A.I.M. Users Bulletin Board

[SFSecurity]

Hi Is7550, Thanks for this analysis. I would expect that AIM would correlate with stocks as the S&P is solely the 500 biggest stocks. What I would like to know is what are the results of the 9 sets of cycles. Also, where did you get the S&P back to 1876 and the inflation figures as well?

At http://www.in2013dollars.com/ you can get what they calculate it to be, but you would have to go year by year to get it and that is a pain. Then there is always the question of how did they come up with the figure in the first place. It's a gypsy mystery.

BTW, when I was talking about selection basis in reference to your link about an analysis of the Ivory Portfolio, I found that looking at the inflation figures given by http://www.in2013dollars.com/ was a perfect example of this type of bias.

If you go back as far as they cover, historical inflation for 1665 - 2014 is only 0.94%/year but if one only goes back 50 years to 1964 the rate is 4.12%/year. Then if you go back 10 years it is 2.37%/year. Which one should one use to plan for your future needs? Tough call, but I would use the 50 year one and add in a fudge factor as they have been f$%^ing with the way inflation has been calculated. At least with the DOW or the S%P 500 you can look at how they come up with their figures and see what biases there might be, such as moving the selection around as the DOW does. Another example of selection bias.

To show a different view of inflation take a 1964 Chevy Impala. It had a Manufacturers Suggested Retail price of $2,779. The current one, roughly, is $27,670. Granted there are a bunch of newer requirements compared to the 1964 model so a direct comparison is almost impossible, but as a rough guide it has to do for cars. This is 4.7%/year.

The concept behind Chained CPI (which is what the Republicans are pushing for SS beneficiaries) is that if steak is too high then you will move to a cheaper cut of beef and therefore inflation is less in real purchasing terms. Great, but what do you do when you need medical care and the price is sky high? If you have enough money you pay, if not then you do without, therefore you really didn't need that medical care, did you?

The actual alternative is go overseas. A friend of a friend (before the Affordable Care Act) had no insurance and blew out his knee. He hunted around in the US and the best he could do was about $150,000. He finally went to Belgium and paid just over $15,000, including his travel and meals and stay while recovering enough to travel safely, about a month if I recall correctly.

There is an interesting PDF from the Social Security Administration at http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p73.pdf. On the right of the graph you can see the results of Chained CPI.

Anyway, as has been said, there are liars, damned liars and statisticians. Personally I tend to substitute politicians for the last in the list. Most people drink deeply at the well of knowledge, politicians only gargle is the way I think of that class of "humans."

Best,

Allen