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Cash Cows of the Dow

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Long time readers know that I have been a shareholder yield advocate on the blog for almost a decade.  (We used to call it net payout yield back then, and we define it as the combination of dividends and net buyacks.) People are slow to change of course, but my hopes are that eventually you … Continued

The post Cash Cows of the Dow appeared first on Meb Faber Research - Stock Market and Investing Blog.

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CBC article on Chinese censorship highlights Citizen Lab research

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A CBC article exploring the Chinese government’s use of surveillance mechanisms, what has been called the “Great Firewall” highlights Citizen Lab’s work in studying the state and private enterprises that support it. In an interview with the CBC, Citizen Lab Director Ron Delbert said that “You could go so far as to make the argument that social media and digital technology are actually supporting the regime.”

The article goes on to point out that the Citizen Lab has identified various surveillance mechanisms in social media platforms based in China, which are widely popular in the country, such as WeChat. The content restrictions built into these applications remain in effect when individuals leave the country, including students who study abroad. These services also often gather information about their users. On this topic, Deibert said  that Chinese officials “have a wealth of data at their disposal about what individuals are doing at a micro level in ways that they never had before. What the government has managed to do, I think quite successfully, is download the controls to the private sector, to make it incumbent upon them to police their own networks.”

Finally, Deibert commented on the fact that Chinese authorities appear to store massive amounts of user data indefinitely. This policy of retention, he said, was in contrast with a philosophy of retaining only what is needed and then deleting the rest, a policy Western governments have tended to adopt.

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The post CBC article on Chinese censorship highlights Citizen Lab research appeared first on The Citizen Lab.

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Using Absolute Momentum to Positively Skew Calendar Year Returns

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There are instances where I "borrow" an idea from someone (actually... most of my posts were at a minimum inspired by someone else). In this case, I am stealing the initial concept from Ryan Detrick who posted the following chart of annual U.S. stock returns going back ~200 years as there is a lot of interesting information in his chart. As Ryan pointed out in a supporting post most returns were between 0% and 10%, but returns varied pretty broadly during recessions:
Yes, more recessionary years saw negative returns more often than not, but surprisingly there have been some strong equity returns during years that had an official recession take place. Obviously most of these big gains took place as the recession was ending; still, this is eye-opening and reinforces not focusing too much on just fundamentals, but also incorporating valuations and technicals.


I recreated his chart below using Ibbotson data going back to 1927 (the data goes back to 1926, but you'll see shortly why I selected 1927) and to highlight his point on recessions, I added yellow cells to show final years of a multi-calendar year recession to clearly show the strong performance available for investors that owned stocks after the stock market was already crushed during the initial stages of the recession. Note there are some differences in which years we show as being recessionary. I am not sure of Ryan's source, but I just went to Wikipedia.



Avoiding the Downturn and Capturing the Upturn

So is it possible to avoid much of the drawdown at the start of a recession and capture the rebound? 

Fortunately, it might just be. 

The below recreates the above table, but with one slight twist. Instead of a buy and hold allocation to U.S. stocks, the below utilizes the following allocation rules:
At each month-end, if the total return index is greater than the 10-month moving average of the total return index stay in stocks... otherwise buy U.S. treasuries.
The 10-month moving average calculation pushed the first calendar year of the strategy to 1927, hence the 1927 start in both charts.


Remarkably, while this simple model did reduce some of the strongest calendar years, it resulted in no calendar year return of less than -25% and "converted" most of the tough recession years to much more manageable down years. As remarkable, this simple momentum model was able to capture most of the rebound years (i.e. the yellow cells showing the last year of a multi-year recession), as well as the strong performance of the two positive returning recessions (1945 and 1980).
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⭐ Visit North Korea direct from Shanghai this coming January for 2.5 days!

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⭐  Visit North Korea direct from Shanghai this coming January for 2.5 days! Escape the chaos of Chinese New Year with a mini-break to one of the world’s most fascinating and intriguing countries organised by Koryo Tours. For just ¥8000 you get everything sorted for you! Sign up now. [ more › ]
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WATCH: Taiwanese animators take on Trump-Taiwan call craziness

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WATCH: Taiwanese animators take on Trump-Taiwan call craziness Trump and Taiwan. This week sure did go off the deep end, huh? If you are still trying to make sense of what all happened, check out this helpful recap from the always imaginative animators at TomoNews. [ more › ]
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Tax evasion: Tightening the noose

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Questions over whether new rules to flush out evaders and squeeze havens will work
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