Absolute numbers and ratios : macro economic data

A few economic orders of magnitude :

Gross World Product : 70 trillion US$.

Growth rates since 2006 : 5 (2006), 5, 3 ,-0.5, 5.3, 3.9, 3.5 (2012) (in percent)

Gross Domestic Product by Country in US$:

EU            16.5 trillion
US              15 trillion
China           7 trillion
Japan            6 trillion
Germany   3.5 trillion
France       2.8
Brasil        2.5
UK            2.5
Italy           2.2
India          1.9
Russia       1.9

Real growth rates (adjusted for inflation) for Western countries is between zero and 2.5.
For developping countries it can reach much higher numbers.

US inflation rates between 1914 and 2013 were between -10.5 and 18 percent on a yearly basis. (Negative inflation rates are rare.) In recent history it was 13.5 % in 1980 and -0.4 % in 2009. The last thirty years it has typically been close to 3%.

US market cap       : 18 trillion.
France market cap : 1.8 trillion.
Germany                : 1.5 trillion.

One measure of market valuation is the comparison between total market capitalization and GDP. Between 1970, this measure has fluctuated between 35 and 150 %. It is presently 110% for the US.
For France, for instance, it is much lower. (~ 65%). For Germany ~ 43%.

Price to Earnings Ratio (PER) for the US stock market for the last hundred years was between 5 and 45. Until 1990 it seemed to be around 15 (with large fluctuations). Taking also into account the highs of recent decades, it seems to be around 18 (with large fluctuations). It is presently at 21.37. PER seems inversely correlated with long terms interest rates which are at a historical low of 2%. (These long terms interest rates have been fluctuating between 2 and 16 % over the last hundred years with a baseline of around 4%.) PER DAX : 20, CAC : 23, S&P 500 : 19. (Note how this measure gives a
different picture than total market cap divided by GDP.)

Yet More Books on Mister Market

A few more books :

Excellent   : Barbarians at the Gate by Burrough and Helyar.

Interesting : The Snowball (Warren Buffett biography) by Alice Schroeder
                    Common Stock and Uncommon Profist by Philip Fisher

Average     : The End of Wall Street by Roger Lowenstein

More Books on Mister Market

More decent books on Value Investing:

You can be a stock market genius, Joel Greenblatt

Value investing, Bruce Greenwald et al.

A very entertaining read on the sociology and inner workings of the markets and market contrarians:

The Big Short by Michael Lewis

The Toilet

There are essentially four operations that an amateur might consider performing on his toilet : replacing the mechanism that controls the water flowing out of the water closet, replacing the mechanism that controls the flow of water into the water closet, fixing a leak in the drain pipe, and unblocking it. All of these are fairly straightforward, as long as you understand the flow of water, and do not have to break through walls to reach the relevant portion of the circuit.

The first operation you would typically perform if there is a small leak at the bottom of your water closet tank, causing your toilet to flush now and then for no apparent reason. The second replacement you would do if you for instance don't hear your water tank fill anymore. The third you would do if you or your downstairs neighbour is bothered by water or funny smells, and it will be clear to you when to engage in the fourth.

Books on the Sociology and History of Wall Street

I found the following fascinating informative reads (in order of quality of writing
and  non-trivial content) -- these are books on the sociology, history and development of
contemporary capital markets and firms:

Lords of Finance, Ahamed.
Keynes biography, Skidelsky.
Liars Poker, Lewis.
When Genius Failed,  Lowenstein.
What's wrong with Wall Street, Lowenstein.

Books on Value Investing

In order of importance :

The Intelligent Investor, Graham.
Security Analysis, Dodd and Graham.
The Essays of Warren Buffett, Buffett et al. 
Margin of Safety,  Klarman.
One up on Wall Street, Lynch.

There is surprisingly little decent literature on the subject.

Facts

Should the New York Times fact-check ? Can North Carolina outlaw scientific predictions on how much the sea level will rise in the coming years ?

These are just two illustrations of the phenomenon that people no longer understand the difference between fact and opinion, between truth and social construct, between results and presentation. It is clear that a lack of proper education is to blame.

If we concentrate for a while on the written media, for instance, then we see that journalists quickly write their required number of words on the topic of the reader's choice, without being bogged down by too much background knowledge. Authorative sources are quoted saying 'yes', and other authorative sources are quoted saying 'no'. No attempt whatsoever is made to lay bare the correct statement. These articles are then branded as good objective journalism, representing the various facets of the problem at hand. It's like arguing that a child must be free to choose between evolutionism and creationism, and must be made aware of both.

This type of argument is not only repeated ad nauseam, but also implicitly and much more subtely and generally applied in the serious media. It is mindboggling how many panels consist of one person that knows what she is talking about and five others that have an opinion on the matter that is based on what they thought up while attempting to boil a soft-boiled egg for the correct amount of time, and failing.

The analytic mindset is hardly defended anymore. Analysis is considered boring, both in the media and at cocktail parties. When somebody voices an opinion, and somebody else asks what it is based on, it will be the second person who will be considered slow and annoying. Yet, it is the multitude of unfounded opinions which is disquieting, and it is those who voice them who are wasting our time.