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posted on 11 August 2017

Aaron Brown Wins Silver Bullet: Why Context Is Needed In Reading Charts

from Jeff Miller, A Dash of Insight

Aaron Brown recently wrote a careful analysis of some popular charts that lacked the needed context. As often happens, his excellent work received some attention, but probably not as much as the original post. He deserves more recognition. That is the purpose of the Silver Bullet Award.


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For several years I have highlighted work that represents strong, factual analysis and is not influenced by popularity or page views. One must be like the “Lone Ranger" so I called it the Silver Bullet. Trying to get more recognition for these first-rate posts, I am now highlighting them in a new and separate series (rather than inclusion in my regular weekly updates). I hope that readers and past winners will join me in highlighting this important work.

This Week’s Award - Aaron Brown

One of the most popular market topics is crash risk. The idea that stocks are fully valued and upside is limited seems to be a required part of any current commentary. More and more popular work claims that a crash may be imminent.

Here is the chart pack from a recent article on this theme.

Graphics have a tremendous power on readers, regardless of the actual relevance. Context is required. Enter Aaron Brown!

In a carefully nuanced response he looks at longer-term results. He also objects to the time for the ending of each chart. He shows the dramatic change of extending it a bit. To appreciate his work, you need to read the entire post - and I hope you will! Meanwhile, here is an example.

Brown summarizes, in part, as follows:

For those inclined to see patterns, the takeaway is that it’s not really the slow-build-up-sudden-crash suggested by the original charts. Rather there are periods of general uptrends, which tend to have relatively low volatility around the smooth orange line, interspersed with level or down periods, with much more volatility both up and down. I’ve never tested that rigorously, but it doesn’t strike me as a bad qualitative description.

He also does a careful analysis of comparative drawdowns - a key element in evaluating risk and reward. There is an excellent and helpful table.


This sharp contrast in charts illustrates some key problems for the individual investor who seeks solid information.

  1. Articles that emphasize a continuing trend seem less interesting and less “actionable." Who cares about advice to stay the course?
  2. Articles that provide dramatic warnings capture attention.
  3. Charts that select short time periods and have big curved lines suggesting the future have inordinate power.

There is specific advice here: Do not over-estimate market risks from charts without context!

Prior Winners

I began the Silver Bullet award more than three years ago. It was an occasional part of my regular weekly post. My hope is to give greater visibility and recognition to the winners. If bloggers and media sources are honest about wanting to get beyond the noise, they will join me in recognizing those who have written special posts. I also invite nominations. I expect about 20 awards each year, but I would be delighted if the community found more great candidates.

Here is a list of past winners, which I am calling the “Silver Bullet Band." No one will be surprised to learn that Barry Ritholtz and Josh Brown lead the multiple winners, but there are others. New Deal Democrat and Ben Carlson each have two wins.

Note: Econintersect Managing Editor John Lounsbury is on the list.

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