Yesterday morning, we learned of Rupert Murdoch’s bid for Time Warner for as much as $85 dollar a share, or more than $75 billion. Soon after, the annotated chart below showing the Standard & Poor’s 500 Index began circulating on trading desks and websites, suggesting Murdoch’s offer signaled a market top.

Source: Financial Insyghts LLC
Source: Financial Insyghts LLC

It is such a misleading piece of statistical tripe that it cried out for a rebuttal. It is a prime example of confirmation bias writ large, another in a long line of weak analyses, wishful thinking and intellectual laziness that pollutes the Web.

There are numerous ways to debunk this bilge water, but for brevity’s sake, I will limit my wrath to a few quick lines of attack: Cherry picking, bad correlations, small data set, and randomness.

If Twenty-First Century Fox chief Murdoch only made three acquisitions, and they all occurred at or near market tops, the chart would be much more interesting. Of course, Nassim Taleb would then wag his finger at you, warning that you are being fooled by randomness.

Your pattern recognition sub-routine is again deceiving you. Continues here

Category: Cognitive Foibles, Investing, M&A, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

One Response to “Rupert Murdoch and The Dumbest Chart in the World”

  1. Stock Soup says:

    Hear ye!

    The WSJ acquisition was an example of family over shareholders. The FT did a great a few years back showing how poor Newscorp has treated it’s shareholders over the years.