Thursday, December 26, 2013

A False Sense of Securities

The following chart shows a smoothed version of 5 year annualized real S&P 500 growth (the index is adjusted for inflation as seen in the CPI).

Click to enlarge.

Each data point in the chart is constructed by creating an exponential trend over the previous 5 years of data and then using that trend to determine an annualized growth rate over the 5 year period. That's a lot of exponential curve fitting (and smoothing).

For those interested, this is what the cell contents are for that last data point.


Needless to say, I'm thankful that I did not have to calculate it by hand. Good thing we live in a modern and financially innovative age!

Let's zoom in and add some modern and financially innovative commentary to go with that data.

Click to enlarge.

Don't worry. It is different this time! In no way am I trying to imply that Sure Thing #3 will end in failure at some point just because Sure Thing #1 and Sure Thing #2 did. Heavens no. Our economy was weakened far too much by the previous two failures for there to ever be a third.

Here's the best part. As seen in the chart, I had to rotate the text for Sure Thing #3 a bit extra. That means Sure Thing #3 is the steepest sure thing yet! To infinity and beyond! What an awesome story! What could possibly go wrong?

This is definitely not investment advice.

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart


Stagflationary Mark said...

Speed wobble

If there is insufficient damping in the steering the oscillation will increase until system failure.

I'm told by the financial experts that we're only accelerating to the upside from here though and that it is virtually impossible for the stock market to actually fall again. If true, that means we are no longer oscillating! Woohoo!

If "ifs" and "buts" were candy and nuts, we'd all have a merry Christmas.

To rephrase it: if all these reasons why we can't do something were party foods instead of words, we could have a really great party.

Party foods! Really great party! Yes! Woohoo! ;)

(This comment inspired by Rob Dawg who first used the "tank-slapper" term in the comments of this blog.)

Stagflationary Mark said...

Don't let it concern you that...

1. Sure Thing #1 lasted about 5 years.
2. Sure Thing #2 lasted about 5 years.
3. Sure Thing #3 is about 5 years old.

I refuse to be Debbie Downer. I am not ruining this party! ;)

Rob Dawg said...

So you are saying that the returns I've seen since March aren't normal?

P.S. thanks for going to the trouble of understanding a tank slapper and why it applies to more systems than just motorcycles.

Stagflationary Mark said...

Rob Dawg,

So you are saying that the returns I've seen since March aren't normal?

Abby Normal?