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EJ
12-26-06, 12:32 PM
In the Shadow of 1937 (http://www.nysun.com/pf.php?id=45680)
December 26, 2006 (John Batchelor - NY Sun)

Not since 1937 have the richest 1% of Americans been so far above the average citizen in assets and earning power as today. More, these one percenters are not coupon-clipping, Palm Beach-squatting heirs. They are wage earners and entrepreneurs, and their prospects just get grander as globalization grows the market capitalization of all enterprises. Further, the one percenters are pulling away not only from everyone in general but also from the richest of the rest. Their income has doubled since Ronald Reagan, while in the same time frame the merely rich, the 90th to 95th percentiles, have flatlined.

What this means today, brooding on George Santayana's drollery that you are doomed to repeat the history you don't learn from, is that it is useful to travel back to New York City in 1937 to see what severe and, truth be told, grotesque income disparity might mean in the world of affairs ahead.

AntiSpin: We've drawn the parallel between 2007 and 1937, two periods when government intervention to manage post bubble economic pain, as an unintended consequence, produced wealth and income inequality. Here Batchelor extends the comparison and takes it to its logical conclusion.

The October 19, 2006 iTulip piece Dow 12,000: Not a bubble, but not healthy growth, either (http://www.itulip.com/forums/showthread.php?t=527&highlight=1937)" states, "This bounce has more in common with the US market bounce in 1937 that was fueled by the sudden surge of inflation and liquidity produced by the Fed starting in 1933, and the temporary increase in industrial production that followed, as you can see in the charts below."


http://www.itulip.com/images/1933to1937econheadfake.jpg


Batchelor says:
The rich got richer in 1937 not only because of their assets but also because of a deepening worldwide deflation that, destabilizing democracies, favored strongmen on all continents. In Spain, in the proxy war between communist Russia and capitalist Europe, leftist rebels claimed that two "Reich Divisions" were en route to aid the government forces under Francisco Franco. In Moscow, the mood was drunken self-denial, the crammed Metropol Hotel charging 115 rubles for half a bottle of foul Soviet champagne. In Berlin the mood was grim ambition. Propagandist Joseph Goebbels's official newspaper, Angriff, asked, "Will War Come Automatically?" Four-Year Plan boss Hermann Goering proclaimed, "Full steam ahead to assure German honor and German rights." And Hitler admonished, "Fulfill in the new year the eternal watchword, ‘Everything for Germany'."
Actually, the rise of strongmen has a greater correlation to hyper-inflation than deflation. Nations that suffered deflation during The Great Depression tended to maintain their democratic institutions. Quoting from the iTulip bible, galbraithmoney by John Kenneth Galbraith (Houghton Mifflin, 1975), Economic woes leading to Fascism or Communism: The Economic Policies of Hitler:
"That the great German inflation, like the ones elsewhere in central Europe, produced a large transfer of wealth from those who possessed saving accounts, money, securities or mortgages to those who had debts or tangible property is assumed. And, despite a shortage of affirming statistics, that such transfer occurred does seem plausible. The loss so involved, the parallel lost by people of their stake in the social order and the companion anger and frustration were, in turn, thought to have much to do with the rise of Fascism or Communism. These are matters on which there is no proof, and it is unbecoming, however customary, to substitute certainty of statement for hard evidence. But the simple facts are worth a glance. All of the countries of central Europe that suffered a collapse of their currencies following the First World War were eventually to experience Fascism, Communism or in most cases - Poland, Hungary, East Germany - both. The countries that did not experience such a breakdown in their money were almost uniformly more fortunate."
To take Batchelor's points a step further, it is likely that Japan's "lost decade" combined with the threats posed by an increasingly economically powerful and militarized China produced the social shift in Japan that resulted in the election of the hawkish Japanese Prime Minister Shinzo Abe.
After a decade of economic slough, Japan is surging back. Amid signs that it is maintaining its economic recovery, the land of the rising sun recently took two significant steps toward shaking the bogeyman of its World War ii legacy and reasserting Japanese nationalism.

On Friday, December 15, the Japanese Parliament passed a bill that upgraded the Japanese Defense Agency to full ministry status. This takes the new Japanese Defense Ministry into the cabinet arena along with other top government departments. Significantly, the defense bill enjoyed the support of the Diet’s main opposition Democratic Party, making it, with the exception of two minor opposition parties, a virtual bipartisan affair.

All that now remains for Japan to finally legitimize itself as a fully fledged member of the international community empowered by parliamentary authority to act militarily, both defensively and offensively, beyond its own shores, is to change Article 9 of its postwar constitution which, in theory, presently prevents Japan from so engaging. Shinzo Abe is on track to obtain that change during his first tenure as prime minister.

Barely an hour following this historic change in the Japanese government, another bill was approved along party lines requiring schools to teach patriotism. Consistent with Prime Minister Abe’s efforts to have Japan shed remaining taboos associated with the nation’s inglorious defeat in World War ii, the Japanese leader had made this legislation a key plank in his political platform. He understands clearly that the old generation that still remembers that huge national loss of face is dying out. The new generation needs a fresh focus on the nation’s future. To this end, schools will now be charged with the responsibility to generate and instill a new sense of national pride in their students. Japan—on the Rise Again (http://www.thetrumpet.com/index.php?page=article&id=2812)
A distinct rise in militarism and idealism, paralleling a decline in diplomatic engagement and pragmatism, is spanning the globe, from East to West. A more nationalist Japan is but one of the wild-card geopolitical antecedents for political turmoil in the next few years as the liquidity driven economic boom of the past four years winds down and a major global recession begins, much as during the period following 1937.

Finster
12-26-06, 04:17 PM
Conclusions? The 1937-2007 parallel is a compelling one in some very fundamental ways. I can also think of some with circa 1975. If we could count on history to repeat, investing for 2007 would be a slam dunk. But assuming that rather than repeat, history rhymes, what can we conclude? Stocks, bonds, commodities, real estate, cash ... which to overweight, which to underweight?

spunky
12-26-06, 06:01 PM
Yes;

In 1975 the American people perceived inflation as a threat. Now, through the last 15 yrs, inflation has been masked. Finster is right, in that every time we have a " new " crises it might be similar but isnt exactly the same. What is the same is that the government must step in and redistribute wealth. This goes againist my Libertarian beliefs but it is the only way semi equality can be achieved ; that is without a complete meltdown of the government and economic systems as we know them.

bart
12-26-06, 06:10 PM
[B]

Not since 1937 have the richest 1% of Americans been so far above the average citizen in assets and earning power as today.

In one of those interesting serendipitous moments, I ran into hard some data last week on the "wealth gap"... and here's the result.

http://www.nowandfutures.com/download/household_net_worth_by_wealth_class_log.png

Jim Nickerson
12-26-06, 06:28 PM
Bart, what about the other 29%? Why aren't they accounted?

Charles Mackay
12-26-06, 06:30 PM
In one of those interesting serendipitous moments, I ran into hard some data last week on the "wealth gap"... and here's the result.

http://www.nowandfutures.com/download/household_net_worth_by_wealth_class_log.png

Kinda needs a log scale doesn't it Bart? .001% to 100% ????

Finster
12-26-06, 06:31 PM
Yes;

In 1975 the American people perceived inflation as a threat. Now, through the last 15 yrs, inflation has been masked. Finster is right, in that every time we have a " new " crises it might be similar but isnt exactly the same. What is the same is that the government must step in and redistribute wealth. This goes againist my Libertarian beliefs but it is the only way semi equality can be achieved ; that is without a complete meltdown of the government and economic systems as we know them.

FWIW, I think what has happened is the government already has redistributed wealth - in favor of the wealthy. Just the latest example is the Fed's serial bubble blowing. In the past few years, the Fed drove interest rates down to multi-generational lows, prompting millions of homeowners to "equity extraction". Folks, they "extracted equity" - real, long term wealth - in order to spend on stuff that wears out or burns up - consumer goods and energy. Sending that wealth overseas in the process, the financial establishment turned record profits as it took a cut of the wealth as it passed through its hands. The whole process was greased by cutting taxes on international commerce to the bone even as those on American labor and production were left in place.

If the government would simply stop redistributing wealth, a lot of wealth inequality would go away.

akrowne
12-26-06, 06:33 PM
But assuming that rather than repeat, history rhymes, what can we conclude? Stocks, bonds, commodities, real estate, cash ... which to overweight, which to underweight?

Indeed, the $60,000 question =)

I think history can be instructive, but we shouldn't try to impress the mould of the past fully on the present. I prefer to focus mostly on today's fundamentals. Given those, I see massive inflationary pressures soon on the horizon (perhaps surfacing only some time into the major upcoming recession), widespread financial system crisis (greater than the S&L scandal), and the bursting of the remaining financial economy bubbles (including the stock market). However, the market declines may not happen in nominal terms, so I think real asset plays are the most attractive.

Look at the S&P 500, for instance: while up supposedly near 14% on the year, it is actually only up a little over 5% when adjusted for the dollar's devaluation over the same time period.

You wouldn't want to have shorted that market, but on the other hand, your money would have been better allocated to gold and other natural resources/commodities (gold itself was up about 10% on the year with the same dollar devaluation adjustment).

Charles Mackay
12-26-06, 06:35 PM
I was a sucker for the 1974 analogy and now after reading this I'm a sucker for the 1937 analogy.

God, I'm easy!

Finster
12-26-06, 06:47 PM
I was a sucker for the 1974 analogy and now after reading this I'm a sucker for the 1937 analogy.

God, I'm easy!

Probably elements of both at work, Charles. In fact, the experiences of the 1930's and the 1970's were quite similar at a fundamental level. Remember the 1930's started out with the price of gold fixed in dollars - and as the value of the gold rose, so did the dollars. In the 1970's that link was severed, and the value of the gold rose just the same, while the dollar was free to fall in relation to it.

In both cases, we had deflation in gold terms. More generally, the value of claims on assets fell in relation to that of assets themselves - the hallmark of a deflation of inflated claims.

bart
12-26-06, 06:54 PM
Kinda needs a log scale doesn't it Bart? .001% to 100% ????

Believe it or not, that actually is a log scale and chart.

Excel does a pretty poor job with many log based charts, which is the main reason I seldom use them. But I had no choice with that extreme range of data - $900 to $16 million.

Finster
12-26-06, 07:16 PM
Believe it or not, that actually is a log scale and chart.

Excel does a pretty poor job with many log based charts, which is the main reason I seldom use them. But I had no choice with that extreme range of data - $900 to $16 million.

Must be okay...

Hey, even Mr. Log F. Chart didn't complain ... ;)

bart
12-26-06, 07:59 PM
Must be okay...

Hey, even Mr. Log F. Chart didn't complain ... ;)


My first cut actually was a linear chart with left and right scales. But the data and points are tougher to really understand and see:

http://www.nowandfutures.com/download/household_net_worth_by_wealth_class.png


So I had to lower myself to log style... ;)

Charles Mackay
12-26-06, 08:14 PM
Yes, I agree Finn...both times were a revaluation of real vs. paper wealth. My relatives used to be farmers in Northern Ohio and they always said that the "fabulous 40's" were the best farming profits they ever experienced (in real terms). Maybe that is the overriding consensus and most important distillate we can come to. The tangible boom in relation to paper is the big similarity between the two periods.

Finster
12-27-06, 03:51 PM
Yes, I agree Finn...both times were a revaluation of real vs. paper wealth. My relatives used to be farmers in Northern Ohio and they always said that the "fabulous 40's" were the best farming profits they ever experienced (in real terms). Maybe that is the overriding consensus and most important distillate we can come to. The tangible boom in relation to paper is the big similarity between the two periods.

It's a kind of asset musical chairs ... the number of chairs stays the same, but more and more people get tickets entitling them to one. It creates the illusion of an increasing number of chairs ... more and more wealth. That is, until the music stops and people start to stake their claims. Then the market value of the claims falls back into line with the number of chairs there really are.

The whole process is staged by the moneyed powers through the agency of the central bank. In the US before 1913, the normal feedback mechanism brought the value of claims back into line with the value of the assets themselves before it got too far out of whack. Then the Fed was deliberately chartered with the objective of expanding credit, almost as if the value of claims could be forcibly kept rising without any regard to the underlying assets. It succeed for a while, but by the end of the 1920's reality began to reassert itself - calamitously.

Pretty much the same thing happened all over again in the sixties and seventies, but this time, the currency unit was untethered from anything tangible ... so that rather than the value of claims on assets plunging in nominal terms, the dollar itself plunged right along with them, giving rise to an illusion that the claims were more or less holding their value. Of course, this illusion was laid bare as well, as people eventually found that their power to buy something tangible with claims fell regardless.

It cannot be otherwise. Each cycle seems to bring progressively more clever means to perpetuate the illusion as long as possible, but the result is always the same. We're seeing a repeat of the same phenomenon on the heels of a mega-bull-market in claims during the eighties and nineties. Over and over the cycle repeats - the value of claims is inflated beyond the value of the assets upon which they are claims - and then they fall back again.

The effect is an almost extraordinary popular delusion and apparent madness of the crowd...

(BTW ... loved your book ... ;))

DemonD
12-28-06, 02:17 AM
I think history can be instructive, but we shouldn't try to impress the mould of the past fully on the present. I prefer to focus mostly on today's fundamentals...

Look at the S&P 500, for instance: while up supposedly near 14% on the year, it is actually only up a little over 5% when adjusted for the dollar's devaluation over the same time period.

You wouldn't want to have shorted that market, but on the other hand, your money would have been better allocated to gold and other natural resources/commodities (gold itself was up about 10% on the year with the same dollar devaluation adjustment).

This, IMO strengthens the the argument FOR stocks and equities, because the best way to stay ahead of inflation is to invest in the human capital of people who are out-producing inflation. With less tax hits, and less hassle of holding gold. Plus you can just buy gold-based equities, or other resource based equities. And while we want to look at the present, can you completely discount history? Stocks historically obliterate commodities. Plus, dividends, sweet, yummy dividends. And why not combine them all? Get a dividend-paying, commodity-based stock with above-average growth prospects, and you get the best of all worlds.

That, in any case, has been my own personal financial conclusion. Buy good commodity extracting and selling companies. (I still say oil is safer/better than gold, but that's my own preference. There has been enough evidence presented on itulip to convince me that gold is also excellent for investment.)

Finster
12-28-06, 09:21 AM
This, IMO strengthens the the argument FOR stocks and equities, because the best way to stay ahead of inflation is to invest in the human capital of people who are out-producing inflation. With less tax hits, and less hassle of holding gold. Plus you can just buy gold-based equities, or other resource based equities. And while we want to look at the present, can you completely discount history? Stocks historically obliterate commodities. Plus, dividends, sweet, yummy dividends. And why not combine them all? Get a dividend-paying, commodity-based stock with above-average growth prospects, and you get the best of all worlds.

That, in any case, has been my own personal financial conclusion. Buy good commodity extracting and selling companies. (I still say oil is safer/better than gold, but that's my own preference. There has been enough evidence presented on itulip to convince me that gold is also excellent for investment.)

Historically stocks have been the best inflation hedge, although the record is irregular. Over time, stock prices do track inflation, but fall behind during times of rising inflation and ahead during falling inflation. There is an effect at the level of the second derivative, so to speak. In contrst, gold actually has not fully kept up with inflation over time, but does tend to outperform during periods of rising inflation as well as falling behind during periods of falling inflation. They are thus both inflation hedges at the first derivative level but complementary at the second derivative level.

One reason for the difference is that stocks are securities which discount the value of future money. When inflation and interest rates rise, the discount increases. For that reason, gold itself (which does not discount future money) is a better complement to a portfolio of stocks and can easily outperform mining stocks when stocks as an asset class are doing poorly. This is not to argue against owning mining stocks, just against viewing them as a substitute for the real thing.

Commodity futures as a class also historically have provided returns comparable to stocks; over time they pay an additional return component over and above commodity prices themselves, somewhat analogous to the dividends paid on stocks. They also tend to exhibit a similar complementary characteristic to stocks as does gold with regard to the inflationary cycle, and are therefore useful portfolio diversifiers, especially in times of inflation.

bart
12-28-06, 11:20 AM
Stocks historically obliterate commodities.

Not to take away from any of your other points, but do be cautious on such a broad statement.

http://www.nowandfutures.com/images/dow_gold_oil_crb1900-current.png

(note that the housing data has been extrapolated from very sparse data prior to 1963, and that the CRB data has been spliced with other commodity data from the NBER prior to 1956)

Finster
12-28-06, 07:06 PM
Not to take away from any of your other points, but do be cautious on such a broad statement.

You are both right. The gap lies in that DemonD is probably referring to pure commodity prices, which are widely outpaced by stocks. Commodity futures, on the other hand, over time have been shown to be capable ot providing returns comparable to stocks. This is because of a number of additional attributes such as "roll yield", and the "insurance" component the futures investor provides. This has been discussed in depth by researchers such as Gary Gorton and K. Geert Rouwenhorst, in Facts and Fantasies about Commodity Futures (http://www.cfapubs.org/doi/abs/10.2469/faj.v62.n2.4083).

bart
12-28-06, 07:48 PM
You are both right. The gap lies in that DemonD is probably referring to pure commodity prices, which are widely outpaced by stocks. Commodity futures, on the other hand, over time have been shown to be capable of providing returns comparable to stocks. This is because of a number of additional attributes such as "roll yield", and the "insurance" component the futures investor provides. This has been discussed in depth by researchers such as Gary Gorton and K. Geert Rouwenhorst, in Facts and Fantasies about Commodity Futures (http://www.cfapubs.org/doi/abs/10.2469/faj.v62.n2.4083).


Yeah... but I'm righter... ;)

One of the advantages you didn't mention and that paper does not cover is the ease with which one can short, which basically eliminates any issue about commodity prices vs. stock prices. Another is the ease of using anywhere from zero leverage up to nosebleed territory of 50:1 or more, and there are many more.

I could also get into some of the very poorly known and understood issues about comparing long term stock prices against commodities, but I don't want to encourage anyone to jump into futures. But I will mention just one - comparing the Dow or S&P against gold or most other commodities (that bushel of corn is very different in nutritional value and taste from one even as little as 20 years ago) is not even close to an apples to apples comparison, since the components of the Dow have changed hugely over the long term and generally only include the higher performing blue chips.

Finster
12-29-06, 10:08 AM
One of the advantages you didn't mention and that paper does not cover is the ease with which one can short, which basically eliminates any issue about commodity prices vs. stock prices. Another is the ease of using anywhere from zero leverage up to nosebleed territory of 50:1 or more, and there are many more.

Oy, but these advantages are also disadvantages ... you yourself have warned of the dangers and risks of things such as shorting and extreme leverage. Best left to experts such as yourself. The type of futures investing Gorton and Rouwenhorst refer to is long-only, fully collateralized, which puts "straight" futures investing on a level playing field with the same with regard to equities.

bart
12-29-06, 10:53 AM
Oy, but these advantages are also disadvantages ... you yourself have warned of the dangers and risks of things such as shorting and extreme leverage. Best left to experts such as yourself. The type of futures investing Gorton and Rouwenhorst refer to is long-only, fully collateralized, which puts "straight" futures investing on a level playing field with the same with regard to equities.

Extreme leverage - yes... it is unwise to say the least for most.

But the 'long-only' side of it is an area with which I disagree. It has elements of an "everybody knows" or an "eeeevil" element - shorting, to use an extreme analogy to help make my point, can be quite wise in markets that are downward bound like stocks after Oct 1929 or gold after Jan 1980.

After all, the point was made that commodity prices have gone down on a relative basis on the long term. If stocks tend upwards over time and being long is wisest, why wouldn't being short in markets that tend down also be the wisest? (*tweak* ;)) (and yes, this is another extreme analogy)
If da bear was here from DR, he might say "why does everybody hate shorts?" ;)

Finster
12-29-06, 02:35 PM
Extreme leverage - yes... it is unwise to say the least for most.

But the 'long-only' side of it is an area with which I disagree. It has elements of an "everybody knows" or an "eeeevil" element - shorting, to use an extreme analogy to help make my point, can be quite wise in markets that are downward bound like stocks after Oct 1929 or gold after Jan 1980.

After all, the point was made that commodity prices have gone down on a relative basis on the long term. If stocks tend upwards over time and being long is wisest, why wouldn't being short in markets that tend down also be the wisest? (*tweak* ;)) (and yes, this is another extreme analogy)
If da bear was here from DR, he might say "why does everybody hate shorts?" ;)

It sounds like we are talking past each other, talking about futures and commodities as if they were indistinguishable. But the mere fact that futures are the main means for investing and speculating in commodities does not mean they are one and the same.

The facts are undeniable. Over the long haul, stock prices have roundly trounced commodity prices. So DemonD's statement "Stocks historically obliterate commodities" is utterly correct. But this statement alone sidesteps the question of whether returns from investing in commodity futures are comparable to those from investing in stocks. The asnwer to that question is entirely different - in the affirmative as shown by Gorton and Rouwenhorst. The gap is due to the fact that stock prices and commodity prices are not the sole means of returns from investing in stocks and commodity futures, respectively.

The questions of short-versus-long and levered-versus-unlevered have nothing to to with the basic premise. You can invest in stocks or commodity futures either on a short or long, or levered or unlevered basis. This is why Gorton and Rouwenhorst didn't get into those questions; they wanted to examine equities and commodity futures on the same footing. Had they attempted to compare long-only stock investing with short-and-long commodity futures investing, or leveraged stock investing with unleveraged futures investing, their research would not have been published, but round-filed.

The scientific method demands that when comparing two things, all else be kept equal.

Now I would be more than happy to debate the highly dubious wisdom of shorting and leverage, but that would be a separate matter ... :D

bart
12-29-06, 03:06 PM
It sounds like we are talking past each other, talking about futures and commodities as if they were indistinguishable. But the mere fact that futures are the main means for investing and speculating in commodities does not mean they are one and the same.

The facts are undeniable. Over the long haul, stock prices have roundly trounced commodity prices. So DemonD's statement "Stocks historically obliterate commodities" is utterly correct. But this statement alone sidesteps the question of whether returns from investing in commodity futures are comparable to those from investing in stocks. The asnwer to that question is entirely different - in the affirmative as shown by Gorton and Rouwenhorst. The gap is due to the fact that stock prices and commodity prices are not the sole means of returns from investing in stocks and commodity futures, respectively.

The questions of short-versus-long and levered-versus-unlevered have nothing to to with the basic premise. You can invest in stocks or commodity futures either on a short or long, or levered or unlevered basis. This is why Gorton and Rouwenhorst didn't get into those questions; they wanted to examine equities and commodity futures on the same footing. Had they attempted to compare long-only stock investing with short-and-long commodity futures investing, or leveraged stock investing with unleveraged futures investing, their research would not have been published, but round-filed.

The scientific method demands that when comparing two things, all else be kept equal.

Now I would be more than happy to debate the highly dubious wisdom of shorting and leverage, but that would be a separate matter ... :D


I couldn't disagree more about the facts being undeniable and the same about stocks historically obliterating commodities... and the basic reason is covered in the "their research would not have been published, but round-filed" plus a *creative* approach to the scientific method.

The scientific method, where apples are compared to apples, was precisely my point on comparing stocks to commodities too. Allow me to change the purity of a gold bar the same way that the Dow is rebalanced and its components changed over time, and the picture will change significantly.

But my opinions and views are so far off the beaten path and away from the "conventional wisdom" area that it would be almost worthless to discuss or debate them.

Finster
12-29-06, 04:10 PM
I couldn't disagree more about the facts being undeniable and the same about stocks historically obliterating commodities... and the basic reason is covered in the "their research would not have been published, but round-filed" plus a *creative* approach to the scientific method.

The scientific method, where apples are compared to apples, was precisely my point on comparing stocks to commodities too. Allow me to change the purity of a gold bar the same way that the Dow is rebalanced and its components changed over time, and the picture will change significantly.

But my opinions and views are so far off the beaten path and away from the "conventional wisdom" area that it would be almost worthless to discuss or debate them.

Since there is a factual question here, let's take a look at the hard data. The below is a chart comparing broad commodity prices to broad stock prices for the past several decades. The commodity index is made up of the Dow Jones AIG back to its inception, spliced to the CRB prior to that. The stock index is that of the Dow Jones World index, spliced to the MSCI World index prior to that back to its inception, then to the S&P 500. So we have a both a proxy for the price of commodities as a class and for equities as a class. Because of the range of the data, the chart is ... (you guessed it;-) semilog. Thus, the increase in stock prices over the period is 132.8 times versus 4.27 for commodities.

On theoretical grounds, this is not altogether surprising because due to the advancement of technology in mining, agriculture, and industry, commodities ought to become cheaper over time - in real terms - as it takes progressively less labor to produce each unit. The fact that commodity prices actually have risen in nominal terms is a sad testament to the persistence and magnitude of inflation and the erosion of the value of the US dollar.

Worth emphasizing, however, is that these are price-only charts. Dow Jones, for example, publishes separate indices for price and total return for both stocks (Dow Jones Stock Indices (http://www.djindexes.com/mdsidx/index.cfm?event=showTotalMarket)) and commodity futures (Dow Jones Commodity Indices (http://www.djindexes.com/mdsidx/index.cfm?event=showAigHome)). The conclusion reached by Gorton and Rouwenhorst comes about by comparing the total return of investing in commodity futures with that of investing in stocks. Due to phenomena such as the insurance premium and roll yield, the return broadly available from investing in commodity futures - despite the price return disadvantage of commodities per se - has historically been comparable to stocks.

http://users.zoominternet.net/~fwuthering/Posts/StockCom.png

bart
12-29-06, 08:12 PM
Since there is a factual question here, let's take a look at the hard data. The below is a chart comparing broad commodity prices to broad stock prices for the past several decades. The commodity index is made up of the Dow Jones AIG back to its inception, spliced to the CRB prior to that. The stock index is that of the Dow Jones World index, spliced to the MSCI World index prior to that back to its inception, then to the S&P 500. So we have a both a proxy for the price of commodities as a class and for equities as a class. Because of the range of the data, the chart is ... (you guessed it;-) semilog. Thus, the increase in stock prices over the period is 132.8 times versus 4.27 for commodities.

On theoretical grounds, this is not altogether surprising because due to the advancement of technology in mining, agriculture, and industry, commodities ought to become cheaper over time - in real terms - as it takes progressively less labor to produce each unit. The fact that commodity prices actually have risen in nominal terms is a sad testament to the persistence and magnitude of inflation and the erosion of the value of the US dollar.

Worth emphasizing, however, is that these are price-only charts. Dow Jones, for example, publishes separate indices for price and total return for both stocks (Dow Jones Stock Indices (http://www.djindexes.com/mdsidx/index.cfm?event=showTotalMarket)) and commodity futures (Dow Jones Commodity Indices (http://www.djindexes.com/mdsidx/index.cfm?event=showAigHome)). The conclusion reached by Gorton and Rouwenhorst comes about by comparing the total return of investing in commodity futures with that of investing in stocks. Due to phenomena such as the insurance premium and roll yield, the return broadly available from investing in commodity futures - despite the price return disadvantage of commodities per se - has historically been comparable to stocks.




Ok... now tell me how many things have been missed or not stated about that chart and stocks and commodities? ;)

You can start with the concept that "Everybody knows that stocks are the best long term investment"... and then for dessert "everybody knows that real estate always goes up"... ;)

Finster
12-30-06, 09:39 AM
Ok... now tell me how many things have been missed or not stated about that chart and stocks and commodities? ;)

You can start with the concept that "Everybody knows that stocks are the best long term investment"... and then for dessert "everybody knows that real estate always goes up"... ;)

Let it not be lost that I am not trying to make a case for investing in stocks over commodities, especially now! As they say, past performance is no guarantee of future results. :eek:

Quite the contrary. The weight of the evidence is in favor of commodities - conspicuously including futures on commodities - for probably at least the next few years. My guess is that these past three or so years we've seen but the first wave of two of exceptionally strong commodity performance. Too much money has been printed and interest rates kept too low too long; rates will have to rise and this will be a headwind for the traditional financial assets stocks and bonds. And as you must be aware from the record, while I think most investors should have stock exposure in their portfolios, my position is that stocks of commodity producing companies are first and foremost stocks, and are therefore not a substitute for exposure to commodities through direct holding (as in the case of bullion) and the futures markets.

Are we copasetic on this much? :D

WDCRob
12-30-06, 11:46 AM
Finster, can you explain the comment above in light of your FFF prediction of +17% for the S&P 500?

Finster
12-30-06, 12:06 PM
Finster, can you explain the comment above in light of your FFF prediction of +17% for the S&P 500?

Sounds like someone is paying attention! ;)

The discrepancy stems partly from time frame and partly from relativity. My forecast for the S&P for 2007 is a 20.45% gain in dollars. The comments above are more oriented towards the longer term, i.e. "probably at least the next few years". Moreover, the S&P 500 prediction you cite relates stocks and dollars, whereas the above comments relate stocks and commodities.

bart
12-30-06, 01:46 PM
Let it not be lost that I am not trying to make a case for investing in stocks over commodities, especially now! As they say, past performance is no guarantee of future results. :eek:

Quite the contrary. The weight of the evidence is in favor of commodities - conspicuously including futures on commodities - for probably at least the next few years. My guess is that these past three or so years we've seen but the first wave of two of exceptionally strong commodity performance. Too much money has been printed and interest rates kept too low too long; rates will have to rise and this will be a headwind for the traditional financial assets stocks and bonds. And as you must be aware from the record, while I think most investors should have stock exposure in their portfolios, my position is that stocks of commodity producing companies are first and foremost stocks, and are therefore not a substitute for exposure to commodities through direct holding (as in the case of bullion) and the futures markets.

Are we copasetic on this much? :D


I very much agree on the past performance position and generally also do about the commodity and hard asset position, as shown by the roughly 15-20 year cycle in the Dow/gold or Dow/(most commodities).

But my point isn't about that. I maintain that the apparent out performance of stocks over commodities over the long term is, at the very least, highly over stated.

It's also not a valid apples to apples comparison, and could be compared to a statement that a new dining room table at $500 can be validly compared to one's grandparents new dining room table bought new for $50 in the '20s.

The official CPI-U has roughly 10x'ed since the '20s and it seems to be a valid comparison. That table is 10x more expensive than theirs and the CPI has 10x'ed and they both do the same function well... apparently. But they're nowhere near the same table. One is solid wood and the other is plastic, veneer and particle board. There are obviously many more differences, and I could go off into a diatribe about "reverse hedonics" but that would just be off the subject and point.

Overall though, my view on stocks is not exactly a popular or welcome one and I generally avoid discussing the area since it very much flies in the face of conventional wisdom.
I already do that enough on my web site... ;)

Finster
12-30-06, 03:31 PM
But my point isn't about that. I maintain that the apparent out performance of stocks over commodities over the long term is, at the very least, highly over stated.

I’m willing to concede that even the specific figures I cite above could overstate the sustainable price outperformance of stocks vis-ŗ-vis commodities somewhat. The reason is that the time frame begins in what was a period of relatively low valuation of stocks (early forties) and ends in a period of relatively high valuation of stocks (now). But the degree of low/high valuation can only explain at most, say, a two-three-four factor of price appreciation. This based on accounting for such things as dividend yields, book values, and the total value of the equity markets relative to GDP (whether on a US or global basis). This compares to an overall increase in the nominal price of stocks of 132.8 times versus 4.27 times for commodities. Thus even viewing the data in the light harshest to stocks, we’d still have stock price appreciation of 33.2 times for stocks versus 4.27 times for commodities. So while we could quibble about the degree of long term historical price outperformance of stocks, the fact of its existence is beyond question.

The price of stocks, as I have shown before, tracks overall GDP remarkably closely over long periods of time. It ought to, since stocks represent productive capital. The price of commodities, on the other hand, over time represent a shrinking portion of GDP. It likewise ought to, because the advancement of technology means that fewer hours of labor need be devoted to their production. Decades ago, a it took a quarter to half to population to produce our food supply, while it now takes a small fraction of that. The productive effort thus freed up now goes into the production of things that are not commodities, like electronics, entertainment, movies, television, Internet. The total fraction of productive effort devoted to commodities has been in decline for virtually all of recorded history, while equity capital tracks it proportionately.

So the price underperformance of commodities per se is not only a historical fact, but reasonable in terms of economic rationality.

As for the historical fact, no one need take my word for it. The data I’ve charted above is widely publicly available from respected sources such as Dow Jones, Morgan Stanley Capital, Standard and Poor’s, and the Commodity Research Bureau, and any one wishing to do so can corroborate it themselves if they wish.


It's also not a valid apples to apples comparison, and could be compared to a statement that a new dining room table at $500 can be validly compared to one's grandparents new dining room table bought new for $50 in the '20s.

The official CPI-U has roughly 10x'ed since the '20s and it seems to be a valid comparison. That table is 10x more expensive than theirs and the CPI has 10x'ed and they both do the same function well... apparently. But they're nowhere near the same table. One is solid wood and the other is plastic, veneer and particle board. There are obviously many more differences, and I could go off into a diatribe about "reverse hedonics" but that would just be off the subject and point.

As you know, I am happy to concede the existence of your "reverse hedonics", since I have complained myself about the diminution of quality in, for example, agricultural commodities due to the introduction of cheaper gene-spliced substitutes for the "real thing" of yesteryear, as well as numerous other substitutions of questionable quality "equivalents". But that does nothing to detract from the indisputable apples-to-apples nature of the data I cite. You could just as easily argue that the stock of a Monsanto or Cargill is a cheaper substitute for the "real thing". And even more to the point, the fact of such substitution is already embedded in the commodity price indices. The question of the quality of the commodities themselves is completely independent of the actual, factual, historical record of commodity prices. The commodity price indices are constructed to represent the experience of an average investor owning commodities, just as the stock price indices are constructed to represent the experience of an average investor owning stocks. If we are to truly conduct an apples-to-apples comparison, we can hardly compare real stocks with hypothetical commodities.

This last point you raise speaks not to the relative price performance of stocks versus commodities, but to the question of inflation and the relative value of the currency to stocks and commodities respectively. It is an extraneous third variable which we eliminate by using the same monetary unit in which to price stocks and commodities, thus factoring out the common denominator. No matter how you slice it, the price of stocks as a class relative to commodities as a class, over the sixty-four year period cited, has risen by a factor of 132.8/4.27 - over thirty. No matter what currency you use and regardless of the degree of inflation it has undergone, the ratio stock:commodity remains the same.

We can even control for reverse hedonics if we like, by looking only at commodities whose essential makeup is the same over time. Such as gold. One can convert any desired index of stock prices from inflating currency units to gold and one will still see a sustainable, long-term increase in price. This is because of the same phenomenon of advancing technology and productivity as cited above in connection with commodity prices in general. For actual historical data, one can refer to the well-known Ibbotson Associates. Just using the same time frame as cited above, the price of gold was $34 per ounce in 1942, and the S&P 500 was $9. Thus the price of gold has increased by 18-fold since 1942, while the price of the S&P has increased 158-fold. Eliminating the dollar unit, the price of the S&P 500 has increased by 158/18 - or over eight times - even in terms of gold. Similar results occur with any representative equity and commodity group over sufficient time, as here, to encompass one or more full secular cyles.

Reviewing the record developed thus far, it is clear that we have abundant hard data showing conclusively that stock prices have far outperformed commodity prices over very long periods of time. We have no data at all showing otherwise.

bart
12-30-06, 04:24 PM
This compares to an overall increase in the nominal price of stocks of 132.8 times versus 4.27 times for commodities.
...

As you know, I am happy to concede the existence of your "reverse hedonics", since I have complained myself about the diminution of quality in, for example, agricultural commodities due to the introduction of cheaper gene-spliced substitutes for the "real thing" of yesteryear, as well as numerous other substitutions of questionable quality "equivalents". But that does nothing to detract from the indisputable apples-to-apples nature of the data I cite.

You don't see the contradiction or logic issue between those two statements?





We can even control for reverse hedonics if we like, by looking only at commodities whose essential makeup is the same over time. Such as gold. One can convert any desired index of stock prices from inflating currency units to gold and one will still see a sustainable, long-term increase in price. This is because of the same phenomenon of advancing technology and productivity as cited above in connection with commodity prices in general. For actual historical data, one can refer to the well-known Ibbotson Associates. Just using the same time frame as cited above, the price of gold was $34 per ounce in 1942, and the S&P 500 was $9. Thus the price of gold has increased by 18-fold since 1942, while the price of the S&P has increased 158-fold. Eliminating the dollar unit, the price of the S&P 500 has increased by 158/18 - or over eight times - even in terms of gold. Similar results occur with any representative equity and commodity group over sufficient time, as here, to encompass one or more full secular cyles.



Ah yes, grasshopper... I expected that... and I ask you to consider the issue of a level playing field (without intervention or support of any kind).

The bottom line is that it is a logical failure to attempt a true and valid comparison when the playing fields and/or the items being compared are very different over a significant period of time.

Finster
12-30-06, 04:41 PM
You don't see the contradiction or logic issue between those two statements?

No. As noted, the question of fact before us is simply whether equity prices have increased in relation to commodity prices long term. If they have, then my contention is correct.


Ah yes, grasshopper... I expected that...

Sometimes a little like chess, no? ;)


... and I ask you to consider the issue of a level playing field (without intervention or support of any kind).

The bottom line is that it is a logical failure to attempt a true and valid comparison when the playing fields and/or the items being compared are very different over a significant period of time.

You are more than welcome to present what you consider a true and valid comparison. So far the only facts and data presented have been those I have offered in support of equity prices outpacing commodity prices. If we have only arguments and allegations against which to weigh them, then the conclusion is obvious. Equity prices have outpaced commodity prices.

Check.

bart
12-30-06, 05:12 PM
No. As noted, the question of fact before us is simply whether equity prices have increased in relation to commodity prices long term. If they have, then my contention is correct.

No wonder you didn't see the logical issue. Your assertion isn't what I was talking about...





You are more than welcome to present what you consider a true and valid comparison. So far the only facts and data presented have been those I have offered in support of equity prices outpacing commodity prices. If we have only arguments and allegations against which to weigh them, then the conclusion is obvious. Equity prices have outpaced commodity prices.

Check.

Sorry, I don't take checks from the *fin* man, only cash or .999 fine gold... ;)

I have enough trouble with my tinfoil hat as it is. And besides, its fine with me that failing to look at the raw facts and areas that would allow you to see valid & logical comparisons is your choice... mate.

http://www.nowandfutures.com/grins/rimshot.mp3

Finster
12-30-06, 05:33 PM
No wonder you didn't see the logical issue. Your assertion isn't what I was talking about...

This is what I meant when I suggested we were talking past each other. My core assertion, pursuant to DemonD's statement, is, over the long term:

Equity prices have outpaced commodity prices.

Now that we agree on that, do you still want to talk about shorting and leverage? :eek:

:D

jk
01-01-07, 12:57 AM
maybe i missed it, but bart brought up the issue of substitution of index components, and i did not really see it addressed.

we have survivorship bias in the stock indices. furthermore, survivorship is an issue not just for the indicies but, more broadly, for whole markets. stockmarkets disappear, in toto, along with the political regimes that provide their context. i'm not holding any iraqi bonds issued by the current so-called government, but they exist. i am skeptical of their long-term value. and i suppose there may have been bonds issued by the now departed saddam's goverment. i wonder if there is a market for them?

similarly, whole stockmarkets have disappeared. what happened with the markets of austro-hungary? i know they had a bond market, i don't know anything with regard to austro-hungarian equities.

i read a neat article about risk perception in 18th to 20th century european bond markets. after the napoleonic wars, the british bond market, for example, was very skittish in the face of geopolitical risks. but after 1880 it and the other european markets got progressively more stable and even complacent. after the assassination of archduke ferdinand in 1914 the british market didn't move. about 3 weeks later it sold off to the tune of [only] 1 basis point- from [iirc] 3.3 to 3.31% 7 days later all the european bond markets closed.

after the war was over some of those markets re-opened. and some didn't.

this brings us back to the post that started this thread. economic instability breeds political instability and geopolitical risk and, possibly, war more widespread than the ones we've already got going.

Finster
01-01-07, 10:46 AM
maybe i missed it, but bart brought up the issue of substitution of index components, and i did not really see it addressed.

There are several ways to address this. First, from the standpoint of the weight of the evidence. Even if the evidence I have provided is imperfect, we nevertheless have no countervailing evidence. Imperfect evidence still beats no evidence.

Second, no case has been made that survivorship bias is not present in commodities. It has not been shown why survivorship bias needs to be disproven for stocks if it does not also have to be disproven for commodities.

Third, index providers such as Dow Jones go out of their way to construct "investable" indexes. See e.g. the discussion at http://www.djindexes.com/mdsidx/index.cfm?event=showTotalMarket. The Dow Jones Industrials - one of the longest-running indexes available - is such an index, as being added to the index is equivalent to buying a stock and removing it selling it, which an investor can do. Dow Jones applies the same principles to the construction and calculation of equity and commodity indices alike. In fact, component substitution is a factor with both.

jk
01-01-07, 12:47 PM
There are several ways to address this. First, from the standpoint of the weight of the evidence. Even if the evidence I have provided is imperfect, we nevertheless have no countervailing evidence. Imperfect evidence still beats no evidence.

Second, no case has been made that survivorship bias is not present in commodities. It has not been shown why survivorship bias needs to be disproven for stocks if it does not also have to be disproven for commodities.

Third, index providers such as Dow Jones go out of their way to construct "investable" indexes. See e.g. the discussion at http://www.djindexes.com/mdsidx/index.cfm?event=showTotalMarket. The Dow Jones Industrials - one of the longest-running indexes available - is such an index, as being added to the index is equivalent to buying a stock and removing it selling it, which an investor can do. Dow Jones applies the same principles to the construction and calculation of equity and commodity indices alike. In fact, component substitution is a factor with both.

what was the original commodity for which bushels of wheat was substituted? nuts and berries? roots and grubs?

more seriously, i just think it's important for people to remain aware that looking at historical index returns does not provide an untainted view of asset performance. otherwise, they're likely to fall into the "stocks for the long run" delusion, and kid themselves into not perceiving the risks that are always present. i have no worries about your own awareness of this, finster. my comment is more for the general and less sophisticated reader of these threads, should such a creature exist.

Finster
01-01-07, 01:19 PM
more seriously, i just think it's important for people to remain aware that looking at historical index returns does not provide an untainted view of asset performance. otherwise, they're likely to fall into the "stocks for the long run" delusion, and kid themselves into not perceiving the risks that are always present. i have no worries about your own awareness of this, finster. my comment is more for the general and less sophisticated reader of these threads, should such a creature exist.

I'm sure there is no more general and less sophisticated reader of these threads than myself, JK. :D So we ought to be confident that no one will read a single post out of context and then take his entire nest egg, put it into all-stocks, zero-commodities form, and delude himself into thinking he has adopted a safe and effective investment posture for the next three or four years.

If he has, he evidently missed the following from the preceding posts in this very thread:


DemonD is probably referring to pure commodity prices, which are widely outpaced by stocks. Commodity futures, on the other hand, over time have been shown to be capable of providing returns comparable to stocks. This is because of a number of additional attributes such as "roll yield", and the "insurance" component the futures investor provides. This has been discussed in depth by researchers such as Gary Gorton and K. Geert Rouwenhorst, in Facts and Fantasies about Commodity Futures.



Over the long haul, stock prices have roundly trounced commodity prices. So DemonD's statement "Stocks historically obliterate commodities" is utterly correct. But this statement alone sidesteps the question of whether returns from investing in commodity futures are comparable to those from investing in stocks. The asnwer to that question is entirely different - in the affirmative as shown by Gorton and Rouwenhorst.



Worth emphasizing, however, is that these are price-only charts.



Let it not be lost that I am not trying to make a case for investing in stocks over commodities, especially now! As they say, past performance is no guarantee of future results.
Quite the contrary. The weight of the evidence is in favor of commodities - conspicuously including futures on commodities - for probably at least the next few years. My guess is that these past three or so years we've seen but the first wave of two of exceptionally strong commodity performance. Too much money has been printed and interest rates kept too low too long; rates will have to rise and this will be a headwind for the traditional financial assets stocks and bonds. And as you must be aware from the record, while I think most investors should have stock exposure in their portfolios, my position is that stocks of commodity producing companies are first and foremost stocks, and are therefore not a substitute for exposure to commodities through direct holding (as in the case of bullion) and the futures markets.


My core assertion, pursuant to DemonD's statement, is, over the long term:

Equity prices have outpaced commodity prices.

bart
01-01-07, 01:35 PM
This is what I meant when I suggested we were talking past each other. My core assertion, pursuant to DemonD's statement, is, over the long term:

Equity prices have outpaced commodity prices.

:D


But not only was that not DemonD's statement, it is relatively meaningless to state that equity prices have outpaced commodity prices when (generally) neither equities nor commodities are anywhere near the same products over any significant period of time.

Surely you can't be suggesting that, for example, the corn of 70 or 40 or 20 years ago is the same as that of today?
Are you also suggesting that, as another example, the "playing field" for gold and stocks is similar?

You ask for proof, but don't address the points I bring up... or the substitution bias that jk brought up... hmmm... what's an amateur *fin* to do... ;)

Jim Nickerson
01-01-07, 02:25 PM
my comment is more for the general and less sophisticated reader of these threads, should such a creature exist.

I'm here. I'm here.

Finster
01-01-07, 02:53 PM
But not only was that not DemonD's statementÖ

Eccccch Ö (insert screeching of brakes) Ö No one said it was.

Letís recall the context in which that point arose. DemonD said "Stocks historically obliterate commodities.", and you challenged the statement as overly broad. I responded by pointing out that DemonDís statement is correct insofar as prices were concerned (which also does not contradict your challenge), even though overall returns from investing in commodity futures have been shown to be comparable over the long term.

My comment that "My core assertion, pursuant to DemonD's statement, is, over the long term: Equity prices have outpaced commodity prices." in no way misquotes DemonD.


Ö, it is relatively meaningless to state that equity prices have outpaced commodity prices when (generally) neither equities nor commodities are anywhere near the same products over any significant period of time.

We are of course not talking about individual assets, but asset classes. Asset class selection, rather than being meaningless, is one of if not the most important determinants of an investorís return.


Surely you can't be suggesting that, for example, the corn of 70 or 40 or 20 years ago is the same as that of today?

We already disposed of this point earlier as well:


As you know, I am happy to concede the existence of your "reverse hedonics", since I have complained myself about the diminution of quality in, for example, agricultural commodities due to the introduction of cheaper gene-spliced substitutes for the "real thing" of yesteryear, as well as numerous other substitutions of questionable quality "equivalents"Ö


Are you also suggesting that, as another example, the "playing field" for gold and stocks is similar?

Yes. People can choose whether or not and when and how much to invest in either. More significantly, it isn't even relevent to the question of whether stock prices have risen more than commodity prices, since the statement is either historically, factually, true or it is not. Quite independently of whether we deem it to have been "fair" or "unfair".


You ask for proof, but don't address the points I bring up... or the substitution bias that jk brought up... hmmm... what's an amateur *fin* to do... ;)

The argument is about stock price indices versus commodity price indices. How can substitution bias in stocks be an argument against the former if commodity indices have the same problem?

bart
01-01-07, 03:12 PM
Eccccch … (insert screeching of brakes) … No one said it was.

Let’s recall the context in which that point arose. DemonD said "Stocks historically obliterate commodities.", and you challenged the statement as overly broad. I responded by pointing out that DemonD’s statement is correct insofar as prices were concerned (which also does not contradict your challenge), even though overall returns from investing in commodity futures have been shown to be comparable over the long term.

My comment that "My core assertion, pursuant to DemonD's statement, is, over the long term: Equity prices have outpaced commodity prices." in no way misquotes DemonD.

Yes, but that is relatively meaningless since not only have I shown that they don't obliterate commodities, but also that the two classes are not logically comparable.



We are of course not talking about individual assets, but asset classes. Asset class selection, rather than being meaningless, is one of if not the most important determinants of an investor’s return.

Yes, and I expect the sun to come up tomorrow too... and wouldn't dare change the subject on you either...





Yes. People can choose whether or not and when and how much to invest in either. More significantly, it isn't even relevent to the question of whether stock prices have risen more than commodity prices, since the statement is either historically, factually, true or it is not. Quite independently of whether we deem it to have been "fair" or "unfair".

You're obviously welcome to make any comparisons that you like, whether they're valid or not (how am I doing on *finning* the *fin* meister? ;)).



The argument is about stock price indices versus commodity price indices. How can substitution bias in stocks be an argument against the former if commodity indices have the same problem?

As I just said, you're still welcome to compare anything you like and attempt any conclusion you like, whether its valid or not. This is Earth after all... ;)

So now you're admitting that its an unfair comparison per the substitution bias issue?

Finster
01-01-07, 03:32 PM
Yes, but that is relatively meaningless since not only have I shown that they don't obliterate commoditiesÖ

But you havenít shown anything Ö only questioned my showing. I have presented data, and you have (rather fruitlessly :D) attempted to impugn it. You have presented no countervailing data .. actually no data at all.


Ö , but also that the two classes are not logically comparable.

Given that I have just posted a logical comparison of the two classes, wouldnít you say the burden was yours to at least make a case as to why they are "not logically comparable"? As opposed to merely state your conclusion to that effect?


Yes, and I expect the sun to come up tomorrow too... and wouldn't dare change the subject on you either...

Ö you wouldnít dare do an impression of the V-monster, huh? Ö :eek:


You're obviously welcome to make any comparisons that you like, whether they're valid or not (how am I doing on *finning* the *fin* meister? ;)).

See aboveÖ


So now you're admitting that its an unfair comparison per the substitution bias issue?

I have said nothing about whether it is fair that stock prices have trounced commodity prices for time immemorial. Only that it has occurred. :D

bart
01-01-07, 03:41 PM
But you haven’t shown anything … only questioned my showing. I have presented data, and you have (rather fruitlessly :D) attempted to impugn it. You have presented no countervailing data .. actually no data at all.


Given that I have just posted a logical comparison of the two classes, wouldn’t you say the burden was yours to at least make a case as to why they are "not logically comparable"? As opposed to merely state your conclusion to that effect?




I don't have to. Not only is there the absolute fact that you can not deny that corn (as an example) is not the same item over the last many decades, but you've actually made comments about GMO corn elsewhere.

Simply noting a false premise is usually enough for *normal* people... ;)





… you wouldn’t dare do an impression of the V-monster, huh? …

Moi?!?! (insert best innocent look of shock and dismay ;))

Finster
01-01-07, 08:12 PM
You have presented no countervailing data .. actually no data at all. Given that I have just posted a logical comparison of the two classes, wouldnít you say the burden was yours to at least make a case as to why they are "not logically comparable"? As opposed to merely state your conclusion to that effect?

I don't have to. Not only is there the absolute fact that you can not deny that corn (as an example) is not the same item over the last many decades, but you've actually made comments about GMO corn elsewhere.

Simply noting a false premise is usually enough for *normal* people... ;)

Of course you donít have to. But it ought to be obvious by now to any casual reader that you have no factual data to support your position. Weighed against the data I have posted, you have clearly pled nolo contendere.

We can paraphrase the whole debate thus far as follows.

DemonD: Albuquerque is north of Phoenix.

Bart: No, itís not.

Finster: Okay, okay, so itís not due north. But DemonD is correct at least insofar as Albuquerque is further north than Phoenix.

Bart: No, itís not.

Finster: Huh? Of course it is. Just look at this map.


[posts image of Rand McNally map of Arizona - New Mexico]

Bart: Maps have been known to have errors.

Finster: Well, I suppose so, but we have no reason to believe the map Iíve posted incorrectly shows Albuquerque to be further north than Phoenix. After all, itís from a reliable source and has not been contradicted by any other information.

Bart: I saw a map of Ohio once that had a city on it called "Cincinnita".

Finster: WTF??? Okay, here is a picture of the Mayor of Albuquerque taking his oath of office. And here is a similar one of the Mayor of Phoenix being sworn in. Taking into consideration the date, time of day, and the angle of the shadow, we can deduce from [posts series of equations and graphs] that Albuquerque is 1.80 degrees of arc further from the equator than Phoenix, which translates into approximately 1.80/360* 24,000, or 120 miles.

Bart: The voting machines were rigged. That is not the legitimate Mayor of Albuquerque.

Finster: %^$&#^$??? Come on, the only information we have on record so far shows Albuquerque to be further north than Phoenix. Iím doing all the leg work here and youíre just sitting back taking pot shots. Sorry, but Iím not playing your game.

JK: Finster, you never addressed Bartís point about the accuracy of the voting machines.

Finster: Itís irrelevant. All the data we have indicates Albuquerque to be further north than Phoenix. I never said the guy was legitimately elected.

Bart: Aha! So you admit he's a phony!

Finster: All I've admitted is that Albuquerque is further north than Phoenix.

Bart: You canít logically compare Albuquerque to Phoenix. Like apples and pears.

Finster: Why not?

Bart: I donít have to tell you why not.

Finster: Nobody said you have to present facts and logic. But nobody has to believe you, either... :p :eek: :D

bart
01-01-07, 08:27 PM
Of course you donít have to. But it ought to be obvious by now to any casual reader that you have no factual data to support your position. Weighed against the data I have posted, you have clearly pled nolo contendere.



Not bad... I give it a 7.7... and 2.6 attempted ipso facto's... ;)


You may now choose your prize from the following:

Appeal To False Authority:
Your logical fallacies aren't logical fallacies at all because Einstein said so. Einstein also said that this one is better.

Appeal To Numbers:
Millions think that this fallacy is the best, so clearly it is.

Appeal To Tradition:
We've used Appeal to Tradition for centuries: how can it possibly be wrong?

Argumentum Ad Nauseum:
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.
Argumentum ad nauseum is the best logical fallacy.

Begging The Question:
Circular reasoning is the best fallacy and is capable of proving anything.
Since it can prove anything, it can obviously prove the above statement.
Since it can prove the first statement, it must be true.
Therefore, circular reasoning is the best fallacy and is capable of proving anything.