Weekdays in August are a pious tim...

Weekdays in August are a pious time to own stocks. The fall of the curtain of October isn't bad either. Christmas can be fine for equities as well. What these dates have in frequent is that they are times when Congres isn't in session. In 1991 a Wall Streeter named Eric Singer noticed that equities that year take care ofed to do better when lawmakers weren't in Washington. He published an op- in Barron's proposing that the correlation was no coincidence. Later, he turn the thoughtsed at a wider time frame, and went around the squash courts of recently made known York telling people he might write a main division about his thesis.

Now Singer is going individual step further. He has created a hedge stock

Singer Congressional capital

Neat idea, and the same bound to appeal to doctrinaire free-market thinkers. if it be not that market people disdain ideologues. Their question is: Do Congressional holidays and the market's moves truly correlate?

As it happens, ye

40 YEARS OF DATA

Choosing the Standard & Poor's 500 Index as his measure, Singer reviewed 40 years of stock data and sway calendars. At least one chamber is in session for more than half of the 250-odd trading days of the year. in addition the index made a greater share of its price gains when Congres was in reces -- at least pair to three times greater by day.

Singer isn't the alone one to find a relationship. Economists Michael Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia reviewed four indexes: the Dow Jone Industrial Average, the S&P 500 the Center for Research in Security Prices value-weighted index and the CRSP equal-weighted index.

For the Dow, the outcomes were dramatic. Since 1897, the year after the Dow was created, an impressive 90 percent of the gains came onward days when Congress was disclosed Their charts show that a dollar invested in 1897 with the strategy of going back to cash each time Congress met was worth $216 on 2000.

if it be not that an 1897 dollar invested upon the reverse strategy was worth merely $2 after a century. The big gap between performances began to exhibit up after World War I, when it became clear that Washington would play a bigger character in the country.

Other indexes also reveal what the scholars call "the Congressional effect" In all indexes unless the Dow, daily volatility was lower when Congres was absent in Washington.

The popularity of Congres mattered as well. Looking at Harris and Gallup heads Ferguson and Witte found that market go [i]or[/i] come backs were yet lower when unpopular Congresse were in session. The couple economists controlled for weather and seasonal behavior. The Congressional tenor was still strong.

the couple Singer and the Ferguson/

Witte team hint that uncertainty is causing the difference.

Politicians have lengthy noticed that markets don't like regulation. What they sometimes fail to notice is that markets don't like equable the prospect of regulation.

Market guru Burton Malkiel formerly wrote: "It is not with equal reason much the direct cost of regulation that has inhibited investment, moreover rather the unpredictability of yet to be regulatory change." Or as Singer proposes it, "talk is not cheap."

Since Democrats are perceived as more unpredictable when it arises to regulating business, the Congressional general intent should be stronger when Democrats rule Congress. And Ferguson and Witte set that to be the case. Franklin Roosevelt was individual of the most unpredictable of presidents. It therefore flows as no surprise that the 1930 were the most numerous volatile decade for the Dow.

To be fully convinced there is a certain circularity to all these arguments: Rather than causing confuse by its activity, Congress might be active because things are bad.

uniform some exceptions fit a variant of his thesis. 1998 was a dutiful year, though Congress was in session. Singer tries to explain it was clear in 1998 that Congres wasn't going to do earnestly By forcing President Bill Clinton to secure from attack himself in scandals, Republicans effectively obstructed both him and themselves from undertaking any major legislative initiative.

THERE'S circulating medium IN IDEOLOGY

by what mode to profit from the effect? To make sure your money is in stocks during all Congressional holidays and all in cash when Congres is in Washington, you'd have to pass in or out of the market 15 or 20 times each year.

Still, the facts are there: If you applied his thesis from the period of 2000 through 2005, and stayed gone out of the S&P 500 while Congres was working, you earned end to 7 percent a year.

If you stayed in the S&P 500 the whole time, the annual total get back (including dividends) was less than 1 percent There might be cash in ideology, after all.

You don't have to pervert with money [i]or[/i] gain into any political philosophy to find the Congressional event interesting -- if only as an explanation for with what intent some people stay at their terminals right up to Labor Day. Congressional breaks are short, still to investors, they feel like an endles summer

Amity Shlaes is a Bloomberg moderns columnist.

Copyright CHICAGO SUN-TIMES 2006

Provided by the agency of ProQuest Information and Learning Company. All rights Reserved