There are at least 70 variables we look at and evaluate, from sales to taxes, stability, sovereign risk, insurance, pensions, return on invested capital, management,corporate ”fat” etc., all of which is explained in that little brown and blue book to the right.
|DATE||CURRENT PROBABILITY||MAIN REASONS FOR STRENGTH||MAIN REASONS FOR WEAKNESS||PROBABILITY- A YEAR AGO|
|Aug 10, 2010||14%||Credit, fin, flex, fcf,valuation, mgt spending discretion||Consumer conf, power ocf, nom yields,housing, stability metrics||9%|
|Aug 11, 2010||15%||9%|
A stock market “crash” is defined as a 20% rapid decline in the widely followed equity indexes.
The probability is based on: (1) growth of operating and free cash flows; (2) cost of equity capital versus return on invested capital; (3) world economic conditions as measured by various yield spreads; (4) valuation multiples; (5) VIX ; (6) money supply growth; (7) leverage and credit conditions; (8) nominal and real interest rates; (9) any miscellaneous factors relevant to the time period; and, (10) the CT Capital’s quantitative risk models.