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US stocks are expensive. There seems to be article after article on the expensiveness of US stocks these days. Plus, bonds in general are really really expensive. Both US stocks and all bonds are in the top (90th+ percentile) tiers of expensiveness relative to history. As Cliff Asness of AQR points out, the problem is that they are both at these expensive levels at the same time, which hasn’t happened ever. That means that a portfolio of US stocks and bonds (50/50, 60/40, take your pick) has a very low expected return going forward. Maybe the lowest ever. OK. Now what? … Continue reading
In today’s post we’ll update the top 6 economic indicators as of mid April 2017. The final 2 indicators for March were released this morning. Each of the 6 indicators is updated with March data. For background on the top 6 see here. The table below shows the current heatmap for the top 6 indicators. All of the 6 indicators remain green for this month. 3 of the indicators showed improvement, 3 showed deterioration. None are even near a warning signal. This also means that there is no trigger for the COMP indicator which means there is no possibility for the SPY-COMP system … Continue reading
Today I want to talk about my friend Jose. About a year and half ago, after months of Q & A between us, Jose decided to implement Antonacci’s GEM portfolio in his IRA (see this post for a detailed description). This post describes his first 6 months in GEM, November 2015 through April 2016. I think there are some good lessons here for the implementation of any TAA portfolio or any active strategy for that matter. I covered some TAA implementation tips and tools before. See here and here. Let’s jump right in. Starting out in any active strategy can … Continue reading
The unemployment report was released on Friday, April 9 2017. Here is the update for the SPY-UI model. There is so much noise out there on this report that its important to just ignore the noise and focus on the trend. Note: you don’t need fancy paid tools to track this model. You can use easy free tools like Stockcharts.com for example. I’ll do that below. Most ink on these reports is spilled over the headline total non-farm payrolls number. This is a very noisy number with a margin for error of about 100K jobs. It’s much better to focus … Continue reading
In quant investing there is always an urge to continuously look for ways to improve a model. Trying better ways of doing things can be a worthy and profitable endeavor. After all, markets do change. You learn new things, etc… But it can also be fraught with pitfalls. Data mining is a constant worry. With these caveats in mind in this post I’ll take a look at a potential new value composite metric and it’s performance over the last 16 years. My idea for a new value composite comes from Professor Damodaran at NYU, his blog is at Musing on Markets. His academic … Continue reading
A few months ago I implemented the SPY-UI model on the P123 platform. It has recently exited it’s incubation period and is now available for FREE on P123 once you are a member. If you’re not a member you can use my P123 link for a free trial. It is available to all subscription levels. I’ll review the model again here and provide some important details on the P123 model. I first discussed the SPY-UI model in this post. If you really want to dive into the historical details of SPY-UI model then you need to read the Philo Econ post on … Continue reading
In today’s post I’ll update the composite indicator heat map for April. See this post for an introduction to the composite indicators and the heat map. I’ll also provide some detail on another of the composite indicators. Below is the composite indicator heat map as of Friday, March 31 2017. The composite heat map is telling us the same thing as the top 6 indicators, and the other individual indicators – no signs of a recession on the horizon, which most of these indicator assume means about 9-12 months out. I like to use the composites as a supplemental set of indicators to … Continue reading
Here are the Q1 2017 total return and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the portfolios page. All equity portfolios consist of 25 stocks and were formed at the end of 2016. No changes in the holdings since that time (except for the TAA Bond strategy which re-balances every 4 weeks). In the table below I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices. All performance numbers are from Portfolio123.com. Overall, the equity quant strategies underperformed both domestic and foreign stock … Continue reading
Update: I updated the charts and some of the performance results on March 28, 2017. I found and corrected an error in the performance calculations. Conclusions remain the same. 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 … Continue reading
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