrey Hirsch: Well, the January effect, first of all, is something different than the January barometer.
Dan Ferris: Oh, OK.
Jeffrey Hirsch: The January effect is the tendency of small-cap stocks to outperform large-cap stocks in January. That didn't happen this year. Small caps are having trouble with what's going on in the world and interest rates and clearly tariffs now. We've observed in the Almanac that that tendency for small caps to outperform large caps, the January effect, tends to take place in the latter part of the year, in the last two weeks of December. That also didn't happen this year. That's a concerning sign as well. But we see small caps start to turn around late October.
The January barometer, which is what Yale invented back in '72 along with the Santa Claus rally, is an indicator based upon the S&P 500 that as January goes for the S&P 500, so goes the year. Kind of a binary, up-or-down kind of thing. There's been some errors. Nothing's perfect. Nothing works 100% of the time. It's about a 75% accuracy ratio, including all flat years, up or down, plus or minus 5%. Excluding the flat years, it's more like 80%.
But then there's our January trifecta, which we didn't hit this year, which is the Santa Claus rally, the – which is the last five days of the year, the first two of the new year, his famous line, "If Santa Claus should fail to call, bears may come to Broad and Wall." Yale was a bit of a songwriter. And then, you combine that with the first five days, which is an early warning system that's been around for a long time, and then the full month January barometer. And when you hit all three, you get the year up about 90.6% of the time for a 17.7% gain. It's on page 20 of the Stock Trader's Almanac – yeah, 17.7%, 90.6% – up 29 of 32 years when you hit all three of those January indicators.
Dan Ferris: I see.
Jeffrey Hirsch: So, kind of standing on Yale shoulders, we combined those three into the trifecta.
Dan Ferris: And for our listeners, Yale – Yale Hirsch.
Jeffrey Hirsch: Yes.
Dan Ferris: Your father.
Jeffrey Hirsch: Yeah. Pop left us in '21 at the ripe old age of 98.
Corey McLaughlin: And I do want to ask you about the – you say it's tracking a postelection year right now. What is the moving-ahead forecast? I think people would be interested in that, of course. We're coming off two straight years also of 20% gains in the S&P 500, of course, and that's like dot-com bubble territory. And so, what's the forecast for reference here?
Jeffrey Hirsch: I mean, my forecast, my base-case scenario, which we give about a 65% probability to, was 8% to 12% leaning on the more recent postelection-year pattern with weakness in Q1, weakness in Q3, which we're seeing. Best case scenario was like 12% to 15%. That means everything's got to just click perfectly for the president and what's going on there.
And then, the worst-case scenario, I'll just – this is – we put this forecast out the Friday before Christmas. Worst case is old-school, weak Republican president postelection-year performance, just like I mentioned on page 28: Trump administration, Republican Congress implements too many drastic measures, inflation spikes, economy cools, rates higher for longer, and stubborn global turmoil, teetering on bear-market recession territory, flat to negative full year performance with broad losses across most asset classes. That was a 10% probability that we put out on December 19.
I'm not convinced that we're going worst case right now. We're still looking at that election gap on the technical basis that we're testing right now. It doesn't mean we can't dip a little bit through there. The market really likes to hit stops and go through them if you put them out there. That's one of the things we don't do with our stock picks and ETFs: We don't put stops in the market for market makers to wipe you out of. We have a – it's sort of an alert. If the stock or ETF closes below the stop, then the next day we'll exit the position.
Dan Ferris: I see.
Jeffrey Hirsch: But yeah, the market's looking a little bit jittery right now.
Dan Ferris: Yeah, a little bit. It's interesting that you got so quickly that – so quickly here, just minutes into this interview, we got to honor your stops and do your risk controls and do all that stuff that traders really are in the business of doing rather than making predictions, because we – it usually takes us a little longer to get there, but we always, always get there with every trader who knows anything about what they're doing. I mean, we always get there. We've talked with market wizards. We've talked with Schwager, Jack Schwager himself. We've talked with dozens and dozens and dozens of people who trade for a living rather than a long-term fundamental sort of value investor, which is what I am. And every time we talk to those traders, every single one of them winds up where you did, saying "But whatever you do, whatever else you may be doing, honor your stops." And then you described how you put your stops out. You don't put them in the market and so forth, which is another thing that everybody says.
Jeffrey Hirsch: The other side of that is, you know, let your winners ride.
Dan Ferris: Right.
Corey McLaughlin: Right.
Dan Ferris: Yeah. They all do it. And then we get into, "What is the mechanism for this? How do you set stops? How do you determine how long to let a winner ride?" And it's funny to me – well, it's not funny. It's just very telling and very obvious that that's where the discussion ends up because I think the average kind of investor who thinks – who's sort of a novice and they want to trade more actively. they tend to think that it's all about the entry, what you're buying and when. But really, the discipline is not there. I mean, it is there to an extent. Everybody has their system for when they want to enter a trade, of course, and it's important. I'm not saying it's not. But when I press all the traders, when I press you all against the wall and say, "Come on now, what business are you really in?" They're in the risk-control business. And so, the position size and the trailing stops and all the rest of it, stop losses, however you set them, trailing or not –
Jeffrey Hirsch: A little diversification.
Dan Ferris: Diversification. Right?
Jeffrey Hirsch: Or at least a certain number of positions that you can manage that don't reduce your edge, but don't have you exposed to too few things.
Dan Ferris: Yeah. So, yeah, here we are again, Jeff. We're back – it's heartwarming. If we ever don't get here, I'm going to go "Boy, we're never going to have that guy on again." It's just – it's table stakes for traders, isn't it? If you don't understand that you're not in the risk-control business, then you're not a trader. You're just not going to get it right.
Jeffrey Hirsch: We like to combine a few different disciplines. Seasonality is our is our foundation. We look at fundamentals, both stock and sector, as well as economic and technical analysis, policy, like monetary and government policy as well as sentiment. I like the Investors Intelligence for market sentiment. We use MACD to confirm buys and sells for our seasonal trades. And we look at old school chart analysis for stop losses and exits, consolidations. I mentioned the election gap as a point for the S&P and Nasdaq and the market in general.
And then, one of my father's old school exit strategies is to sell half on a double, which is more geared towards the small and more speculative trades. For our sector trades, we have sell targets that we put, like, 10% above the historical performance. For some of the trades, we have trailing stops that we use the charts with. And we'll give more room to smaller, thinner – smaller caps, thinner traded stocks, more like a 20% type of – in that area – type of stop.
But it's still an art. There's no exact science. I'm looking at VWAP a little bit more these days. I've looked at pivot points. I rely on colleagues and other analysts, traders that I know and trust. I look for other ideas there. I'm not so proud that I can't check on someone else's analysis that I respect and use that for my own trading. And I don't trade like a day trader. I pretty much trade what's in our newsletter. I kind of – I mean, I eat as much of my own cooking as I can fit in.
Dan Ferris: Yeah, and just for our listeners' sake, you mentioned MACD and VWAP. [MACD: Moving Average Convergence/Divergence.]
Jeffrey Hirsch: Convergence/divergence.
Dan Ferris: Right. How moving averages behave relative to one another. And VWAP: Volume Weighted Average Price. Over, what, 30 days or so, or usually…?
Jeffrey Hirsch: I also look at the anchored VWAP where you pick up a point, like say, the election gap, the November 5 close or something, or the low in January or the – whatever. If you pick a date or a time frame or nine months, you look at a bunch of them. But MACD is an interesting thing. It was invented by the late great [Gerald] Appel and carried on by his son Marvin, who retired as well, who was a friend. I knew Gerry as a kid. But in his original research, [MACD is] to be used as a confirmation of another reason to buy or sell a security, whether it's fundamental, seasonal, or whatever. A lot of people use it just by itself, and it's really to be used in conjunction with another indicator or another analysis, or another ruling reason that you might want to enter or exit a position.
Corey McLaughlin: That brings up an interesting point I was going to ask you about, what's one of your nuggets or indicators that you feel like gets misinterpreted the most?
Jeffrey Hirsch: It's probably the Santa Claus rally.
Corey McLaughlin: Yeah? Why is that?
Jeffrey Hirsch: They just think it's any year-end rally. A lot of people don't realize that it's just the last five trading days of the year and the first two of the new year. It's not the December rally. It's not the year-end rally. It's not the rally from Halloween to whatever. It's the last five days of the year. Basically, around Christmas and New Year's where a lot of the world, a lot of the people on the Street and in the business tend to take off and you have some prop desk pros, traders in there picking up bargain stocks that are oversold from tax loss selling. And there's usually this little rally, about 1.5% or so, in the S&P. And when we don't get that, it means that the traders, the pros that are in there working when everyone's out at Christmas parties and New Year's, they're concerned about the market. Something else is going on.
So, that's probably the most misinterpreted thing. And I think the, "Sell in May and go away," people forget about the other side of that, which I coined the phrase "You've got to buy in October to get your portfolio sober." So, it's October – the buy is really more important than the sell in May. We don't go away. We reposition in May. We tighten up stops. We limit new longs. We get rid of underperformers. It's kind of a spring cleaning type of thing. We do that between sort of our end of the best six months sell signal and – for the Dow and S&P, and the end of the best eight months for Nasdaq, which goes from November to June. And we use MACD for that to confirm those entries and exits in and out of the best months.
Corey McLaughlin: Right.
Dan Ferris: OK.
Corey McLaughlin: Yeah, I'm glad you brought up the "Sell in May and go away." Because obviously that one – I mean, who goes away in May anymore? You don't – nobody's – I wish I could but there's trading to some degree at all – I think people maybe – and you could tell me but – misinterpret that one as – like what you just said.
Jeffrey Hirsch: Yes. It doesn't mean that you sell on May 1. It doesn't mean that the market goes down immediately. If you look at our seasonal research – now, Yale invented the best six months switching strategy in 1986, which is most of the markets gains are in November to April, whereas the market kind of goes sideways May to October. I've presented on this all the time. There's lots of charts. But basically the old saying "Sell in May and go away" is an old British saying. Are you familiar with the rest of it?
Dan Ferris: No. I'm not.
Jeffrey Hirsch: "Sell in May and go away –
Corey McLaughlin: Dan, you've got to save me here.
Jeffrey Hirsch: – come on back on St. Leger's Day." St. Leger's Day is the day of the St. Leger Stakes thoroughbred horse race, the final leg of the British Triple Crown, which occurs in mid-late September and basically heralded in the beginning of the London season. I don't know if you've ever watched Downton Abbey or any that stuff, but London was pretty much built on a swamp, And if you've been there in the summer, it kind of gets hot and whatever and they didn't used to have air conditioning back in the day. So, the bankers and merchants and aristocrats would all leave London and go up to the country in May and they'd do their fox hunts and their horse races and their parties and all that stuff. And then, they would come back after the St. Leger Stakes race and start again with their business of London season.
It kind of runs close to the Memorial Day to Labor Day period where we show market volume, the summer doldrums, as we call them, it kind of dries up and we see the market tend to waffle. We don't all go away in May but, I don't know, kids go to camp. People take vacations. My wife and I are already looking at what we're going to do next summer – or, this summer. Are we going to go to a national park? Are we going to the beach again? Are we going to go to Europe? What are we doing to get away? And everyone does it. Wall Street goes out to the Hamptons. And you have this sort of vacuum or low volume, which is what creates that period.
But it's not down. It kind of goes sideways. Actually, we see the market tend to have this mid-July peak, which we had very − specifically last year. There's something we call Christmas in July, which is the last few days of June through the first nine trading days of July. We see that sort of – after the midyear shuffling of the Russell and the beginning of July, we see that sort of sell-off from mid-July through mid-September − tends to occur there. And you have the worst two months of the year − August and September, October turnarounds, and that's what sort of creates that vacuum, that flat-to-weak period where the market's more vulnerable to downdrafts from May to October and especially July to October.
Dan Ferris: When you're assessing all these tendencies, these seasonal tendencies, how far back does this data go? Is it like 100 years or is it the 1800s or the 1700s? How far back does it go?
Jeffrey Hirsch: That's a great point, great question. Some of the data we have goes back to 1833. There's other people that have data that goes back a lot further. That I use – for the four-year cycle stuff, that comes out of the old Cal's commission. That's Andrew Jackson's administration. But I do show a chart – and I'm going to get around to this – where we show that the data that I have goes back to 1901, that I really triple checked for the Dow, and S&P is to 1930. We used the close of '29. Some people have stuff that's older. I think that data is a little bit questionable.
But if I show this one-year seasonal pattern from 1901 to 1949 versus 1949 forward, and it's like the reverse. It's like "Buy in May" because it was a whole different economy driven by farming and agriculture. And you see the market – all the money is flowing into the economy with the buying of fertilizer and seed and hiring of people, borrowing of money, fuel, and all the planting, and then it sort of peaks at harvest time in late September. That flips with the industrial – military industrial complex, as Eisenhower told us, back after World War II, where you see that sort of "Sell in May," or the sideways pattern May to October.
So, we look – we go back to post-World War II, '49, '50 for some things, for most things. We'll look a little bit further back when we're looking at the presidential cycle. And then Nasdaq started in '71 and – we also like to keep things current. We look at the most recent 21-year period rolling forward. And we use 21 instead of 20 because it's an odd number and you don't get any 50%s, [10% up, 10% down] type of thing. And we compare over different time frames. And when we look at the monthly patterns, if you look at – back to 1950, back to '71, or 30-some-odd years, and then the 21 years, and you see a consistency of a pattern over those three different time frames, then you're on to something.
Dan Ferris: I see. So, if you go back – it sounds like maybe '49 or '50 is sort of the modern era, right?
Jeffrey Hirsch: Mhm.
Dan Ferris: That's the oldest date that has any resemblance to how the economy might behave today and how the market might behave today.
Jeffrey Hirsch: Agreed.
Dan Ferris: One would think that that wasn't enough data points. And yet here it is. Here we are. To establish –
Jeffrey Hirsch: How is that not enough?
Dan Ferris: Establish like a seasonal trend.
Jeffrey Hirsch: How is 75 years not enough?
Dan Ferris: Because it's only 75. It's not like 7500 or 750 even. It's –
Jeffrey Hirsch: Right. Seven hundred and fifty years ago.
Dan Ferris: Yeah, that – we don't get to do that.
Jeffrey Hirsch: There was no such thing as indoor plumbing, man.
Dan Ferris: Exactly. Exactly. That's my point.
Jeffrey Hirsch: You've got to look at things from a realistic standpoint. You have to compare it to what people are doing. I mean, you had – I mean, inauguration day used to be March 4 because John Adams had to take his horse and buggy from Massachusetts down to D.C. It took him a couple of weeks to get there. You can't have that compared to a zoom call.
Dan Ferris: Right.
Jeffrey Hirsch: Tweeting tariffs −
[Crosstalk]
Dan Ferris: No, I get it. I'm just – I'm talking strictly statistically speaking.
Jeffrey Hirsch: Strictly statistically speaking, 21 or 20 is about as short as I go. I mean, when people were asking me about crypto – and I did a whole seasonality on bitcoin. I did a whole study on that. I was very skeptical for a while. I still am concerned about it but it's here to stay. But it wasn't until we got 10 years of data that I could really look at it from a Stock Trader's Almanac seasonality standpoint. And you could argue that it really doesn't have valid data until the CME futures started trading.
So, one of the periods that I begin looking at bitcoin seasonality is only from 2018 forward, the first full year after the CME futures started trading, which takes out all that Wild West trading that we had. It was kind of like the Vancouver mining stocks or whatever craze you want to compare. So, it's all relative time frames and statistically significant levels. You've got to work with what you have.
Dan Ferris: Right. Yep. And it works, right? I mean…
Jeffrey Hirsch: It does work. Amazingly.
Dan Ferris: Amazingly, yeah. Actually, you know what I'm wondering, Jeff, here? I'm wondering about Yale. I'm wondering about your father. Do you know what got him started in this? Do you know why he became interested in this?
Jeffrey Hirsch: I do. The story goes that his cousin, Sam Coslow, who I named – Samson Coslow, who I named my first son after, was my godfather. He was a songwriter. He wrote the song "Cocktails for Two" and "My Old Flame," produced the movie Copacabana with Carmen Miranda. And he was a bit older than Yale. He sold his – one of his publishing companies to RCA or something for stock. And the stock got hammered and he got serious and began to analyze the markets and continued to do that. He ended up – he wrote a book called Super Yields.
But back in 1961, my father was in the war and never really went overseas, was bounced around from school to school and ended up in the officer's mess, kind of cleaning up. And there was a piano there. So, he was playing that piano and then came back and went to the – got a degree in music at Brooklyn College on the GI Bill. So, he was in the music business working, publishing. He was a songwriter and kind of working with Sam. And then in '61, Sam puts out an ad for a new publication in Barron's, Indicator Digest out of Palisades Park, New Jersey. He runs an A-B split with two different headlines on the two presses in Barron's and it hits. He calls my father, he says, "Yale, I want you to run operations for me. Come work for me in this newsletter business."
A few years later, Yale has this epiphany to take all of the markets' indicators, patterns, strategies and put them all together in a counter format so he could follow the market schedule along with his own. And that was what became the Stock Trader's Almanac. So, in 1966, in February, when my mother was several months pregnant with me – I was born in May of '66 – he goes out and incorporates the Hirsch Organization and begins the 18-month research process using all the Barron's lab pages and all the stuff he had learned and picked up from Indicator Digest and created the Stock Trader's Almanac and put the first edition out, the 1968 edition out in the fall of '67.
And the version you see today is not all that different in shape and content. I mean, things, as I told you earlier, evolved. We've perfected things. We've removed things. We've gone through different covers and different bindings and that sort of stuff. But basically, the calendar format of what to expect from the market on any given day of the year is still much like the original.
Dan Ferris: That's so cool. It's amazing, too. It really is amazing considering how different trading and everything is now to what it was then. You're still able to present very similar data and it still has value to traders, even though trading has just completely been revolutionized. That's –
Jeffrey Hirsch: It's just faster.
Dan Ferris: Very cool. Yeah, it is faster.
Corey McLaughlin: Yeah, right. That's the point, right? You don't want it to change.
Dan Ferris: And cheaper and easier and – yeah.
Corey McLaughlin: You've got to learn from the history, right? That's the whole point.
Jeffrey Hirsch: You do. People – the old saying from Santayana is that "those who fail to remember the past are condemned to repeat it." I like to say that "those who understand market history are bound to profit from it."
Dan Ferris: Oh.
Corey McLaughlin: Cool. Yeah. I love any story that also – well, that's an awesome quote, but I also love any story that starts with "My cousin." That's a good one. And Dan – we've got to – I've got to bring up the obvious for you. The musical background here. Dan's a classically trained guitarist. There's some –
Jeffrey Hirsch: Are you really? Fantastic.
Dan Ferris: Yeah. Yeah. It was when you –
Jeffrey Hirsch: My father wrote a musical. A literal Broadway musical. It was called American Melissa, about the Elephant Man.
Dan Ferris: No kidding.
Jeffrey Hirsch: And he wrote it during the Gulf War I when Schwarzkopf was doing all those press conferences. I had moved back home. This is when I started with him. And I was basically living under his piano in my room downstairs listening to him compose this thing. And he ended up trying to produce it. Didn't get anywhere, but we spent a few bucks on it, had a reading. But – so, you're a classical guitarist?
Dan Ferris: Yeah. And actually, the – I never wrote a musical, but I did in college – I set music to the lyrics that are included in Bertolt Brecht's play The Good Woman of Szechwan.
Jeffrey Hirsch: Cool.
Dan Ferris: So, that's the closest I ever got. And I worked in a lot of musicals in college and after, just in orchestras. And I played in what they call a zarzuela, which is like a light comic Spanish opera, onstage at the Kennedy Center. We were playing these little – it was a Spanish thing. It was set in the 18th century or something with all the costumes. And so, we were wearing these Captain Crunch hats with puffy shirts and Beatle boots and capes.
Jeffrey Hirsch: Like the Three Amigos.
Dan Ferris: Yeah. But we played our instruments on the stage and the conductor was like – we started backstage when we were playing, so we had to get the cue from the conductor on a camera. It was wild. It was a wild experience. We got to work with Placido Domingo.
Jeffrey Hirsch: Wow.
Dan Ferris: Yeah, pretty amazing.
Jeffrey Hirsch: Very cool.
Dan Ferris: Pretty amazing. But that was – that's my – practically my whole career aside from playing solo classical guitar here and there over the past few decades or whatever.
Jeffrey Hirsch: My younger son –
Dan Ferris: Several decades. Sorry. Several decades.
Jeffrey Hirsch: My younger son happens to be a fantastic guitar player.
Dan Ferris: Ah.
Jeffrey Hirsch: He's quite a Deadhead. But he plays a lot of different things, jazz as well. And my father had an ear where he could hear something and he would play it on the piano. It's a little bit unorthodox. But my son seems to have picked that up where he plays a lot of different things. And it's pretty cool.
Dan Ferris: Yeah, that's how I started. I started sitting there – we mentioned Zeppelin. I would sit there with Zeppelin and just learn every song and every note on the album and just – I marched through albums. I mean, Zeppelin, Aerosmith. In the beginning, Kiss. And Yes. And all kinds of stuff, just all kinds of stuff. And then I wound up going to school for it.
Jeffrey Hirsch: And I think you'll appreciate this. One of the things, I think, that made Yale able to see these patterns was his musical composition, the patterns of music, and not just the music part but also the lyrics. And that helped to put words together and also helped him write headlines and add copy. So, the whole songwriting and understanding music and playing it with the pattern recognition – I mean, he used – he taught me a bunch of things here and there. I didn't quite get the talent or the gift that he and my son have, but I think it really lent itself to this whole study of seasonal patterns and historical patterns and cycles and understanding market behavior.
Dan Ferris: Yeah, it makes sense.
Corey McLaughlin: Yeah, that's what I was going to say.
Dan Ferris: I've heard that from other people.
Corey McLaughlin: Yeah, that's what I was going to say, too. The creativity part of thinking about things and picking up on patterns. I feel like there's some – I don't know the exact science behind it but I feel like –
Jeffrey Hirsch: There's a certain harmony. There's a certain harmony to some of these stock market patterns.
Dan Ferris: Yeah. And if you can – and if you do read music – well, even if you do or you don't, the pattern recognition is like – it's essential because if you look at it as a bunch of individual notes, you will rapidly lose your mind. But that's one of those things where when I was a kid people would say, "Oh, math and music. People who are good at math are good at music" and all this stuff. And I just personally have never – put it this way: I've never felt the connection. We seem to see it in individuals, that they do these two things, but I've never felt it myself. I always felt like "Well, I'm good at music because I worked my tail off at it for years and years and years starting as a kid." And I'm good at what I'm doing now because I've been doing it for almost 30 years. And it's – I don't know. I don't know what my point is there. But certainly the pattern recognition makes a lot of sense because you are – I mean, the Almanac, the Stock Trader's Almanac that Yale started and that you have continued is a massive, massive exercise in pattern recognition.
Jeffrey Hirsch: Oh, yeah.
Dan Ferris: That is your game, right? That is the game you're playing here.
Jeffrey Hirsch: It is. And the real game is matching it to what's going on in the current market.
Dan Ferris: Of course. Yes. Yeah. That's what I described as the game is step one. That's step one. That's your resource.
Jeffrey Hirsch: Yeah. Putting it together and then comparing – sometimes you leave your – the bat on your shoulders because it doesn't line up this time. I know what we're seeing right now is a little bit choppy and volatile but it does line up with postelection year patterns. So, we're still seeing how it's playing out but it's definitely worth – and important to track that right now. And it will give us some vision to what's to come ahead in the stock market this year.
Dan Ferris: Yeah. And very specifically, since we're talking about the present moment, one trader I know has said – has identified 5700 on the S&P as a really critical level. And rather than get into what that other trader said, do you care about that level at all?
Jeffrey Hirsch: Fifty-seven hundred, it's right near that gap I mentioned, 5773 or 5775. Yeah, that's a big level. Whether that's – how thick you draw that 5700 line, it depends. But that's the vicinity. Just because we break below it, though, doesn't mean the bottom is falling out. It depends on what we do after that. There's some other –
Dan Ferris: That's an interesting thing, Jeff, because – I just – I'm sorry to stop you, but that's an interesting thing –
Jeffrey Hirsch: No, go ahead.
Dan Ferris: – because it's an excellent point. Just because it breaks below, that is the event, but the event requires confirmation, doesn't it?
Jeffrey Hirsch: They all do.
Dan Ferris: Right.
Jeffrey Hirsch: Confirmation is required. I mean, it's bouncing around there right now. I can't help but look – forgive me for cheating. But we're dancing with that level. I mean, I had 5780 as a line on my charts going through some consolidations. I mean, I try to be – pick a round number as well. You can pick an exact entry day, high or low. But yeah, that's the ballpark. I mean, there's numbers that – like the November – the October/November low. There's the early September low. There's the January low, which we've already danced with. There's that election gap. I mean, there's – it's more than just a number or level. It's about what happened. That's where the volume-weighted average price stuff comes into play. It's – you can also just see it. If you look at a candlestick or a [inaudible] chart, you can see where there's a lot of action around a certain level. But it's not exact.
Dan Ferris: No, it's not. You know what I think is also interesting about this level is we've basically – at this moment as we speak, and just a few days before this podcast will be published, we can tell folks that much, we've basically lopped off the Trump election rally, right?
Jeffrey Hirsch: Oh, yeah.
Dan Ferris: We've lopped that clean off and who knows, maybe that's it. Maybe that's all we need to do.
Jeffrey Hirsch: There's another level I look at, is the – remember I mentioned the mid-July peak earlier when we were talking about seasonality and stuff?
Dan Ferris: Yeah, right, Christmas in July. Yeah.
Jeffrey Hirsch: Yeah. So, that's kind of just below that 5700. The early October lows, the late October/November lows are all around at that 5700 level. So, there's a whole bunch of events that happened right around 5700 that this other trader is talking about. And it's – I've got lines all around that on my technical chart for different support. So, yeah, it's game on right now. I mean, it's – the test is underway.
Dan Ferris: Yeah. And I can tell you that you and the listener, the other trader I'm talking about is Hugh Hendry. He's a global macro guy. So, he's looking at the market –
Jeffrey Hirsch: I'm not sure I know him.
Dan Ferris: He's looking at the market in a completely different way. And yet, you both think 5700 is kind of important. I find that fascinating when people – and this happens frequently too. We've interviewed – I mean, I took over the podcast in 2018. We've interviewed a couple hundred people since then. And we get this a lot. Just as we get traders who all wind up with risk controls being at the core of their strategies, we also get different people who approach the market in completely different ways winding up with very specific commonalities like this.
Jeffrey Hirsch: We like that.
Dan Ferris: Yeah.
Jeffrey Hirsch: We like when can we get to the same conclusions from different angles?
Dan Ferris: Yeah.
Corey McLaughlin: Exactly. Love that. I love that even from our own editors and analysts who come in from different angles that settle on the same thing and for completely different reasons. I'm like "OK, that's important to me."
Dan Ferris: Intellectually then, we are bound – we are intellectually bound then to ask ourselves about the possibility of confirmation bias, because that's what we're looking for. We set these – you've created these tools, you've done this research, you go back to 1949, '50, or 1833 or whatever and then you create these tools. And as you say, the job is applying it to the current environment. Is the risk control just the mechanism for avoiding the confirmation? Because you don't know that you – maybe we're saying you don't know that.
Jeffrey Hirsch: I think the risk control is – a lot of it's psychological. In the words of Daniel Kahneman, losses loom larger than gains. So, in the perfect world, if you didn't put stops in you'd probably be better because it ends up getting you whipsawed, but people can't handle that.
Dan Ferris: Right. Yeah. My point was, though, I think – I think I'm answering my own question. Suddenly I'm interviewing myself. It's nice to have you here, Jeff, but I'm going to interview myself.
Jeffrey Hirsch: [Laughs] That's OK.
Dan Ferris: But I'm just thinking out loud. I just want to think aloud with you.
Jeffrey Hirsch: Yeah. Please.
Dan Ferris: And what I'm thinking is to avoid confirmation bias, to be always looking for confirmation and often seeing it, it seems like the ultimate mechanism for avoiding that intellectual error is the risk controls, the position sizing, the stops.
Jeffrey Hirsch: Can I give you – go ahead.
Dan Ferris: No, I'm done.
Jeffrey Hirsch: Yeah, the stops help. I mean, for sure. You have to have them. There's another quotation from John Malone, the cable mogul.
Dan Ferris: Oh, yeah.
Dan Ferris: He was quoting Moses Shapiro from Texas Instruments. He says, "Always ask the question 'If not?' Few people have solutions or plans for when their assumptions are wrong. That's Talmudic wisdom. Always ask the question 'If not?''
So, if your – what are you going to do if your assumptions are wrong? I may have butchered the quote a little bit. It's in the Almanac. It's one of the things we put in there. But the point is, always ask the question "If not?" And we've talked about that a lot. So, that's one of the things that I keep in my mind, whether it's risk controls, stops, or whatever it is. You've got to ask yourself to avoid the confirmation bias or recency bias or whatever bias you want to say. You just ask yourself, "What happens if I'm wrong?"
Dan Ferris: Right. So, you can tell I don't normally think like a trader, so that when I try to do it, I have to do it out loud in a very simplified way.
Jeffrey Hirsch: I'm with you.
Dan Ferris: But yeah, I think we've gotten in somewhere here. We are actually at the point – where we got [to] very quickly today because it's been a fun talk – of our final question. It's time to ask our final question. And it's the same question for every single guest, no matter what the topic, even if it's a non-financial topic, identical final question. If you've already said the answer, feel free to repeat it. Simple question. It's for our listeners' benefit. If you could just leave our listener with a single thought today, what would you like that to be?
Jeffrey Hirsch: A single thought. Those who understand market history are bound to profit from it. I mean, you have to take into consideration what's happened before and what's happening now. Patrick Henry said, "I know of no way of seeing the future but by drawing a line from the past through the present."
Dan Ferris: All right. I like that a lot. It's actually very wise, isn't it? It reminds me of the difference between the inside case and the outside case. People look at a company and they don't consider – they look at a company in a particular circumstance and they – it's a mistake not to consider other similar companies in other similar circumstances previous to that one. That's the outside case. They just – and that is what you have described. History, your study of history, that's the outside case to whatever's happening in the market today. It's very wise, Jeff. Thank you for that.
Jeffrey Hirsch: Thank you.
Dan Ferris: That's a great final thought.
Jeffrey Hirsch: Appreciate that.
Dan Ferris: Listen, it's been great having you here and talking with you. And I hope we'll do it again. We should pick a good seasonal moment to have you on the show. March is not a bad one, I have to say, of a postelection year.
Jeffrey Hirsch: How about the end of April when the "Sell in May" period comes?
Dan Ferris: Oh, the "Sell in May" period. Or maybe we'll wait until St. Leger's Day and we'll get all of that history up to then.
Jeffrey Hirsch: Sure.
Dan Ferris: All right.
Jeffrey Hirsch: All right.
Dan Ferris: I'm going to remember St. Leger's Day now. Maybe we'll try to do that.
Corey McLaughlin: Yeah. So am I.
Dan Ferris: All right, Jeff. Thanks a lot, man. It's been great.
Jeffrey Hirsch: All right, gents. I appreciate you. Thanks.
Corey McLaughlin: Thanks.
Dan Ferris: All right.
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I feel like we could talk to him for hours and hours. We could probably sit here with a copy of the Trader's Almanac for a given year or whatever and just thumb through it and talk to him for hours and hours about each and every historical, seasonal thing that he's found. There's a lot there. There's a lot to talk about with Jeffrey Hirsch.
Corey McLaughlin: Yes, so great. Yeah, that was fun conversation to get into the history of, well, the stock market and also the history of the Almanac itself. It was interesting to hear how his dad started and how he's continuing it. The history is there. And you just – it's, like, what do you make of it? And so, I think a lot of people – I think it's important to remember, yes, this is history. These are patterns. This is what has happened. It's not a guarantee that it will happen in the future. But to the point that we were making, adjusting a risk to probabilities if you're trading, to the four-year presidential cycles if you're looking at that time period, if you're looking at four or five years, I put a lot of stock in it. The presidential cycle, just – you see it every – it just happened. I mean, you can try to argue against it or not believe in it, but it's there. And we're seeing it right now. So, again, it's not like "Hey, because this happened 86% of the time since 1962, it's definitely going to happen in 2025." But you've got to – you take it into consideration is the point. And then you've got to apply it to your goals from there.
Dan Ferris: Right. It's a tool. It's a tool that you have to know how to use.
Corey McLaughlin: It's a tool. Yeah, there you go.
Dan Ferris: It's not like –
Corey McLaughlin: It's a tool. You said it.
Dan Ferris: Yeah. When people are starting out − like when I was starting out, you think to yourself "I know there's a way to predict stock prices perfectly and I'm just going to find it." And of course at some point, if you're paying attention, you realize that that doesn't exist and you're going to get your rear end handed to you if you persist in that belief. And then you find out what's really important, which is risk controls.
And we got there quick with Jeff. I like the fact that we got there so quick, because that's like – that's the credibility of a trader that – how fast did they get to risk controls? When do we get to the discussion about risk controls? Because if we never get to it, they're never coming back. They're probably never going to be on the show to begin with. And we got there pretty quick with him.
And I agree, all the history of the Almanac itself is a great story, which I've obviously never heard before. And all that market history is kind of cool. The story of how his father got into it and all of it is fascinating.
Corey McLaughlin: It's just such a familiar story about trying to figure out why the market behaves the way it does. Or a stock – one stock. I think he said RCA stock.
Dan Ferris: I forget the fellow's name, but it's a typical story, getting killed in a stock. Often – some people, they abandon all hope and they never come back. But some people, it just – it irks them so much and it just – it piques their interest and they have to find out, "OK, if this doesn't work, if what I just did wipes me out, what doesn't? What works? How can I make this work?" And we've had a lot of folks on the show who said, "Well, I started out during the dot-com era and then I got wiped out and then I really got fascinated with markets and investing and trading and so forth." It's a quirk of human nature. But that was a great talk.
Corey McLaughlin: You stick around – if you stick around – well, if you're going to stick around, you've got to figure it out.
Dan Ferris: That's right. Yep. And I enjoyed hearing Jeff's story and his father's story and how he does his work and everything. It's great.
Anyway, that's another interview and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it every bit as much as we really did. We do provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript" and enjoy. If you liked this episode and know anybody else who might like it, tell them to check it out on their podcast app or at investorhour.com, please. And also do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram, our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want us to interview? Drop us a note at feedback@investorhour.com or call our listener-feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my co-host, Corey McLaughlin, until next week, I'm Dan Ferris. Thanks for listening.
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