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