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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Mercer-Hursh who wrote (40168)	3/10/2001 2:47:36 AM
From: lurqer	Read Replies (2) \| Respond to of 54805

In order to make it easier for those that would like to skip this topic, I'll respond to both of your posts with one. 1st post. Yes, I know "lies, damn lies and statistics". These days, though, we are dealing with a lot of factors in this area which are orders of magnitude different than they were 70 years ago or whatever. While I grow weary of defending Dent (with whom I at best only partially agree), I'll make one more stab. Fewer consumers (in the 40 to 55 age range) mean less demand - which in turn means a slower economy. It worked 70 years ago (Great Depression), it worked 25 years ago (70s secular bear and associated economic contraction), it works today (Japan). It's not complex, it's not obscure and it's not from a technologically primitive epoch. Some may agree with Dent, some will disagree and many won't care. Today has made me appreciate the last category. 2nd post First of all, half of the data is some "stock price composite" while the other half is the DJIA. Are these related? Do we in this group care about the DJIA? S&P500 might have been more generally applicable at least. If you want to graphically represent market behavior for two centuries the DJIA has the longest "track record" going back to 1896. Even it has to be extended to get to 1800. My discussion only involving the last century did not use any extended data. Secondly, what is this linear trendline created on the semi-log presentation and what does any of this have to do with inflation adjustment? As near as I can tell this has the Dow about 10,000 so how can this possibly be inflation adjusted with respect to 1800? ??? Why would you think the center channel line involves inflation adjustment? And why would you assume the inflation would be adjusted relative to 1800? Why not just keep it simple. Start with the present. Adjust the DJIA values in earlier years based on inflation. And if linear channel lines assist one in seeing the structure in the data, draw them. And, guess what folks, linear trends are at the very best rude first approximations to real trends, a reference line from which to more easily gauge variation. I've played some statistical games myself on long term trends and let me tell you that the revealing baseline was far from linear. If that mid-line is supposed to reflect the long term inflation trend ... just a guess since this is in no way clear from the context ... why would one think that a linear model of two hundred years of inflation was at all an accurate view of what actually transpired? It's a little hard to know how to respond to this. Again keeping it simple, just consider the center of the channel line as exhibiting the long term market price uptrend in the inflation adjusted data. I can imagine some interesting graphs about this data that might provide valuable information. This isn't one of them. Correctly interpreting the chart helps. In the final analysis the chart was merely meant as a "visual aid" for the more basic point of my post to which you didn't respond. We can expect a secular bear to follow the current secular bull. Both the older members of this thread and many of the companies represented in our portfolios will no longer exist at the end of that bear. Maybe we ought to give this a little thought, and devise a few preparations. lurqer