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« ETF Update: Looking to the Internet | Main | ETF Update: A Glimmer of Hope for Growth Stocks? »

October 30, 2009



Adam -- You are quite correct in sensing our pain. My wife grew up in Green Bay, and I lived in Wisconsin long enough to form loyalties.

It was a tough day for Packer fans!



Al -- Thanks for another good example.

If more people understood causation, we would all recognize this every day.

One of my favorites is when the analysts say that if Team A's running back goes for 100 yards, they always win.

They seem to miss the concept that a team leading by a nice margin runs the ball.

Thanks again.



nice stuff and belated thanks for including me in there. The causation stuff on TV drives me nuts, it's such awful advice some casual listeners must internalize without giving a second thought.

And sorry about Packers yesterday, I imagine they'd trade losing every other game this year to win that one.

Al Brockman

Very perceptive - few people seem to understand the difference between correlation and causation. Great example (if i remember right) in the book "How to Lie With Statistics" (Should be a must read for anyone trying to understand the economy/market). There is a direct correlation between shoe size and SAT score for high school students. High school seniors are usually taking the test for the second time and usually do better. They are older and have bigger feet. No causation!!!


Morph - If you have been reading here for a while, you know that I am a big fan of Art Cashin. It is important to know what people on the floor are thinking, and Art is the best for providing that insight.

Your account of the interview is accurate, as anyone can see by going to the link as I suggested.

You might be surprised that a leading foreign exchange expert frequently writes that the causation is exactly the opposite -- stocks leading the dollar.

To suggest that something is spurious is definitely NOT saying that it is a coincidence. It means that an apparent relationship between B and C can occur if both are caused by A. In my traffic light example, the regular guy looks at the signal as do the drivers. To someone looking just at the person giving "directions" and the motorists, it may seem that the two are related. It is definitely not a coincidence, but it is a spurious relationship.

As I noted in the article, we lack the evidence to infer the causal model in this case, and I have no opinion. I do believe that many, and perhaps most, relationships you see in economic and stock market discussions are spurious. So many things are all indicators of the same phenomenon.

I hope this is a better explanation, and I appreciate your comment.



I watched the Cashin slot and think that he acquitted himself well on the accusation of inferring a causation between the dollar and stocks.
There undoubtedly is a strong inverse correlation and the manner in which the traders of forex and equities echo each other within micro seconds makes it impossible to isolate the actual causal sequence - but you are surely not suggesting that the high correlation is a coincidence? That is certainly the under-current to the suggestion that it is spurious

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