jungle

Interesting comparison and it raises some interesting questions.

Reality Check: The Dow Jones Industrial Average Vs. Bananas | Zero Hedge

DYNASTY HVY

What goes up must come down at some point !

Patts

Not sure why the DOW gets so much attention. Its only 30 company's. Doesn't represent much of the market.

rickair7777

Cute, but cherry-picking a single commodity to compare to the Dow (which should be somewhat representative of the economy as a whole) is like comparing a single stock to the Dow...you can find both winners and losers.

If you averaged all commodities across all sectors, I suspect that would closely approximate the economy, and thus probably the Dow as well.

UnderOveur

Looking at the indexes today is a worthless and meaningless exercise. Each and every one is thoroughly manipulated. (Ex: see LIBOR)

Winged Wheeler

Quickly,

I'll take the DBC etf as a proxy for all commodities. It's correlation with the DIA etf (proxy for the DJIA) is .52 and the DBC correlation with the VTI etf (total US equity index) is .54. The correlation between the DIA and the VTI is .98.

Here is the link if you'd like to see charts or test others:

Correlation Tracker - Select Sector SPDRs

WW

Winged Wheeler

I look at the indices all the time and I make a lot of money doing it. I disagree that it is worthless.

The construction of the indices in US equity markets is not complex and is transparent, as far as I am aware. Can you defend the claim that the indices are manipulated?

LIBOR is a rate, not an index.

WW

UnderOveur

I used the absolutely and thoroughly disgusting true story of the LIBOR manipulation as a proxy for my contention. Additionally, Google: "the Greenspan Put".

You say the indicies aren't manipulated? What do you call "too-big-to-fail" and all the bank bailouts, then? Had the banks not been bailed out and allowed to fail (ie. "free market" = no intervention), where do you think the DOW might be today?

A: Sure as heck not setting new all-time highs.

Yes, the markets are most definitely manipulated. There is NO question of it. LIBOR and "too-big-to-fail" are the best known examples of it. There are plenty more. Research how the Silver market has been manipulated, and/or how the world's central banks are manipulating the price of Gold (hint: the price of Gold is a proxy for how "the markets" judge Central Bank(s) policy....read: rising Gold prices are a repudiation of Central Bank policy).

The evidence is overwhelming...and making money "trading" the indices doesn't preclude these facts in any way.

Winged Wheeler

Lots of ground to cover here and I have limited time, so I will return to this several times.

Regardless of how disgusting it is/was, the LIBOR scandal is associated with rates. It is tangentially associated with any equity index. You are certainly entitled to your opinion, as am I. My opinion is that you have constructed a deeply flawed model and your conclusions about equity indices are, at best, suspect, and are possibly meritless.

WW

Winged Wheeler

Manipulation of a certain company or a certain element of the financial system is not the same thing as a manipulation of an equity index.

Like LIBOR, TBTF was a problem that was exacerbated by gov't/central banks. This was clearly a type of manipulation of the financial services sector of the economy; however, this is (again) only tangentially related to an equity index.

The economy tried to give us a 21st century financial system. Central planners thwarted this; they saved and enlarged our 20th century financial system. We are all poorer for this.

Had their been no intervention and had the market been allowed to operate without FED/gov't/TBTF interference I think that we would have hit a lower low on the DJIA, but it would have been a true bottom. 4 years on, the DJIA would be at least as high as it is now but unemployment would be lower, gdp growth would be higher, and we would have amassed much less public debt.

Free markets=peace, liberty, and prosperity.

WW