This is the book I'm asking about.
As straight forward as the book seems to try to be, some things just aren't very clear imo.
Here's the summary of Part I on yield curve.
Buy stocks when:
• The federal funds rate is declining.
• And the money market yield curve is positive.
• And bond quality spreads are shrinking.
• And the 10-year note, three-month bill spread is positive.
Sell stocks when:
• The federal funds rate is rising.
• And the 10-year, three-month spread is negative.
• And bond quality spreads are expanding.
• Or the yield on the 10-year note is greater than 10 percent.
How do you define the federal funds rate rising or declining? Over what period do you calculate? ex) Is the federal funds rate higher today than it was 3, 6, 9 months ago? etc.
Money market yields has 1 month, 3 month, 6 month and 1 year yields. How do you define the curve being positive? 1mth < 3mth < 6mth < 1yr? Or do you just look at two numbers like 3 mth vs 1 yr? That is what the author seemingly does to determine whether the mid to long term yield is positive or inverted. She uses 10 year - 3 month. So what exactly do you use for the money market?
How do you define bond quality spreads shrinking? Over what period and by how much?
Also, there is a chapter she talks about long term yields inverting as a sign of upcoming decline. I think in one example she uses 20 yr vs 30 yr but then in the summary talks about 10 yr vs the longest dated treasury (which I assume she means 30 yr). So which is it? 20 vs 30 or 10 vs 30?
Does anyone have good answers for these? What are you opinions on this market timing strategy?
Submitted March 13, 2018 at 10:58PM by cryptogalaxy http://ift.tt/2DpSSEL
