The Switkay USA Economic Vitality Index for 2014, 4th quarter is 73.66. This represents an increase of 2.29 from the previous quarter. The index is continuing to rebound slowly from its recession low of 58.21 in 2011, 3rd quarter. The index now stands at its highest level since 2009, 3rd quarter.

The Switkay USA Economic Vitality Index is a function of the following variables:
·         real gross domestic product per capita;
·         total Federal debt as a percentage of gross domestic product;
·         the U6 unemployment rate (including those working part-time who would prefer full-time work);
·         mean weeks of unemployment;
·         average hourly earnings, production and non-supervisory employees, private;
·         US population;
·         the civilian labor force participation rate;
·         the consumer price index, all urban consumers;
·         the velocity of the M2 money stock;
·         the real trade-weighted exchange value of the US dollar (broad index);
·         real net worth of households and non-profits.

It is updated at the end of every quarter, when data for the previous quarter become finalized. We use the word real to mean inflation-adjusted. All data is taken from FRED, the research service of the Federal Reserve Bank of St. Louis. The index is normalized so that its median value in the years 1973 to 2008 is 100.

The change in the index's value for the 4th quarter of 2014 was driven most strongly by a 4% increase in the real trade-weighted exchange value of the US dollar (broad index). This could be due to an anticipation of a rate increase by the Federal Reserve Bank, or by quantitative easing in Europe, among other reasons.

The U6 unemployment rate declined slightly for the quarter, but the labor force participation rate was unchanged, near 37-year lows, and mean weeks of unemployment increased for the first time in more than a year.

Word clouds are a clever way to visualize the results of text mining. The image above is based on a combination of the texts of the United States Declaration of Independence and the United States Constitution.

So-called "stopwords" are removed from the text. This includes common functional words like articles, prepositions, pronouns, and forms of the verb "to be". The remaining words are depicted with the most frequently occurring words shown as the largest.

Everyone wants to know how to pick a winner in the stock market. What should you look for? I analyzed a dataset created by Stephen Jones, of String Advisors, and Chris Mayer, of Agora Financial's Capital and Crisis: http://agorafinancial.com/publication/fst/

Their dataset contained dozens of variables for hundreds of companies over decades of time. That's a lot of data!

My model suggests you can predict about 12.76% of the variability in the total return of a stock by looking at some of the well-known ratios involving the stock's price - but these ratios play an unexpected role in the formula. Put another way, the correlation between the observed returns and those predicted by my model is about .357, as shown in the image above.

This is only the beginning of a fascinating project. Stay tuned!

You have an enormous set of data: thousands of observations and dozens of variables. How do you locate outliers - possible mistaken data, or problems, or opportunities?

Multivariate statistics gives us the tools to discover these outliers. The above image depicts 2697 observations in 73 variables. The potential outliers are clear in this diagram.

In my analysis of the monthly report from the US Bureau of Labor Statistics, I find it useful to combine 1) the labor force participation rate (measuring the fraction of adults who are working or looking for work), with 2) the U6 unemployment rate, which counts not only the unemployed in the more widely quoted U3 rate, but also long-term unemployed and those working part-time who would prefer full-time work. This combination tells us what fraction of the adult population has full-time work.

The image above covers the period January, 1994 to February, 2015. The high point is 62.7% in April, 2000. The low point is 53.6% in December, 2009 and December, 2010. The current level rose 0.1% to 55.9%, the highest since January, 2009. The U6 unemployment rate fell 0.3% to 11.0%, its lowest level since September, 2008. Unfortunately, this was countered by a fall in the labor force participation rate 0.1% to 62.8%, remaining within a narrow range matching a 36-year low.