Some Market "Fun With Numbers" From Art Cashin

Art Cashin shares this amusing market "performance" anecdote which should come as no surprise to anyone who follows the uber-volatile chaos that the stock market has become.

Fun With Numbers - A friend passed along some fascinating stuff from Michael Higley’s weekly “By the Number$” note. He begins with a review of the whipsaw nature of the S&P this year:

During the first 4 months of this year through 4/29/11, the S&P 500 gained +9.1% (total return). From 4/29/11 to 10/03/11 (i.e., approximately the 5 months that ended just 2 weeks ago), the S&P 500 lost 18.6%. But in the last 9 trading days through last Friday (10/14/11), the stock index gained +11.5%. The net YTD result for the S&P 500: down 1.1% as of 10/14/11.

Higley then notes some quirks about timing:

The S&P 500 is down 1.1% (total return) YTD through Friday 10/14/11. If you were out of the market for the 3 worst trading days of 2011, your YTD gain is +16.5% (source: BTN Research).

Naturally, there is a flip side to that coin:

If you were out of the market for the 3 best trading days of 2011, your YTD loss falls to 12.7% (source: BTN Research).

That certainly makes you think again about a buy and hold strategies. Always a novel nugget in BTN.


And for those needing yet another analogy for the stock market, here is a comparison of the European daily rumormongering Groundhog Day to that tried and true staple of efficient markets - the "Town Crier"


Town Crier Attempt Produces Market Tears - It is hard to believe in an age of Twitter and Facebook, but for hundreds of years, the closest thing to a news bulletin was the update from the Town Crier. You know the bit - “Hear Ye, Hear Ye. It is ten o’clock and all is well!” Simple. Reassuring but with little or no detail.

The European banking crisis seemed to have reverted to the Town Crier system on Monday. As markets were opening around the globe yesterday, the Town Crier announced that - “It’s October 17th and all is well.” He added that the EU Finance Ministers had set themselves a hard and fast deadline for a rescue plan for the banking system. That deadline was October 23rd, which is when the EU summit is due to convene. No details. No process revealed. Just a vague reassurance.

The initial reaction of the markets was an extension of the sigh of relief rally. But, when they realized the Emperor had no clothes, things headed south.