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TIAA-CREF Actively Managed Equity Funds Did Not Add Value For Investors!

The iM Fund Rating System rates a fund’s return relative to a benchmark fund by comparing the terminal values from periodic $1.00 monthly contributions to both funds over the same period. Ratings can range from a grossly underperforming ‘E’ to a good outperforming ‘A’. The ratings are derived from the most recent past 1-yr and 5-yr Rolling Performances, shown as ’1yr(5yr)’ e.g. A((B)).
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The Dynamic Linearly Detrended Enhanced Aggregate Spread: A Long Leading Recession Indicator

  • The DAGS, short for Dynamic Linearly Detrended Enhanced Aggregate Spread, is a derivative of the Enhanced Aggregate Spread (EAS) recession indicator which comes from Robert Dieli.
  • The DAGS can signal, as much as nine months ahead when a cycle peak (recession start) is likely to take place.
  • Armed with that information, investors can make appropriate plans. As of writing (May 2016), it signals, at least to the end of January 2017, a continuation of the expansion phase of this business cycle.

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The Dieli Enhanced Aggregate Spread: A Long Leading Recession Indicator

  • The Enhanced Aggregate Spread (EAS) comes from Robert Dieli, and most of the following description of this indicator, and why it works, is from personal communications.
  • The EAS can signal, as much as nine months ahead, when either a cycle peak (recession start) or a cycle trough (recession end) is likely to take place.
  • Armed with that information, decision makers can make appropriate plans. As of this writing (May 2016), it signals that it is highly unlikely for a recession to begin before the end of 2016.

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A 0.3% Rise in the Unemployment Rate Will Signal an Oncoming Recession.

  • A reliable source for recession forecasting is the unemployment rate (UER), which can provide signals for the beginnings and ends of recessions.
  • Recently Gundlach warned if the UER moves up a couple of tenths in the next couple of months, “we will be on recession watch.”
  • The latest UER (March 2016) is at 5.0%, signifying that no recession is imminent. However, should the UER increase to 5.3% then a recession will be signaled.
  • Investors should carefully monitor the unemployment rate, because if it moves up a few tenths of a percent from where it is now, then high recession probabilities prevail.

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iM-BestogaX-5(SDS) System (Long Hedging Strategy)

This model is similar to our iM-BestogaX-5 System which is partially hedged by shortening SSO. But the underlying component models of the iM-BestogaX-5(SDS) System use a long SDS hedge instead of short SSO.

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The iM-BestogaX Index of the Russell1000 and related Trading Systems

  • The iM-BestogaX Index of the Russell1000 holds the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
  • This capitalization weighted index outperformed SPY by about 4.5-times from Jan-2000 to Mar-2016.
  • Over down-market periods the iM-BestogaX Index lost on average 87% less than SPY, and over up-market periods gained on average 24% more than SPY.
  • Trading systems which periodically select a small number of highest ranked stocks from the Index produced simulated annualized return as high as 34.4% with maximum drawdowns of about -20%.

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iM-BestogaX-5 System

  • The BestogaX universe of the Russell1000 consists of the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
  • A discussion on the merits of investing in the stocks of the BestogaX universe is available here.
  • The iM-BestogaX5-System is a combination of the partially hedged BestogaX-5 Investor and Trader models, each of which periodically select five of the highest ranked stocks from the Russell1000 BestogaX universe.
  • No market timing in the stock buy- and sell rules. During adverse market conditions it is hedged short SSO, with hedge ratios varying from 20% to 50% of current holdings.
  • This system has a low turnover, because the specified minimum holding periods are one year, and three months for the Investor and Trader component models, respectively.  

Please refer to the relevant model descriptions for performance curves of the two equal weight component models BestogaX-5 Investor partially hedged and BestogaX-5 Trader partially hedged.
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iM-BestogaX-5 Trader

  • The BestogaX universe of the Russell1000 consists of the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
  • A discussion on the merits of investing in the stocks of the BestogaX universe is available here.
  • The iM-BestogaX5-Trader model periodically selects only five of the highest ranked stocks from the Russell1000 BestogaX universe, and holds them for at least three months.
  • There is no market timing in the buy- and sell rules. The model is rebalanced weekly, resulting in small weight adjustments, and dividends are re-invested when available.
  • Backtesting was done on the web-based trading simulation platform Portfolio 123.

In the Figure-1 below, the red graph represents the performance of the model and the blue graph shows the performance of the benchmark SPY.
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iM-BestogaX-5 Investor

  • The BestogaX universe of the Russell1000 consists of the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
  • A discussion on the merits of investing in the stocks of the BestogaX universe is available here.
  • The iM-BestogaX5-Investor model periodically selects only five of the highest ranked stocks from the Russell1000 BestogaX universe, and holds them for at least one year
  • There is no market timing in the buy- and sell rules. The model is rebalanced weekly, resulting in small weight adjustments, and dividends are re-invested when available.
  • Backtesting was done on the web-based trading simulation platform Portfolio 123.

In the Figure-1 below, the red graph represents the performance of the model and the blue graph shows the performance of the benchmark SPY.
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Beating the Market with the BestogaX Stocks of the Russell 1000

  • The BestogaX universe of the Russell1000 consists of the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
  • A capitalization weighted index of this universe outperformed SPY by about 4.5 times from Jan-2000 to Mar-2016.
  • Over down-market periods the iM-BestogaX Index lost on average 87% less than SPY, and over up-market periods gained on average 24% more than SPY.
  • Many of the BestogaX companies have affordable products, familiar name brands, and worldwide distribution networks, providing them with reliable revenue growth also during adverse economic climates.
  • Investors holding continuously all the BestogaX stocks, and rebalancing to equal weight every four weeks, would have had an annualized return of over 17% from January 2000 to March 2016.   

Over the backtest period, Jan-2000 to Mar-2016, the number of stocks in this universe varied from a minimum of 23 to a maximum of 32. Stocks currently in the BestogaX universe are listed in the table below, with market capitalization shown in $-millions. There are 25 large-cap companies with a market-cap greater than $5-Billion.
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The iM Standard Market Timer

The iM Standard Market Timer endeavors to signal periods when it may be advantageous to exit the market or hedge one’s portfolio of stocks.

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iM-Combo6: Combining 5 ETF Models with BESTOGA3 for Good Returns and Low Drawdowns

  • This combination model aims to provide reasonable returns with low drawdowns during all market conditions.
  • There are six equal weight component models in Combo6, five of which are from Combo5 and the BESTOGA3 is the sixth component model.

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iM-Combo7: Combining 5 ETF Models with BESTOGA3 and Hedging with Best10(Short Russell3000)

  • This combination model aims to provide reasonable returns with low drawdowns during all market conditions.
  • There are six equal weight component models from Combo6, (five of which are from Combo5 and the BESTOGA3), which are then hedged 25% with the Best10(Short Russell3000), the seventh component model.

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The iM Gold-Timer

The iM Gold-Timer timer endeavors to signal long-term investment periods for Gold. It uses the SPDR® Gold Shares ETF: GLD. When not invested in GLD the model goes to 100% cash.

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iM-Best10 Shorts from the Russell 3000

  • This model selects periodically up to 10 stocks of the Russell 3000 index to sell short.
  • Stocks having a market-cap less than $800-million and those having a 10-week average daily total amount traded of less than $6,000,000 are not sold short.
  • Simulated performance over a 16 year backtest period shows an annualized return of 18.8% with a maximum drawdown of -48%.

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iM-Combo5; Combining 5 ETF Models for Good Returns and Low Drawdowns

  • This combination model aims to provide good returns with low drawdowns during all market conditions.
  • For the period 2000 to 2016 the backtested annualized return is 24.0% with maximum drawdown of -10.5%.
  • There are five equal weight component models in Combo5.

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Too Many To Fail — It Is Time To Bailout The Oil Industry!

  • The energy sector is in a recession — the energy industry has filed negative earnings for four consecutive quarters.
  • Negative earnings and Debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio at historic highs, and no respite in sight.
  • The US government should not let this strategic industry fail and arrange a bailout program.
  • According to our analysis the energy ETFs (XLE, VDE, XOP, etc) and energy stocks remain strong sells.

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Model Revision: Combo3.R1 Replaces Combo3

  • Due to inconsistencies in SPEPCY (SP500 Current Year EPS Estimate) data at the beginning of the calendar year we have amended Combo3.
  • Going forward we will not replicate the signals from the P123 subscription models anymore as the P123 models can only be revised every six months. We have set up new component models for Combo3.R! which incorporate rule changes.

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Questioning the Best(SPY-SH) and Best(SSO-TLT) Signals.

Followers of Best(SPY-SH), Best(SSO-TLT), Combo3 and Combo3b please read this.

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How Much More Will The Market Decline? The Trailing 12-Month Income Available Could Provide An Answer.

  • The Trailing Twelve Months Income Available to Common Stocks (TTMIACS) of the S&P500 is tightly correlated to the S&P 500.
  • TTMIACS has been declining since Feb-2015 when its 10-week moving average crossed its 40-week moving average to the downside.
  • Exiting the stock market according to this indicator would have avoided major losses in 2001 and 2008.
  • According to this indicator, a downwards potential remains in the S&P 500 with a possible low of 1660 in the next three months.

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