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Individual Gurus

These blog entries consist of reviews of the performance of individual gurus based on information freely available on the web.

Accuracy of Robert Taylor’s Xyber9 Trend Forecasts

In February 2008, a reader requested evaluation of the market timing value of Xyber9 trend forecasts for the U.S. stock market, as developed and presented by Robert Taylor, CEO of Trend Corporation, Inc. Our conclusion then was that the claimed accuracy rate probably derives not from forecasting skill but from defining targets that are hard to miss. In June 2014 via email, Robert Taylor reported: “I was nominated for the Nobel Memorial Prize in Economics in March of 2000 for proving the financial markets are not random, but rather predictable. During the past 8 and a half years my U.S. Market forecasts…averaged better than 80% accuracy, including several years with an accuracy of over 90%, while the worse year produced over 70% accuracy.” He claims an aggregate forecast accuracy “greater than 83%”. He bases his forecasts on “Taylor’s Law”: “The financial market’s expansion and contraction is qualitatively in direct correlation to the increases and decreases in gravitational fluctuations experienced at the human level. The increases in market price are in direct response to decreases in gravitational forces; the decreases in market price are in direct response to the increases in gravitational forces.” He measures forecast accuracy as follows:

“The lowest price on the last day of a downtrend will be below the highest price recorded on the last day of the previous uptrend. The highest price on the last day of the uptrend will be above the lowest price recorded on the last day of the previous down trend.”

Robert Taylor observed that the accuracies reported in Guru Grades are rather low and inquired about a review of his forecasts, which for the U.S. market typically project short-term (a few days) trends in the S&P 500 Index and/or SPDR S&P 500 (SPY). Using daily highs and lows for the S&P 500 Index during March 2006 (when the Xyber9 historical forecasts commence) through June 2014, we find that: Keep Reading

Guru Grades Project Milestones

As of the end of 2012, we stopped adding forecasts to the Guru Grades database and published a preliminary report on findings. As of the end of 2013, we have completed the grading of all forecasts added during 2012 and now publish a final Guru Grades report.

The final report encompasses 6,582 graded forecasts from 68 gurus, adding 123 forecasts to the preliminary study (an increment of about 2%). The final report also incorporates a few minor corrections. The relatively small number of additional grades and corrections do not materially affect preliminary findings. Specifically:

  • Terminal forecast accuracy is still 46.9%.
  • Averaged by guru rather than across all forecasts, terminal accuracy is still 47.4%.

Accuracy rates change for individual gurus involved in the 123 incremental forecasts. We have updated the detailed forecast grading for these individuals. The histogram of guru accuracies in the final report is somewhat more symmetric than that in the preliminary report.

The final Guru Grades report will remain available indefinitely as a caution to investors on: (1) the (un)predictability of complex systems such as financial markets; and, (2) the risk or relying on grades self-assigned by students of financial markets.

The Timing Value of John Hussman’s Market Climate Assessments

Do quantitatively-driven mutual fund managers such as John P. Hussman, Ph.D, president of Hussman Investment Trust, successfully time the stock market? He describes his market timing approach as follows: “The key elements in evaluating securities and market conditions are ‘valuations’ and ‘market action.’ Each unique combination of these conditions results in a distinct Market Climate, with its own profile of expected return and risk.” His investment approach, as applied to funds such as Hussman Strategic Growth (HSGFX), is to “align our investment position with the prevailing Market Climate and shift that position when sufficient evidence of a Climate shift emerges.” Does this fund demonstrate good market timing? Using weekly dividend-adjusted returns for HSGFX during 11/21/00 (the earliest available) through 7/26/13 (660 weekly returns), along with contemporaneous weekly returns for the S&P 500 Index and the Russell 2000 Index as benchmarks, we find that: Keep Reading

A Few Notes on The Little Book of Market Myths

In his 2013 book The Little Book of Market Myths: How to Profit by Avoiding the Investing Mistakes Everyone Else Makes, author Ken Fisher, chairman and CEO of Fisher Investments, “covers some of the most widely believed market and economic myths–ones that routinely cause folks to see the world wrongly, leading to investment errors.” His hope is that “the book helps you improve your investing results by helping you see the world a bit clearer. And I hope the examples included here inspire you to do some sleuthing on your own so that you can uncover still more market mythology.” Some notable points from the book are: Keep Reading

Jim Rohrbach’s Disagreement with Review of His Technical Timing Approach

In a series of emails, Jim Rohrbach, president of Investment Models, Inc., expressed disagreement with the findings of “Jim Rohrbach’s Technical Timing Approach” and requested removal of the review. So that readers can assess the basis of his request, here are the verbatim  emails, with raw links replaced by descriptive links: Keep Reading

Arora Report Performance Review

A subscriber suggested review of the Arora Report trading performance. According to the offeror, this performance derives from application of the “ZYX Change Method”, which “is the culmination of over a quarter of a century of experimentation in developing fundamental, technical, and quantitative models as well as implementing gray boxes to execute the models in a variety of market conditions. …The method consists of six screens to be applied in a specific order and trade management guidelines.” In describing the performance data, the offeror states: “Every closed trade since inception in 2007, without exception, is included in the following performance record. …Typically, these stocks have enough liquidity to easily enter or exit large sizes.” Using the data for all 211 closed trades and other information on the Arora Report site available as of the end of May 2012, we find that: Keep Reading

John Maynard Keynes: Star Investor?

Was John Maynard Keynes, famous for contributions to macroeconomic hypotheses, a superior investor? In their March 2012 paper entitled “Keynes the Stock Market Investor”, David Chambers and Elroy Dimson evaluate the investment philosophy, strategies and performance of John Maynard Keynes based on his discretionary trading for the King’s College endowment (and, by similarity, for his own account). A key performance measure they apply is buy-and-hold abnormal return (BHAR), defined for each security as the geometric difference between the security’s cumulative total return over a specified interval and the cumulative beta-adjusted return on the market over the same interval. They combine BHARs for individual securities by averaging (equal weighting). Using King’s College endowment annual investment reports (including lists of holdings) and transaction records (567 buys and 387 sells) for portfolios managed at Keynes discretion for fiscal years 1924 through 1946 (ending in August), along with associated security prices/dividends and estimated UK market index levels, they find that: Keep Reading

Doug Kass: Lyrical Oracle?

As suggested by readers, we evaluate here Douglas Kass’ outlooks for the U.S. stock market since mid-2006 as extracted from his Seabreeze Partners blog. Douglas Kass is founder and President of Seabreeze Partners Management, Inc., which “specializes in the management of alternative investment products.” He writes regularly for TheStreet.com (apparently the source of blog articles) and appears frequently on CNBC. The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that: Keep Reading

Peter Eliades: Cycling the Markets

As suggested by a reader, we evaluate here the public stock market forecasts of Peter Eliades since late 2002. Evaluated predictions/recommendations come indirectly via MarketWatch columns, which have reported his commentary sporadically in recent years. Peter Eliades is editor of Stock Market Cycles. His “approach to the market is based on the theory that stock prices move as a result of a combination of cyclical forces. The theory contends that the major trends of stocks and stock averages are determined by fundamentals which affect a stock or a stock average smoothly. The trend is sideways, up or down at varying angles, and is subject to change when fundamentals change. These smooth fundamental trends are affected by cycles and the cycles are most important for market timing because they repeat with a good degree of regularity. At any one time there are theoretically scores of cycles acting simultaneously on the market, making analysis a more difficult process than a simple breakdown of mathematical formulas.” The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that: Keep Reading

Does Accurate Forecasting Get Attention?

Do individual experts whose U.S. stock market forecasting records are good (bad) gain (lose) attention? The “pro” argument is that investors (and online intermediaries) eventually flock to good forecasters and ignore bad ones in search of a market timing edge. The “con” arguments are that loud noise (for example, marketing-related or entertainment-driven) swamps information, and/or investors do not or cannot measure forecaster accuracy, and/or investors are more interested in ideas than forecasts. As a simple test these arguments, we compare two data series: (1) the stock market forecasting accuracies of gurus in the Guru Grades summary table; and, (2) the attention paid to these same individuals as measured by the number of search results found by a Google query on (“[guru name]” “stock market”), with the “stock market” qualifier intended to filter out potential namesakes and connect each name to the forecasted variable. Using results from searches for 60 individually graded gurus on 7/20/11, we find that: Keep Reading

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