Wednesday, October 29, 2008

"According to the researchers, the revised index doesn’t do a better job of reflecting presidential approval ratings than the original."

So, now, along with the Consumer Confidence Index, which is at its lowest point in history, and the VIX is to to its highest point in decades, and the Misery Index is the highest it's been since 1982:

"By any measure, the U.S. is pretty miserable right now.

misery_cs_20081029100445.jpg
Source: Peterson Institute

Yesterday, the Conference Board reported that the consumer confidence index hit the lowest level in its history. The was presaged by a rise in the so-called misery index. The measure was created by Arthur Okun in the 1970s and consists of adding the inflation rate to the unemployment rate. The index was at 13.5 in the first half of the year. That isn’t a historical high, but was the highest level seen since 1982.

As inflation starts to recede and the misery index retreats, Gary Hufbauer, Jisun Kim and Howard Rosen of the Peterson Institute propose a revised version of the misery index that includes asset price measures. “Building on these commonplace observations, we tried adding a housing price index and the S&P 500 index to Okun’s two original components, inflation and unemployment,” they wrote."

I'm willing to base a derivative on any of these indices:

"Essentially any risk that has an objectively observable event and an objectively measureable associated magnitude can be assigned a financial component and allocated using a derivative contract. There are derivative markets for risks tied to weather, energy products, interest rates, currency, etc. Wherever there is a business or regulatory motivation, financial products will appear to meet the demand."

Any takers?

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