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

[LargoWinch]

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

sorry... what's compelling about it? all it shows is where we are. where's the calc risk chart from mid 2006 to compare it against? where is it going?

The pig says it is going to 0!

Thats is good enough for me and probably true in real terms...

[WDCRob]

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

Yes... probably wasn't safe to assume others were familiar with CR already.

[Rajiv]

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

Metalman, it appears to be a "Calculated Risk" joke -- search for "Mortgage Pig" in google.

[EasternBelle]

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

[metalman]

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

Some pretty compelling technical analysis over at Calculated Risk tonight.

sorry... what's compelling about it? all it shows is where we are. where's the calc risk chart from mid 2006 to compare it against? where is it going?

[WDCRob]

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

Some pretty compelling technical analysis over at Calculated Risk tonight.

[Rajiv]

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

Thanks -- I think that this adds clarity to the debate.

[Sharky]

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

If the goal is estimating "real" growth instead of debt-driven illusory growth, then it seems like what you would want to do is to calculate the CAGR up to right before the recent debt-driven bubble started. Then extrapolate that curve to 2009. Otherwise, if you include the recent numbers, the curve will be biased to the upside.

It would be interesting to compare that curve to one calculated the same way for GDP.

[bart]

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

Thank you bart!

The saying; "gentlemen and a scholar" certainly applies, which to that, I would add: all around good guy.

You're most welcome.

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

[LargoWinch]

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

Thank you bart!

The saying; "gentlemen and a scholar" certainly applies, which to that, I would add: all around good guy.

[bart]

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

Bart,

Instead of a linear trend , could we have it log linear? log on the vertical?

Then we can have a direct comparison between EJs version, and that corrected for CPI+ lies

Also that may show what the real Dow Growth rate has been, rather than the 1.64% that EJ shows -- and possibly also GDP corrected appropriately on the same graph.

Thanks

I'm limited by the functions available in Excel - exponential is as close as I can get (and its basically log).
This is the best I can do on a log chart too:







As far as the very long term growth rate, I've only calculated it for the yearly return for Dow including dividends from 1/1900-12/2007:
Nominal - 6.1%
CPI corrected - 2.9%
CPI w/o lies corrected - 2.3%







Edit/add: I just did calculate the CAGR for my CPI adjusted Dow series for 1900-2007, and its 1.88%/year. If I go through 2008, it's 1.46%/year... so EJ's 1.64% is very workable.

[Rajiv]

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

What does your "growth rate" work out to?

[bart]

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

bart, am I correct to assume that your chart implies that the Dow is below its trend line in real (shadowstats) terms?

If so, that appears to be a divergence from iTulip real Dow chart no?

Or perhaps your trend line differs from iTulip's trend line, hence a direct comparison is not possible...?

First, the two charts are not directly comparable since mine uses Dow values back adjusted from the base year 2000 where iTulip's uses a ratio... but the general shape of the iTulip one matches my CPI only corrected line fairly well.

The trend lines are also different, since mine is based on the CPI w/o lies data and also covers a different time period. That's the major difference that makes valid comparisons tough.

I did just switch the chart to an exponential trend line to help out a rough comparison, and the approximate value behind the trend line is about 2.3%/year growth which seems pretty close considering that CPI w/o lies would be higher than CPI.

And yes, we are already quite a bit below the long term trend line. An overshoot is 100% normal & expected.

bart: You did a linear fit rather than an exponential, and included the entire data set -- right?

My impression is that iTulip fit a "compounding rate of growth" model rather than a straight line, and they are not including data from recent decades.

Right on both... and I mostly posted the chart to satisfy those who were also looking for a shadowstats correction. It didn't strike me that the trend line would turn into an issue, so I just switched it to exponential instead of linear to hopefully help.

It looks from here that the iTulip 1.64% value covers the period 1924-1995 (best I can tell from the referenced article), so its to be expected that my growth rate doesn't match -- even excluding that one uses CPI and the other CPI w/o lies.


Here's the new chart, the only change being to change the linear to an exponential trend line:

[Rajiv]

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

Bart,

Instead of a linear trend , could we have it log linear? log on the vertical?

Then we can have a direct comparison between EJs version, and that corrected for CPI+ lies

Also that may show what the real Dow Growth rate has been, rather than the 1.64% that EJ shows -- and possibly also GDP corrected appropriately on the same graph.

Thanks

[ASH]

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

The data and calculations are all here.

Ah. Average annual growth between the mid points between market peaks.