Report Date: 07/23/2010
Copyright © 2007-2010 c4cast.com, Inc.
All rights reserved.
Report Date: 07/23/2010
Copyright © 2007-2010 c4cast.com, Inc.
All rights reserved.
EconomicInvestor database updated: 07/23/2010
Data is updated at the end of each business week.
Getting Started » Open Your Toolbox » Economic Climate Rating
The Economic Climate Rating Report gives you weekly updates on whether the economy is driving your stock or portfolio forward to greater success or hindering its progress. Our ratings are different from everyone else's - we don't pretend that we know for sure which stocks are going to skyrocket tomorrow. But we can tell you which investments the current economy says are probably underpriced or overpriced. With this exclusive knowledge, you can choose more wisely between various potential investments. The Economy Matters, so don't ignore it!
On the Economic Rating Report, we have given you access to information never before available to the public. Here, you can see whether recent changes in the economy will tend to shift your stock price higher or lower in the next several months, and also see historical Economic Ratings for your stock. Since the economy's effects often aren't fully seen in a stock's price for 3 to 12 months, by informing yourself about the current economy with EconomicInvestor's unique tools, you can look through a Better Window on the Future.
Economic Climate Ratings go from 1 to 5, and are displayed at the top of the Climate Rating Report. These ratings tell you whether the economy is currently helping or hindering your stock's performance. Imagine that your stock is like a ship travelling across the ocean. It can make its way forward with no wind at all, or even with a headwind, but it will reach its destination much faster if a tailwind is pushing it along. The economy is like the wind. At times, the economy may hinder your stock's progress, even if the company is well-run and has a great product. At other times, the economy may be helpful to your stock, pushing it towards higher returns than it would otherwise realize. For instance, this happened during the "dot-com bubble" of the nineties, when even mediocre companies made gargantuan profits. If the economy is pushing your stock forward, it may have a Climate Rating of four or five; if the economy is hindering its progress, it will be smaller. (Note that the Economic Climate Rating does not tell you whether the "ship" is well-built or leaky.) If you already have stocks that you think are "well-built ships," you can compare their Climate Ratings to see which of them the economy is currently favoring.
Next, the MacroRisk Profile page tells you how well the economy really explains your investment's changes in price. We've discovered that the economy is often responsible for determining over 80% of a stock's price variation. The rest is governed by company-specific details, such as actual decisions that the CEO makes, the perception of the company by others in the field, or whether, for instance, the company just won a major lawsuit. Of course, the total percentage of the stock's price that our model explains (called an "R2") is different from company to company and from index to index.
Price changes in the S&P 500, for instance, are caused almost entirely by the economy, while most companies' changes in stock prices are only mostly dependent on the economy. The higher the R2, the better our models will be able to explain your investments' price movement. (For comparison, many other models that claim to tell you the risk of an investment only have an R2 of 5%-15%.) By showing you how much of your stock, fund, or portfolio's price change is influenced by the economy, we let you decide how much other information you need to take into account.
Finally, you can check out a graph of how your stock has done in the past year, with historic Climate Ratings superimposed from 3, 6, 9, and 12 months ago. (Climate Ratings are updated every week, but since they reflect major economic conditions and change, they frequently stay the same for moderate lengths of time.) Occasionally, a particular investment will not be given a climate rating for a particular week: this happens when the stock or fund currently has too great a chance of fluctuating wildly because of economic changes.
Below the graph, a small table of statistics shows you how well the investment's Climate Ratings actually predicted its movement. You can see the historical Climate Rating, then the percentage that the stock or fund's price had gained or lost three months later and six months later.
It is important to note that Economic Climate Ratings only measure what the economy is signaling about investment prices; we can't predict price movement from political, social, legal, or industry-specific change. For instance, the 2008 credit crunch and subsequent recession was due to institutional and legal changes, not due to changes in standard economic variables such as the unemployment rate or the consumer price index. In this kind of turbulent economic situation, you might instead choose to use our other resources, such as our exclusive Composite MacroRisk Index, to minimize your economic risk. (Even so, economic factors usually account for over 80% of a stock's price.) When combined with company-specific information and a little common sense, however, Economic Climate Ratings can be a valuable tool to help you achieve your investing dreams.
Economic Climate Rating Report is just one of our exclusive tools. For information on how much risk your stocks are facing from changes in the economy, check out our patented Macro Risk Profile.
Or, if you'd like, view a tutorial on how to generate a Climate Rating Report.