At the risk of telling all to be calm before a crash….I offer the below chart as an antidote to the 2014/1929 'analogue' stuff flying through cyberspace at the moment.

One hopes Messrs Stigler & Lorie would be proud of me.

Phil McDonnell adds: 

One of the common caveats in looking at correlations and analogs is that the correlation should be based on price changes rather than price levels. Using levels leads to spurious high correlations in both directions.

My concern is that using charts of price levels is essentially the same thing as calculating a correlation based on levels. It will lead to spurious conclusions.





Speak your mind

2 Comments so far

  1. Andrew Goodwin on February 19, 2014 11:15 pm

    Whether or not the chart is of any prospective value, you would not have done well trading that spread from 1920 ’til 1924 on a convergence theory one might admit?

  2. Ed on February 20, 2014 11:28 pm

    If this ends up working, we will be hearing about the German potato cropland indicator for the next 30 years. I can see it being added to all the chart packages as a seasonal study.


Resources & Links