Looking at the S&P500 (Relatively)

Last week, we looked at the question Which is Performing Better, the Dow or the S&P500 ?

A significant difference between the two indexes is how they are computed — the Dow is price-weighted, while the S&P500 is market cap-weighted.

The higher priced Dow stocks (Boeing, United Technology, Catepillar, 3M) have a disproportionate impact on that index. On the SPX, the biggest cap stocks — Exxon Mobbil, GE, Citigroup, Microsoft, AT&T — are (literally) the heavyweights. GE and Microsoft, at about $37 and $30 respectively, have only a modest impact on the price-weighted Dow. Yet on the cap-weighted SPX, the $382.2 and $292.4 billion dollar respective caps have an enormous impact.

That was last week. This week, Floyd Norris takes a different tack: looking at the SPX in various weighs based on different measures:

"It has taken 88 months, or nearly three-quarters of the decade, but the American stock market is finally back to where it ended the last decade.

At least that is true if one measures stock performance in the traditional way, using dollars. As the chart accompanying this column indicates, the Standard & Poor’s index of 500 stocks ended April a full 1.1 percent above its level of Dec. 31, 1999.

Unfortunately for those who owned American stocks during that period, the dollar itself has not been a star performer. As a store of value, the buck is having a bad decade.

The charts show how the S.& P. has performed against some other currencies, and against some alternative investments:"

Charts are below:


click for larger chart


Charts courtesy of NYT


Against the Japanese yen, S&P500 is up 18 percent during this decade. But in British pounds, its down 22%. Even worse, in Euros, the SPX lost a third of its value.

The impact of inflation on commodity prices is even more stark: Compare what a unit of S&P500 bought at the end of 1999 versus today. The S&P500 index buys only 58% as much corn, only 57% as much house (based on the Case-Shiller index) as it used to, only 40% as much Oil, and only 32% as much gold as it did in 1999.

This isn’t to suggest that the Index has moved up over the past few years; it obviously has. But it also reveals two fascinating factors: Iy shows how important relative performance of any asset class is; and secondly, it demonstrates how pernicious the effect of inflation has been. No wonder its called the cruelest tax.


A Comeback for the S.&P. (If the Yardstick Is Dollars)
NYT, May 5, 2007

Category: Commodities, Currency, Index/ETFs, Investing, Markets

May Linkfest (Part 2)

Category: Weblogs

Famous Opinions

Category: Psychology

Kentucky Derby Linkfest (Part I)

Category: Weblogs

Barron’s Two Fer

Category: Media

Friday Night Jazz: Artie Shaw

Another guest musical director for FNJ this week: Eddie Elfenbein of Crossing Wall Street on Artie Shaw. Take it away, Eddie:


Rare_and_unreleased Artie Shaw was cool. Not Elvis cool or Sinatra cool, but a darker, more subdued cool.

What Shaw did was make things look easy. Check out this clip and notice how, even after six decades, his music hasn’t aged a bit. It’s still fresh and smooth. It’s just…cool. (You gotta love Shaw’s reply to the compliments: “Yeah, yeah. Glass of water.” Pure cool.)

Artie Shaw was the very last of the big bandleaders. He died a year ago at age 94 and fifty years after his last performance. He wound up outliving all the greats—Goodman, Herman, Miller. Those names may loom larger today, but back then, Shaw’s star was the brightest. He was making $60,000 a week—not bad for the Depression. With America poised to enter World War II, Time magazine reported that Germans’ vision of America was “skyscrapers, Clark Gable and Artie Shaw.”

Fascists, apparently, have issues with tall buildings.

When Shaw hired Billie Holiday, he became the first white bandleader to hire a full-time black singer. But Shaw detested the limelight. In fact, Shaw hated the words “jazz” and “swing.” No, he considered himself a musician. He hated the audience. He hated the singers. He hated the dancers. He hated other bandleaders (“Benny Goodman played clarinet. I played music.”)

By 1951, Shaw walked away from music altogether and became—what else?—a dairy farmer. Crazy, maybe, but cool in its own way. Duke Ellington told him, “Man, you got more guts than any of us.

So what did Shaw like? Women. Lots and lots of them. He was married eight times. He nabbed Betty Grable which would have pleased most men. Not Shaw. While they were engaged, he ran off with Lana Turner. (Whoa, Duke was right!) Shaw had an affair with Rita Hayworth. He dumped Judy Garland. He married Ava Gardner before Sinatra. How in earth did he have time enough time for music?

Ah, the music. Brilliant. Here’s an example: In 1938, Shaw took an obscure and forgotten Cole Porter song and made it a jazz classic. Have a listen to “Begin the Beguine.

If you’re keeping score, that’s a Jewish bandleader playing Negro music written by a homosexual.

Very_best_of_artie_shaw Exceedingly trivial trivia: “Begin the Beguine” has been performed a gazillion times since. In the movie, The Rocketeer, it’s performed by Melora Hardin, who’s better known as Jan in The Office. (Told you it was trivial.)

If you’ve never heard of Shaw and want to get your feet wet, I’d recommend: The Very Best of Artie Shaw

That pretty much has it all. Personally, I love “Star Dust” and “Deep Purple.” Wonderful stuff.

Two others you might enjoy are:  The Complete Gramercy Five Sessions (all the big band guys made smaller bands after the war); and Last Recordings: Rare and Unreleased.


BR adds:  Thanks Eddy — nicely done. There is a terrific recording of Shaw over at NPR:  Performance by Shaw of Shaw’s 1940 Concerto for Clarinet

videos after the jump . .

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Category: Digital Media, Friday Night Jazz, Music

Murdoch WSJ

Category: Financial Press, Politics

Bull/Bear Ratio

Category: Markets, Psychology, Technical Analysis

NFP: 88k (and I don’t believe even that)

The Payroll numbers are out, and they are not particularly pretty:

88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November ’04. Cumulative revisions for prior months were to the downside by 26,000.

As expected, losses were in Manufacturing (19k), Retail (26k) and Construction (11k). The  weakness in Construction has been very uted, implying that the full impact of the housing slow down has yet to be fully realized.

Biggest gains were had in Services (116k), Education and Health (53k), Gov’t (25k) Professional (24k) and Leisure/Hospitality (22k).    

Temporary help jobs fell for a 3rd month (January was flat) making 4 consecutive months of no gains. Temp help tends to lead employment gains, and this weakness can be read as a future forecastor of employment.

We don’t pay close attention to the Household survey, (the self reported number is very volatile) but the drop of -468k was an eyebrow raiser.


Birth Death Adjustment:  A whopping 317k B/D adjustment — that is the single largest "adjustment" on record for any single given month. And despite that giant add, the number was a very soft 88k.

To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?

While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keeep up with population growth.

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Category: Data Analysis, Economy, Employment

NFP: The Return of the Over?

Category: Data Analysis, Economy, Employment