Jun

4

Inspired by the Berkeley astronomers in The Education of A Speculator, below is a chart of log CPI (monthly, 1928-present, FRED) vs contemporaneous log DJIA monthly closes.

Log CPI ranged between 1.1 and 2.3 during this period. Beginning at the lower left, the downward squiggle was the depression - when CPI declined along with stocks. Then both stocks and CPI rose (irregularly) in tandem, from CPI ~1.13 to 1.5, from the 1940's to the mid 60's. CPI increased from 1.5 in 1965 to 2 in 1983 - a period which saw no net change in stocks, with log DOW stuck below 3. The great bull market 1983-2000 occurred while CPI rose from 2 to 2.2.

The last decade is depicted by the squiggles at the upper right, ending with a miniature retracement of the 1930's style cpi/stock decline followed by increase.


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