Tuesday, January 09, 2007

Coincidence? I think NOT!

Commenter MM sent me this link, which was part of a larger article commenting on the same WSJ piece I panned yesterday. Do I claim this chart is all coincidence? Not at all.

What if I had a chart of average speed of baseballs pitched in each inning of all games. Let's say that the chart showed that the average speed for innings 1-8 was 87mph. But the average speed for the 9th was 91mph. I'm making these numbers up, so just go with it.

Now imagine you are at a Yankees game. Mike Mussina was the starting pitcher and he's pitched a pretty good game: 8 innings, 2 runs, 116 pitches. He strolls out to the mound to start the 9th. You say to the guy sitting next to you, "I saw a chart showing that on average, the fastest pitches in a game come in the 9th inning! Mussina had been throwing in the upper 80's all game, but I bet he throws 90 this inning!"

Mmmmm... the logic sounds a little fuzzy doesn't it? Turns out the reason why pitch speed is higher in the 9th inning is because teams so often bring in their fireballing closer. It doesn't have anything to do with the 9th inning per se. Put another way, there may be correlation between inning and pitch speed, but the inning itself isn't the cause of the faster speed. The relationship exists, but its an indirect one.

So to conclude this analogy: teams often bring in their closer in the 9th inning. The closer tends to throw a very fast fastball. Because of this, average pitch speed around the major leagues is higher in the 9th inning than any other inning.

I think its the same for today's inverted curve. The Fed usually cuts short-term rates when the economy is weakening. The curve inverts when the Fed appears likely to cut short-term rates. Therefore, it is often the case that the curve inverts ahead of the economy weakening. The relationship is indirect.

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