ETF Expert

Even if you do not follow football… even if "sports" is not your thing… I want you to stay with me on this write-up. I want you to pick up the gist. (I’m building up to an investment phenomena that will be worth the wait!)

What do video gamers, fantasy football participants and Las Vegas odds-makers all have in common? The "Madden Curse."

Specifically, Electronic Arts (ERTS) produces one of the most popular video games on the planet, Madden NFL Football. And every year, the athlete on the cover has had a terribly unsuccessful outing in the year following the game’s release.

• Madden 2001 (2000): Eddie George. A career low 3 yards per carry and a failure to garner 1000 yards.
• Madden 2002 (2001): Daunte Culpepper. Threw as many interceptions as touchdowns before succumbing to a season-ending knee injury.
• Madden 2003 (2002): Marshall Faulk. Missed two games with an injured ankle and failed to reach 1000 yards.
• Madden 2004 (2003): Michael Vick. Bitten by a dog… just kidding. Broke his leg before the regular season and missed the first 11 games.
• Madden 2005. (2004). Ray Lewis. The only year that the killer linebacker didn’t have an interception.
• Madden 2006. (2005): Donovan McNabb. McNabb missed the final seven games of the year because of a sports hernia, and the Eagles were a lamentable 4-5 when he left.
• Madden 2007. (2006): Shaun Alexander. Slowest start of his career in 3 games, followed by sideline-injury season.

So the 2007 season is here, and so is Madden 2008. Vince Young is on the cover after an incredible rookie start with the Tennessee Titans. The Titans are off to a great start so far… but based on the curse? Well… let’s say that Vince may struggle with either the "Madden Curse" or the "Sophomore Jinx."

What does all of this have to do with investing success? Why am I talking about curses, jinxes and pixie sticks? Actually, I didn’t say a word about pixies.

Well… let me take you back to the cover of Smart Money magazine in March of 2000. The cover feature read, "15 Great Tech Stocks. What’s Next for the Market’s Hottest Sector — And How To Profit From It."

As we know today, March of 2000 was the beginning of the 2000-2002 bear market where the Nasdaq lost 76% of its value… largely because of a bust in dot-com/technology.  In fact, the Nasdaq at 2670 is still a long, long way from the 5000 mark that it set in March 2000.

(Not to mention that the 15 tech stocks in the Smart Money cover are still collectively down more than 80%. That’s correct… an 80% loss on these stocks 7 1/2 years later!)   

The official start of the tech-led bear market occurred in March of 2000…  when the Smart Money cover ran. Ironically enough, Smart Money September 2002 read, "Beyond Stocks. Wall Street May Have Lost It’s Luster, But There Are Other Great Investments Out There." The bear market ended after this cover’s release, and we have been in a 5-year bull market for stocks ever since!

Is Smart Money magazine cursed? Is the advice inside seriously flawed?

Actually, there’s a lot to like about Smart Money magazine. Like any good publication, it provides a number of great ideas to consider.

That said, covers of video games and covers of magazines are designed to titillate your interest. You are supposed to be compelled to purchase that magazine or that video game. That’s how the supplier makes more money.

It follows that, the year an athlete is hot, he/she gets an enormous amount of coverage, and the following year may not be as spectacular. Similarly, as people get more and more excited about IPOs/tech/dotcom euphoria, Smart Money is going to cover it. (And when everyone has thrown up the white flag and given up on stocks… you get… Beyond Stocks.)

Today, you’re starting to get a great deal of coverage on the emerging market arena. China (FXI) , Brazil (EWZ), Russia (RSX) — the interest is moving from rational exuberance towards speculative glee.

It’s not irrational yet. Moreover, investing in emerging markets should definitely be part of your overall plan.

Nevertheless, some day, you’re going to see the cover story. It’s going to read, "The 7 Hottest Emerging Markets… And How You Can Make Incredible Gains Right Now." And when it comes, you should know what to do.

Disclosure Statement:  As a Registered Investment Advisor, Pacific Park Financial, Inc. may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.