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To: philv who wrote (21150)	6/11/2004 2:13:54 PM
From: sea_urchin	Read Replies (1) \| Respond to of 82192

Phil > Can such an analysis be applied to other indices, other commodities? Yes, sure. The difficulty is to get enough data points. Very hard before 1990 and impossible before 1980, certainly for me. > How about crude oil I wish I had the data, but I don't > or the price of a house, That's impossible, unless it's resold every month. There has to be a real world market. > value and volume of the dollar I try to estimate the value of the USD from the value of the other currencies because I don't have any data for the USD Index. I even play with a gold/dollar index just to see what it looks like because, as we have discussed, the value of gold tends to be the reciprocal of the value of the dollar. Therefore the value of gold plus the value of the dollar should be a constant. The arithmetic difficulty is that each is measured in terms of the other. > Does not monetary policy throw such analysis off? If inflation was flat, (no wage or price inflation) and the supply of money constant, such an analysis would be correct, imo. I guess there are theoretical objections. However, the multiple regression variables which I use are mainly the values of the currencies and the main indices so inflation and other monetary inconsistencies would be taken care of in the calculation. > The cost of doing business in 1988 was considerably less than today, and in 1988, the it was far costlier than 1968. So, should such an analysis not take inflation into consideration? I began this about 12 years ago and I could use only the data which was available to me. But what I have done is to "tune" the analysis so that it is (a) consistent and also that (b) the high and low probability values coincide with what has actually taken place. If that has not happened, I discard the analysis and don't repeat it. So, part of the process was to find those regressions which "worked". The object was not just to produce a graph, or series of graphs, from an academic point of view or whatever, but a working tool. Something which could tell me, and be right more than half the time, whether I should be buying or selling. And, as you well know, that's already a tall order. I might also add that I could never come to the conclusions about the market which this analysis does. In fact, whenever I try to, and I often do, make forecasts from daily graphs or whatever, I am invariably wrong. With the regression method, however, I have been right virtually every time I have placed a bet. Not necessarily at the very top or very bottom, but certainly near to. As you can see from the graph, it is necessary to trade only very infrequently, perhaps once every two years or so. This was another reason I tried to work out such a "slow" method because a high frequency of trading attracts the tax man in SA. When I first came on the boards at Kitco, and also here, I used to talk about the analysis quite often but lately I haven't done so for the simple reason that I always believe the analysis could be wrong "this time" and I don't want to look foolish and have to make all kinds of explanations and apologies when it hasn't "worked". Anyway, most people want to be busy buying and selling every day and a trading tool that doesn't enable this is of no particular interest.