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How many pigs went to market?

How does one measure a market? The answer is “any number of ways”, depending on which markets you are referring to – the gold market, the oil market, the share market, the housing market, the local farmer’s market or a craft market.

Even with gold there is some variety because the standard price is set in US dollars. The person buying an ounce of gold and paying in euros will almost certainly have a different valuation from someone in Sydney paying with Australian dollars.

Oil is interesting because nearly all of us are affected by variations in its price. When we fill our car with petrol, the violent fluctuations we experience at the petrol pump in Brisbane bear little relationship to the price paid for Saudi Arabian crude oil on a daily basis.

The share market is easy, as long as the person who hears that the share market has either gone up or gone down recognizes that the news agency making the statement is talking about an INDEX which is not particularly sophisticated. It is possible, if not certain, that a small group of shares, and in particular one single company share, will go UP when the market goes DOWN – the reverse will also apply.

The housing market is especially interesting. Every single piece of real estate that is sold is unique, whereas the BHP shares that I bought in 1980 are exactly the same as all the other BHP shares that were on issue at that time. Their intrinsic value can change over time, but on any given day ordinary BHP shares are IDENTICAL with all other BHP shares on issue on that day.

The standard reporting measure for real estate is a median price. Some time ago I wrote that a median price for anything is as useful as saying that someone with one foot in a bucket of ice and one in a bucket of boiling water is comfortable, ON AVERAGE!