Market Update 1.02.11

Recap for the year. Towards the beginning of the year we strongly favored India and Turkey and leading markets. Turkey was slow to get off but exploded during the summer and September. From there it fell hard but still up considerably. We missed the top but declined our exposure to Turkey before it fell further. The BFIA long only portfolio earned a return of 21% over the year which includes dividends. We also created a long-short portfolio in November of this year. We shorted in November and closed our shorts in November to take advantage of December. We were up 1.5% in November compared to down 2% in most markets. We held in cash during the first week in December and missed those returns but was able to still long from then to earn a nice December return.

Going into the new year there are select markets that we like as well as asset classes.
1. Mexico (EWW)
2. Malaysia (EWM)
3. South Africa (EZA)
4. Korea (EWY)
5. Chile (ECH)

The asset classes we like are:
1. Gold (GLD)
2. Silver (SLV)
3. REITs (REM)
4. US high yield corporate bonds. (HYG)

Our allocation is high for the above ETFs and more modest for the asset classes as we favor the select equity markets above over the asset classes.

Market Update 12.26.10

Going into 2011, how do we see the markets behaving. The BFIA model signals that the investment for the year is select emerging markets with small but sufficient allocation to REITs, Energy, and Gold. Some of those select emerging markets include south africa, mexico, malaysia, korea, and Russia. We also are taking a look at some developed markets including Canada and Japan. BFIA model sees the Japan market as under valued, however, there are no signals as for as the timing to when the Japanese market will appreciate greatly.

Our prediction for the US market is based on the following reasoning. The agent-based model signals that the US market will behave similar to the US market in 2005. Based on these signals we see an appreciation of the S&P 500 of around 9%. The US market is still under valued based on our model but there is not much room until it becomes over valued.

Market Update 12.19.10

Each week we run our behavioral finance - agent-based models to predict future asset prices globally. We run measures for major markets around the world. However, we always like to look at our US measure being the largest economy in the world. One of our measures for the US is showing an interesting similarity with the measure back in 2004.

Date
12/19/2004 0.9435
12/19/2010 0.9563

Our agent-based US measure back in December of 2004 is almost identical to the measure in December of 2010. In fact we have noticed similar dynamics for 2004 and 2010. If these similarities are to continue than we would predict 2011 will be similar to 2005 in the US. This means it will take a year for US markets to become slightly over valued. Therefore, the US market is currently under valued. However, we view the US as an under performer relative to other markets such as:



Indonesia
South Africa
Mexico
Malaysia
Chile
Easter Europe

We also like REITs.

Market Update 12.12.10

Today is Monday morning, 12.13.10. BFIA is updating our views of the global markets for the week. Looking at the US market we believe the US is going to be trading in a tight range for several months. The good news is that we do not see any major downside risk for the time being as we did in November.

The behavioral measures like the following global markets from the top being the best. As you can see from the list that the top markets are emerging markets with exposure to high yield corporate bonds, energy, REITs, and gold.

indo
south_africa
mexico
mal
chile
ushy
israel
energy
Europe
Taiwan
us
brazil
canada
Korea
RE
Gold

Market Update 12.05.10

In the last several weeks we have noticed based on our agent-based measure that the US dynamics were similar to that of May 2010 but less severe. We predicted two down weeks in a row and then up week, which transpired almost as predicted. If the similarities were to continue we would predict a major down week for the US market. However, based on running our model this week we have seen a departure from the similarities. Therefore, we can say anything about this week for the US market. The agent-based measure is currently at 0.917. Looking back at 2003 and 2004 where 2003 was similar to 2009 and 2004 similar to 2010, we see a lot of back and forth for now until we see another major move to the upside for the US.

Based on our recent measures we like to reiterate the markets we like for the long-run. In the past year we have liked India and Turkey. We have scaled back our allocations to those markets and re-allocated to South Africa, Indonesia, Mexico, and Malysia.

Country
1. south_africa, EZA
2. indonesia, EIDO
3. mexico, EWW
4. Malysia, EWM
5. Chile, ECH
6. Gold, GLD
7. Turkey, TUR
8. Korea, EWY
9. India, INP
10. Israel, EIS

Market Update 11.28.10

For the last two weeks our BFIA measures had been bearish on the global financial markets. Our long-term view is long. We have been seeing similar dynamics to the May Flash crash dynamics. It has been two weeks since we first sighted that similarity and it had played out as we thought. Going forward we believe it will continue to follow those dynamics which means this week will be an up week and next week will be a down week. We have already covered our short position.

The markets we like continue to be the following:
Indonesia, Malaysia, South Africa, Mexico, and Chile.

We have decreased out exposures to India and Turkey. We did that before the large decreases in shares prices of those ETFs.

No hedge for the week. To see if we should hedge next week tune in next week.

Market Update 11.21.10

For the past several months BFIA has been a bull on India. Since that time India has gone up considerably. We currently see dynamics in India to start scaling back the over weighting. BFIA likes Indonesia, South Africa, Malaysia, and Mexico.

BFIA has also been a bull on US high yield fixed income. BFIA believe that trade does not have much more room to grow. Based on our measures we have not seen our bond measures this high in our history of data, indicating that it is over valued. Therefore, BFIA has decided to sell off that position. BFIA earned about 20% in a one year period investing fixed income.

What is our prediction of this week. Last week, we predicted a major downside dynamics which we saw last Tuesday. BFIA believed it was seeing dynamics similar to May. Based on our current measures we are now receiving mixed signals. One measure is predicting that this week will be similar to the second week in May which declined about 2.0%. About 80% of that week which means a 1.6% decline for the week. However, our sentiment measures are moving away from the May numbers which suggests the dynamics will not be similar. This may mean that the market will sway back and forth for the week.

11/14/10 Market Update

We are finding that the US stock dynamics today are almost exact to the dynamics on May 3, 2010, right before the flash crash. The magnitude is not the same. However, this means there is downside risk to come. Our long measures are saying to currently stay in all markets. However, we believe one should hedge their positions until we see dynamics change again.

BFIA measure Sentiment Change from last week
May 2 0.94 0.048 16%
Nov 14 0.94 0.045 13%

Market Update 11.08.10

At BFIA we exploit behavioral biases to detect long-term investment cycles. The major investment cycle we have been talking over this year has been in the Asian markets with India being the biggest and Malaysia, South Korea, Indonesia, and Thailand being the other Asian markets we like. We also have talked about Turkey and it is our second biggest position.

We are still sticking with this investment cycle even with the recent run up in these markets.

We also like to look at our agent-based behavioral measure each week to determine where the US market is currently standing. Even with the recent run up we still see the US as undervalued. One key concern is that the dynamics of our measure look similar to the dynamics in April of this year. We are currently at 0.914 and the measure was at 0.946 at the beginning of May. Once we hit 0.946 again we will look for any signs within our behavioral measures to determine whether there will be a large pullback.

Market Update 10.31.10

Below is a ranking of what BFIA believe to be the top markets and asset classes. I can be seen that ex-China Asia countries such as Malaysia and India are on top of the list. In addition, US investment grade and high yield fixed income are still strong asset classes. The US and Europe are towards the bottom of the list.

Regarding our agent-based behavioral measure it is not at .913. It has only slightly increased since last week. Once it hits around .94 we then believe we may hit a point where there is major breakout of major decline. Stay tuned until we see it hit 0.91.


1 malaysia
2 chile
3 India
4 Korea
5 USIIG
6 USHI
7 turkey
8 thailand
9 israel
10 canada
11 Taiwan
12 brazil
13 south_africa
14 mexico
15 China
16 Gold
17 Europe
18 Real_estate
19 Russia
20 EE
21 oil
22 Japan
23 us
24 EMFI

BFIA Market Update 10.24.10

The BFIA behavioral models are signaling to continue over weighting India as well as other Asian market including Thailand, Indonesia, and Malaysia.

Our agent-based-behavioral measure for the US is now at 0.91. If we are to compare this time period to the time period right before the flash crash, we are two weeks before a major downside movement. Therefore, we predict another week or two of low volatility.

Market Update 10.17.10

We now run our BFIA measures for additional markets including Thailand, Indonesia, Chile, and Canada. Based on our long-term behavioral measures, below are the top ten markets we like with number one being the most bullish market.

1 India
2 chile
3 thailand
4 turkey
5 canada
6 south africa
7 brazil
8 Korea
9 Malaysia
10 Eastern Europe

The next top ten list are the markets we like on a short-term basis.

1 turkey
2 Eastern Europe
3 brazil
4 India
5 canada
6 thai
7 China
8 south africa
9 Korea
10 Malaysia

Looking at our agent-based behavioral measure. If we compare the current stock market environment to back in March to May 2010 we would be in the second week of April. This means we may see very low volume for the next three weeks than major downside volatility. It is important to analyze the measures every week to understand the major changes.

Market Update 10.10.10

Last week we mentioned the market was going to continue up, overweight Turkey and South Africa. Summary of the week was the market went up and Turkey went up 7.96% for the week and South Africa was up 2.5% for the week.

Current model results indicate that India is still the largest exposure with Malaysia, South Africa, Turkey, and South Korea the next largest exposures. Based on our agent-based behavioral measure the US is still undervalued by 11%. We still see some more upside before year end. However, we are getting close to the point where we might see a decent pullback. We will keep you updated.

Market Update 10.03.2010

Based on our behavioral measures for the past year, we have been a bull on India. Since investing in India we are up over 40%, which is our best performing ETF. For the first time in months our behavioral measures have signaled to reduce the allocation to India slightly, 1.5%. The markets we should re-allocate to are Turkey and South Africa which are our second and third largest exposures at the moment. We are still bullish on high yield bonds, but we are running the models every week to determine the right time to sell. Our allocation to the US is still under 5%, our lowest exposure.

At the beginning of last week we said this week will help determine the direction of the markets for the next several weeks. Based on the week we believe the markets are going to continue going higher. Currently, our agent-based-behavioral measure for the US is 0.88. The last time it went as high as 0.88 was back in the beginning of March 2010. From that point it went up to 0.94 right before the flash crash. If the dynamics repeat themselves we see the markets going higher and then a slight correction.

09/26/2010 Market Update

Each week we run our behavioral measures. Based on the behavioral model, India is the largest exposure with Malaysia and South Africa tied for the second largest exposure and South Korea the third. High yield corporate debt still looks attractive based on what we have seen in our models. We are concerned about India, Malaysia, and high yield corporate debt become over valued as the measures are heading toward unprecedented bullish territory which is a contrarian indicator. However, at the moment we do not see any reason to sell.

We also run a third agent-based measure which has predictive power for short-term movements. This week will we believe will indicate where the market is heading the next several weeks. Our indicator for the US hit 0.86. Last two times the measure hit 0.86 the market fell dramatically the next week. However, before those two periods the US market went up to 0.94 right before the flash crash. Stay tuned for the right time to sell India and high yield corporate bonds. We are still involved in that trade and whether our agent-based measure is correct about the next several weeks.

Market Update 9.29.10

As we look over at BFIA's first year of performance, the behavioral model signaled to overweight India the most relative to all other markets. India has returned up close to 30% since. In addition the model has signaled US high yield corporate bonds were preferred to US equity. Since September 2009 it appeared the model was incorrect. However, the model was built to pinpoint investment cycles and not short-term movements. Over the past year high yield corporate bonds have returned BFIA 17% relative to the S&P 500 which returned 6.5% over the same time period.

We have become more confident with our weighting system given our one year track record. Currently, we are still over weighting India and Malaysia. Other markets we like continue to be South Africa, Turkey, Taiwan, and South Korea.

Another interesting signal we have discovered in our continued research is based on the spread between our long-term and short-term indicators. Based on the spread, BFIA likes China, Taiwan, Turkey, and Brazil for the short-term, short-term meaning at least 1 month.

As far as bonds, we do see unprecedented bullish in our measures, which means we see a turnaround in the bond market at some point. However, at this point we do not see any signals points to exit bonds.

Market Update 9.12.10

The past week was a good week for the financial markets. The BFIA fund is up 3.3% so far this month. However, since May the markets have note been able to sustain a long positive up trend. Below you can find our agent-based indicators for the last several months. It shows that the US has been in the range of .77 to .86 for the last several months. If we stay in that range it means there is little more upside and a high probability of downside to come since the US is currently at .846. Since BFIA fund is not a trading strategy we are remaining long, but we recommend to be cautious for the next several weeks.

Our long behavioral indicators are still bullish on India and Malaysia. Since we purchased Malaysia in August we are up over 10% even over the month of August which was a horrible month for the US stock market. South Korea, Turkey, and South Africa are also markets we are over weighting. We still see some bullishness left in US high yield bonds and less in US government bonds.







5/16/2010 0.84867
5/23/2010 0.8698
5/30/2010 0.82752
6/6/2010 0.83135
6/13/2010 0.80929
6/20/2010 0.83315
6/27/2010 0.85641
7/4/2010 0.82415
7/11/2010 0.77513
7/18/2010 0.82649
7/25/2010 0.81462
8/1/2010 0.84754
8/8/2010 0.84509
8/15/2010 0.86223
8/22/2010 0.82405
8/29/2010 0.81916
9/5/2010 0.81119
9/12/2010 0.84639

Market Update 9.05.10

Markets have performed well in the last week. After running our weekly behavioral model, allocations have not changed much. We still overweight India and Malaysia as well as high yield corporate bonds.

We believe these markets will become over valued in the next year, two, or three as the behavioral model is indicating that they are slowly reaching a contrarian threshold. Our models are designed to determine when that exit point occurs.

Our agent-based market signals an interesting market to look at is Japan. Out of all the markets we study Japan is the most under valued. The US is also one of the most under valued markets. Our model is not a fundamental model and does not explain if there exist structural factors coming into play that are keeping these markets under valued which make take years before they are fixed. Therefore, we have small exposures to these markets for now, but we are looking for appropriate points to add additional exposure.

Market Update 8.29.10

We are at an interesting crossroads right now. Our long-term behavioral model has indicated as in previous weeks that emerging market equity and fixed income are the best bets. More specifically our model is signaling to overweight India, Malaysia, South Korea, and Turkey and high yield and Investment grade bonds.

The country that received the lowest exposure is the United States equity market.

I make a point about the interesting crossroads because I see that bullishness in fixed income is moving toward unprecedented levels. Which at some point becomes a contrarian signal. However, the US equity market behavioral measure is signaling bearish sentiment. This means at some point the investment cycle of over weighting bonds (which to year to date has been the best move regarding the US) may end in the near future. But where to put the money when that time comes if US equity market is still signaling bearish sentiment. Well, we have confidence when that time comes our behavioral model will signal the correct steps to make. As of today, we will are still allocating to fixed income and emerging market equity.

Market Update 8.22.10

Last week our short-term US behavioral indicators signaled a down week last week. The S&P 500 was slightly down for the week. Given the week was slightly down instead of down big, our short-term US behavioral indicators have improved indicating to close the US hedge.

Our agent-based indicators still indicate the US is 18% under valued. However, the long-term behavioral indicator or sentiment is still bearish. The fixed income sentiment is still very bullish. We believe that there could be a bubble in fixed income since we have not seen such bullishness last for such a long time. Even though, we do not see signs of the bubble bursting anytime soon.

Our long-term plays currently are India, Korea, and Malaysia. In addition, we like fixed income markets in Emerging markets and the United States.

Our indicators indicate a relatively mild week of volatility.

Market Update 8.15.10

Last week was a pretty bad week for the global stock markets. What does the behavioral model indicate about what do for the coming week and beyond?

First, our US behavioral indicator has crossed it's short-term threshold indicating that this week will be a down week. Therefore, we are hedging our position for the week.

Second, our agent-based indicator indicates that the US is 18% under valued. The dynamics appear the US market will hover around 20% under valued for sometime. Therefore, we do not anticipate too much more downside. The worse possible scenario is 5% downside in the next month.

Our long-term perspective is still overweight emerging market equity and US high yield corporate bonds. Our indicators are also bullish on emerging market fixed income. We purchased some several weeks ago.

Market Update 8.8.10

Nothing much has changed since our posting last week. As far as the US is concerned we are more bullish on the fixed income market than the equity market. We recommend a 70% bonds, 30% stocks for the US. For emerging markets, we are more bullish on the equity markets.

Emerging markets to look at are: India, South Korea, Taiwan, South Africa, and Malaysia.

Even though we have exposure to US bonds versus equity, we believe the US stock market is 14% under valued. However, that valuation will occur over the next year and half.

Market Update 8.1.10

Based on our behavioral indicators our equity exposure to global regions are the following:


Asia 32.91%
Latin America 15.30%
Middle East, Africa 16.13%
Eastern Europe, Russia 15.65%
Japan, Australia 9.19%
Europe 8.84%
US 4.24%

Our US equity exposure is the lowest of all the regions. However, we do have 25% allocation to bonds which are invested in high yield US fixed income. We see bonds are still preferable to stock in the US market. Therefore, we high exposure to emerging market equity and US high yield fixed income.

Our agent-based indicators suggest the US is now 15% under valued and Europe is 20% under valued. Comparing this period to the recovery period after the 2000-2002 recession it will take until the end of 2011 to become fairly valued.

Market Update 7.25.10

Interesting week for the financial markets. BFIA's indicators has been signaling that there is no double dip recession. (Please view back at previous posts.) Even during the turbulent months of May and June BFIA indicators have argued to stay with the market. Even though BFIA indicators do not signal a double dip recession, we still see risk in the US equity markets and currently prefer the high yield bond market for the near term. Regarding international markets, our long indicators do not like China. The long indicators like India, Korea, South Africa, and high yield bonds.



BFIA's agent-based indicator still indicates the US equity market is 18% undervalued. Since September of 2009 the US equity market has hovered around 20% undervaluation. Looking back in history at our indicator, the US equity market hovered around 20% undervaluation from 9/28/2003 to 8/22/2004. The US stock market became fairly valued on 1/8/2006. If we are to compare the 2003-2006 time period to the 2009-2012 period, it will take another year and half for the stock market to become fairly valued. For the time being we like high yield bonds and specific emerging markets listed above.

BFIA 7.18.10 Update

Markets have been volatile. It appears we may see this kind of volatility for some time. What are the BFIA indicators signaling? Our long-term indicators are quite bearish on the United States and China. We have small exposures to these markets. We are completely out of the US equities market and have purchased a US high yield debt ETF. The BFIA behavioral indicators are more bullish on the bond market currently than the stock market. Our top long-term markets again are India, South Korea, South Africa, and Israel.

Our short-term indicators have eased a bit. However, our US short-term indicator is still signaling to hedge the US market for now. This means there may be some more volatility in the next two weeks. Therefore, we recommend exiting your US position or hedging your US position as well as other developing country positions such as Europe and Japan. Our exposure for the bond market has increased based on the movement of our indicators for developed market equities.

Our third indicator signals that the US market is 20% undervalued and it has been hovering at 20% undervalued for the last year or so. Therefore, in the near term we do not see major downside but moderate downside in which the market will recover to its 20% undervaluation.

July 11 Update

In our last blog we mentioned that the upcoming weeks we will know if we are in a double dip recession or not. Our US behavioral indicators was getting close to its threshold which indicates a major downturn. However, in our sample we have never seen our indicators indicate a major downturn so late in the downturn. Therefore, we believed this was a market correction. This past week we believe has proven that no double dip recession is on its way. We are not extraordinary bullish about the US. However, we do not see a double dip recession. Our agent-based indicator for the US indicates the US stock market is 20% under valued. It does not indicate when the US will gain that 20%. It could six months or several years. But the indication is that US is on a up trend albeit a slow one.

We are still bullish on India, South Korea, South Africa, and Israel.

July 4th Update

Except for India, Taiwan, and Korea all of our short-term behavioral indicators have crossed their thresholds indicating more short-term downside volatility to potentially come.

Our US and China long-term indicators are getting close to their thresholds. A long-term indicator crossing its threshold indicates an an inflection point that another significant downturn is on its way. We have seen other times where markets come close to passing its threshold but do not and then continue to increase. Therefore, we have limited our exposures to the developed stock markets and have increased our exposure to high yield fixed income. Our behavioral indicators for fixed income is significantly more bullish than the for the developed country stock markets. We are currently over weighting emerging markets such as India and South Korea and investing in high yield fixed income to gain exposure to the developed markets. Once we see improvement in our behavioral indicators we will shift out of fixed income back into the stock market.

Market Update 6.28.10

Nothing has changed since last week. We see markets see sawing for the time being moving slightly upward. Our largest exposures are outside of Europe and the US. We did find a large change in negative sentiment in Europe and we currently do not have exposure to Europe.

We continue to like India.

Please check back next for any significant changes.

Market Update 6.20.10

Each week BFIA runs its three indicators. What are the indicators predicting? Our long-term horizon indicator, 6 months or more, still indicates that India is the market to be in. It is our largest exposure. However, we are close look at our third indicator to indicate when India becomes overvalued.

Our short-term indicators which indicate how long momentum runs in the short-term, indicates that the short-term volatility of May has ended and to close any of your open hedges.

Last week we compared our third indicator to predict the weekly short-term dynamics of the US stock market by comparing the indicator to old values of 2004. We predicted last week was going to be big and it was. What does it say about this week? If the current values do compare to the July, August, September time period of 2004, we predict a lot of back and forth but with slight upward trend. Therefore, we are staying long in the market.



When the value increases it indicates a bullish sign. Decreasing indicates a bearish sign. If we compare 5/2/2010 to 7/11/2004 going forward, the US stock market should increase slightly from here. If the dynamics today do compare to 2004 than we should expect another large down month 7-9 months from today.

Date BFIA_old
7/11/2004 0.90089
7/18/2004 0.88128
7/25/2004 0.8719
8/1/2004 0.85502
8/8/2004 0.86791
8/15/2004 0.83308
8/22/2004 0.83273
8/29/2004 0.86366
9/5/2004 0.87112
9/12/2004 0.87606
9/19/2004 0.88527
9/26/2004 0.89168


Date BFIA_recent
5/2/2010 0.94169
5/9/2010 0.91633
5/16/2010 0.84932
5/23/2010 0.8705
5/30/2010 0.82822
6/6/2010 0.83201
6/13/2010 0.80986
6/20/2010 0.83363

Every Sunday there will be a new post regarding the results of our models. Please bookmark the site and take a look before the new week begins.

What does the model predict going forward. Again, BFI Advisors employs 3 indicators. One of the indicators integrates behavioral finance and agent-based modeling to indicate when markets are over and under valued. If the indicator is under 1 it is undervalued and over 1 means overvalued. We do see some similarities from May/June of 2010 with the month of July/August in 2004. Remember from 2000-2002 was similar to 2008 and 2003 was similar to 2004 as far as the direction of the market. The magnitude of the movements was distinct. And 2004 compares to 2010. Our under/over valued indicator in 2004 has similarities to 2010 as noted below. If we believe this similarity will continue than our 2010 indicator should rise in value over the next several weeks. What does this mean. It means we predict the stock market will rise in the next several weeks.

What do the other indicators say about which markets to invest long-term. The model is still over weighting India, South Africa, and Israel. India and South Africa have weathered the May storm well relative to other markets. However, Israel has not. We do recommend to hold off on Israel until our short-term indicators indicate to close the hedge. Currently, there is no hedge on India or South Africa. We will keep you updated next week.








4/25/2010 0.92496 7/4/2004 0.90089
5/2/2010 0.94169 7/11/2004 0.89277
5/9/2010 0.91633 7/18/2004 0.88128
5/16/2010 0.84932 7/25/2004 0.8719
5/23/2010 0.8705 8/1/2004 0.85502
5/30/2010 0.82822 8/8/2004 0.86791
6/6/2010 0.83201 8/15/2004 0.83308
6/13/2010 0.80995 8/22/2004 0.83273
8/29/2004 0.86366
9/5/2004 0.87112
9/12/2004 0.87606
9/19/2004 0.88527
9/26/2004 0.89168

Stay Strong

BFI Advisors employs three indicators. The first two are based on behavioral biases. One is a short-term and the other is a long-term indicator. The short-term indicators indicate volatility will continue and to maintain any hedge you have opened for now. However, more importantly, the long-term indicators indicate to stay long. That we are not in a double dip recession nor another financial crisis.

The third indicator is a hybrid indicator exploiting agent-based modeling and behavioral finance. Our agent-based indicator indicates whether a market is under or overvalued. Surprisingly, Europe and the US are both undervalued which corroborates the long-term behavioral indicator.

Given the model results we are not selling here, but will look for an opportunity to buy in the near term.

Where do we go from here? May 13th, 2010

The markets have been turbulent over the last two weeks. What does our behavioral model have to say going forward. The long-term indicators indicate that we should stay long for all markets for the time being. However, we have not seen such a change in our behavioral indicators since March of 2007 and July of 2007. Those were weeks of turbulent markets that preceded the financial crisis of 2008. According to our back-tests, large changes in our indicators predict down markets in the upcoming months. We therefore, believe that last week was a similar event to that of March and July of 2007, events to proceed a longer term downfall. Currently, we are remaining long, however, we will be on the look out for the appropriate time to exit. This could be in the next 6 months to 18 months. We will keep you updated.

Holy Land Update

Since starting our position in Israel on December 1, 2009, Israel has gained 12.5%. The S&P 500 gained 6.4% over the same time period. We added to our position on January 21, 2009 and posted about Israel the next day on the blog. Since Jan. 21 Israel is up 8% compared to 7.8% for the S&P 500. We are still bullish on Israel in the upcoming months.

Latin America

In the summer of 2009, BFIA was extremely bullish on Latin America. Well, Latin America was the top performer in 2009. The average Latin American mutual fund outperformed all other market funds. The question is will Latin America keep outperforming over the course of 2010?

Our allocation in the summer of 2009 was 26%. Latin America was our largest exposure. Currently our behavioral model indicates a 13% allocation to Latin America. A pretty significant reduction. Therefore, we believe in there are other markets out there that will become the outperformers for 2010. Wait to see if our behavioral model is correct again.

Paul Samuelson

Paul Samuelson and Robert Solow are Nobel Prize winning economists. I am fortunate to participate in the same volume as the nobel laureates and many other very distinguished colleagues.

http://www.routledge.com/shopping_cart/products/product_detail.asp?curTab=CONTRIBUTORS&id=&parent_id=&sku=&isbn=9780415492638&pc=

Update

From mid to late January we saw a pull back in the global stock markets. Some pundits said this was a double dip recession where we would begin to pullback to numbers not seen since October of 08. However, our model suggested this was just volatility meaning traders taking profits and not an inflection point. As of today, markets have rebounded some. What is our long-term view. We are cautious of course on Europe, US, and now Asia. We are bullish on Israel, India, and South Africa.

Volatility or Inflection Point

This past week the major indices were down more than 5%. What does this mean. Does it mean we are in for a downturn in the financial markets? Or is it just volatility meaning there is no substance behind the selling?

My model indicates we are just seeing volatility. The next several weeks will determine if we are correct.

The Holy Land

The BRIC markets have made headlines in the last several years as the markets to invest in. How about now? Are the BRIC markets still the markets to beat? My quantitative model says that Israel is the market to be bullish on over the next year or two.

China

Well my index spoke loud and clear about China. Weeks well before China announced contractionary measures my index was signaling bearish sentiment on China. See post from December. More to come on China.