Hi Rob,

Nice to hear from you; I'm thrilled that you like the piece. You know me too well, yes, I love qualitative indicators, especially when coupled with quantitative indicators. The two forces combined usually result in conviction : ) So you ask a good question: do you have a favorite technical or quantitative indicator you prefer?

I do! I look at a very simple version of the equity risk premium and compare it to market history. My version of the equity risk premium is to take the inverse of Shiller's modified P/E (you can find a time series of it on the web) and then subtract the 10 year US Treasury yield. The inverse of the Shiller modified P/E is essentially the earnings yield, or a form of expected total return on equities.

When I last looked at this number (in November) the sole reason that equities looked reasonably priced was because of the continually low level of interest rates.

Other similar figures could be calculated in other markets, by the way. You simply take the expected return of the asset (e.g. real estate would be the inverse of the cap rate) and subtract the lowest risk available expected rate of return (see my piece on Enterprising Investor about the "risk free" rate).

I also look at the difference between the growth rate in revenues for the S&P 500 relative to the growth rate in earnings for the S&P 500. Ideally you see accelerating revenue growth (i.e. positive second derivative). Right now that is not the case for the SP 500. Instead you see slowing revenue growth.

Hope that helps!

Jason