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.
Sunday, December 19, 2010
Monday, December 13, 2010
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
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
Sunday, December 5, 2010
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
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
Sunday, November 28, 2010
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.
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.
Sunday, November 21, 2010
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.
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.
Tuesday, November 16, 2010
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%
BFIA measure Sentiment Change from last week
May 2 0.94 0.048 16%
Nov 14 0.94 0.045 13%
Monday, November 8, 2010
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.
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.
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