Friday, January 15, 2010

Pub Power Equity Signal Turns Negative

Time to revisit a catchy, data-mined, equity buy signal (with a decent explanation) that was first detailed at EconomPic back in September... the "Pub Power" equity buy signal.

What is the Pub Power signal? As detailed back then:

It is the relative strength of 'food establishment and drinking places' sales vs. grocery sales (as expressed in year over year terms). The relevance? Well, the data seems to suggest that "Pub Power" = Strength in the Dow, one year forward.
The thought was that the relative strength (i.e. demand) of restaurants relative to cooking at home shows the following characteristics:
  • Consumer confidence
  • Exuberance
  • Spending power
  • Wealth
Or something like that...

On the other hand, when times are tough, individuals are more likely to eat at home, causing year over year sales at pubs to decline relative to grocery stores. At the time the signal pointed to a further run in the Dow and here we are four months and 10% later.

So lets take a look at what the signal is telling us now...



Beware all of you equity investors out there... the Pub Power signal has turned negative.

Why does this matter?

It probably doesn't, but from December 1993 through December 2008 (the last period in which we have one year forward data on the Dow) the Dow has returned an average of -9.8% one year forward when the "Pub Power" was negative and 10.8% when the signal was positive.

Source: Census

3 comments:

Angry Saver said...

Jake,

All the best stock market indicators ignore valuations! They are ALL wonderful CONcepts.

Anyway, as a Jet fan, perhaps you should call it the Emerson Boozer signal. ;)

Go Jets!

John said...

By golly you just got a new subscriber!

Greg Merrill said...

I'll drink to this indicator!

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