Exercises in Nominal Reality, a Play in Three Acts. (Act I)
By Marla Singer and Geoffrey Batt
Like a buzzing mosquito inside the netting over your bed, wings on the heavy Mustique air, humming a small pinhole of bright light through the dark veil of your dreams of unbridled success, we have been annoyed by the constant propensity of even learned economists to measure the performance of equity markets in nominal terms. "Worst decade for stocks since [horrific period marker]!" is only the most egregious (not necessarily the most common) offender in this respect. In truth, we have long failed to see the logic of measuring performance in nominal terms (our sporadic gold denominated S&P 500 posts are a good example).
In the long run, performance matters only if it increases wealth, and it makes little sense to speak of wealth unless it is relative to purchasing power. To ignore this little point would elevate, say, Weimar fund managers circa 1923 to levels that would make Soros look like Scotsman Capital's Vince Farrell. Let us then undertake together a brief adventure in the measuring of real, rather than nominal performance.
Today, in a preview of a much larger Zero Hedge project on all the CPI components, we offer the S&P 500 index since 1980 denominated in four individual CPI components with annotated starting and ending values:
Or, in layman's terms, you are fat, Vitamin C deficient1, sick2, and uneducated3, but well indoctrinated4.
We couldn't have planned this better. Now watch some commercials and get out there and buy some consumer goods. We have GDP numbers to revise.
- 1. Not Seasonally Adjusted, U.S. city average, Oranges, including tangerines, Base Period: 1982-84=100
- 2. Seasonally Adjusted, U.S. city average, Prescription drugs, Base Period: 1982-84=100
- 3. Seasonally Adjusted, U.S. city average, College tuition and fees, Base Period: 1982-84=100
- 4. Not Seasonally Adjusted, U.S. city average, Televisions, Base Period: 1982-84=100 - corrected to reflect correct series ending datapoint of 1095.63
(3 votes)
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on Tue, 12/22/2009 - 18:02
#172147
Oh Marla.... THANK YOU!!! FINALLY!!! Someone using real prices, not CPI!
That's just damn sexy.
on Tue, 12/22/2009 - 18:06
#172149
I'm sensing a surge in Marla's participation and it feels good,,,some good stuff in the last 24hr,,,thanks babe...
Makes us all more creative..
on Tue, 12/22/2009 - 18:08
#172152
LOL for Televisions LOL!!!
on Tue, 12/22/2009 - 19:39
#172232
Simpsons: Kent Brockman on the media and government. I'm sure this is taken down repeatedly.
http://www.youtube.com/watch?v=b6m1hVTUqaQ
on Tue, 12/22/2009 - 18:11
#172154
All roads lead to CPI rome hell?
on Tue, 12/22/2009 - 18:18
#172156
It's no longer the CPI, it's the survival index.... The basket is variable, Hedonic regression/ Substitution...
on Tue, 12/22/2009 - 18:26
#172165
You write like an angel. Super comparison and I have not owned a TV for 3 years. Still, without TV, it remains hard to avoid the propaganda poison from the MSM.
on Tue, 12/22/2009 - 19:17
#172214
no, that first line-a is incoherent
a netting over the bed...what fucking country is she in...it's distracting
and the entire argumento is the hackneyed and stock commento of the regular crowd of dissenters
and when you thought she write like an angel, was your hands clasped and your eyes staring to the sky
and the condescending tone, that marla, a female persona, can come up-a with something
'you write like an angel'...you're finito
on Tue, 12/22/2009 - 19:50
#172242
on Tue, 12/22/2009 - 20:21
#172269
marla, sexy and angelic contributor to zerohedge, would you-a like-a to meet-a me there?
what-a you get when a persona meet a persona?
another date for you, no?
on Tue, 12/22/2009 - 21:30
#172316
You want to throw down. OK. Bring it. I know your type. Coward. You will suck a bone for a bag of beans. You want the government to save you. Sir, what you will be is bad fertilizer for heros plants.
on Wed, 12/23/2009 - 11:04
#172613
Dude, you're raging against a midget Italian plumber.
I am Chumbawamba.
on Wed, 12/23/2009 - 11:16
#172624
Ma va bene perche lui, nostro amico Signore Fiasco, e veramente molto comico. Mi piace abbastanza le cose che lui posti per noi.
on Tue, 12/22/2009 - 21:20
#172312
I want to respond, but the spray coming out of your mouth in incoherent. Let me be nice and ask you to take the bannana out of your mouth, before you speak.
on Tue, 12/22/2009 - 18:27
#172166
Nothing a little all-out deflationary holocaust can't fix.
on Tue, 12/22/2009 - 18:34
#172171
Well, it looks like those academic economists have been doing just fine. Maybe one of them can do an analysis of how they're insented to continue the inflation. Ooops. Time to shut up
on Tue, 12/22/2009 - 18:37
#172174
Great one! This is what I'm always spouting about. People say our standard of living has increased and I say "If you are gauging your standard based on the size and shape of your TV maybe but otherwise NO NO NO NO NO NO NO NO NO". The things we DON'T NEED (flat screen tvs, clothes that fall apart in 6 months etc) are cheaper thanks to shipping all of our jobs overseas but the things we do need just keep getting more and more expensive (education, healthcare, quality food)
on Tue, 12/22/2009 - 19:00
#172193
I will bite.
Two pronged question:
1) On education. Can you please show me that "we need" people getting B.A.'s in English or History while going into debt? At least paying this at a place like Harvard seems to be worth it because you buy prestige and maybe connections...but at Michigan State? Oklahoma?
2) On quality of food. I challenge you to prove that the quality of food for the average person has declined.
on Tue, 12/22/2009 - 19:45
#172238
Yes, it's always better to be ignorant of history. Great post. +1,000 asshat
(no offence Asshat).
on Tue, 12/22/2009 - 20:36
#172279
Or, crazy idea, instead of paying 50,000 a year to sit around in a 500 person lecture hall for four years and be read at you could, again crazy idea, go learn history.
But whatever you choose, how is it exactly the fault of the 'evil godlman sacs' that a bunch of high school kids choose to get a degree that by itself produces no financial benefit and that weighs them down for the rest of their lives.
Or is it a birth right to get tertiary education, in random liberal arts, for free? Just like its a birth right to have 70 dollars an hour union jobs for high school drop outs with benefits, forever.
My bad.
on Wed, 12/23/2009 - 14:15
#172866
Your question/challenges are off topic. Are you denying that food prices, medical care, education prices have outpaced wage increases?
on Tue, 12/22/2009 - 23:38
#172394
You may also want to consider that the things you quote as getting more expensive are all things supplied (or funded/subsidized/regulated) primarily by the State.
Healthcare that is paid in CASH is cheaper than ever. How much did Lasik surgery cost at first. How much now? Same goes for cosmetic surgeries, etc.
"TV sets are getting smaller and smaller, and bigger and bigger. Soon the medium-sized set will be a thing of the past."
on Tue, 12/22/2009 - 18:38
#172175
I must say....
ZEROHEDGE IS ON F-ing FIRE RIGHT NOW.
THE QUALITY OF YOUR WORK IS UNREAL.
ZEROHEDGE IS THE #1 FINANCIAL WEBSITE IN THE WORLD (period end of story)
YOU ARE BEATING EVERY OTHER MEDIA OUTLET LIKE CHRIS BROWN BEATS HIS GIRL
on Tue, 12/22/2009 - 18:42
#172177
Would be interesting to see this all normalized by population growth (i.e., per capita growth in the SP500) to see how much our individual slice of the wealth pie has grown (i.e., drastically declined) over the decades.
Better yet, normalize by number of households.
on Tue, 12/22/2009 - 19:13
#172210
relative price comparison does not need further
normalization.
your question is actually of a different nature...
take your income as a ratio of national income..
or determine into which income decile you fall into
over time to find out about pie slices...
on Tue, 12/22/2009 - 18:50
#172182
act 2 pronto please.
on Tue, 12/22/2009 - 18:53
#172186
A good measure is using the price of stamps btw
- Inflation occurs at the margin.
on Tue, 12/22/2009 - 19:10
#172198
It is this sort of thought and excellence that make ZH outstanding above all others.
Sheeople are fed too much with Hopium to dull the brains lest they rise up and protest
Thank you ZH for keeping the air clear
on Tue, 12/22/2009 - 19:07
#172205
With the ramp on the TV CPI - every household having at least one flat panel by now and a couple of CRTs - the S&P should be at 10,000. Education is holding us back.
on Tue, 12/22/2009 - 19:13
#172211
And I am so much better off because my old Pentium 90 cost more than my quad core and I can type so much .... uh faste..r... with a qu..a..d core, compared to, my 90?
on Wed, 12/23/2009 - 01:37
#172437
Sorry, I'm still waiting for your avatar to download through my 9600 baud modem.
on Wed, 12/23/2009 - 12:46
#172766
9600 baud...fb I remember those days..
on Wed, 12/23/2009 - 15:35
#172980
'mano a mano' Warcraft I with my buddy 0.5 mile away:
http://www.youtube.com/watch?v=Qtqz0bdq30Q
on Tue, 12/22/2009 - 19:24
#172222
"Or, in layman's terms, you are fat, Vitamin C deficient, sick, and uneducated, but well indoctrinated."
I thought you said no personal attacks? You're mean. I'm telling Tyler.
on Tue, 12/22/2009 - 20:09
#172250
the ironic thing is that there are very few mosquitoes there but one Walter Noel (of Fairfield Greenwich / Madoff fame) spends time there in one of his two villas:
one for his friends that he rents out
http://www.mustique-island.com/the_villa_collection/villa_08.php
and one for he and the misses a lovely hill top villa called "Discovery" where he hides out (so to speak)
http://web.archive.org/web/20010826194254/mustique-island.com/images/dis...
on Tue, 12/22/2009 - 20:31
#172274
1095.63. Not even a well gamed system. Do you suppose it is contempt or just not caring if it is obovious?
on Tue, 12/22/2009 - 20:50
#172288
everthing I know I learnt frum tv...
on Tue, 12/22/2009 - 20:54
#172290
And don't forget that most people make stock purchases through their retirement plans every two weeks or every four weeks. As the S&P 500 trended higher during the great bull market of 1982-2000, people were buying in at ever higher prices (the pullbacks were short lived). This means that peoples' cost basis was way, way over the low of 1982 (which I'm guessing you used in this analysis for performance measures). In fact, at the low in March, the person buying stocks every two weeks, every four weeks, or even once a month since the 1982 low had actually lost money on his/her investment since that time.
What I am basically trying to say is that your argument is even stronger than I think you realize.
Keep up the great work!
on Tue, 12/22/2009 - 21:21
#172313
You know, from everything I have heard, anyone in your Los Vegas who was this obovious at any of those casino's would just disappear. Sorry, he (or she) checked out last week. We have no idea where they are.
Don't you wish the solution was that simple?
Unfortunately, real world is more complicated than that.
on Tue, 12/22/2009 - 21:56
#172333
This is great, I recently shared an analysis of a few CPI categories compared to gold, DJIA, and average household income appreciation (didn't include services) since 1913.
The only items to consider in this are the S&P 500 dividends (total return would make appreciation higher assuming it's not included) and the substitution in all indexes of winners for losers (only GE remains from the original DJIA and this bias would make real return less).
Hey Marla and Tyler, I am surprised you didn't do a piece on the recent substitutions in the indexes - it should have benefited the stocks that were chosen and sunk the stocks pulled out due to major index buying bias.
on Tue, 12/22/2009 - 23:45
#172395
Bingo.
Total return is the key to any such analysis.
As far as the other biases AN mentions, perhaps some kind of median investable asset analysis is in order: what were people buying? E.g. Magellan in the '80s, etc. Do some kind of Monte Carlo sim to get a sense of what the median Joe Public investor saw through the available retail lens, and what the range of outliers were.
Don't forget the total return, but also don't forget the fees.
I'd also like to see the total return which is more common and more meaningful than the cult of equity capital appreciation: the total return on the average retail bank deposit over time. That's the real measure against which the dollar should be valued.
on Tue, 12/22/2009 - 22:14
#172345
Liberate yourself. Destroy your TV, strip the cable wires off your home.
on Tue, 12/22/2009 - 23:32
#172388
It's about time we re-examined the dogma of wealth building. Why stop at the 80's? Go back even further in time and you will find that there hasn't been much wealth creation over an even longer time frame. More people chasing fewer goods leads to less wealth in my way of thinking. This may be an overly simplistic zero sum mentality but the mirage of growth fades once the inflationary impacts are factored in. The desire for economic growth is so ingrained that it is almost heresy to wish for stability.
on Wed, 12/23/2009 - 01:43
#172438
A big light went on for me when I first saw the inflation-adjusted Dow back in 2005. "Hiding a crash in plain sight" was the thought that came to mind.
No doubt, in 5 years the housing bulltards will be gloating over how their "investment" is above water again, right after bitching about paying $10 for a gallon of gas and $10,000 to replace the stolen catalytic converter on their car.
on Wed, 12/23/2009 - 03:16
#172457
What about the S&P500/Big Mac?
on Wed, 12/23/2009 - 15:36
#172983
Quem sabe nestes dias, ne?
on Wed, 12/23/2009 - 09:47
#172564
Marla Marla Marla.
An intelligent women...(pants fall off)...
*waddles around with panted ankles*
-MobBarley
on Wed, 12/23/2009 - 10:04
#172570
Could you also post the average (compound) annual return in each case? Those numbers will lay bare the absolute devastation of wealth that has taken place over the past 30 years, despite the endless torrent of BUY propaganda issued by the finance industry.
We see the record Wall St. bonuses but, as a great man once asked, "Where are the customers' yachts?"
on Wed, 12/23/2009 - 20:13
#173293
awesome and devastating! Thank you!
on Wed, 12/23/2009 - 20:14
#173294
Awesome and devastating!