## Wednesday, March 27, 2013

### Dealing with negatives can be a challenge, in so many ways

It seems that when we come across negative values, or when trying to express differences between lower and higher values, from the perspective of the lower, we often have a difficult time adjusting. Handling positives is pretty simple; perhaps because we began our schooling shielded from negatives, and in most things, being on the positive side of zero is a good thing. Likewise, speaking of a higher value relative to a lower is something we're all quite adept at.

I've commented about the Share ratio's challenges when returns are negative, how they can sometimes provide what appears to be nonsensical numbers. I've also addressed the problems when one wants to geometrically link returns for short positions.

It's not uncommon to find folks struggle in trying to compare two negative numbers, for example, -10% and -20%. We may hear that the second is bigger than the second; bigger in what way?

In this past weekend's Financial Times, in an article titled "Cyprus laments end of way of life as 'family' lends no comfort" (by Joshua Chaffin) the following: "The typical German household is three times less wealthy than its Spanish or Italian counterpart, according to a Bundesbank study of personal wealth published this week. Whereas the median Spanish household has net worth of €178,000, the equivalent in Germany is €51,000."

"Three times less wealthy"??? Would it not be more appropriate to state that they have one-third the wealth?

I realize that mathematics / arithmetic is a challenge for many. But we should all be capable of comparing two numbers in a way that makes sense.