Chart Crimes and the Knicks
Every bull market eventually produces the same chart. Two lines move together. One line curves into a steep drop while the other hangs at the peak. What’s going on? The chart shows today’s market overlaid against a famous bubble. The timeframes are compressed, and it gets shared on social media before anyone checks the scale. The dot-com bubble soared roughly 400% over nearly a decade. The current bull market is up about 100% in 44 months. Posting a chart of one of these over the other isn’t market analysis. It’s a chart crime.
Two other false indicators are making the rounds today, but these are more obviously suspicious.
The Knickerbocker Indicator
The New York Knicks won the Eastern Conference in the NBA in 1999 and went on to lose to the San Antonio Spurs. The tech bubble burst shortly after and the Knicks never made it back to the finals… until this year. The Knicks beat the Cavs to make it to the Finals and now face… the San Antonio Spurs.
The Inseam Indicator
My current favorite indicator has a statistically significant fit with the Fed Funds Rate. If I put the raw data on a scatter plot and projected interest rates into the future, it expects the Fed Funds rate to hit 11% during Kevin Warsh’s tenure as Federal Reserve Chairman. The secret indicator? The height of the Federal Reserve Chair. This works through Paul Volcker’s 6’7” frame coinciding with 20% rates plus Janet Yellen’s 5’3” stature lining up with a 1.5% interest rate peak. Newly confirmed Fed Chair Kevin Warsh is 6’1”.
Wealth isn’t destroyed by a Knicks playoff run or the height of a Federal Reserve official. It’s lost by abandoning a financial plan. Investors should focus on factors that have historically mattered such as their own behavior, taxes, and expenses.
