Aug

2

 Kim Zussman sent me this paper "Sunspots, GDP, and the Stock Market"

The paper strikes me as an affront to the scientific methodology. Here are a few dubious quotes from the Conclusion:

The calculations yield a rock-bottom level of 7919 for the DJIA in early 2014,

On the contrary, one is surprised that the correlation between DJIA and GDP turns out to be scientifically insignificant. Are our scientific criteria too stringent in this case?

If one accepts that there must be some correlation between GDP growth and stock-market growth as displayed in Fig. 5, then one cannot use the lack of scientific proof as an argument against the existence of correlation between the stock market and sunspots (Fig. 2), or between GDP and sunspots (Fig. 4).


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2 Comments so far

  1. Craig Bowles on August 3, 2013 12:53 pm

    Even short-term, you often see sunspots back off and then stocks struggle. A sunspot pullback is kind of like barometric pressure falling below 30 in that it puts you on alert but you can’t otherwise trade it. Generally, sunspots have remained rangebound fluctuating between 50-100 since the high at the end of 2011.

    Iben Browning said the link to GDP is more complex. His view was that increased tidal pressure on the earth increases volcanic activity. The volcanic activity cools those latitudes as the ash spreads. (We saw this a few years ago in the northeast after all that volcanic activity in Alaska and the tip of Russia. It was a really cool, wet summer.) Browning’s point was if you have cooling at northern latitudes (lowering the circumpolar vortex is the cool phrase he used) and active solar activity warming the equatorial areas, the jet stream whips up and down wildly. (Remember the drought in the farming belt at the same time we had our cool, wet northeast.) Farmers hate this, because they want more stable growing conditions. People have to put a greater percentage of their income into necessity items, so have less disposable income. The economy slows.

    The temperate regions that are less regulated (historically the US) have been able to adjust. Places like India which can really suffer when monsoons are delayed are more likely affected by less stable conditions. The regulations on farmers in a place like India make adjusting to unstable conditions even more difficult. This was a real problem in the 1970s for India, so we kept shipping them more milk. (Lactose intolerant people can only use milk to whitewash fences.) India’s population has doubled or tripled since then.

  2. Craig Bowles on August 12, 2013 3:23 pm

    Maybe the reason why sunspots have remained relatively high since the late 2011 peak is the peak is still ahead… http://www.lewrockwell.com/2013/08/no_author/warning-solar-maximum-ahead/

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