Asset Allocation Indicator:
The difficulty I have with the indicator I developed, and I suspect its true of Richard Bernstein's as well, is that its failed the test of a good contrarian indicator in recent years. It's not enough that such an indicator is high when the Market is high, it must also be low when the Market is low. It failed to decline significantly at the '98 low and again at the April 2001 and Sept 2001 lows. Therefore, anyone relying on it would have been left at the starting blocks and missed some great bull market opportunities. I suspect that, if one had 80 yrs or more of data, one would see that, within the cyclical bull markets, there is an undercurrent of rising allocations during secular bull market periods. Without such long historical data, however, I find it of limited value. If it is responding to the secular, i.e. long term trend, it would be more of a long term contrarian indicator, interesting, but not of much value to the short or intermediate term investor/trader.
By the way, if you're interested in getting the data yourself, it's in a quarterly feature that I think the WSJ still runs, called "Who has the best blend". It appears inside a box with the names of 12 or 13 brokerage firms, usually on page C1. I use the top 10 for simplicity's sake and chart Merrill Lynch separately. It would be interesting if one could get the data for the mid-60s topping out period, as well as the 1974 and 1982 bottoms. |
