I’d like to point out some cause for alarm concerning the variable spepscy at least in relation to p123’s Fed Model, underscore what a difficult position the manner in which these recent estimates change has been implemented has placed at least some p123 subscribers, and propose a solution I hope will work for everyone’s benefit.
It does sound to me as if these changes represent improvements, and I am greatly appreciative of p123’s prodigious efforts to expand and improve both its data and the tools it makes available to its users.
However, I’m also worried that the changes have not been thoroughly investigated, and even if they have been thoroughly investigated I believe that p123 has made an obvious mistake, which is to assume that improved data can be seamlessly substituted into user sims and models without user exploration, experimentation and tinkering. Every p123 experienced subscriber must know that what we think is going to happen with our models and results is not always borne out by the data, that great data does not automatically lead to great models, and that improved data does not necessarily lead to better models, either.
The following underscores my concerns about lack of complete attention to spepscy and p123’s Fed Model. If these concerns seem obscure, let me point out that p123’s Fed Model is featured on p123’s own home page:
–>The model has indicated by the date shown, at least previously, that it is updated daily. But the Risk Premium does not change daily. It changes weekly.
→ On the Charts page:
Current Y Estimates Trend shows down
Next Y Estimates Trend shows down
Blended Y Estimates Trend shows up
Can the Current Y and Next Y Estimates Trends both be down and the Blended Estimates Trend be up? How are these trends calculated?
→ Again, on the Charts page, if you click on the choices next to EPS, nothing seems to change.
The practical problem with abrupt changes in data is that traders find themselves without adequate opportunity to update their models and screens, and therefore the models and screens traders rely upon can indicate one set of stocks one day and another set of stocks the next. Or the models indicate might indicate that one should be hedged one day and unhedged the next.
Therefore I’d like to suggest that p123 introduce important changes like this estimate change in a BETA-like manner so that subscribers have time to experiment and revise their models before needing to go live.
I learned a lot from improvements made earlier this year to the manner in which aggregated industry variables were handled, but it took some time. The immediate consequence of that change was confusion and stress.
In some cases I believe it’s possible that the old and new data series will both have value. For example, that was the case this year when UST10YR was introduced. The variable TNX still had value. In fact, the old TNX is more sensitive to change.
I am grateful for the the improvements p123 is making, but please give me, and presumably other p123 users, a chance to keep up!
Hugh
