From the paper which has the widest circulation in the US, USA Today, we have Matt Krantz writing on: S&P's run leaves Wal-Mart, other big caps behind.
For a quarter of the stock market, the celebration about the Standard & Poor's 500's charge back to record levels for the first time in more than seven years is an example of history being written by the victors.
Even though the benchmark S&P index last week finally took out its old high from March 2000, investors who own 23% of its stocks have completely missed out. A total of 115 stocks in the S&P 500-stock index are still below where they were in March 2000, according to data from Bridge Information and S&P.
Oh my fuckin' god! This is by far the stoopidest thing I have seen in the MSM, and this blog has seen some spectacularly stoopid things.
The S&P 500 is an index; hence it's a weighted average of the prices of 500 stocks.
The main property of an average (either weighted or unweighted) is that some of the values must be greater than or equal to it, and some of them must be less than or equal to it.
Quite specifically, the largest value must be greater than or equal to the average, and the smallest value must be less than or equal to the average.
Hence, some of the stocks of the index must lead the index, and some must lag the index (unless all 500 have exactly the same return in which case they will be equal to the index.)
That's what makes the average the fuckin' average!
So the statement that "first time in seven years ... history written by victors" is completely ridiculous.
The point is that the "victors lead the index" is always true at all points in time because it's a mathematical tautology. And forget the S&P because it is true of all indices that are averages (stocks, bonds, currencies, whatever!)
This is the most content-free article I have seen in a long time, and speaks volumes about the quality of mathematics education in this country, and it speaks even larger volumes about the intended audience because they are too stoopid to read a paper critically.
They are truly sheeple!
Subscribe to:
Post Comments (Atom)
1 comment:
There's a small difference between weighting the prices of 500 stocks, and weighting the returns of 500 stocks.
I'm perfectly aware of the difference but trust me, the mathematics works itself out; and the article is correct (even though a few statements may be slightly misleading.)
Post a Comment