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NPR: Dow Misleading Without Including Inflation
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TOPIC: NPR: Dow Misleading Without Including Inflation
#22540
NPR: Dow Misleading Without Including Inflation 1 Year, 5 Months ago Karma: 75
From tonight's broadcast of All Things Considered from NPR: "Dow's 'Record Highs' Misleading Without Including Inflation"

While it may be the case that the MSM has attempted to put the significance of the Dow into perspective, this is the first I've heard of it.

www.npr.org/2013/03/06/173648884/dows-re...-including-inflation
agau121
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#22541
Re: NPR: Dow Misleading Without Including Inflation 1 Year, 5 Months ago Karma: 262
It's a small step in the right direction. However, even as this "expert" was debunking the "record high" for the Dow he was making factual errors himself. The most glaring was when he said that the Dow should be adjusted for inflation when calculating gains because "all statistics" are inflation-adjusted; this is simply untrue.

Putting aside the fact that NONE of the official statistics are adjusted for actual inflation; many aren't adjusted for inflation at all. Wage data, house-price data, and retail sales data are three obvious examples of statistics which should be adjusted for inflation -- but generally aren't.
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Last Edit: 2013/03/06 23:19 By Jeff Nielson.
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#22542
Re: NPR: Dow Misleading Without Including Inflation 1 Year, 5 Months ago Karma: 75
Jeff Nielson wrote:
...even as this "expert" was debunking the "record high" for the Dow he was making factual errors himself. The most glaring was when he said that the Dow should be adjusted for inflation when calculating gains because "all statistics" are inflation-adjusted; this is simply untrue.

I had not caught this error when I first listened to the piece. When I'm done with this posting, I will email him to point that out. I've emailed the Planet Money team at NPR in the past with questions and suggestions and have sometimes even received replies. They seem to recognize me at this point.

He did, however, make a few key points that I was pleased to see presented to the public, mostly a lay audience, in a way that was easy to understand and to appreciate the significance of.

1. "But the crucial thing is, no matter how great the measure of the stock market you're using is, all it tells you is how the stock market is doing. And that is not a proxy for the health of the overall economy."


2. "The stock market really only has a loose correlation with things like inflation, the overall growth of the economy, the things that really matter to us."


3. "And it's important to note that 80 percent or so of stocks are owned by the richest 10 percent of Americans.

"So if you're measuring the stock market well, and if it does reach a historic high, then all you're celebrating is the fact that the top 10 percent got a little bit richer, and I'm not convinced that's something that the media needs to be running around celebrating."
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#22551
Re: NPR: Dow Misleading Without Including Inflation 1 Year, 5 Months ago Karma: 262
Yes, there were certainly some valid/important points made. The problem when there are also errors present, some readers may identify/realize the mistakes -- and thus assume that all the analysis is invalid.

Indeed, I just caught myself incorporating a major inaccuracy in may latest commentary (mentioned in an "Editor's note"). As with this piece, the inaccuracy didn't invalidate the analysis, BUT with any/every reader who noticed that inaccuracy I would have lost credibility with respect to the rest of the piece.

Fortunately I caught the mistake quite quickly, or it could have proved a major embarrassment -- particularly given my regular preaching here on the Forum.



None of us are perfect, however for all those claiming to be "analysts" of one form or another; we simply can't afford major blunders. Out of all "commodities" credibility may be the most scarce...

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