Posts filed under “Bad Math”
Five years ago today, I made the luckiest market call of my career. A few details and some context first, than an explanation as to why this was so lucky.
In 2005, I knew something was amiss in the global markets. The various metrics we track showed that credit had become a full on bubble, and was manifesting itself in residential housing. We discovered this by looking at such factors as median income to median home prices – at the time it was two going three standard deviations from the norm. Cost of owning versus cost of renting was also flashing warning signals, as was Housing value relative to GDP. Indeed, half of all new jobs being created were Real Estate related. That in itself was a giant red flag. All other signs pointed to a major correction in Housing, despite the denials from pundits
In 2006, I had done a huge analysis as to the fair market value of the Dow Industrials. At the time, the Dow was heading to 12,000, but by my calculations, was worth only 9,800. My expectations was that to reach fair value something was likely to have gone wrong in housing, and that could lead to a 3,000 point panic. My best guess was that Dow 6800 – and that hitting this was more a greater possibility than most traders might bet.
It was just a guess – and an early one at that. But after Housing began to reverse, it was apparent it would spill into the real economy. The stock market stubbornly ignored the collapsing residential real estate market until October 2007 – making that time feel like the longest year in my career. But as equities started rolling over, I began to wonder if my guess might come to pass. And so I made a promise to myself, not to become one of those one-way pundits who got one thing right in their career, and never changed their stripes ever again. There is a laundry list of such one hit wonders, and I vowed not to become one of them. Continues here
One of the things that baffles me about people is how they completely misunderstand risk. Lots of my friends panic about things that have no real chance of killing them, but ignore the things that will. This can lead us to make irrational decisions, and sometimes irrational policy. What really will kill us? Watch and learn.
What Kills Us? How We Understand Risk.
I never really liked the classic definition of boomers as those born 1946 to 1964. Its overbroad, and well, wrong. That age cohort should really end in 1959. I see why they Demographers made up that range — its so there is a seamless, artificial flow right into to the Gen X group, born 1965…Read More
@TBPInvictus here. In yet another stunning display of journalistic malpractice, Terry Jeffrey put out the following piece after last Friday’s NFP release: Because it suited his (political) purpose, Jeffrey jumped on the Household Survey; looking at the Establishment Survey would not have provided such a dramatic headline. Indeed, it would have provided, for…Read More
I am writing up my BBRG coverage of the innumerate business reporting of Black Friday and the holiday shopping weekend. The press as per usual got it wrong again this year. Here is the press release from the NRF, pushing their usual survey silliness as if it were actual retail sales data: “More than 141…Read More
Thanksgiving is but a few days away. We celebrate by the giving of thanks for whatever bounty has come your way. It is a warm and wonderful holiday full of family and tryptophan and good cheer. Black Friday, the day after turkey day, is the official kick off of the season I like to call…Read More
@TBPInvictus here It’s a well established fact that the Obama administration has been spending like a drunken sailor since the day he was inaugurated. I first wrote about his spendthrift ways here, toward the end of 2010 (has it already been three years?). Some time has now passed, so how’s it going? Let’s take another…Read More