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ECON: ECONOMETRIC FORECASTING MODELS DC Econometrics Copyright 1989 Table of Contents Software License Warranty 1. Introduction 2. Getting Started 2.1 Required Hardware 2.2 Making a Backup 2.3 Running the Program 3. Main Menu 3.1 Input Monthly Data 3.2 Econometric Forecasts 3.3 Play "WHAT IF" Games 3.4 Edit Files 3.5 Historical Forecasts 3.6 Adjust File to New Baseline 3.7 Exit the Program 3.8 Help 3.9 Printer Options 3.10 Print Registration Form 4. Using the Forecasts 5. The Econometric Models 5.1 Checking the forecasts 5.2 Details on the Regressions 6. Getting Help 6.1 Error messages 7. Recommended Reading 8. Placing an Order Software License Read this user agreement before using the software. By using the software, you agree to be bound by the following terms of the license and warranty. The econ software recorded on disk is copyrighted software of DC Econometrics, and all rights are reserved. DC Econometrics authorizes you to make archival copies of the software for the purpose of backing-up our software and protecting your investment from loss. You may give away copies of this shareware program to others and you may make it publicly available on bulletin board systems. You may not distribute copies of the output forecasts of the program without written permission from DC Econometrics. You agree that the liability of DC Econometrics, its affiliates, agents, and licensors, if any, arising out of any kind of legal claim (whether in contract, tort, or otherwise) in any way connected with the software shall not exceed the amount you paid to DC Econometrics for the software and documentation. Warranty DC Econometrics warrants the diskette and documentation provided upon registration to be free of physical defects in workmanship and materials for 90 days from date of registration. In the event of notification within the warranty period, DC Econometrics will replace the defective diskette or documentation. The remedy for breach of this warranty shall be limited to replacement and shall not encompass any other damages, including but not limited to loss of profit, and special, incidental, consequential, or other similar claims. DC Econometrics excludes and disclaims any and all other warranties expressed or implied, including but not limited to implied warranties of merchantability and fitness for a particular application. DC Econometrics and its affiliates cannot and do not warrant the accuracy, completeness, currentness, merchantability, or fitness for a particular purpose of its software or data. In no event will DC Econometrics, its affiliates, agents, or licensors be liable to you or anyone else for any decision made or action taken by you in reliance upon this software or its output. The entire risk as to its quality and performance is assumed by the purchaser. The purchaser relies on the software entirely on his own risk. In no event will DC Econometrics be liable for any loss of profit or any other commercial damage, including but not limited to special, incidental, consequential, or other damages. DC Econometrics and its affiliates are not responsible for any cost of recovering, reprogramming, or reproducing any program or data, or damages arising out of the use of this product, even if DC Econometrics has been advised of the possibility of such damages. This statement shall be construed, interpreted, and governed by the laws of the state of Colorado. 1. INTRODUCTION This program contains several econometric models to forecast the stock market, interest rates, and inflation. It forecasts all of them 3 months, 6 months, and 12 months in the future. There is also an asset allocation routine to calculate suggested portfolios. Once a month, you enter 8 numbers: stock prices, interest rates, CPI, unemployment, P/E ratio, and dividends. These are available from many sources, but I find Barron's most timely and convenient. The software stores the new numbers and uses its historical database to calculate predictions that you can use to find new Bull or Bear markets. 2. GETTING STARTED 2.1 Required Hardware The program is designed for IBM personal computers and compatibles with MS-DOS or PC-DOS 2.0 or above. It will work with IBM PC, XT, AT, and PS/2 machines. You also need 256K of internal memory and one 5 1/4 inch or 3 1/2 inch disk drive. IBM, AT, and XT are registered trademarks of International Business Machines Corp. MS-DOS is a registered trademark of Microsoft Corp. 2.2 Making a Backup Disks are fragile, so you should make a backup copy as soon as possible. Since the program stores historical data, you should make a backup copy every few months, rewriting the old backup. If you have a power failure while the program is writing data, a file could be lost. To make backup to floppy disk: 1. Boot up in MS-DOS 2. When you get the A> prompt type: diskcopy The DOS disk may need to be in the A drive if you have no hard disk. The computer will respond: Insert SOURCE diskette in drive A: 3. Insert the ECON disk and press any key 4. When it asks for TARGET disk, insert a blank diskette. 5. Verify that the following files are located on your TARGET disk: ECON.EXE UNEMP SP500 CPI TBILL SPPEM TBOND SPDIVM PRIME ISTYR ECON.TXT README.TXT To make backup to hard disk: 1. Boot up in MS-DOS 2. Put SOURCE diskette in drive A 3. Create a directory on the hard disk mkdir \econ 4. Copy files to hard disk copy a:*.* c:\econ 5. Verify that the following files are located in the directory: ECON.EXE UNEMP SP500 CPI TBILL SPPEM TBOND SPDIVM PRIME ISTYR ECON.TXT README.TXT 2.3 Running the Program 1. Boot up in MS-DOS 2. Insert the ECON disk into the floppy drive or move to the \econ directory (cd \econ) 3. Type: ECON (and press Enter) 4. The program will load, and the shareware message will come up. Press return. You will then see a list of options for output devices. I usually choose 1 for screen, or 2 for printer. 3. MAIN MENU The program reads in the historic data. This takes one minute. After the data is loaded, the main menu is displayed: 1. INPUT MONTHLY DATA 2. ECONOMETRIC FORECASTS 3. PLAY WHAT IF GAMES 4. EDIT FILES 5. HISTORICAL FORECASTS 6. ADJUST FILE TO NEW BASELINE 7. EXIT THE PROGRAM 8. HELP 9. PRINTER OPTIONS 10. PRINT REGISTRATION FORM You decide which choice you want, type its number (1 to 10) and press Enter. The next ten sections will describe the function of each choice. 3.1 Input Monthly Data Once a month, new data needs to be entered. I get this data from the first issue of Barron's available each month. Other sources may be used, however. Barron's is available on Mondays with numbers from the previous week, so if Friday was in the new month, I use those numbers. You only need 8 numbers. It is best to record them for future reference. A log sheet for this purpose is enclosed. You may subscribe to Barron's by writing to Barron's, 200 Burnett Road, Chicopee, MA 01021. Or call 1-800-328-6800, Ext 292. If you can't get the data for the first week in the month it is OK to use next week's numbers. Small changes do not affect the forecasts, but it's best to be consistent. The data is stored in ascii files so you can use them easily. The program stores 25 years of history. Every 5 years, on years ending in 0 and 5, the oldest 5 years of numbers are erased. So if you want to keep older data, archive a copy of the files soon. Here is an explanation of the 8 numbers you enter monthly: S&P 500 close: This is the closing value of the S&P 500 index, an average of the 500 stocks. It is not the futures, industrials, utilities, or financials. It is the close from the first Friday in the month. Prime Rate: This is the Prime interest rate charged by United States banks. It's hard to make a mistake on this familiar number. It is the latest available rate as of Friday. 90 Day Treasury Bill Rate: This is the latest week's rate on 13 week T Bills. It is the Average Discount Rate, not the Coupon Equivalent Yield. This is a small but important difference. The yield will be higher than the discount rate. 30 Year Treasury Bond Rate: This is the latest week's rate on 30 year Treasury bonds. It is reported under Adjustable Rate Mortgage Base Rates in Barron's. Consumer Price Index: This is reported in Pulse of Industry and Trade in Barron's. It is the familiar number used each month to gauge inflation. Due to reporting delays, it lags the others by two months so October's entries include the August CPI. Percent Unemployment: This is the Unemployment Rate in percent. It, too, lags the others by two months and is also found in the Pulse of Industry and Trade. S&P 500 Dividend %: This is the dividend yield of the S&P 500 in percent. It is reported in Barron's under Indexes' P/Es & Yields. S&P 500 P/E Ratio: This is the Price/Earning ratio of the S&P 500, reported near dividends. 3.2 Econometric Forecasts After entering the new data, choose this option 2 from the main menu. The predictions will be displayed on the screen and dumped to the printer if you chose the print option earlier. Forecasts include the S&P 500, bonds, T bills, and inflation, all 3 months, 6 months and 1 year in the future. The program calculates a recommended asset allocation . The 3-, 6-, and 12-month forecasts are combined to produce an estimated return for the near term. The calculated yields are displayed on an annualized basis for easy comparison. The dividend return is added to stocks' return from appreciation. The asset allocation routine looks at a portfolio containing a mix of three assets: Stocks, 30 year T bonds, and 90 day T bills. The estimated return and annual standard deviation of return for each asset is displayed. Two portfolios are calculated. The Conservative Portfolio is the one with the minimum standard deviation of any possible combination of these 3 assets. It will be mostly T Bills due to their risk-free nature and low standard deviation of return. The Aggressive Portfolio is willing to take more risk if more return is possible. It aims for a return halfway between the 2 highest yielding assets. While many combinations will achieve this return, the Aggressive Portfolio displayed does so while accepting the minimum risk necessary to get the return. If you want to get more aggressive, add more of the highest yielding asset. There is an "efficient frontier" of portfolios which achieve a given return at the minimum risk. This can be thought of as a curved line starting at the Conservative Portfolio, passing through the Aggressive Portfolio and ending at 100% of the highest yield asset. You can get a good approximation of intermediate points with simple averaging of the above portfolios. Assets which have a negative estimated return (possible for stocks or bonds in bear markets) are immediately eliminated from consideration because cash in a mattress has a 0% return with zero risk. T bills will probably look better than cash. 3.3 Play "WHAT IF" Games This option allows you to enter data and get forecasts without storing the numbers. It is useful for checking effects of surprises such as market crashes, big up days, prime rate increases, or other news which causes concern. It also allows you to enter imaginary data and play with the numbers to get a feel for what is bullish or bearish. Use this routine to enter the most current data to get forecasts weekly if you like. All 8 numbers described in "Input monthly data" must be entered. You can input these numbers for as many months as you choose. For reference, the most recent data is displayed. To re-use a displayed number, just hit Enter when asked for its value. 3.4 Edit Files If a wrong number is entered and stored on disk, the problem can be fixed by editing the data file. 1. First, choose which of the 8 data files you want to edit. A list of entries is printed with a reference number to the left of each one. 2. To change an entry, enter its reference number, then change the value. To delete the last data value, enter zero for its value. Deletions are not allowed in the middle of the list. The last 12 entries are displayed, but older entries are available by entering their reference numbers. 3.5 Historical Forecasts Enter a year and month from the past and the program will use its database and models to give you its forecast and asset allocation for that time. This allows you to check the program's ability to spot past market movements. For example, look at the great bull markets starting August 1982 or December 1974. Test it against the August 1987 peak before the October crash. The historical forecasts are calculated from data available at that time, using the same models used to make the current forecasts and the same asset allocation routine. The linear regressions used to create the models used data from 1963 to 1989, so the models will perform well over that time. They cannot be guaranteed to continue to perform as well in the future. 3.6 Adjust File to New Baseline This routine is rarely used. Prices are subject to large changes over decades and occasionally the Commerce Department will make a major adjustment. Consumer prices use 1982 to 1984 for the base year (1982-1984=100). The base year was once 1967. This adjustment caused CPI values near 300 to plunge to 100 when prices actually hardly changed. The computer could interpret this as a crash in prices, so the historical data must be revised to the new index. To do this, enter a number from the old index and the equivalent value from the new index. The program will adjust all numbers. If one of the new numbers has already been entered, this routine will adjust it improperly. Use EDIT to verify that everything is OK after adjusting the file to the new baseline. Only CPI and Stock prices will need this adjustment since the others are expressed in percent. 3.7 Exit the Program Choose this when you are finished and want to return to DOS. 3.8 Help A short explanation of main menu items is available. Use the Print Screen (PrtSc) key if you want a hard copy of the paragraph displayed on the screen. 3.9 Printer Options Output may be directed to screen, printer, files, or other devices. Choose from the menu. Choice 1 directs output to screen only. Choice 2 works for most printers. To direct output to a file, choose 6, and enter the filename. 3.10 Print Registration Form This will send a copy of the registration form to your printer or other output device. It goes to LPT1: unless you use Printer Options to choose another device. When you register, you will receive a printed manual and a disk with current monthly data files. The registration fee is $39.99. 4. USING THE FORECASTS Many profitable strategies exist. One should be chosen that fits your available capital and tolerance for risk. The less capital you have, the more commissions will consume. Frequent trading can be very expensive. This program tries to find the large moves which continue for months or years. You probably should not make every change called for monthly in the asset allocation section. Backtesting the model over the period 1971 to 1990 shows a 16% per year average compound return from investing 100% of your money in the asset (S&P 500, T Bonds, or T Bills) forecasted to perform best under asset allocation. This method resulted in 2.1 trades per year on average. Remember, these forecasts are not perfect. Like weather forecasts, they are subject to error. I try to give you an idea of the errors by reporting expected standard deviations under asset allocation. These are the standard deviations observed from 1963 to 1989. Standard deviation is a term from statistics describing a bell curve distribution. 68% of the time, the actual return will be within a range of plus or minus one standard deviation from the predicted return. 95% of the time, it will be within 2 standard deviations. Occasionally, there will be larger errors. The stock market has larger tails than a normal bell curve and there is reason to believe the standard deviation is not stable. No-load mutual funds that allow telephone switching are ideal for avoiding brokerage fees. Money market funds are similar to T bills but do not have a $10,000 minimums or commissions. One conservative strategy would be to switch between a stock mutual fund, a bond fund, and a money market fund in 50% increments only, trying to approximate the aggressive portfolio. For example, if the aggressive portfolio is 45% stock, 35% bonds, and 20% T Bills, you round it off to 50% stock and 50% bonds. If it later goes to 35% T bills, you go to 50 % money market and drop either stocks or bonds, whichever the aggressive portfolio is weighting less. The conservative portfolio is the least risky of any possible combination of the 3 assets. It is always mostly T bills, so it's not very interesting. Check its yield against the aggressive portfolio. If you're not getting at least 1% better expected yield in the aggressive portfolio, stick to the conservative portfolio and you will not be affected by market swings. I don't recommend following only the conservative portfolio because it is always heavily T bills. I print it out because it is the most conservative portfolio possible and it is useful for other asset allocation strategies such as averaging the conservative and aggressive portfolios. It is one endpoint of the efficient frontier, low return and very low risk. If you are really that risk-averse, just buy T bills and forget the markets. Of course, during bear markets, this works great and the aggressive portfolio should be the same as the conservative, 100% T bills. The aggressive portfolio suits me best. Its yield is halfway between the 2 best assets of the three (stocks, bonds, and bills). You get some diversity and some action from the stock and bond markets. If history is a useful guide, you will be on the right side of major moves. Although its name is aggressive, there are much more aggressive strategies. To get really aggressive, hold 100% of the asset predicted to do best at the beginning of the asset allocation printout. The program gives its expected returns on stocks, bonds, and T bills. Note that stock returns include dividends, and all returns average the annualized yields forecast for 3, 6, and 12 month periods. The aggressive portfolio is not as aggressive as this strategy and you can expect to get burned occasionally. If stocks are predicted to do quite well, you can buy them on margin and nearly double your return in a bull market. But you more than double your risk. A 50% market drop will wipe you out. The risk from stocks is doubled and you have added the risk due to fluctuations in the interest rate on your margin borrowing. Due to interest costs, your return does not double. This strategy and all the ones described previously lie on the efficient frontier. The efficient frontier is the imaginary line connecting portfolios with minimum risk for their expected return. The line starts at the Conservative portfolio, passes through the Aggressive portfolio, and continues to 100% of the highest yield asset. If the return on the highest yield asset is greater than the margin interest rate, the efficient frontier extends to a fully margined account containing the highest yield asset. Minimum risk for their expected return does not imply that they are all safe or that you should take such risks. A fully margined account would have been wiped out several times over the past century. Expected returns and actual returns will differ. If you want even more risk, use the options market. Wait until the S&P 500 is expected to advance 20% per year and buy calls. Or buy a call after a 5% dip in a bull market. It is easy to lose all your money if you are wrong, so treat this like gambling and bet only what you can afford to lose. It is speculation, not investing. For the totally crazy, there are the futures markets. 90% of the players lose money here, so I do not recommend it. You can lose more than your original investment and limit moves mean you can be stuck in a losing position. The advantage is that you get the gain or loss on a large block of stock represented by the S&P 500 index for a reasonable commission. It is a game for experts only, armed with more knowledge than this program provides. Large sums of DISPOSABLE income and capital are required. T bills and T bonds also have futures markets. If you are playing the futures, this program should be useful to help you find the major trends. The trend is your friend. More money is made in the direction of the trend than on the reactions against it. You can be bailed out of losing trades when the trend re-asserts itself. Bull markets can be bought on 5% dips but not bear markets. If you have short term indicators, use them too but only play in the direction of the longer term move. 5. THE ECONOMETRIC MODELS The econometric models used in this program are based on multivariate linear regressions. The variables used were chosen from hundreds of others because they performed the best. In 1987, I used two advisors' models to forecast the stock market. Neither one predicted the crash that happened in October. Fortunately, I had sold most of my stock that summer because I was afraid of the rising interest rates and high P/E ratios. Still, I couldn't believe how many advisors and other models missed this major move. The crash of 1987 led to the development of this program in 1989. One problem with mathematical models is that they become obsolete. Stock Index futures make it possible to short stock and be neutral or long in the market. They also give institutions more reason to hold cash. Therefore short interest and mutual fund cash, 2 good indicators, have changed in meaning. The options market is larger now by far than it was 10 years ago. Odd lot traders now use options. Models constructed ten years ago often did not plan for such changes. To avoid these pitfalls, I chose the simplest, most elementary variables I could find. They also produce good correlations, which should not be surprising, since they are basic measures of value. Interest rates tell about the attractiveness of alternatives to the stock market. They also tell whether the economy is booming or busting. Interest Rates are a measure of the supply and demand of money. When rates are high and rising, stocks will be falling. If I could have only one indicator, it would be short term interest rates. Consider market history 1948 to 1987. When T bill rates fell December to December, the return on the S&P 500 averaged 23.4% in the following year. When T bill rates rose, returns averaged 6.7%. T bill rates were rising going into the crash of 1987. The yield curve compares short term rates to longer term rates. When short rates are higher, the yield curve is said to be inverted. It is not normal and usually precedes recessions. Stocks usually fall during these times. In his book Stock Market Logic, Norman Fosback reports the impact of the yield curve. Normal yield curves were followed by an average 11.5% per year gain on the S&P 500 in the years 1941 to 1975. Inverted yield curves were followed by an average 0.7% loss. Consumer prices are a measure of inflation. When inflation is low, interest rates stay low, and the stock market rises. High or rising inflation can be curbed by raising interest rates to choke off demand. This also strangles the stock market. High inflation offers people an alternative to the stock market. It is better to spend the money on goods before prices rise, or invest in real estate. Unemployment also exerts political pressure on the Fed. They are hesitant to raise interest rates during high unemployment. The economy needs stimulation, not restraint. A good time to buy stocks is when unemployment is rising in a recession. Dividend yields are an excellent long term forecaster. They set record lows before the October 1987 crash. They were low in 1929 and also in 1973 before bear markets. Low dividends called the sharp 1962 drop. High dividends predicted the 1982 bull market, the 1975 bull market, and the long advance of the 1950s. In the years 1948 to 1987, dividend yields above 4% on the S&P 500 led to an average 20.0% return on the S&P 500 the following year. Dividend yields below 4% were followed by an average 5.1% return. Price/Earning ratios are another good measure of value. It is always safe to buy the S&P 500 at low P/E's. The long term average is about 14, so a P/E of 8 for the S&P 500 is cheap. Recessions can depress earnings, so it is safe to buy at higher P/E's then because good times will return and carry earnings higher. I believe these variables are of such a basic nature that change in our markets or economy won't change their effects much. But if you have reason to suspect these variables, don't follow this model blindly. 5.1 Checking the forecasts Here is a simple way to check the model's forecasts for the S&P 500. We can combine T bill rates and dividend yields into a model that you can do in your head. We have seen the high returns on the S&P 500 with falling T bill rates, and with dividend yields above 4%. Combining these 2 variables is even better. With both variables bullish, the average return on the S&P 500 is 30.8% per year. With only one of them bullish, the return is 9.7% per year. With both in bearish territory (rising T bill rates on a 12 month basis, and dividend yield on the S&P 500 less than 4%) the average return on the S&P 500 is 3.7% per year. Of course the models in the program are much more complex, and should be more accurate. This example demonstrates the power of a two-variable model and used data from 1948 to 1987. The business cycle provides an independent check on the forecasts. For details, see Bowker's book Strategic Market Timing. Events may occur somewhat out of order, but you should be able to get an idea of where the economy is heading. The sequence of events is: 1) Stock Market bottom 2) Leading indicator bottom 3) Coincident indicator bottom 4) Unemployment peak 5) Official announcement of Expansion 6) Lagging indicator bottom 7) Inflation bottom 8) T bill interest rate bottom 9) T bond interest rate bottom 10) Stock Market peak 11) Leading indicator peak 12) Unemployment bottom 13) Coincident indicator peak 14) Official announcement of Recession 15) Lagging indicator peak 16) Inflation peak 17) T bill interest rate peak 18) T bond interest rate peak 19) Back to Stock Market bottom If you want graphs of these indicators, subscribe to the Survey of Current Business by calling 202-783-3238, or write Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. The cost is $29.00 per year. 5.2 Details on the Regressions I used stagewise multivariate linear regression on 25 years of data spanning 1963 to 1989. In stagewise regression, the best variable is found and its effect is subtracted out. Then all variables are examined again for correlations to the residuals. To enter the model, a variable must have 99% confidence that its correlation is not due to random variations. An F test was used for this. The process continues until no more variables can pass the F test. Many predictor variables can be constructed from the database. The Prime rate can be compared to moving averages from 3 months to 4 years in length. Dividend yields can be compared to T bill yields. The yield curve can be computed as T bill/T bond rates. I looked at 165 such predictor variables for each model to pick only the most effective variables. Correlation coefficients are a measure of a model's fit to the data. They range from -1.0 (perfect negative correlation) to 0.0 (no correlation) to 1.0 (perfect correlation). Here is a list of the model's correlation coefficients: S&P 500 (3 months ahead).....................R = .53 S&P 500 (6 months ahead).....................R = .64 S&P 500 (1 year ahead).......................R = .80 T Bonds (3 months ahead).....................R = .46 T Bonds (6 months ahead).....................R = .58 T Bonds (1 year ahead).......................R = .74 T Bills (3 months ahead).....................R = .56 T Bills (6 months ahead).....................R = .66 T Bills (1 year ahead).......................R = .68 CPI (3 months ahead).....................R = .83 CPI (6 months ahead).....................R = .87 CPI (1 year ahead).......................R = .90 R values are not the only measure of a model's effectiveness. There are many ways to get a high R value. One way is to include a lot of variables which have a low confidence. My 99% standard is more rigorous than many others. Another way is to regress to something easy. I am regressing to the changes in my predicted variables, not to their levels. Over a 25 year period, the previous day's level of S&P 500 correlates with R > .99 to the next day's level, but tells you nothing about which way the market will go. The money is made on the changes, not on the day's closing value. 6. GETTING HELP Your satisfaction is of utmost importance to us. If you need help, first consult this manual or the help menu. If that does not fix your problem, please write to: DC ECONOMETRICS 2920 Mount Royal Court Fort Collins, CO 80526 We want to hear your comments, suggestions, and criticism. 6.1 Error Messages If you ever see an error number, here is a list of the most common ones. Error# Meaning ------ ------- 24 Device time out. COM device? 25 Device fault. Printer interface? 27 Out of paper. 53 File not found. Change directory to the one containing econ. Type "dir" and check for econ.exe and the 9 data files. If your prompt is for the C: disk and econ is on B:, type "b:". 57 Device I/O error. Probably your printer is off. 61 Disk full. 70 Permission denied. You tried to write to a write- protected disk. 71 Disk not ready. Floppy door open? 7. RECOMMENDED READING The Encyclopedia of Technical Market Indicators Robert W. Colby and Thomas A. Meyers Dow Jones-Irwin, 1988 A comprehensive collection of graphs and computer research on over 110 indicators. Stock Market Logic Norman G. Fosback The Institute for Econometric Research, 1976, 1984 This book is a thorough discussion of virtually every stock market indicator in use. Norman Fosback's scholarly approach to stock market forecasting is without equal among advisory services. Winning on Wall Street Martin Zweig Warner Books, Inc., 1986 Marty Zweig's emphasis on interest rates and tape action first influenced me in 1982. He talks about the market in scientific terms I can relate to as an engineer. His record proves he is right. Tight Money Timing Wilfred R. George Praeger Publishers, 1982 This book shows the effect of interest rates on the stock market from 1914 to 1981. Asset Allocation Robert D. Arnott and Frank J. Fabozzi Probus Publishing Co., 1988 Everything you ever wanted to know about asset allocation and then some. It is a complete discussion of theory and application. Many contributing authors present their views. A Consensus Approach to the Determination of Not-So-Good Years to Own Common Stock Edward Renshaw Financial Analysts Journal/January-February 1989 How to forecast the S&P 500 using T bill rates and dividend yields. This simple method is similar to the simple model in the manual, and will usually agree with the complex models in the software. Strategic Market Timing Robert M. Bowker New York Institute of Finance, 1989 Use predictable turning points in the business cycle to forecast the direction of interest rates, stock prices, and other economic indicators. This method provides an independent check on econ's forecasts. How to Forecast Interest Rates Martin Pring Interest rates are a lagging indicator. They go up after the economy goes up. The Practical Forecaster's Almanac Edward Renshaw Business One Irwin, 1992 137 Reliable Indicators for Investors, Hedgers, and Speculators. Forecast the stock market, interest rates, or recessions. 8. PLACING AN ORDER Order by mail. Payment may be made by credit card, check, or money order. Use the order form below. Shipping is free in US and Canada. International orders please add $3.00. We prefer payment by check. Where did you obtain your copy of Econ? _________________________ DESCRIPTION QUANTITY PRICE 5.25" diskette and manual ________ $39.99 3.5" diskette and manual ________ $39.99 TOTAL ENCLOSED ________ Please charge my ____ VISA ____ MASTERCARD CREDIT CARD NUMBER ____________________________________________ Expiration Date ____________________________________________ Signature ____________________________________________ Ship to: Name:__________________________________________________________ Address:_______________________________________________________ City:___________________________State__________Zip_____________ Country:_______________________________________________________ Please send your order to: DC ECONOMETRICS 2920 Mount Royal Court Fort Collins, CO 80526 To register your copy of econ, choose 10 from the main menu to print a registration form. For your $39.99 registration fee, you will receive a disk with all current monthly data files and a printed manual. Registered users may order a new disk with current data files any time for $9.00. This is handy if you forget to enter data for a while but want to start using the program again, or if you destroy your disk. Please specify 5.25" or 3.5" disk. To view this manual on screen, enter "type econ.txt | more" from MS-DOS. This will let you see one screen at a time. Press the space bar to see the next one. To send a copy to your printer, ready the printer, and type "copy econ.txt > prn". Don't type the quotes, just the stuff inside them.