I was reading a stock market report the other day when the journalist reported somewhat breathlessly that approximately $15 billion had been wiped off the value of the stock market today. When we looked at the actual numbers it worked out that this somewhat extravagant number was in fact around about 1% fall in the value of the market, which is not all that unusual.
Rises in the market are seemingly only reported in terms of percentages but falls are always reported in terms of dollars. Bill Shorten was waiting in the wings of course, so that he could say that the retirement savings of ordinary Australians have been decimated by the recent fall in the market and demand that the government should do something about it, as if they could.
I could be forgiven for taking a glance out of the window to see if there were tumbleweeds blowing down the street or if the trains had stopped running or someone had turned all the lights out. Clearly this was not the case. I appreciate that $15 billion (!) is a lot of money, but with a market capitalisation in the All Ordinaries Index of $1.5 trillion, it is, as I say, about 1%.
When the Reserve Bank moves official interest rates up or down by half a per cent, this doesn’t sound like much, but with rates at 1.5%, a change to 2% is actually a lift of 33% compared to the prevailing rate – get it?
A 20c rise in the price of fuel doesn’t sound like much, but in $1.20 it is 17% and it seems to move up and down by this much (at least in my area) almost daily. I can’t think of too many markets where this kind of gyration is accepted.
A 2% commission on the sale of a $2 million house is $40,000. A 1% fee on assets under management of $3 million is $30,000. The $3,000 sports pack on your $30,000 car is an effective increase in its price of 10%.
My financial world is based on dollars not percentages, after all I can’t buy my groceries with anything but dollars. I think I might get a funny look if I told the cashier that I wanted to only spend 10 per cent of my income from this week for my trolley load. I always convert this kind of stuff to its’ money impact. None the less, as in the stock market example, the only way to properly asses what you are being told is to have an eye to the relativity of the measure. My suggestion – do both
Is it cynical of me to question whether this manipulation of the language of numbers is by design? People wouldn’t use the of expressing something which provides their own best result would they?
As I say it’s all in how you tell it.
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