Fee-Only Financial Planning in North Carolina

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Gauge History

 

Here is a short history of Greedometer development.

Research began in 2005, and lead to an early version deployed at Triangle Wealth Management (this business was sold in Q1 2017)- towards the end of 2005. The early version was based on a combination of the S&P500 Profit Margin, S&P500 adjusted P/E, VIX, and ECRI’s WLI.

More input parameters were added over the course of 2007 and 2008 until there were 8 inputs. The early version of the algorithm provided enough insight to assist in the limiting of client losses during the 57% S&P500 collapse (October 2007 to March 2009) — to approximately 6.5%. There was sufficient confidence in the early version of the gauge that TV advertisements were run in January 2009 indicating the Dow would drop to the 6000s that year. Two months later the Dow plummeted to the 6000s.

In April & May 2011 information about the Greedometers was sent to every large financial news organization. At the same time, a USPTO trademark was applied for.  The email contained a warning that July would see an initiation of another crash (the SPX dropped 20% in a violent 2-week drop in late July-early Aug 2011– it had to be stopped by more actions from the Fed as well as ECB. Absent their actions we would have seen a far more destructive protracted crash.)  Forecasting a stock market crash is bad for business, so no one touched it –except for one news organization –but they would wait twelve months. Twelve months after I sent them (and everyone else) details about the Greedometers, this one news organization launched their own similar looking and sounding web-based stock market timing tool.

More input parameters were added to the Greedometer algorithm in 2012 and 2013 (until it had 10 -as it does now).  2014 saw a breakthrough in understanding the different impact on the Greedometers between Fed and non-Fed central bank sugar bombs (surprise threats and actions to deliver more new supportive monetary policy actions that do not address a structural economic problem, but that cause a short term rally in risk asset prices).