Purchasing Power Parity Valuations

Because purchasing power parity valuations are a component of our currency rotation model on VectorGrader.com, we thought it would be a great idea to let users view the implied relative valuations of major currencies relative to the US dollar. So, we’ve created a new page on VectorGrader.com with sortable tables of  valuations.

Below, we have a table of the purchasing power parity implied valuations of the G10 currencies. A trade weighted basket of these currencies is roughly 16% overvalued relative to the dollar, which is the same as the dollar being 14% undervalued.

Currency	Exchange Rate (to USD)	% over or under valued
Euro	1.3474	9.0353%
Japanese Yen	0.0119	32.5029%
British Pound	1.5823	5.223%
Canadian Dollar	0.9755	18.2306%
Australian Dollar	0.9588	44.7788%
Swiss Franc	1.0153	73.6163%
Swedish Krona	0.1469	39.2318%
Norwegian Krone	0.1700	69.439%
New Zealand Dollar	0.7351	19.6743%

The Improved Primary Market Model

I’ve been intending to do this for a while, but it kinda got delayed for a while. We’ve finally improved the format in which we bring you our Primary Market Model as part of the weekly strategy update on VectorGrader.com. The new format is all about showing the underlying indicators and their signals in addition to the overall signal. Prior to now, I had never really disclosed what was behind this strategy. Now however, with the new format, this strategy is more understandable with the exception of a few proprietary indicators.

First, a brief overview of how it works...

I consider valuation and trend to be the most important indicators and so these categories have a four-fourteenth weight. Interest rate trends were given a slightly smaller three-fourteenth weighting. Sentiment is more of an intermediate term indicator and does not fit here as well, so I only gave it a one-fourteenth weighting. The balance of the weighting went to our proprietary indicators, which weren’t given a larger share because I didn’t want this to be too much of a black box.

The scaled score at the top left is intended to be a signal for investing in stocks long only without leverage. When used as this, it is conservative and can probably be expected to be 60% invested on average. The scaled score is essentially “zoomed in” on the combined score between -33 and 33. Because we average so many indicators, the combined score rarely reaches far outside that range.

Would you like to see any other indicators here?

…and, the new Primary Market Model

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