Hi everyone,
My version of the Zweig Model for stocks is currently on the low side of neutral. The Fed has been raising rates every three months, which means that Zweig's Fed indicator, while moderately bearish, is not getting any worse. The next increase is expected in December, which again will not drive the Fed Indicator more negative.
The Prime Rate indicator is negative, since the prime rate has been increasing steadily along with the Federal Funds and Discount rates.
The consumer installment debt indicator is the one positive, in that it has been increasing by around 4.8% year over year, which is statistically reasonable vis a vis stocks.
The trend, as I calculate it, is negative for a several-month time frame. This is where I depart from Zweig's trend indicator for the masses, as described in his book. A similar number for a several week time frame is also negative.
The recent jump in wholesale prices is currently not alarming, vis a vis inflation. The strong dollar seems consistent with low inflation.
Ironically, the major indexes recovered significantly last week. This is not surprising given that almost all investors are (rightly, in my opinion, as well as Warren Buffett's) investing in major stock indexes in their retirement accounts and many are probably doing the same in their retail accounts. The interesting conundrum for contrarians is that when large numbers of investors are doing the same thing, such behavior has often signaled a turning point. Far be it from me to figure out the alternative to stock and bond indexing, unless one has the courage to move to cash (e.g., G-Fund for the TSP) in anticipation of a market drop. Such trading usually does not end well for professionals or nonprofessionals. Of course, Sarah has been the exception to that, helping countless people on the board with her consistently superior analysis..
For people who are retiring in 20 or more years, stocks are the place to be, at least historically. On a contrarian basis, bonds do not appear to be a good idea for a continuous holding period covering the next several years, since interest rates are still historically quite low.
The G-Fund, while held to low returns by the record low 10-year treasury yield, is still a unique option for the TSP investor alone. In that sense, it is a miracle for some specific investing strategies or temperments.
Just my opinions - not recommendations.
Happy Thanksgiving,
Tex
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Posted by: mrweyl@hotmail.com
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