November has come to a close, so it’s time to make changes based on the signals from my modified Ivy Portfolio. The signals automatically update, so if you’re reading this post long after I wrote it, chances are the signals look much different from what they are now.
Planned Transactions on December 1
For the end of November, here is a summary of what the signals are saying:
Buy – AGG, IPE
Sell – JNK, SPY, VXF, EFA, EEM, VNQ, DBC
Only JNK and DBC have flipped sides from the end of last month. All other positions remain the same. Therefore, tomorrow morning (Dec 1) I will change the JNK and DBC positions to short at 9:35am ET (5 minutes after markets open). I believe there will also be dividends from the AGG, IPE and JNK funds deposited into cash.
Performance for November
From the close of Oct 31 thru Nov 30, the Easynomics Portfolio gained 0.98% versus a loss of 0.51% for the S&P 500 index. That’s a net gain of 1.49% for the portfolio, leaving the cumulative result still trailing the S&P 500 by 2.80% (or $2,517).
Disclaimer: All of the information provided at Easynomics is for informational and educational purposes only and should not be construed as financial, legal, or any other kind of advice.
I love indexes! If you haven’t figured that already, I don’t know what to tell you …
Easynomics Temporary Staffing Index (ETSI)
Don’t say the name of this index too loudly anywhere unless you want to hear “bless you” afterward.
Why did I create this index?
The labor market (jobs) is generally a lagging indicator. That is, long after the economy gets better or worse, you see the same thing happen to the labor market. But there are some specific areas of the labor market that are closer to being a leading indicator than others. One of those is the temporary staffing (temp jobs) portion. Generally speaking, before a company decides to hire full-time workers, it first tries to add temporary workers, in case the extra work doesn’t stick around. It’s much easier to hire and let go of temporary workers. Therefore, the ups and downs of the temporary workers can be a guide to what may happen to the overall jobs market.
What makes up the index?
There are two components, which I list below. I average the value of an index that is based on each one. Each item below is indexed to the level in June 2006, which means that the value for each is set at 100 at the beginning of June 2006:
- American Staffing Association Index (Source: American Staffing Association) - This weekly index is based on a survey of companies that are in the business of getting temporary jobs for people who are interested. The index is great because it comes out very close to real-time. The only problem is that it’s not seasonally adjusted. If you look at a graph of the index for the past several years, there is a clear pattern throughout the year. Therefore, I have decided to do a very basic seasonal adjustment so that we can really see whether the index is up or down versus the previous week/month/year. Lastly, in order to make it roughly equivalent to the monthly nature of the other component listed below, I decided to use a 4-week moving average, specifically the last 4-week moving average of each month.
- TEMPHELPS – Temporary Help Services (Source: Federal Reserve Bank of St. Louis and Bureau of Labor Statistics) - When the BLS releases its Employment Situation on a monthly basis, the portion of it dedicated to temporary workers can provide us the same kind of information as the ASA index above. It is already seasonally adjusted.
How is the index calculated? continue reading…
I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.
New Homes Inventory Months of Supply
Quick ‘n Easy
When there are too many new homes still left unsold (inventory) on the market, it usually means that prices will be dropping because supply is greater than demand. A good way of measuring the inventory is to calculate how long it would take that inventory to sell at the current pace of sales. The normal level for this is around 6 months. For October 2011, the number came in at 6.3 months. This would suggest that new home prices are still likely to decrease but only barely.
When there are too many new homes still left unsold (inventory) on the market, it usually means that prices will be dropping because supply is greater than demand. The opposite is true if there is very low inventory. A good way of measuring whether current levels are too high or too low is to calculate how long it would take the current inventory to sell at the current annual pace of sales. For example, if there are 150,000 unsold new homes with the most recent report saying the annual pace of sales was 225,000, here’s what the calculation would look like:
225,000 new homes sold per year
divide by 12 to get 18,750 new homes sold per month
150,000 unsold homes divided by 18,750 sold per month = 8 months supply
Here’s a graph of the New Homes Inventory Months of Supply from Calculated Risk:
Trends and Projections
Below, I will discuss whether the indicator is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. continue reading…
Modified Ivy Portfolio Simulation
It was a stellar week for the simulated portfolio. The Easynomics portfolio is now leading the S&P 500 index by 7.28% versus last week’s lead of 1.01%. That’s a positive difference of 6.27% in just one week. You can read all the latest details in the link.
Easynomics Stock Market Forecast (Experimental)
As for the Stock Market Forecast, the projected close for Fri Nov 25 was not even close. The model is taking a long time to say anything with conviction, as there is simply not enough data yet. Once I feel it has enough data, I will remove the “experimental” tag. This time it overestimated the S&P closing price by just over a whopping eleven percent!
Here’s how the forecast performed last week: continue reading…