Individual Gurus

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

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

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

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

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

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

A reader suggested Condor Options as a guru for review. To conduct a review, we evaluate the Condor Options Newsletter Performance table of iron condor trades (with a few hedging trades) available via the Condor Options Performance self-assessment. This table includes entry and exit dates, trade duration, specific positions/strike prices, initial value (credit), total amount risked (Real Risk), final value (credit), final value as a percentage of amount risked (% Return), risk-adjusted trade size, return on investment (Trade ROI) and cumulative value of a $1,000 initial investment (VAMI). The initial and final trade values account for bid-ask spread by sampling actual fill quotes, but they do not account for broker trading commissions. This evaluation accepts the basic premises of performance assessment as presented in the table. Using the Condor Options Newsletter Performance table as of the end of June 2011, covering closed trades from initial position entry on 5/11/07 through 6/10/11 (162 trades), we find that: Keep Reading

As suggested by a reader, we evaluate here Gary Savage’s outlooks for the U.S. stock market since May 2007 as extracted from his current Smart Money Tracker blog (since March 2010) and its predecessor site. While Gary Savage states that his “main goal…for the next few years will be to keep investors focused on riding the secular gold bull,” he also promises to “monitor cycles, money flows and sentiment in the stock market.” However, he does “strenuously suggest that you don’t waste your time or capital trying to trade the stock market.” 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

At the suggestion of a reader, we began tracking on 5/4/06 the intermediate-term stock market outlooks of Steve Todd. Steve Todd is founder of the Todd Market Forecast, which states: “For the years 2003, 2004 and 2005, The Todd Market Forecast was rated #1 for the preceding ten years [by Timer Digest]. For the year 2006, we slipped to #3 and in 2007, we were ranked #5.” His short-term and intermediate-term stock market outlooks are available on a weekly basis at Decision Point. His outlooks are clear and binary, bullish (buy) or bearish (sell). Because Decision Point offers no historical archives, accumulation of recorded switches between these two outlooks is slow. During 5/4/06 through 11/27/12, he has changed his intermediate-term outlook 26 times. Using closing levels of the S&P 500 Index on signal change dates to assess these switches, we find that: Keep Reading

Eddie Kwong of TradingMarkets.com requested a review of Larry Connors’ Daily Battle Plan (Battle Plan). TradingMarkets.com presents the Battle Plan service as “a reliable guide for short term traders looking to take advantage of the surge in interest in exchange-traded funds (ETFs) with “a record of more than 80% correct trades. …Larry and his research team developed this evidence-based trading to counter the spotty performance and glaring conflicts of interest that exist on Wall Street.” To enable a review, TradingMarkets.com made public a listing of all Battle Plan trades since mid-October 2008, which uses ETF closing prices on trade recommendation dates to calculate gross returns and gross win rate [since removed from public view]. Using the data for the 165 positions listed as of 4/21/11 for the period 10/14/08 through 4/20/11, we find that: Keep Reading