A short editorial showing the unique bonding of BRK to SP500 to AAPL. This explains much of the current market richness. Below note the rich-cheap of AAPL.


Using the Fisher Effect, where Fed Funds ~ Real NGDP + Inflation, all instantaneous, is brought forward for 7 years. The Atlanta Fed “GDPNow” is used to have best efforts of current NGDP annual change of current dollars, which is NGDP .

This in turn is applied to the last NGDP current dollars level and then this is disaggregated to a daily NGDP current dollars level. Using the Fisher Effect a forward annual change in NGDP current dollars, NGDP, is derived and this then is applied to the last NGDP current dollars levels to derive a 7 year forward NGDP current dollars level, or NGDP level.

Equity price is then compared or charted against this value to determine both relative rich/cheap and outright rich/cheap.

A problem this market presents to “asset liability managers” (ALM) is that the usual negative correlation between risky equity and risk free notes, strips, and bonds is approaching 0, and at times has been positive.

For instance in the 2008 to 2009 crash in risk assets, in equity markets, Us Treasurys soared in price with long duration increasing in price by 50% to 60%. This had large ALM problems survive.

Now, as correlation approaches 0, there is no offset.

A Markowitz type portfolio construct will not provide offset from riskless fixed income to equity declines.

The “risk premium” for risk free is derived, the increase in yield required to extend duration - per year in basis points.

The risk premium has been from 0 to 30 basis points usually, but now is crushed towards 0.

The term premium is almost 0.

The annual change in NGDP priced into the market is derived for that change in 7 years.

This can be seen as the growth potential in the US economy.

The US economy has, according to a forward Fisher Effect logic, increased as the Federal Reserve actions have raised long term rates. This rise has more than offset the drop in the term premium towards 0.

The change in NGDP level implicit in 7 years is not small.

This is in accord with Neo Fisherian logic that rates forced to be chronically well below the desired expected NGDP will drop NGDP annual change.

The “basis” of NGDP for 7 years is netting NGDP level in 7 years to current dollars NGDP.

The basis is the implicit growth priced into the US economy.

The basis is given in both then current dollars and then in percentage of the current NGDP.

The current dollars instantaneous NGDP, the NGDP level expected in 7 years, and then the basis of that 7 year forward NGDP level is used to qualify equity values overtime.

## calculating recursion for 4515 datapoints
Log SP500 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-06-19 -7.221409 1.510369 0.7887712
2008-06-20 2022-06-10 -21.030952 2.916829 0.9691640
2022-06-13 2022-08-22 -22.213093 2.991009 0.8765434 

## calculating recursion for 4515 datapoints
Log SP500 to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2012-01-06 2020-01-17 -8.403918 1.618195 0.9195357 2023
2004-09-20 2012-01-06 -6.605971 1.400261 0.3794164 1834
2020-01-17 2021-11-09 -8.649064 1.682830 0.8688457 458
2021-11-09 2022-08-22 19.855991 -1.117939 0.6590528 199 

## calculating recursion for 4515 datapoints
Log R2000 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2007-12-31 -13.54510 2.111041 0.8698990
2008-01-02 2022-01-14 -19.46951 2.700036 0.9312850
2022-01-18 2022-07-18 29.41039 -2.155520 0.7950982
2022-07-19 2022-08-22 -40.45062 4.702182 0.8027094 

## calculating recursion for 4515 datapoints
Log R2000 to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2010-09-27 2020-06-22 -9.565418 1.6783063 0.8765983 2448
2004-09-20 2010-09-27 -12.345325 1.9225519 0.5528719 1516
2021-02-12 2022-08-22 15.568337 -0.7762095 0.6650944 387
2020-06-22 2021-02-12 -60.095114 6.7800754 0.9418000 163 

## calculating recursion for 4515 datapoints
Log W5000 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-01-17 -9.323941 1.973685 0.9150569
2008-01-17 2022-06-14 -17.917743 2.838746 0.9580694
2022-06-14 2022-08-22 -22.674576 3.261446 0.8831258 

## calculating recursion for 4515 datapoints
Log W5000 to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2012-01-05 -3.496662 1.319802 0.3354932
2012-01-05 2020-04-09 -5.734212 1.586315 0.8920233
2020-04-09 2021-09-16 -7.284883 1.782225 0.9078507
2021-09-16 2022-08-22 21.203088 -1.024962 0.6420479 

## calculating recursion for 4515 datapoints
Log AAPL to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2012-12-05 -115.79770 12.231355 0.9596838
2012-12-05 2020-01-13 -46.88584 5.100035 0.9211048
2020-01-13 2022-05-11 -32.83902 3.755456 0.8995864
2022-05-11 2022-08-22 -23.57668 2.805938 0.5546740 

## calculating recursion for 4515 datapoints
Log AAPL to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2009-10-19 2020-01-17 -31.38185 3.485449 0.7265505 2572
2004-09-20 2007-07-20 -58.93413 6.063096 0.7987174 728
2020-01-17 2022-08-22 -10.68312 1.535791 0.6466085 657
2007-07-20 2009-10-19 -18.42906 2.029288 0.2717340 557 

## calculating recursion for 4515 datapoints
Log BRK to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2004-10-20 53.39350 -5.229508 0.8382162
2004-10-20 2005-03-15 -36.11973 4.250173 0.8183007
2005-03-15 2022-06-16 -23.29561 2.874166 0.9650247
2022-06-16 2022-08-22 -21.17485 2.630609 0.8684659 

## calculating recursion for 4515 datapoints
Log BRK to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2012-07-09 2019-11-01 -13.3696564 1.8491143 0.9351646 1846
2006-10-03 2012-07-09 1.3937024 0.2989305 0.0292210 1437
2019-11-01 2022-08-22 -6.4542258 1.1868773 0.7951020 709
2004-09-20 2006-10-03 -0.4287969 0.4588170 0.4239410 522 

## calculating recursion for 4515 datapoints
Log AMZN to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2007-04-24 4.021001 -0.3553787 0.0129248
2007-04-24 2020-02-11 -76.660467 8.1459125 0.9678069
2020-02-11 2020-12-31 -40.576287 4.5731808 0.8679317
2020-12-31 2022-08-22 23.070617 -1.7871234 0.4687852 

## calculating recursion for 4515 datapoints
Log AMZN to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2009-10-22 2020-01-31 -49.606404 5.3375682 0.8178050 2578
2007-04-25 2009-10-22 -4.768979 0.6196121 0.0535407 622
2004-09-20 2007-04-25 4.763716 -0.4202904 0.0383983 666
2020-01-31 2022-08-22 3.937992 0.1040400 0.0073544 648 

## calculating recursion for 2588 datapoints
Log META to Log NGDP
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2008-12-02 2014-06-16 -34.59043 4.006444 0.7697341 2022 days
2004-09-20 2008-12-02 -115.44244 12.224613 0.9263325 1534 days
2014-06-16 2015-01-05 32.65919 -2.699232 0.6940189 203 days 

## calculating recursion for 2588 datapoints
Log META to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2004-09-20 2007-12-18 -40.07220 4.474598 0.8788139 832
2012-08-28 2014-06-16 -7.01240 1.262252 0.6923286 452
2007-12-18 2012-08-28 -13.08595 1.808339 0.4988146 1163
2014-06-16 2015-01-05 29.41083 -2.344576 0.4981010 140 

## calculating recursion for 4515 datapoints
Log MSFT to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2013-04-23 -7.590532 1.104220 0.3078697
2013-04-23 2020-01-16 -59.125308 6.410011 0.9818592
2020-01-16 2022-01-13 -27.661642 3.307830 0.9436671
2022-01-13 2022-08-22 16.503961 -1.071118 0.3700434 

## calculating recursion for 4515 datapoints
Log MSFT to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2012-01-03 2019-03-15 -27.747337 3.1863879 0.9034061 1813
2020-06-05 2022-08-22 -3.661606 0.9091975 0.5959430 561
2019-03-15 2020-06-05 18.237169 -1.3251965 0.5245582 309
2004-09-20 2012-01-03 -2.487488 0.5580184 0.0787829 1831 

## calculating recursion for 4515 datapoints
Log BA to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-03-03 -36.51345 4.249318 0.9164111
2008-03-03 2020-06-12 -50.96933 5.692522 0.9457851
2020-06-12 2020-11-13 49.12278 -4.411153 0.3853460
2020-11-13 2022-08-22 29.51023 -2.400301 0.5962125 

## calculating recursion for 4515 datapoints
Log BA to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2011-04-27 2021-03-10 -35.864256 4.1185550 0.9003823 2486
2021-03-10 2022-08-22 24.473397 -1.8801316 0.7643095 370
2004-09-20 2010-07-20 -27.735117 3.2265709 0.6052123 1469
2010-07-20 2011-04-27 -1.038573 0.5166211 0.2660930 189 

## calculating recursion for 4515 datapoints
Log JPM to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2005-10-21 19.19486 -1.696674 0.6987843
2005-10-21 2007-07-20 -40.10421 4.555924 0.9094053
2007-07-20 2022-02-28 -33.15483 3.789046 0.9378250
2022-02-28 2022-08-22 20.91371 -1.585086 0.6129014 

## calculating recursion for 4515 datapoints
Log JPM to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2009-08-04 2019-11-15 -25.64638 2.990561 0.9033352 2582
2019-11-15 2021-10-08 -20.34277 2.509424 0.8578543 478
2021-10-08 2022-08-22 27.14557 -2.164856 0.8558551 221
2004-09-20 2009-08-04 -16.82226 2.049953 0.5604021 1233 

## calculating recursion for 4515 datapoints
Log BAC to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2007-11-01 -14.17346 1.860013 0.7501994
2007-11-01 2008-06-04 93.27539 -9.354993 0.5085915
2008-06-04 2008-07-15 -1142.25256 119.182944 0.9307918
2008-07-15 2008-07-17 9899.49752 -1030.163145 0.9937215
2008-07-17 2008-10-06 76.13293 -7.593686 0.2308742
2008-10-06 2022-08-22 -26.76614 3.009555 0.7325509 

## calculating recursion for 4515 datapoints
Log BAC to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2008-06-04 2022-04-22 -27.537098 3.0629336 0.7880561 3484
2022-08-11 2022-08-22 13.237111 -0.9322078 0.5492189 7
2004-09-20 2008-06-04 -8.677671 1.2431589 0.5361551 945
2022-04-22 2022-08-11 23.735903 -1.9573708 0.3938098 78