Posts filed under “Bad Math”
I love this debate between the idea of Tobin’s Q-Ratio as th be all for valuation analysis. It is embodied between Smithers & Co. quoted in this scary BBRG article and Pragmatic Capitalism’s Cullen Roche.
Here is PragCap:
“Better yet, look at the number of times this ratio has been cited during the most recent bull market as a reason to exit stocks:
- In November of 2009 Smithers said equities were 40% overvalued (see here also).
- In December 2010 Smithers said equities were 70% overvalued.
- In March of 2012 Smithers said equities were 50% overvalued.
- And now we hear the citation about an 80% overvaluation.
At least he is consistent!
Let me remind readers of the folly of Single Variable Analysis . . .
Single vs. Multiple Variable Analysis in Market Forecasts (TBP, May 4th, 2005)
When Correlations Lie (Bloomberg View June 27, 2014)
There was some pushback on yesterday’s rather tame suggestion that the U.S. properly finance the fund that pays to maintain and repair our roads. Much of the correspondence was surprising. Then again, I am continually flabbergasted by the cognitive errors that the human brain can make. It’s a marvelously designed piece of wetware that does a…Read More
We’re down to the Final Four in this year’s iteration of March Madness, also known as the national collegiate basketball tournament. Our earlier discussion of “The March Madness Theory of Investing“ didn’t sit well with some readers. The lessons we sussed out from the bracket-destroying results included home-country bias, how expert forecasts are about as good as those…Read More
As one of those folks who has spent a lot of time bashing economic and stock-market forecasters (see this, this, and this), I have no choice but to take issue with an argument made by former hedge-fund manager Jesse Felder, who asserts “that everything is a forecast.” To quote Felder: Can we please stop bashing forecasters already? There is a…Read More
Earlier this week, Greg Zuckerman of the Wall Street Journal pointed out one of the great mysteries of today’s investment landscape: Despite underperforming by a substantial margin, hedge funds keep attracting more investors and assets under management. It is almost as if (to borrow the headline on Zuckerman’s article), “Hedge Funds Keep Winning Despite Losing.”…Read More
Last week, I was in Seattle for an event sponsored by the CFA Institute. The trip was booked long before any of us knew the Seahawks were going to defend their championship title in Super Bowl XLIX. Following the Seahawks’ amazing comeback in the NFC Championship versus the Green Bay Packers on Jan. 18, the city…Read More
“All of the job growth from 2007 to today can easily be attributed to the shale oil fracking situation and the oil Renaissance. If you take Texas and North Dakota out of the data series for job employment, what you see is that we haven’t added any jobs in the United States other than…Read More
Salil Mehta is a popular statistician and risk strategist, who has developed a unique method to teach quantitative techniques. He blogs at Statistical Ideas. ~~~ We’ve started the year with a sizable downward market pattern, which is making market participants think in ill-advised ways. Eight of the first eleven trading days (S&P 500) were negative. If…Read More