Why is “Stock Market Uncertainty” the first factor in your Uncertainty Index?
Bob Wiedemer: So my first factor in my Uncertainty Index, is the stock market, because the stock market is a wonderful reflection of how investors feel. I look at that not just by saying, "Oh is the market high or low or whatever." I look at three factors. The first is longevity of a decline or an increase. So, obviously, an increase that's lasted a week doesn't mean much, but if it lasted a year, that's more important. So, I look at that. Second thing, clearly, volatility. That's measured by what's called the "VIX," the VIX indicator and I look at how volatile the market is. The less volatile, the more likely... or more certain the market is. The more volatile, there's a lot more uncertainty being reflected. Finally, and most importantly actually in many ways, is just the overall valuation. Is the market highly valued or not? Because that's really what ultimately makes people nervous about a market is that it's gone way out of line with the economic growth, and in fact, that's not a bad valuation indicator to look at. It's just, compare the market value with our economy, with the size of our GDP. It's a basic or a Warren Buffet type way to value a market. Right now, we're about 132% of our GDP. That's high. We're there in terms of market value, all our markets called the "Wilshire Total Market Index." That's nearing its peak all time valuation, which in the late 90's where it was 150% of GDP. So, things like market valuation are really what's leading you fundamentally to decide whether or not the market is starting to get more uncertainty or less, along with, of course as I mentioned earlier, volatility, and longevity of decline or increase. That's my first factor and most important one.