I recently wrote a piece for Marc Faber titled “In Defense of the Broken Clock,” which was related to a question I am often asked about using utilities and Treasurys, both inputs in our models for our mutual funds and separate accounts. The question asked is, "How many false positives are there?" In other words, how many times do leading indicators of volatility warn of coming volatility, causing a defensive rotation, and that volatility never comes? The answer? A lot — which is exactly why those indicators work over time. After all, you need disbelief in an anomaly for the anomaly to persist. Otherwise, it gets arbitraged away. Frequency over long periods of times does not determine one's success in investing, but rather magnitude. Consistency is largely an illusion when it comes to markets as studies prove that stocks do not follow a normal distribution. More often than not, the magnitude of being right matters far more than frequency. So when someone uses the analogy that "a broken clock is right twice a day" when it comes to markets, the assumption being made is that the importance of each minute is the same. This could not be further from the truth when it comes to investing."Don't watch the clock; do what it does. Keep going." —Sam Levenson Having said that, after a "surprisingly" weak January for stocks, especially relative to defensive Treasurys and low-beta sectors, will the false positives of the utilities sector outperforming finally yield a true positive, indicating a correction is right around the corner? Take a look below at the price ratio of the iShares Dow Jones Utilities ETFIDU, +0.50% relative to the SPDR Dow Jones Industrial Average ETF DIA, +1.06% As a reminder, a rising price ratio means the numerator/IDU is outperforming (up more/down less) the denominator/DIA. Note the incredible strength in utilities to start 2014. According to our thesis, strength in utilities tends to precede stock-market volatility. There have been many false positives with that since QE3 began, but now it appears the volatility is indeed rising on average and intraday movement is not as contained as it once was. Utilities continue to show strength, which near-term may indicate the first quarter in general may be won not through offense, but by being aggressively defensive (a key component to how our own strategies work), and how the Patriots won the Super Bowl. Anyone else starting to think the real broken clock is central banks saying things are fine when all evidence suggests they are failing miserably at sparking reflation? This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.