“Two Staggering Drunks Connected By a Long Rope”

Does the economy eventually have to catch up with the stock market – or confirm it if you will?

Or, in failing to do so, will the economy eventually drag stocks back to “reality”?

The answer to both is maybe, eventually, probably.

The financial blogosphere has come alive this week with a discussion about the equivalence or lack thereof between the economy and stock market. I liked this take I hadn’t seen before from economist Roger Farmer as quoted by Peter Coy at BusinessWeek (emphasis mine):

When he’s talking to his fellow economists, Roger Farmer describes the stock market and the economy as “co-integrated random walks.” For lay audiences he prefers a clarifying metaphor: two staggering drunks connected by a long rope. Sometimes the stock market and the economy go in the same direction, sometimes not. But tied together as they are, they can never get too far apart. “The relationship has been quite strong,” says Farmer, a Briton who teaches at the University of California at Los Angeles. “It’s one of the most stable things I’ve seen in the postwar period.”

Source:

The Stock Market and the Economy’s Apparent Disconnect (BusinessWeek)

Read Also:

The stock market and economy are two very different animals (Abnormal Returns)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. how to spot fake rolex commented on Sep 18

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  2. Energy Plans commented on Sep 23

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  3. old facebook commented on Sep 26

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  4. bitcoin loophole review 2020 commented on Sep 27

    … [Trackback]

    […] Here you will find 80153 more Information on that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  5. Bitcoin Era Review commented on Sep 28

    … [Trackback]

    […] Here you will find 41358 more Info to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  6. click here commented on Sep 30

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  7. immediate edge reviews commented on Oct 01

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  8. 토토 commented on Oct 19

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  9. data hk 2020 commented on Dec 01

    … [Trackback]

    […] There you will find 89970 more Information to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  10. replica watches commented on Dec 29

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  11. tangerine chequing account log-in commented on Jan 16

    … [Trackback]

    […] Here you will find 40978 more Info on that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]

  12. check that commented on Feb 03

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2013/03/16/two-staggering-drunks-connected-by-a-long-rope/ […]