More by the Same Author
2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
2012-07-24 The Ultimate Death Cross - False Harbinger of Doom by Georg Vrba, P.E. (Article)
Skeptics and devotees of technical analysis took notice last week when Albert Edwards, the closely followed investment strategist at Societe Generale, warned the S&P 500 was 'on the verge of an ultimate death cross,' foretelling imminent major losses for the stock market. Edwards' sense of doom is misguided. An ultimate death cross is mathematically impossible unless the S&P were to suffer an immediate and precipitous decline. Moreover, the signal would provide a positive outlook, if it were to occur.
2012-06-19 Likelihood Ratios and their use in Recession Indicators by Georg Vrba, P.E. (Article)
In medicine, likelihood ratios improve patient outcomes and refine drug regimens by assessing the reliability of common diagnostic tests. In finance, likelihood ratios can quantify the reliability of an economic indicator such as one designed to identify recessions.
2012-05-08 The Adjusted Gold/XAU Ratio as an Indicator of Forward Returns for Gold Stocks - An Update by Georg Vrba, P.E. (Article)
The latest data have a clear message for investors: gold stocks are attractively priced.
2012-02-21 Evaluating Popular Recession Indicators by Georg Vrba, P.E. (Article)
Recessions are notoriously difficult to forecast. That, of course, hasn't stopped many high-profile analysts from predicting recessions in 2010 and 2011 - incorrectly, at least thus far. Given the wealth of often contradictory economic data that exists today on which to base such forecasts, this should come as little surprise. What's more surprising, however, is that they have based their predictions on models that were ill conceived and insufficiently tested.
2011-12-13 Improving on Buy and Hold: A Buy Signal by Georg Vrba, P.E. (Article)
In my August 2010 article I advocated a market timing strategy, to sell or significantly reduce one's stock holdings in anticipation of a recession or slowdown in the economy and switch into cash or a low-beta Treasury bond fund, and then reverse the process ahead of a recovery. A type-A buy signal was generated on December 9, 2011.
2011-11-15 Are Gold Prices Correlated to the Real Federal Funds Rate? by Georg Vrba, P.E. (Article)
The price of gold depends on many variables, among them the real federal funds rate, which is the federal funds rate adjusted for inflation. But the real federal funds rate, or RFFR, alone does not explain variation in gold prices. One must also look at the change in the RFFR for a full understanding.
2011-10-04 The Adjusted Gold/XAU Ratio as an Indicator of Forward Returns for Gold Stocks by Georg Vrba, P.E. (Article)
While the recent bull market took gold prices to new highs, the prices of gold-mining companies lagged. Some claim those companies are now drastically undervalued, and we can investigate that claim by examining the relationship between gold and gold-mining prices.
2011-08-30 Seeking Beta in the Bond Market: Sell Long Bonds by Georg Vrba, P.E. (Article)
I have updated the model described in my article, Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns. An upper switch point was generated on August 25. This indicates the beginning of a down market for bonds.
2011-08-02 Does Citigroup's Panic/Euphoria Model Work? by Georg Vrba, P.E. (Article)
Citigroup's Panic/Euphoria model fell into panic territory at the end of June 2011. According to the model's originator, strategist Tobias Levkovitch, this indicates a roughly 90% probability that equity prices will be higher in six months and a 97% chance of gains in 12 months. How reliable is this model?
2011-07-12 Profiting from the Steep Yield Curve by Georg Vrba, P.E. (Article)
The yield curve, as measured by the spreads between the yields of the 10-year note and the 2-year note, has now steepened to levels seen only twice before since 1965. This is only the third time in the last 45 years that investors can take advantage of a flattening of the yield curve this extreme, an opportunity that should not be missed.
2011-06-28 Where are Long Bond Yields Heading? The Bond Value Ratio as a Predictor of Future Yields by Georg Vrba, P.E. (Article)
Are long-maturity bond funds still a good investment? My analysis shows that there is currently a maximum potential appreciation of only about 10% for long-bond values. The 30-year bull market for bonds will be ending soon and the risk-reward ratio is too high to warrant buying long-bond funds now.
2011-06-07 Improving on Buy and Hold: When is the Best Time to Sell by Georg Vrba, P.E. (Article)
My model, Improving on Buy and Hold: Asset Allocation using Economic Indicators, has been updated. A Sell-A type signal will be generated by the model in the second week of August and I advise reducing one's stock market investments then.
2011-05-31 Letter to the Editor – Challenging Dave Rosenberg by Georg Vrba, P.E. (Article)
Predictions are usually made with great conviction and without a specified time frame. I review some of David Rosenberg's past predictions and show that investors would have underperformed the market had they followed his advice.
2011-05-17 Improving on Buy and Hold: An Initial Sell Signal by Georg Vrba, P.E. (Article)
I have updated the model described in my article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on May 13, 2011, together with the most recent values of the other indicators, have been incorporated in my model. A basic sell signal was generated last week.
2011-01-25 Go for the Long Bond: Technical Indicators are Positive by Georg Vrba, P.E. (Article)
My article, Seeking Beta in the Bond Market: Update December 31, 2010, showed that my Bond Value Ratio (BVR) model indicated the beginning of an up-market for high-beta bond funds on 12/17/10. I present a further indicator here which reinforces this signal.
2010-11-23 Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns by Georg Vrba, P.E. (Article)
Investors seeking permanent exposure to the bond market should invest in high-beta funds during up markets and low-beta funds during down markets. This simple strategy provides consistent long-term returns that are considerably higher than what a static investment in bond funds would achieve.
2010-10-26 Improving on Buy and Hold: Buy by Georg Vrba, P.E. (Article)
Georg Vrba updated the model described in his article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on October 22, 2010, together with the most recent values of the other indicators used, have been incorporated and generated a buy signal.
2010-10-05 Improving on Buy and Hold: Don’t Buy Yet by Georg Vrba, P.E. (Article)
According to Georg Vrba, all conditions for a type A buy signal have not as yet been satisfied. Exactly the same conditions exist now as those of 5/6/08. The past is not an indicator of the future, but it would not have been a good decision to enter the market in May 2008.
2010-09-28 Improving on Buy and Hold: The Updated Signals by Georg Vrba, P.E. (Article)
At the request of many readers, Georg Vrba updated the model described in his article Improving on Buy and Hold: Asset Allocation using Economic Indicators. The Economic Cycle Research Institute's (ECRI) U.S. Weekly Leading Index (WLI) and the index's annualized growth rate published on September 24, 2010, together with the most recent values of the other indicators he used, have been incorporated in the model.
2010-08-24 Improving on Buy and Hold: Asset Allocation using Economic Indicators by Georg Vrba, P.E. (Article)
Most long-term stock market investors follow a buy-and-hold strategy, one that makes big losses unavoidable when major downturns strike the stock market. This strategy assumes that an investor cannot know when to switch from one asset to another and that if one avoids the bad days of the market, one is also likely to miss the best days. In this guest contribution, Georg Vrba presents a way to resolve this dilemma, based on various economic indicators that provide timely buy and sell signals for the S&P 500 index.
