July 31, 2009 · 8:01 pm

Correlation is not causation

I’m extremely skeptical of any theory that events of the past foretell the future, and I don’t give a fig for astrology but nonetheless, this chart reprinted in BusinessInsider is kind of cool, in a “gee, what if…” sense.

dow chart 1930

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6 Responses to Correlation is not causation

  1. Lorin
    July 31, 2009 at 8:59 pm

    Oh dear………look out beloooooowwwww???

  2. Another anon
    August 1, 2009 at 1:00 am

    Really bad correlation. Check these links out instead.

    http://dshort.com/charts/bears/four-bears-large.gif

    or

    http://www.calculatedriskblog.com/2009/07/daily-show-lonely-condo-owner-and.html

    It looks to me as though the chartist chopped the first 12 months off of the current downturn and then overlaid that to the beginning of the 1929 downturn.

    There’s an old saying that goes something like “there are lies, damned lies, and then there are statistics”.

    Beware of statisticians and their damnable charts.

    At least Doug Short (and Bill McBride of Calculated Risk) have been reporting these numbers for the last 12-18 months. Their numbers/graphs may not be 100% correct either (past behaviour is no indicator of future performance blah blah blah), but they’ve at the very least not picked an arbitrary start point to begin the comparison.

    Carney and Blodgett have used Doug’s charts many times in the past, I’m not sure why Joe W. chose this chart of the day to post because, to me anyway, it seems dishonest. I believe zero hedge started that one on the blog disemination lists and I have zero faith in anything coming from zero hedge in the last 3-4 months. It seemed to start off reasonably well, but now it seems as though they are catering to the tin foil hatted audience they’ve attracted. I stopped placing any faith in that site once “Marla Singer” started flogging the Italian/Japanese Kennedy bonds issued in the 1930′s. WTF, seriously?

  3. Kidding Really??
    August 1, 2009 at 6:30 am

    for correlation fans – check out the Nasdaq 1999 – present and the Dow 1929 – 1939.

    Expect 2010 key word to be “doubledip”

  4. tom
    August 1, 2009 at 10:26 am

    the markets will trend higher as long as the government is willing to inject stimulus. It really is that simple. The second the stimulus ends, look out below. The government can keep printing money to stave off the next implosion for a very long time to come, so trying to time the impending crash (and I believe it is coming) is impossible. Past charts are only history, the future is a mystery.

  5. Net Worth Declining
    August 1, 2009 at 9:16 pm

    Your correlations are rediculous. Sorry. Over time, the stock market has been the best predictor of future economic activity. This one is going up. The private economy is trying to get this going. The economic stimulous package has not begun to take effect yet. All the activity is private enterprise and consumers.

    • christopherfountain
      August 1, 2009 at 9:31 pm

      Hey NetWorth, it’s not my correlation, I just tossed it out there. And an earlier commentator said not only is there no causation, there’s no correlation – the chart maker chopped up the stats to make his look pretty. But that said, I’m not convinced by your argument that because the market’s going up. all is well. Remember that Tom Leher song” Ze rockets go up – who cares where zey come down? Nazi, Schmazie, says Werner Von Braun”. Look out below.