For years, it's been a staple of our Weighing the Week Ahead
series to recognize analysts who go above and beyond in their
coverage of the issues. We congratulate these writers with the
Silver Bullet Award - named in honor of the Lone Ranger, who lived
by a strict code: "…that all things change but truth, and that
truth alone, lives on forever."
In 2015, we gave out the Silver Bullet Award 21 times - the most
ever in a single year. Despite the constant fearmongering from some
bloggers and media personalities, more and more people are
providing individual investors with the tools they need to make
informed decisions. Our winners are summarized below. Readers may
also want to check into our
compilations, as many of the same issues persist to this day.
Have any thoughts or predictions on what will dominate news
cycles in 2016? Know of a great analyst flying below our radar?
Feel free to post in the comments with any suggestions or
January 4, 2015
first Silver Bullet
of the year went to RL at
Slope of Hope
for his examination of charting "techniques" in the post-2008
(click to enlarge)
What can we conclude from all the above? Well, first of all
that making long-term trend predictions is not recommended,
no-one knows what is awaiting for us in the future. Bull or Bear
Market, inflation or deflation, you name it. What we can do, is
to predict market trend
with statistical analysis, comparing past trends and current
trends and that is in fact what we do with our RL models. We do
not know if the market can go to 3000 in the next few years, it's
possible if all of a sudden a lot of investors, after staying on
the sidelines since 2009, decide to join this 5 years long rally
(how about that for a "confirmation signal"?). What we do know
(based on our statistical models) is that the market is
overbought right now, and it has been rising ~500 points in the
last 2 years, although the strongest rise was in 2013, and in
2014 the speed of advance was a little bit slower (maybe a sign
that the rally is faltering?).
In our view, this strong pace is not sustainable in the long
term and some correction inevitably will come, although it does
not have necessarily to be a 3-years Bear Market, it may be a 3
months correction, or a quick crash followed by a recovery, etc.
What we can do is to gauge the market trend extension from a TIME
and PRICE point of view with our model and this is an honest
method to gauge the short and medium-term market direction
March 1, 2015
Nicholas Colas and Jessica Rabe
of Convergex took on Jeff Gundlach's assertion that equities have
never risen for seven years in a row since 1871. With due respect
to Mr. Gundlach, the authors primarily took issue with the dataset
(courtesy of Robert Shiller) he had used to draw his conclusion.
Colas and Rabe write
"Gundlach used a well-known dataset from Robert Shiller for
his findings, but it is not suitable for calculating
calendar-year returns since it does not capture exact month-end
levels. The S&P 500 actually rallied for eight consecutive
years from 1982 to 1989 based on price returns and total returns.
The index was also up for nine straight years from 1991 to 1999
using total returns. Therefore, the S&P 500 may have a few
more years to run before breaking any records, but volatility
will likely rise as well…Whether the stock market finishes the
year in positive territory is anyone's guess, but it wouldn't be
April 5, 2015
dug up an old Onion article
, as an analogue for
what passes as analysis
in the financial blogosphere. Readers may be reminded of
"Given this line's long history of jaggedness, we really
should take a wait-and-see approach,"
magazine associate editor Charles Reames said. "And even if this
important line continues its upward pointiness, we must remember
that there are other shapes, colors, numbers, and lines to
consider when judging the health of the economy."
Reames also warned that the upward angle of the line, which
most analysts agreed was approximately 80 degrees, may have been
exaggerated by the way the graph was drawn.
"The stuff that's written along the bottom of the graph is all
squished together, making the line look a lot more impressive
than it is," Reames said. "Had that same stuff been spread out
more, the line would have looked a lot less steep."
April 11, 2015
Bill McBride (AKA Calculated Risk) ended 2014 by asking himself
ten questions about the state of the economy. His
helped to measure economic progress over time, in line with his
expectations. This innovative approach to interpreting data earned
Silver Bullet Award
"At the end of last year Bill made a series of ten forecasts
about the economy with a full post on each. He provided a
three-month update this week. While early in the year, I found it
quite impressive. It is more measured than the optimistic
economic predictions and much better than those always seeing the
worst from any report.
See for yourself
, and you will understand why I emphasize this source each week.
If you are interested in economic growth, housing, employment,
the Fed, or
there is something for you."
April 19, 2015
thorough deconstruction of ShadowStats
is one of our favorite blog posts from 2015. From the way he picks
his target, to his measurement of the data - his post reads like a
step-by-step guide to winning a Silver Bullet
. We found this excerpt particularly interesting:
"As mentioned above, Williams' ShadowStats inflation series
incorporates an additional 2.0 percentage point correction to
reflect methodological changes that are not captured in the
CPI-U-RS series. I would like to examine that number more
carefully in a future post, but for the sake of discussion, we
can let it stand. If so, it appears to me that, based entirely on
Williams' own data, methods, and assumptions, the adjustment for
the ShadowStats inflation series should be about 2.45 percentage
points below CPI-U, rather than the 7 percentage points he
In my view, Williams alternative measure of inflation would be
more convincing if he were to make this correction. It would also
be less likely to feed the anti-government paranoia of some of
his followers, who allege that the BLS is falsifies source data
and manipulates reported indicators in the way that Argentina and
some other countries appear to do.
It is worth noting that Williams himself makes no such claim.
He is a fierce critic of BLS methodology, but he acknowledges
that the agency follows its own published methods. He argues that
the BLS has adopted methods that produce low inflation
indicators, but not for motives of short-term partisan politics.
Rather, he sees the choice of methodology as driven by a
longstanding, bipartisan desire to reduce the cost of Social
Security and other inflation-indexed transfer payments. It would
be hard to deny that he is at least partly right about that
April 26, 2015
The "what if?" question plagues individual investors and fantasy
football fans alike. While the sports fans can afford to indulge in
flights of fancy, investors probably shouldn't.
for writing to this effect very effectively:
Lastly, I think it's important for investors to forget the
"if/then" narrative that seems to be a
psychological barrier to living in the
and investing for the future.
If the Fed had never….
If big banks had never….
If stock buybacks had never….
Stop worrying about what the world might look like if those
things had never happened, because they did and we are where we
are. Focus on the present and the things that you can control in
order to get the most out of your investment portfolio.
June 08, 2015
We frequently warn individual investors to keep their politics
and their investments separate.
earned himself a Silver Bullet by illustrating this with
a clear, relatable example
. The market has seen significant gains since 2008. If you've been
sitting on the sidelines, you've missed some big opportunities.
Take these two statements:
"11 million jobs have been created since 2009. The stock
market has tripled. The unemployment rate nearly cut in half.
The U.S. economy has enjoyed a strong recovery under
"The recovery since 2009 has been one of the weakest on
record. The national debt has ballooned. Wages are stagnant.
Millions of Americans have given up looking for work. The
economy has been a disappointment under President Obama.
Both of these statements are true. They are both history.
Which one is right?
It's a weird question, because history is supposed to be
objective. There's only supposed to be one "right."
But that's almost never the case, especially when an
emotional topic like your opinion of the president is included.
Everyone chooses the version of history that fits what they
want to believe, which tends to be a reflection of how they
were raised, which is different for everybody. We do this with
the economy, the stock market, politics - everything.
It can make history dangerous. What starts as an honest
attempt to objectively study the past quickly becomes a field day
of confirming your existing beliefs.
June 13, 2015
Regular readers know that we like to
mainstream financial media. Needless to say, we got a kick out of
Cullen Roche's colorful guidelines
for financial journalists. They're all well worth reading, but our
favorites are quoted below.
I. The Stop Scaring People Rule. Scaremongering is not to
be tolerated except during the middle of a financial crisis or
Writing scary articles for the sake of conjuring emotionally
driven page views is not a legitimate business model and is
III. The Crash Call Rule. That pundit who comes on TV
predicting financial Armageddon every week is not a "guru" and is
directly contributing to poor financial decisions.
Please refrain from interviewing him regularly. Also, see Rule
IX. The Bubble in Bubbles Rule. If you feel the need to
use the word "bubble" please reconsider.
This word is only allowed to be used by a select few financial
experts (Robert Shiller, Robert Shiller & Robert Shiller). If
you are not one of the names listed in the previous sentence
please do not use this terminology.
June 20, 2015
Declining profit margins are a prime target for perma bears in
the blogosphere. You'd think after an "expert" calls nine of the
last three recessions, this one would go away - but
we've been fighting it for years
Pierre Lapointe received the Silver Bullet
for taking on the crowd.
"It can take a long time before contracting margins begin to
hurt stock prices," Lapointe and colleagues Alex Bellefleur and
Francois Boutin-Dufresne wrote in a report yesterday. They cited
the 1982-1987 bull market, which took place even though earnings
as a percentage of GDP were among the lowest since World War
(click to enlarge)
"It isn't at all clear that margins will contract further from
here," they wrote. "They could stabilize and remain near current
levels for some time. This wouldn't be a disastrous scenario for
July 04, 2015
Beyond errors in the investment world, we like to
caution our readers
to think carefully about all kinds of data. Math Professor Jordan
Ellenberg, of the University of Wisconsin-Madison, provided
a fascinating article
about the misuses of numbers. We gave him the Silver Bullet based
on his conclusion:
All these mistakes have one thing in common: They don't
involve any actual falsehoods. Still, despite their literal
truth, they manage to mislead. It is as if you said, "Geraldo
Rivera has been married twice." Yes-but this statistic leaves
out 60% of his wives.
In the era of data journalism, truth is not enough. We
need people in the newsroom who can check not only a number's
value but also its meaning. Unless we can ensure that, we're
going to be reading a lot of data-driven stories that are
true in every particular-but still wrong.
July 18, 2015
Zero Hedge is one of the least credible yet oft-cited websites
sucking up oxygen in the financial blogosphere. Their supporters
are apparently pervasive, which is why
we had to give Fabius Maximus a Silver Bullet
for his thorough deconstruction.
The full article
is of course excellent: his commentary ranges from exposing
half-truths, conspiracy-mongering, selective use of data, and
ZH is an ugly version of Wal-Mart or Amazon. It would be sad
but insignificant if ZH was exceptional. But ZH is a model of
successful web publishing, probably taking mindshare from
mainstream providers of economic and market insights. I see
websites using its methods proliferating in other fields. For
example, geopolitics has become dominated by sites that provide a
continuous stream of threat inflation as ludicrous as the worst
July 26, 2015
On a lighter note, we greatly appreciated a
video done by Jimmy Atkinson
at Dividend Reference. His guide to useless (but entertaining)
stock market indicators comes with an
important lesson attached
. Below is one example particularly relevant to hockey fans in the
August 02, 2015
won a Silver Bullet
this year when he abated growing fears about market tops.
His careful analysis
(backed up by solid data) is a huge asset for individual investors
looking for an edge.
Conventional wisdom goes that prior to market tops, the major
averages become more reliant on just a handful of stocks to lead
the rally. When stocks are making new highs, it's important to
look at breadth indicators because indices can pull a nasty trick
of masking what is
happening to the majority of stocks. For instance, the S&P
500 is up 2.3% YTD, however, the average S&P 500 stock is
Observers with a mission fail to note that divergences often
resolve to the upside. Here is an interesting table, showing both
frequency and the range of gains.
August 22, 2015
We at "A Dash" applaud anyone willing to challenge the so-called
We gave Barry Ritholtz a Silver Bullet
this year for taking on the
…yesterday's decline triggered the dreaded Death Cross, as the
index's 50-day moving average crossed below the 200-day moving
average. The other major indexes haven't yet succumbed to the
Death Cross horror, though the S&P 500 is heading in that
In a research note late yesterday, Bespoke Investment Group
observed that this was the first time this has happened since
Dec. 30th, 2011, or in 903 trading days. They also note the
modest statistical significance of the Death Cross. Looking at
the past 100 years, they wrote that "the index has tended to
bounce back more often than not." Shorter term (one to three
months), however, these crosses have been followed by modest
declines in the index.
How modest? The average decline is 0.17 percent during the
next month and 1.52 percent the next three months. By comparison,
Bespoke notes, during the past 100 years the Dow averages a 0.62
percent gain during all one-month periods and a 1.82 percent rise
during all three-month periods.
In an e-mail I asked Justin Walters of Bespoke to expand on
the details. He wrote: "Most of the time these crosses don't mean
much of anything. This one the forward performance numbers are a
little more negative than we would expect to see over the next
one and three months, but it's basically 50/50 whether we go
higher or lower."
August 30, 2015
Our final award of the year
(citing "Davidson) for two separate articles on the same theme.
Both illustrate the danger in the way the Shiller CAPE ratio is
presented to investors. Batnick notes:
When Shiller says 15-16 is where CAPE has typically been, what
he really means is this is what the
has been. However, what he fails to mention is that over the past
25 years, the CAPE ratio has been above its historical average
95% of the time. Stocks have been below their historical average
just 16 out of the last 309 months. Since that time, the total
return on the S&P 500 is over 925%.
Sullivan shows that the profit estimates in the data are flawed
because of accounting changes. He shows that large and completely
implausible changes in "earnings" were actually the result of the
FAS 157 rules.
As always, you can feel free to contact us with recommendations
for future Silver Bullet prize winners at any time. Whenever
someone takes interest in defending a thankless but essential
cause, we hope you'll find them here. Have a Happy New Year and a
Signet's A Real Market Gem