Reuters

Wednesday, March 21, 2001

"Finding it difficult to forecast financial markets in their current state of flux? Maybe it's time to ditch your economic model and start looking to the heavens.

Some investors are turning to Astroeconomics, the art of using astrological cycles to predict financial asset prices, in deciding where to put their money -- and other people's money.

``Astroeconomics is like technical analysis 30 years ago. People were using it and nobody talked about it,'' says Henry Weingarten, a financial astrologer turned money manager." It's a fairly open secret that a certain segment of fund managers, traders and investors use financial astrology, and eventually it will become mainstream.''

Financial astrology involves using correlations between past market events and the alignment of the planets, sun and moon to predict market movements. Some astrologers, including Weingarten, also draw up horoscopes for companies, currencies and national stock indices based on their first date of trading.
Widely quoted for his predictions, Weingarten is the director of the New York-based Astro fund under which he manages around $5 million worth of assets on behalf of clients.

He combines astrological forecasting with traditional fundamental and technical analysis to form his investment and trading strategy. ``Around 50 percent of what I do is astrology,'' he said.
Technical analysis, where forecasters use graphs of previous market trends to predict future movements, was once frowned upon but is now a recognized tool for mapping the markets.

STARGAZING
According to Weingarten, he is not alone in star-gazing to make a profit. ``Ten to 15 percent of professional fund managers use astrology as a secondary or confirmation tool to trade the markets,'' he told Reuters.

Weingarten says his predictions include the 1990 Tokyo stock market crash and the 1997 Asian financial crisis. But is his success due to good luck or can planetary cycles really affect the markets?
David Simpson, a technical analyst at a stock broking firm who has been analyzing the financial markets for 40 years, insists there is an effect.

``The Earth is subject to magnetic influences around the clock. The moon and the sun have the power to move the oceans across many thousands of miles,'' he said.
``The average human body is made up of at least 87 percent water and is subject to the same tidal flows. These magnetic attractions cause a chemical and neurological reaction within the body which changes peoples' perception of black and white.''

Astrology, says Simpson, holds the key to irrational behavior by investors. ``Company results don't often bear any relationships to share price movements,'' he said.

``People think the share is cheap one day and expensive the next, even though the price is the same. There's something else going on out there which is difficult to fathom, but I think I've got fairly close to it.''

There's no doubt financial markets sometimes behave differently from what economic theory says. Asset prices are supposed to be driven by fundamentals, but that didn't prevent the bubble in technology stocks in 2000.

Simpson says he foresaw the frantic peak of the NASDAQ stock market in March 2000 six months in advance. He warns there could be further trouble ahead for stock markets around March 21, the date of the spring equinox.

``I think we are heading for a real nasty crunch and we could see a massive sell off,'' he said.
But is there any evidence for astrological effects on the markets? Academic research in the area is hard to find but one investment bank did examine the subject.

Goldman Sachs published a paper on the impact of eclipses on the financial markets in August 1999. Using regression analysis, a statistical tool that measures relationships between data, the bank found a statistical link between eclipses and the Japanese equity market and U.S. bond yields. But the authors also found similar correlations using purely random data and so dismissed the results as spurious.
Even if no evidence of a connection exists, astrology could still have some effect. This is because, as Weingarten points out, expectations can often become self-fulfilling.

``Whether or not you believe in astrology, it influences the markets,'' he said. ``There are very big fund managers in India, Hong Kong, the U.S. and Europe that follow astrology and, therefore, it's a factor in the market place.''

MUMBO JUMBO?
But not all market watchers are convinced of incorporating celestial movements into their analysis. ``There are obvious seasonality's and cycles in markets but to correlate these with planetary alignments and to establish cause and effect is hard to do,'' said one technical analyst working for a major international bank in London. ``I don't see how you can apply a planet to forecast a market.''

For Simpson, the more skeptics the better. ``Most people think it's mumbo jumbo and I'm quite happy they should continue in their ignorance. I've got a lead on the markets and that's what counts.''

One academic at a British university who specializes in financial forecasting said the use of astrology is more prevalent in London than most people think.

``There are a lot of traders that use certain aspects of astrology than would care to admit,'' he said.
He said people who trash astrology don't understand it.

``It does not involve straightforward concepts but is more complex. The idea that a certain positioning of the planets causes the market to crash is definitely not true. It just means that the probability of something happening is higher.''
Proving a link between planetary cycles and the markets is difficult, but that problem applies to all types of empirical research.

``Before we start criticizing astrology, we should look at weakness in traditional quantitative forecasting. Lots of qualitative interpretation goes into forecasts,'' he said. ``We are not dealing with an exact science, whether it's modeling astrological data or economic data.''

Whether Astroeconomics starts attracting more followers remains to be seen. Maybe the answer is in the stars." -- By Hament Bulsara