Real DOW Update: Still looking for a bottom? Eric Janszen

[LargoWinch]

Re: Real DOW Update: Still looking for a bottom?

bart, I have some too!

(small difference [insert sarcasm]: unlike you, I am not the author however :p )



Data source link (see bottom right):
http://dshort.com/charts/dow.html?do...900-real-notes

[ASH]

Re: Real DOW Update: Still looking for a bottom?

I've kept quiet about that 1.64% figure he uses, even though it has some problems, since it truly is close enough and is quite workable too.

"Some problems" include that it is, apparently, an exponential fit to just two data points -- and the two data points were found by averaging across a pair of 35-year periods. Taking the average value is basically a zero-growth model, so that is kind of inconsistent with turning right around and fitting the two averages to an exponential growth model.

I'm actually much relieved to learn that your data treatment is turning up similar types of numbers.

[wayiwalk]

Re: Real DOW Update: Still looking for a bottom?

Just curious - when working this data - have adjustments to the DOW been made for the companies that were removed (due to their failure) from the DOW and replaced with "similar" companies?

How would the current DOW look if the current batch of failures (avoided by bailout) were allowed to fall to their true values.

Just questions that come to mind when trying to use this data.

I'm tempted to dig up notes from a financial analysis course I took around '99. Many iin the class thought the prof a fool (not me, maybe because I wasn't a future master of the universe type) but the guy had two good major points:

1) Include all of the factors that Bart used to come up with a real rate of return - he did his own analysis at the time and got a similar result as EJ; he strongly disagreed about the notion of 8% annual growth long before the financial folks stopped using that as a baseline.

2) Never assign a probability of zero to something that COULD happen...which in hindsight is reminiscent of the black swan theory.

[bart]

Re: Real DOW Update: Still looking for a bottom?

Thank you Bart. Very interesting the GDP adjusted for CPI and lies. Looks like GDP started down as the FIRE economy took over.

My pleasure, and do also note that I'm playing a bit fast & loose with replacing the GDP deflator with CPI or CPI w/o lies, but they sure are closer than the bogus deflator.

Nothing like the way things come together when the truth is the basic goal.

[orion]

Re: Real DOW Update: Still looking for a bottom?

Thank you Bart. Very interesting the GDP adjusted for CPI and lies. Looks like GDP started down as the FIRE economy took over.

[bart]

Re: Real DOW Update: Still looking for a bottom?

Thanks Bart. I was hoping you would have more of the time line for this graph to compare with DOW;



I have found a graph at (http://soffistique.livejournal.com/320943.html);



Unfortunately they don't discuss implications of graph. Maybe the relationship is just too general, at least the two normally trend upwards.

What I am looking for here is a comparison of the 1.64% increase for the Real DOW that iTulip uses and the real potential GDP that EJ uses in the Modern Depression thread (http://www.itulip.com/forums/showthr...0285#post80285). The RP-GDP is such a smooth curve it must be based on some fixed assumption of growth but I can't find it.

Thankfully, I have the data before 1980 and it was trivial to put together a new chart. I elected to use a log based chart since it seems to show the relationships better.




I hope it helps, but I suspect you'll have to ask EJ about GDP or RP GDP vs. the Dow, and also his assumptions. It's far from my strong suit and I don't want to second guess him.

I've kept quiet about that 1.64% figure he uses, even though it has some problems, since it truly is close enough and is quite workable too. Almost any way one can statistically approach something like Dow real returns has problems and shortcomings, and that very much includes my own work.

[bart]

Re: Real DOW Update: Still looking for a bottom?

Bart,

Actually these are quite interesting -- also keep in mind the points that I raised earlier about the shift over the last thirty years from single income families to double income families, and of course how the income/wealth is distributed across the population, and you may come to some very interesting conclusions.

Very much so, Rajiv, and thanks for those links to the income decile data too. I've added a task on my ever growing list to both study them and incorporate the data into some new charts.

At one time I thought that I had an ok handle on the major factors, but the more I dig in and research the area the more I realize how much I'm missing in order to paint a truly inclusive picture.
I was aware of the strong trend in the last 30+ years to dual income families, and view it as the primary method for most families to help counteract inflation... while not realizing that what they're fighting is inflation itself and not all the other horse puckey that media, Wall St. etc. are pushing.

[orion]

Re: Real DOW Update: Still looking for a bottom?

Thanks Bart. I was hoping you would have more of the time line for this graph to compare with DOW;



I have found a graph at (http://soffistique.livejournal.com/320943.html);



Unfortunately they don't discuss implications of graph. Maybe the relationship is just too general, at least the two normally trend upwards.

What I am looking for here is a comparison of the 1.64% increase for the Real DOW that iTulip uses and the real potential GDP that EJ uses in the Modern Depression thread (http://www.itulip.com/forums/showthr...0285#post80285). The RP-GDP is such a smooth curve it must be based on some fixed assumption of growth but I can't find it.

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

Also two links for you
(TABLES AND FIGURES UPDATED TO 2006 in Excel format, July 2008)

and
Summary for the broader public "Striking it Richer: The Evolution of Top Incomes in the United States", updated March 2008

from Emmanuel Saez' site

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

Bart,

Actually these are quite interesting -- also keep in mind the points that I raised earlier about the shift over the last thirty years from single income families to double income families, and of course how the income/wealth is distributed across the population, and you may come to some very interesting conclusions.

[bart]

Re: Real DOW Update: Still looking for a bottom?

Bart,

Thanks for the very nice graphs. Could you do one more with the various Dow's vs GDP or GNP? Do you have any thoughts on a correlation between GNP and Dow? Thanks again.

I've never done much with GDP or GNP or GDI analysis and the Dow, mostly because my focus and time is spent on inflation, the hard vs. paper asset cycle, and money creation factors. I'm sure there's some correlation though.

All I have on GDP, etc. are charts like these.

[bart]

Re: Real DOW Update: Still looking for a bottom?

If that was the case, I would marry myself! :p

It seems like this might apply to both of us then:

http://www.nowandfutures.com/grins/kinky.wav ;)

[bart]

Re: Real DOW Update: Still looking for a bottom?

Bart,

thanks for the charts on the shadow stat's corrections. It's interesting to see that although we are well below trendline there, the overshoots could still be quite substantial.

EasternBelle

You're welcome, and very much so on overshoots. Its just another view on the basic truth that EJ shows in the iTulip chart too.

[orion]

Re: Real DOW Update: Still looking for a bottom?

Bart,

Thanks for the very nice graphs. Could you do one more with the various Dow's vs GDP or GNP? Do you have any thoughts on a correlation between GNP and Dow? Thanks again.

[LargoWinch]

Re: Real DOW Update: Still looking for a bottom?

You're most welcome.

Too bad you're not female, single, gorgeous & rich... ;)

If that was the case, I would marry myself! :p