Q. Good morning, Sanjeev.  We have been following your stock market predictions for some years now, previously at Seekingalpha.com and now at TalkMarkets. It is surprising that you have accurately predicted the stock market correctly every single time. Can you explain your methodology ?

Sanjeev: Good morning and thank you. I have explained my methodology based on disposable income in many of my previous articles and even created a formula using regression analysis in my last article. Using this article, I predicted the S&P would go up between 7 to 20% in 2014.

Q: Can you please elaborate ?

Sanjeev: Essentially, the stock price of a company reflects the demand for the goods or services produced by the company. As the demand goes up, so does the price. Similarly, a broad stock market index like S&P reflects the demand for all goods and services in an economy. The demand for all goods and services in an economy is dependent on the disposable income of the masses. Disposable income is the amount of money left from the income of a person after spending for basic needs like Housing, Food and Fuel.  All my stock market predictions are based on calculating the disposable incomes of the masses.

Q. Sanjeev, will this methodology always work ?

Sanjeev: This methodology would work in “normal” conditions, and it has been proved in the last few years. Based on this methodology, I was able to move my investments away from stocks in the middle of 2007 before the market crashed and I waited for 2 years till 2009 before I moved my money back in the stock market. However, an unusual condition like an act of war, terrorism etc would skew the market to extreme conditions for a short duration.

Q: Are you saying the great recession was a normal stock market condition ?

Sanjeev: As I explained in my May 2009 article on seekingalpha.com, the conditions in 2007 with high inflation, high gas prices, high interest rates and high home prices with low wage increases due to globalization, created very low or negative disposable income for the masses.  The great recession was a result of that condition. Irresponsible behavior of the Banks like giving sub prime mortgages added to those conditions.

Q: Sanjeev, your methodology of using disposable income appears simple, but why is it that it is hard for us to find others with a similar 100% accurate track record of predictions?

Sanjeev: A large number of Wall Street analysts have been basing their analysis on certain ideologies and theories that impacted prices of commodities and gold.

Some other analysts have been using the data from the previous years to predict the market conditions next year.

What I have done differently is that though I have created a formula to predict the stock market based on factors affecting disposable income, I have been able to predict the movement in these factors for next year based on assessment of market forces. And, this has helped my predictions.

Q: The market has been moving up for 6 years now. Do you think the market would correct in 2015 ?

Sanjeev: With low inflation, a strong dollar, low interest rates, lower gas prices and lower unemployment numbers, I do not see the market going lower in 2015. However, I have not  done a detailed analysis using my formula based on disposable income yet. Will publish my predictions, once I have completed my analysis.

Q: Any other tips you would like to give to TalkMarkets readers ?

Sanjeev: It is important for readers to not get swayed by the opinions of the aggressive analysts coming on TV channels and websites, but rather to assess on their own the impact of various economic events on disposable income. For example, low oil prices were explained as a negative thing to us in December by many analysts, and the market went down for some time due to it. In reality, low gas prices are beneficial to consumers, adding the disposable income of the masses.

I get skeptical of analysts attached to large investment banks as they do not necessarily speak what they believe in, but are influenced by the policies of their companies and ideas of their managers.

Q: Thank you.