Building an investing system with the top economic indicators

It’s finally time to start turning all the economic indicator stuff I’ve been posting on into something useful for investors. In this post I’ll introduce the SPY-COMP indicator and how it works as tool for entering and exiting investments. The mechanics of the SPY-COMP system are similar to the SPY-UI system I’ve posted on previously. The only difference is that the new system uses a composite of the top 6 economic indicators instead of only using a single indicator, the unemployment rate. There are many ways to build a composite but we keep it simple. Each indicator covers a different … Continue reading

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Mapping the top economic indicators – mar 2017

In today’s post we’ll update the top 6 economic indicators as of mid March 2017. Each of the 6 indicators is updated with February data. Last month’s update is here. For background on the top 6 see here. The table below shows the current heatmap for the top 6 indicators. Just like last month all of the indicators are green. Here’s a brief update on each. Unemployment rate – Feb was another strong month for employment. UER is back down to 4.7%. Below it’s 12 month SMA. No signs of weakness in this indicator. Real retail sales – Feb’s year … Continue reading

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SPY-UI indicator update for March 2017

On Friday, March 10, the unemployment rate (UER) for Feb 2017 was released by the BLS.  The UER improved to 4.7%. In this post I’ll update the SPY-UI indicator for March. I’ll also provide some new charts with historical data that will be useful in the future. The first thing we’ll look at is the latest UER with respect to its 12 month SMA. The chart below plots both of those along with the US recession boundaries and the SP500 monthly drawdowns. The chart goes back to 1948. For this month the UER at 4.7% is still below its 12 … Continue reading

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Quant investing: is it time to get rid of Price/Book?

The performance of value factors varies over time. Sometimes value is in favor. Sometimes it is out of favor. But overall value overall is one of the two single factors, along with momentum, that has withstood the test of time. But what if one way of expressing value in stocks has simply stopped working or is just nor working as well as in the past? That’s is what I’ll consider in this brief post. In particular, I’ll look at whether it is still worthwhile to use P/B in individual quant stock portfolios. Many of the quant stock models discussed on … Continue reading

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Mapping the pros: composite economic indicators – mar 2017

In my last post I introduced a heat map of the top individual economic indicators and how the heat maps are a very simple yet useful way at looking at the overall state of the economy. In this post I’ll do the same thing but this time with composite economic indicators. What is a composite economic indicator and how is it different than an individual indicator? Individual economic indicators typically provide information about one particular aspect of the economy, say housing, and consists of one data series or a composite of related sub-series. A composite economic indicator, as we’re using the term here, tries to … Continue reading

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Mapping the top economic indicators – feb 2017

Now that we have a good set of top economic reads on the state of the economy and a list of the top 6 individual economic indicators, we can tackle using these indicators to get a gauge on where we are in the economic cycle. In this post we’ll present a simple heat map of the top 6 economic indicators, look at what the heat map looked like in previous recessionary periods, and finally compare it to what the heat map is saying today. This will become a regular monthly post, published on or just after the third Friday of … Continue reading

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Retirement hysteria strikes again

It must be that time of the year again. Retirement hysteria time. Usually in the new year I start seeing a slew of articles on how your retirement is at risk, how you cannot possibly retire now, and the theme for the last few years – how high stock market valuations and low interest rates will guarantee that either you are going to work forever or you are going to retire with a much lower living standard. This time the offending piece was in Kiplinger’s of all places, which was brought to my attention by one my weekly econ reads, … Continue reading

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The top 6 indicators on the state of the economy

A quick post on a new page I have added to the blog. In the top menu you will see a page called ‘Top 6 Economic Indicators“. On this page you will find FRED graphs of 6 economic indicators, updated automatically when new data is available. I’ll tell you a bit more about these indicators below and why they were chosen. First, there are a lot of economic indicators these days. There are individual indicators (we track 66 of them), like the unemployment rate, for very measuring very specific aspects of the economy, and composite indicators (made up of many individual … Continue reading

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Top 10 reads on the state of the economy

This is the first post on economic indicators. In this post we’ll share our top reads on the state of the US economy. Notice I say we, instead of I. In this new endeavor on tracking the economy I now have a partner. He happens to be my cousin and he is also an electrical engineer and even more of a geek than I am. I’ll talk about him more in the future. Before we dive into our top reads let me describe what we’re trying to do. What we’re trying to do is use economic indicators, individual and/or composite … Continue reading

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TAA bond strategy on Allocatesmartly

Just a quick post today on the TAA bond strategy that I’ve posted on and keep track of here. Starting yesterday, the strategy is on AllocateSmartly. See the blog post discussing the details of the strategy and it’s historical performance. A few important items that I’d like to highlight follow. First, the strategy is slightly different from the original that I posted here. The details are in the AllocateSmartly blog post. The ETFs are slightly different, the absolute momentum filter is applied against T-bills instead of using zero like I did, and the backtest results are much more robust. The … Continue reading

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