“To demonstrate how ridiculous market predictors can be, … David Leinweber decided he could prove a point with butter production in Bangladesh:
After casting about to find a statistic so absurd that no sensible person could possibly believe it could forecast U.S. stock prices, Mr. Leinweber settled on annual butter production in Bangladesh. Over an 13-year period, he found, this statistic “explained” 75 percent of the variation in the annual returns of the Standard & Poor’s 500-stock index.
By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to “predict” past U.S. stock returns with 99 percent accuracy.”
I’ve used the STUBL index, pronounced “Stubble” index. It stands for “Standard Transitory Unshaved Beard Length.” I look at college students on Monday mornings. When a majority of them are clean-shaven I conclude they went to sleep early enough to get up early and shave, and therefore didn’t have a great weekend. When a majority of them have a two day beard I conclude they had a great weekend.
This is a leading predictor of the market. However, I’m not sure when the correlation is positive and when it’s negative. That’s where the crystal ball comes in.
See, it’s an integrated approach.