Nearly 2 years ago, at the end of August 2011, the BVR model signaled the beginning of a down market for bonds. Since then long bond funds have returned a total of about 6% and short bond funds about 2%, while SPY, the exchange traded fund tracking the S&P 500, gained almost 40%. The BVR model’s message remains loud and clear: Avoid long bonds.
Blog Archives
Survivorship Bias: neither Myth nor Fact.
Since publishing our iM-Best10 portfolio management system, readers pointed out that the high returns obtained may be distorted by what is known as survivorship bias. Using an online portfolio simulation platform, we investigated the effect of survivorship bias by running simulations on various stock universes. First, the model was run using the present composition of an index series (survivorship biased simulation), then the same model was rerun using the point-in-time composition of the index series (survivorship free simulation). The results were unexpected; the iM-Best10, a quantitative stock trading model, using the S&P 1500 stock universe simulated the very high survivorship bias free CAGR of 48.10% against the survivorship biased CAGR of 42.93%.
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MAC-Australia: A Superannuation Asset Allocations System
Australian employers must pay at least 9% of workers’ annual salary into their superannuation accounts. Because the Government wants people to save for their retirement, they provide tax breaks and other incentives to help grow super savings over time. There is a wide choice of funds available, but most people seem to select, and stay, in a balanced multi-sector fund. A better way to allocate one’s savings and maximize returns is to use the signals from MAC-Australia, with buy signals triggering shifts from fixed interest investments to equity funds, and sell signals triggering shifts back to safer, interest producing bond funds. It’s that simple.
BCIp (or BCI in Off-Peak-Mode): 20 Weeks lead to Recessions
We analyze financial series based on the previous highest peak of the series in a business cycle, which we term the “off-peak-mode” of an index. Using our BCI in off-peak-mode we achieve average leads to recessions of 20 weeks. Exiting the stock market at these early signals significantly improves investment performance. Furthermore, the current level of the BCI in off-peak-mode near 100 provides confirmation that a recession is not likely to occur within the next year.
Exit Signals for the Stock Market from iM’s Business Cycle Index
There is no bell ringing when the market peaks before recessions, but indicators such as iMarketSignals’ Business Cycle Index (BCI) are useful in identifying recession starts well in advance. By exiting the stock market at the time of BCI’s recession signals, investors would still have avoided about 60% of the market declines from pre-recession peaks to inter-recession troughs on average.
iM’s Business Cycle Index replaces ECRI’s WLI
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. We have designed the weekly iMarketSignals Business Cycle Index (BCI) so it would have provided early reliably warnings for the past seven recessions. We achieved recessions leads averaging 11 weeks, all with similar lengths. The absence of false positives, for the analyzed time period of 1967 to 2013, enhances the quality and reliability of the recession warnings.
Silver outshines gold – A buy Signal
The Coppock for silver generated a buy signal on Friday April 12, 2013, exactly 2 years after the sell signal.The long-time average annual return from silver based on the signals from a modified Coppock indicator exceeded those from gold by a considerable margin, 19.7% for silver versus 14.9% for gold.
Unemployment Rate Does Not Signal A Recession Now – Update
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the March figure, does not signal a recession now, nor does it support Economic Cycle Research Institute’s recent claim that a recession started in July 2012, nor their September 2011 recession call, nor any of their many “follow-up” recession calls since then.
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Improving on Buy and Hold: A Modified Coppock Indicator for the S&P 500
The latest interim buy signal from my modified Coppock indicator was at the beginning of February, 2013, and this model will stay invested until the end of this year, possibly longer if another buy signal appears before then. This model would have produced a long-time average annual return from 1970 to 2013 about 4% higher than what one could have obtained from a continuous investment in the S&P; 500. The model avoided the 2000 and 2008 bear markets but did not avoid the 1987 market crash.
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February Unemployment Rate Does Not Signal A Recession Now
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the February figure, does not signal a recession now, nor does it support Economic Cycle Research Institute’s recent claim that a recession started in July 2012, nor their September 2011 recession call, nor any of their many “follow-up” recession calls since then.
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