The financial media is a great, if unintentional, source of entertainment -- provided you know how to assess the welter of facts, half-truths, bald-faced lies, and scurrilous rumors continuously circulating in that world. Needing, as ever, to hold investors' attention, journalists seem to latch onto virtually any story and try to infuse it with meaning.
Thanks! But I'm the preeminent one, that's a Bad Thing. I welcome company. And we used to have more people that did it, some of the serious MPT theorists, and I miss them. But I'm glad to see more and more people are making a practice of viewing and posting relevant growth charts. I'm a semiretired software engineer whose career has been a bit like the feather in the opening titles of Forrest Gump, was a grad student, took Statistics 101 once, had to do stuff for my thesis, etc.hicabob wrote:nisiprius, I'm curious as to your profession? You have to be the preeminent data visualization expert on the board!
nisiprius wrote:I'd also feel better if I thought people were occasionally checking my work...
john94549 wrote:Anybody else notice the Big Dipper (the constellation) in the lower of Nisi's two charts? Look to the right, mid-way down. The North Star, however, is missing. Bad omen?
O...M...G! You're right! How could I have missed it?john94549 wrote:Anybody else notice the Big Dipper (the constellation) in the lower of Nisi's two charts? Look to the right, mid-way down. The North Star, however, is missing. Bad omen?
I don't see the "of course" here at all. Why couldn't the valuations be lower precisely because expected returns are lower? To say "expected returns are now higher," aren't you implicitly making some assumption, such as that the true value of any business is always stable--or that dividends never get reduced after stock prices fall--or, at least, that the true value of all American business taken collectively is always stable?larryswedroe wrote:Of course if you have a bad year in market generally it means VALUATIONS are lower, which in turn means that EXPECTED returns are now higher. Now of course there is no guarantee that will happen, as the expected returns include a wide dispersion around the mean of the distribution.
I misunderstood the word "valuation." The implicit assumption is, then, that P/E has some kind of natural "normal" value to which it tends to return.larryswedroe wrote:There are two possible explanations for market falling, earnings fall due to bad economy (while P/Es can remain the same) or earnings can remain the same but P/Es fall... by valuations I mean P/E. Valuations are lower not because expected returns are lower but because perception of risk is higher, markets price for RISK. No such assumption about stability of valuations is being made, don't know why you had that idea.
nisiprius wrote:And I first learned about Edward Tufte's The Visual Presentation of Quantitative Information first book in one of the Whole Earth Catalogs, read it, and it made a huge impression on me. I've bought all of his books, actually, but the most recent ones are a little self-indulgent and not quite as wonderful as the early ones.
An irony is that the current version of Excel, which I use because I have it and don't want to spend money on anything else, has a "sparkline" feature in the current version--derived from Tufte's work, I assume. So someone at Microsoft knows about Tufte. Yet, Excel's charting features are about 10% devoted to producing "data ink" and 90% devoted to producing bedazzling "chartjunk." A gazillion ways of adding a data-free three-dimensional appearance to a bar chart, and not one way to produce a properly graduated logarithmic scale.umfundi wrote:I always enjoyed his characterization of crosshatching patterns on bar charts and other graphs as "chartjunk"
The implicit assumption is, then, that P/E has some kind of natural "normal" value to which it tends to return.
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