Tag Archive

Vexed by VIX? Part 2

By John S. Tobey

It should be enough to rely on CBOE’s strongly worded advice not to expect too much from VIX – particularly since it is in CBOE’s interest to have investors embrace its use. However, some investors need proof. So below is a series of graphs that show the weakness of using VIX as an indicator... »

Vexed by VIX? Part 1

By John S. Tobey

We are told that VIX (the Volatility Index for the Standard & Poor’s 500 Stock Index) currently indicates investor complacency and, therefore, a coming stock market drop. Actually, that warning sounded last October. So why does the stock market keep rising? Has VIX (a.k.a. the “fear index”) lost its way? Or are stock market... »

Automobile Deaths and the How to be a Losing Investor

By John S. Tobey

After Seeking Alpha selected my article, “New EPA Mileage Standards Could Stimulate Auto Sales,” an investor made the following comment: “Every time CAFE standards rise, the total number of deaths from car accidents rises (lighter cars means less survivability).” The statement is incorrect, as I show below. More importantly, this... »

American Air’s Mishap and Statistical Misuse

By John S. Tobey

Last week’s American Airlines’ Boeing 757 incident helps illustrate a common investment problem: the misuse of statistics. Every day we are inundated by numbers that seemingly prove something. Yet, many are improperly calculated, selected, analyzed and presented. Our defense is to… »

Investors Give up on Value Stocks – Should We?

By John S. Tobey

The Wall Street Journal just provided a big tip for investors: Buy value stocks. This tip was wrapped in a “contrarian” package, meaning they described well why investors are ignoring value. And whenever investors choose to pooh-pooh something, that is where we should look for potentially profitable investments. »

Home Sales Down but Prices Up – What Gives?

By John S. Tobey

The latest housing reports show sales have slipped (particularly for new homes) since the April 30 expiration of the US government homebuyer incentive. Yet, the latest S&P/Case-Shiller data has house prices continuing to rise. Well, that’s not supposed to be how supply/demand works. Demand has clearly tapered off, and we know there continues to... »

Oops! The Wall Street Journal Forgets How the Dow Jones Industrial Average Is Calculated

By John S. Tobey

The weekend edition of The Wall Street Journal carried the headline: “BofA Drives Dow Drop” (July 17-18, by Donna Kardos Yesalavich, page B-11). The problem is that Bank of America, in spite of its 9.2% Friday decline, is too small to have much effect on the Dow Jones Industrial Average (DJIA). Too small? Yes,... »

These Three Economic Gauges Read “OK”

By John S. Tobey

Investors, analysts and pundits can look at the same economic measures and come away with opposing views as to the economy’s health and future. The economy’s “trees” can range from vibrant to blighted, allowing differing economic “forest” diagnoses. As a result, we see predictions of economic normalcy and growth side-by-side with reversal and collapse.... »

Pier 1 Imports – An Example of How Percentage Gains Can Mislead

By John S. Tobey

An investment manager was once asked how he liked being judged by performance numbers. He replied that he was fine with it – so long as he got to pick the beginning and ending points. We’re seeing articles written that do just that, particularly since we are now one year from the stock market’s... »

Consumer Borrowing – Not a Second Shoe

By John S. Tobey

Consumer borrowing remains a concern for many investors. The thought is that people went on a borrowing binge and now the excess has to be undone. In the midst of economic hard times, the argument goes, this can only mean more bad news to come. However, all is not dark This concern has been... »

Homebuilder Stock Articles Raise Questions – And Exclamations

By John S. Tobey

On Monday, Bloomberg reported, “Homebuilding Stocks Seen Rising Too Far, Too Fast.”  The reporter included a graph that shows homebuilders far outperforming the stock market year-to-date. Other publications, including The Wall Street Journal, picked up the theme, helping the stocks to sell off more sharply than the market on Tuesday. The problem is that... »

The DJIA Closes At 5,813 – In 1989 Dollars, That Is

By John S. Tobey

We see many articles and studies that use long-term results to make a point – especially now because the stock market is selling at levels first seen some years ago. For example, the excitement of the Dow Jones Industrial Average (DJIA) re-crossing 10,000 and the “lost decade,” so-called because markets are at levels first... »

Statistical Shortcuts Can Bog Down Your Investment Returns

By John S. Tobey

As a final piece on statistics, I want to cover some popular statistical shortcuts applied to investing. Whether done innocently or intentionally, the results are the same – unusable. If action is taken based on them, the result can be both unexpected and undesirable. »

Beware of Sound-Bite Logic – It’s Compelling but Misleading

By John S. Tobey

“Question everything!” Excellent advice, especially for claims based on simplified statistics. What is amazing – read, disconcerting – is how pervasive improper statistical analysis is. So, we need to ensure pronouncements and conclusions we deem important are accurate. Here is a non-investment example… »

Statistics Can Be Fun – And Profitable

By John S. Tobey

Statistics fun? Well, yes, if they are profitable – and they can be. In investing it isn’t just wise statistical analysis that can make money – it is also the spotting of misapplied statistics by others. The frequency with which this happens is high enough to make it an important strategy for contrarian investing.... »

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