1. The “Golden” Question Ali Alyabis Andrew Clark David Lee S & P 500 Gold? or

2. Executive Summary The “Golden” Question Previous Research Our Hypothesis Procedure and Methods Identify Key Models and Relationships Final Model Different Ways to Look at the Data Possible Applications Future Work

3. The “Golden” Question ?????

4. Previous Research Dow/Gold Ratio Prior Economic Indicators of Performance

5. Dow/Gold Ratio

6. Our Hypothesis We expect it will be better to hold gold during recessions or when the macroeconomic components are otherwise down. When macroeconomic are favorable we expect stock prices to be higher

7. Procedure and Methods Follow CRISP guidelines Gather monthly data from April 1970-Present: ▫US Bureau of Labor Statistics ▫FRED (Federal Reserve Economic Database) ▫Misery Index ▫S&P (Yahoo Finance) ▫Gold Prices (Goldnews.com) Clean data

8. Procedure and Methods Determine Output Variable: ▫S&P or Gold [Binary (0,1)]: If monthly % Growth Rate of Gold Price > monthly % Growth Rate of S&P 500 then 1. If not, then 0. Partition Data Build Models ▫C&RT ▫K-Means ▫Anomaly ▫Logistic Regression ▫Discriminant Evaluate Models

9. Key Models and Relationships Original Findings + Strong Clusters + NOT Time Sensitive - Limited Range v v

10. Final Model 66.52 63.82 56.021 Validation Set Performance

11. Other Nuggets – Today (April 2009) (March 2009)

12. Other Nuggets - Clusters ClusterNameTime PeriodMajor Event 1“Panned Out”1978 - 1982Stagflation 2“Prospectors”1983 - 1988Ali Born 5“The Golden Era”1989 - 1997Berlin Wall Falls 4“Mine Kamph”1998 - 2001.dot Com Bubble and Y2K 3 “Gold Digs, to Brokety Broke” 2002 - 2008Crisis from Authority

13. Other Nuggets – Gold September

14. Different Ways to Visualize Data

15. Implications – Investment Strategy Assumption – June 2009: Inflation will be Low IF inflation is expected to be low, but not negative then invest in Gold IF inflation is negative, invest in S&P Disclaimer: Be wary of Unprecedented Times

16. Future Work

17. Bibliography Web Articles http://goldnews.bullionvault.com/dow_gold_ratio_042920093 http://goldnews.bullionvault.com/dow_gold_ratio_102220085 “Consumer Expenditure Surveys.” US Bureau of Labor Statistics (BLS) Homepage. Accessed 2 April 2009. http://www.bls.gov/cex/#datahttp://www.bls.gov/cex/#data “Economic Data--(FRED)®” Economic Research: Federal Reserve Bank of St. Louis. Accessed 2 April 2009. http://research.stlouisfed.org/fred2/http://research.stlouisfed.org/fred2/ “Historic Data for S&P 500 Stocks” Accessed 9 April 2009. http://biz.swcp.com/stocks/http://biz.swcp.com/stocks/ Ritter, John R. “Founding dates for 8,823 IPOs from 1975-2008.” IPO Data. October 2008. Accessed 9 April 2009. http://bear.cba.ufl.edu/ritter/FoundingDates.htmhttp://bear.cba.ufl.edu/ritter/FoundingDates.htm