Jan

10

Mises Stationarity Index

Buy S&P when MS in lowest quartile. Hold bonds in highest quartile. Beats S&P buy hold by 2%. Per Spitznagel.

James Goldcamp responds:

Is the quartile a rolling or calculated over the entire history, a fixed lookback, etc? (I have this book I think somewhere I guess I could find it myself). The graph would suggest, if using "max quartiles", it stays a buy or hold (bonds) for long periods. I feel like that would also generate many flat periods if you are in bonds in the highest and wait until it drops to lowest to get back into the market.

My interpretation could be totally wrong (above) , so apologies if I'm grossly misrepresenting, but I've always been nervous with very long term timing mechanisms because you may miss good investing years before you know the model is flawed. Of course you might say the same for "long only" domestic investors in Japan investing in the 80s. But it's always nice when flawed ideas fail fast non-catastrophically.

This does bring up fond memories of watching a presentation of various long term timing models of the late Nelson Freeburg in Orlando in 1998 (I think) - I believe one was called "Competitive Returns" that compared equities and bonds and may have been originally attributable to Ned Davis. He reviewed several that day (one may have been a Zweig timing mechanism). I always liked Nelson's newsletter which he graciously sent to our office for many years.

Big Al offers:

The Single Greatest Predictor of Future Stock Market Returns

And the current version on FRED.


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