The main point of the article? History almost repeated itself!
Oct 3, 2008: SPX=1099.23; VIX=45.14
Oct 3, 2011: SPX=1099.23; VIX=45.45
Since the stock market seems to be on track with 2008, I went ahead and used our new backtesting tool in Turnkey Analyst to assess how our screens performed.
First, a screen shot of what the Shiller model predicts for the next 10 year real return on equity–a dismal 35bp/year.
But at the same time, the real spread between stock earnings yield and bond yields is almost 7%–what’s an investor to do? Ugg, the Fed has us all in a pickle!
When we look at how our screens performed from August 1, 2008 through December 31, 2009, we find some interesting results:
We find that ALL of our screens end up outperforming the broad-based Russell 2000 index, however, profit and value and goodwill gone bad stand out as the best performers (here we focus on long-only, long/short systems also did well over this chaotic time period).
Lesson: If you believe we are in the midst of another September 2008 time period, focus on the profit and value and goodwill gone bad screens to find some potential winners.
Best of luck and try out our new backtesting tool if you are interested in exploring deeper.
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