The following transcript was paid for at Speechpad.
Announcer: Live from the Internet, it’s Tradestreaming Radio with your host, Tradestreaming.com’s own, Zack Miller.
Zack: Hey, this is Zack Miller. Welcome to Tradestreaming Radio where we help investors make better decisions with tools, tips, and technology. We speak to some of the smartest and most creative people out there working in this space and hope to illuminate some of these ideas to you.
Robert Wright will be our guest on today’s show. He is the Nef Family Chair of Political Economy at the Augustana College in South Dakota. Wright is an accomplished author. He has two pages worth of books that he’s published on Amazon. He teaches monetary history. He teaches business. He teaches about price discrimination. What I think makes Wright and this book so valuable for people is that it combines detailed scholarship, really sort of drilling down into numbers, fact-based investing. I’m seeing how some of the leading indicators, some economic data and business data that we read about every day in the paper, how those really impact investing, testing them, going as far as seeing whether these data actually help investors and how profitable they may be as investing strategies. But he’s also a good writer. He’s a self-described cynic, along with Simon Constable, and the book has a very good readability.
Some of the things you might learn about in this podcast, so successful investing means making and keeping above market returns at each stage of the business cycle, and this book very much focuses on trying to determine where we are on the map of the business cycle by looking at certain criteria and then figuring out how to invest based upon that location. Investors must correctly forecast the business cycle before they can know which types of specific investments are likely to generate superior returns.
Wright recommends that looking at investing not as a one-off event. It’s a learning process. This is something I talk about in Tradestream all the time. It’s a lifetime commitment to understanding the economy. Forecasting is more art than science. We know this as investors, and it’s good to have rules-based investing, but we know that no rule is going to be right 100%, and our capacity to accurately predict stems from a combination of historical data and a model that correctly identifies causal agents rather than mere statistical correlations.
There are 50 indicators in this book. Some are well known, some are less well known. It’s a good book. It doesn’t cost a whole lot. It’s like $9.99, whether you buy it in mass market paperback or you buy it for the Kindle, which is where I read. It’s useful. It’s definitely important for business cycle investing. It should deserve an important place on your shelf. Continue reading “How to use economic indicators to become a better investor (transcript)”
In a recent webinar, I sat with Maz Jadallah, founder/CEO of AlphaClone, a software provider and investment manager enabling what I call “piggybacking strategies” of top hedge funds.
We discussed some of the objections investors have to creating strategies involving replicating hedge funds. We also provided 5 tips to perform better using cloning strategies. It was a intriguing session with some great questions from the audience — make sure you sign up to this blog to be notified of our next event.
On Tradestreaming Radio, we’re interviewing lots of innovative entrepreneurs, investors, and researchers all trying to make investors better at what they do. Check out our archives. Subscribe on iTunes.
Wright is a university professor, prolific author, and a proponent of business-cycle investment philosophy. Along with WSJ columnist, Simon Constable, he’s written an incredible resource for investors.
We discuss:
Which economic indicators investors should be focused on
Which economic indicators make money, how much money, and how reliable they are
New indicators we haven’t heard of before
How technology is enabling new indicators to help investors to make better decisions
trends in investment book publishing to experiment with digital, freemium model and why he gives away his college textbooks for free
creating a broad swath of indicators to best understand all the nuances of the economy
Listen to the whole program
More resources
If you don’t see the player above, listen to the program here.
Join us this coming Monday May 9th @ 4pm ET for a free online discussion on the “5 Myths About Cloning Hedge Funds”.
We’ve been following hedge fund replication strategies (what I call piggybacking) since the early days of this blog and back to 2009 on NewRules. It’s not only a topic I like to analyze, but I’ve moved a lot of my own investment activity to leverage the power of cloning.
Readers of Tradestreaming will know that AlphaClone, a research platform that enables investors to backtest multiple cloned portfolios of the world’s best investors, has been helping to make piggybacking practical for all types of investors.
But investors I speak with still struggle with understanding the rigor in cloning — misconceptions about the strategy still abound.
So, I’ve invited Maz Jadallah, founder and CEO of AlphaClone, to address these issues. In an upcoming webinar, we’ll discuss:
the effects on performance of the timing delay in disclosure filing
the role of luck in clone portfolio performance
the importance of the absence of hedge fund short positions from disclosures;
Space is limited. Click here to reserve your seat now.
A lot of what it takes to become a good investor and a good manager of your money is just time. Think about people’s learning curve — in some sense we don’t really get an opportunity to become experts in money management unless we really put our minds to it. Most of us will only buy 2 or 3 or 4 homes during the course of our lives — we never really get the chance to become experts at that. So, there’s a good chance that we’re going to mess up.
Similarly, we only get to claim Social Security once, so in terms of when to claim Social Security, there’s a good chance, we’re going to mess up royally.
And similarly when it comes to investing, yeah, we’re going to get the chance to see a lot more bull and bear markets than we would opportunities to buy homes. Nonetheless, the chance to mess up is enormous in part because people have to cope with all this noise.
4 ways to accelerate your investment experience
Nothing beats experience like experience: you just have to be in it to win it. That means ensuring your take adequate precautions to maintain your ability to stay invested. The research shows it’s not about age, it’s about experience and time in the market.
Log your experiences: Keep a trading diary. Better yet, blog about what you’re doing, sharing your activities with others on Seeking Alpha or on StockTwits. You’ll get feedback from others — helping to expedite your learning and climbing the learning curve.
Plug into the tradestream: Use the Internet, the blogosphere, and twitter to identify top performers interested in sharing their knowledge. If you’re interested in making sure results are what they claim to be, follow top performers on Covestor who have agreed to have their performance audited.
I’m sending my kid to high school. Like James Altucher, I don’t know if I’ll send him to college. There is so much information readily available to investors, you can get a degree in hard knocks if your’re diligent and interested.
A new addition to Tradestreaming, the Tradestreaming Cascade is a highlight reel of some of the past week’s most interesting information. Much of this comes from my Twitter feed, @newrulesinvest
Research update: Activist Investing (The Activist Investor): More research into the value extracted by activist investors — this time looking at shareholder proposals and voting.
May 3rd poorest performing month in pre-election years (Stock Trader’s Alamanac): A hypothetical $10k investment in the DJIA for November-April would have compounded to over $500k (1986 – present) while May-October would have resulted in a $379 loss.
Curious to see what resources you use and find most useful for hedge fund cloning, tracking, piggybacking. Vote on the ones below or add your favorites.
A new addition to Tradestreaming, the Tradestreaming Cascade is a highlight reel of some of the past week’s most interesting information. Much of this comes from my Twitter feed, @newrulesinvest.
This transcript is of a conversation I had with Dr Joey Engelberg, Professor of Finance at the University of North Carolina’s Kenan-Flagler Business School (listen to the podcast). You can always subscribe to Tradestreaming Radio on iTunes.
In my book, Tradestreamingand on my website, I talk a lot about what I call collateral research. This is information that’s inherently non-financial in nature, but that investors are using to aid in their investment decisions.
One example I talk about in the book specifically is Amazon sales data. You can go onto Amazon.com, look up best selling computers, and you can get a list at that moment in time, updated hourly, of what’s selling well. So, if you were an investor in Apple, and Apple was introducing a new product to the market, that information, although it doesn’t say specific sales numbers, of what Apple itself is seeing through selling on Amazon, that information is at least important in the sense of how well a product may be received into the market.
Another area of concern for investors, of interest, is Google search data. Google recognizes that itself, and launched about two years ago on Google Finance something called Google domestic search trends, GDST. That’s a mouthful. What that is basically is Google itself is looking at a vertical search, something about the auto industry, unemployment, something where there are a series of search terms around a particular category, and then mapping them against the volume of other search queries.
So, you can get a feel for, qualitatively, how a certain search term or industry is trending vis a vis the rest of the search market. You can then overlay that information on top of an ETF or a mutual fund that may track that industry, and you can get a view for how well some of that data may, or may not influence future price movements.
Today’s guest on the podcast is Joey Engelberg, who studied this actually quite intensely. He’s a Professor of Finance at the University of North Carolina, the Kenan-Flagler Business School. He previously worked at the SEC, as a research specialist.
He recently produced a paper that caught my eye, called In Search of Attention. That basically looks at Google search data and tries to map it to future price movements. He actually did find a correlation that certain abnormal trends in search data can lead to abnormal returns in the stock market.
It was co-written by Simon Constable, a journalist at the Wall Street Journal, and Robert Wright.
, and a proponent of business-cycle investment philosophy. Along with WSJ columnist, Simon Constable, he’s written an 
just came out. Looking forward to reading it.