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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (70603)	4/22/2005 7:00:40 AM
From: Skeet Shipman	Read Replies (2) \| Respond to of 94695

Hi Vi and Bill, In case you missed this Mark Hulbert story on MarketWatch: Fast money By Mark Hulbert, MarketWatch marketwatch.com >>>>>> My study was based on money supply data from the Federal Reserve dating back to the beginning of 1959, nearly 50 years ago. The data included both seasonally-adjusted and non-seasonally-adjusted levels of the money supply, as defined by M1 (the narrowest definition), M2 (less restrictive), and M3 (the broadest definition). For each of the more than 500 months since then, I calculated the rate of change over the trailing one, three, six and 12 months for each of the six different definitions of the money supply. I also calculated for each of these months the returns of the Dow Jones Industrials Average ($INDU: news, chart, profile) over the subsequent one, three, six and 12 months. I then ran all the data through a statistical package to see what I might find. The most striking finding is that month-to-month changes in the money supply have no detectable relationship to the stock market's subsequent performance. Even quarterly changes have no apparent correlation. Yet it is to the short-term gyrations in the money supply -- weekly, in many cases -- that the newsletter editors I monitor pay close attention. I am at a loss to see why such attention is justified. I did find statistically significant correlations when I focused on 12-month changes in M2 and M3 and the stock market's returns over the subsequent 12 months. But not the correlations that the newsletters I follow assume to exist: There turns out to be a strong inverse correlation between the rate of money supply growth and the stock market's return. That means that the stock market over the past 46 years has performed the best following months in which the 12-month change in the money supply was the lowest. >>>>> Skeet