Archive for August, 2009

WAVES.INDIA - NIFTY. ANTICIPATED AND HAPPENED

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ORPHEUS INDIA RESEARCH

WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

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ALPHA INDIA - UP OR DOWN?

MARKET ACTIVITY POLARIZED

DESPITE NEGATIVE ACTION AND STOP LOSSES HIT ON HDFC (-2%), INFY(-2%), ITC(-3%), WE HAVE THREE NEW LONGS ON HDBK, GRASIM, L&T. FRESH LONGS ARE HERE TO STAY OR HAS MARKET DECIDED TO TURN DOWN SHOULD BE CLEAR SOON.

ALPHA is a pair trading, long only and short only strategy product based on TIME fractals.  Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

TIME ARBITRAGE portfolio has five pairs now viz. Reliance - Nifty, CNXIT-Nifty, TCS-Nifty, CNXIT-Infosys, Nifty-ONGC. The above tracker will be updated on a daily basis. The freshly opened trades will have the shortest holding periods. The type of trade will be depicted in the degree i.e. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. CNXIT/INFOSYS means LONG CNXIT, SHORT INFOSYS. This also means +A-B. When the pair inverts to INFOSYS/CNXIT, it would mean SHORT CNXIT, LONG INFOSYS meaning -A+B.

LONG ONLY, SHORT ONLY portfolio covers NIFTY, CNXIT, NSEBANK, RELIANCE, INFOSYS, ONGC, CIPLA, ICICI BANK, HDFC BANK, TISCO.

STOP LOSS AND EXITS are activated at 4%

Please feel free to mail us for any clarifications.  *This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

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SIF2 AT SUB 20% IS PARTIAL PROFIT BOOKING

ERST AT SUB 50 % IS PARTIAL PROFIT BOOKING. BET MOVES TO NEGATIVE, AEROSTAR LOSES GAINS, PEXI HAS NO CHANGE, AMO AND PTR ARE NEW LONGS.

ALPHA is a pair trading, long only and short only strategy product based on TIME fractals.  Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

TIME ARBITRAGE portfolio has five pairs now viz. BRD-BET, BETXT-SNP, SIF2-SIF5, BRD-BETXT, BET-SNP. The above tracker will be updated on a daily basis. The freshly opened trades will have the shortest holding periods. The type of trade will be depicted in the degree i.e. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. BRD/BET means LONG BRD, SHORT BET. This also means +A-B. When the pair inverts to BET/BRD, it would mean SHORT BRD, LONG BET meaning -A+B.

LONG ONLY, SHORT ONLY portfolio covers SIF2, SIF5, BRD, ERST, TGN. BET, BETFI, BETNG, BETXT, SNP.

STOP LOSS AND EXITS are activated at 4%

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GOLD INDIA DIVERGENCE

Unlike international gold spot, regional gold prices have a currency element also. The Indian spot Gold is denominated in Indian Rupee. Hence studying Gold India spot gives cues both on INR and international Gold prices. The respective asset is making a clear multi month intermediate B wave leg up and is clearly non confirming its global peer (international spot gold). The prices on the Gold India spot are making a clear corrective which is getting ready to crash down in a C wave.

B waves are always tricky, so pinpointing a reversal may not be easy. However, such a large corrective clearly suggests that our preferred view of just a marginal retest on international gold prices till $ 1000 is the best case scenario for Gold. In case prices break above 980-1000, this latest report on Gold carries an Alternative Triangle formation on the asset.

The reverse Head and Shoulder continues to retest previous multi year levels. More the test, more likely the break. We should not forget our preferred FLAT has to create a BULL trap before anything.
Silver is still below key resistance line. Platinum and Aluminum are making intermediate final legs up. Nikkei Iron and Steel seems to have topped.

Enjoy the latest WAVES.GOLD

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WAVES.GOLD is a perspective product published on Tuesday and Thursday. The report highlights GOLD and other precious and base metals. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

REUTERS RICS: XAU=, XAG=, XPT=, CU-NYC, .SPGSIZ, SPGSIA,.NSTL


ORPHEUS NEWSLETTER - 31 AUG

THE PERFORMANCE CYCLE

Performance cycles not only work at all time degrees but also challenge the idea of hedging.

We were the first ever in the world to talk about long India and short China on 21 Feb 2009. We were also the first to publish long Nikkei-short BVSP Brazil, long Russia – short Nikkei, long India – short Nikkei and long Nikkei – short China in a paper on performance cycles co-authored by Ionut Nistor and me, published in the Kyoto University Journal in Mar 2009. We gave two time frames for pair performance. One was multiple months and one performance cycle extended for years till 2013-2015. We also said that the Goldman BRIC Model was broken if BRIC country performance with the Japanese region was polarized. All the pairs registered gains and were up 27% (long Nikkei, short BVSP Brazil), up 14% (long Russia, short Nikkei), up 51% (long India Sensex, short Nikkei), up 59% (long Nikkei, short Shanghai composite). We have enclosed the paper as a weblink here.  READ MORE

TIME ANALYTICS

WHERE ARE THE BULLISH LONGS?
BET HAS A FRESH LONG SIGNAL
ALPHA ROM COVERS TOP 30 NOW
ALPHA COVERS INDIA TOP 20 NOW
ALPHA.ROMANIA - TRANSGAZ GIVES A “BUY SIGNAL”
ALPHA.INDIA - TOP INDICES AND STOCKS TURN UP

INDIA

CHANNELS INDIA - EARLY ECONOMIC
WAVES.INDIA - NSEBANK TESTS KEY NECKLINE
CHANNELS.INDIA - MID ECONOMIC
CHANNELS.INDIA - MID ECONOMIC
WAVES.INDIA - NIFTY ALTERNATE
CHANNELS INDIA - LATE ECONOMIC

ROMANIA
CHANNELS.BVB - EARLY ECONOMIC
CHANNELS.BVB - MID ECONOMIC
BETFI - PRICES HOLD AT KEY FIB CONFLUENCE
CHANNELS.BVB - MID ECONOMIC
WAVES.ROM - WHERE IS THE PRICE CONFIRMATION?
CHANNELS.BVB - LATE ECONOMIC
CHANNELS BVB - EARLY ECONOMIC - GAPS ALL OVER

GLOBAL
DOW - STILL STUCK AT 9600
GASOLINE FUTURE - COMPLETING A FLAT
EURUSD - PRIMARY CYCLE TURNS DOWN

FORUM UPDATES


CHANNELS.BVB - GAPS ALL OVER

SIF1 WEEKLY. After making open gaps, prices are still retesting previous highs. We need a clear break here to look for sustained positivity.SIF 2 WEEKLY. Weekly emotional gaps and retest of previous highs keeps us cautious before looking for a sustained rise. Gaps on large time frames suggest buyers are more emotional than decisive. SIF3 DAILY. The ongoing leg crosses key 0.618 projections and remains positive. Key levels to watch lie at 0.5854. SIF 4 WEEKLY (INVERTED). Inverted price structure suggests a head and shoulder reversal patterns. A clear break down here would be a sustained change in trend. SIF 5 DAILY. Prices reach key Fibonacci projection. We need a clear break here to look up till 1.44. BRD 60 MIN. Prices reach key Fibonacci projection. Minor trend remains positive. ERSTE DAILY ANTICIPATED AND HAPPENED. Prices push higher as anticipated. BANCA TRANSILVANIA DAILY (TLV) ANTICIPATED AND HAPPENED. Prices are still below moving average crossover. A break here would suggest another 30% leg higher. We will wait for some price confirmation before looking higher. The move up happened.

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CHANNELS.BVB is our second perspective product published on MONDAY, WEDNESDAY AND FRIDAY. The report uses conventional technical tools and focuses on stocks more than Indices. The report illustrates key price levels, price targets, price projections and time turn windows. WAVES.ROM and CHANNELS.ROM are bundled together as PERSPECTIVE products. Unlike WAVES which focuses more on blue chips, CHANNELS covers just BVB stocks all mid cap and small cap.

CHANNELS.BVB on MONDAY covers the Early Economic Sector cycle including Financials and Discretionary sector stocks.

REUTERS RIC - (BATR.BX, BRDX.BX, BRKU.BX, SIF1.BX, SIF2.BX, SIF3.BX, SIF4.BX, SIF5.BX, BCCA.BX, ASAG.BX, FLAA.BX, EFOR.BX, TUFE.BX, SIPA.BX, ELBU.BX, ERST.BX, IMPT.BX)

CHANNELS.BVB on WEDNESDAY covers the Mid Economic Sector cycle including INDUSTRIALS sector stocks.

REUTERS RIC - (TUBU.BX, SOCC.BX, ARTM.BX, ARSB.BX, SNOS.BX, ALTC.BX, ARMA.BX, CMLF.BX, MEFI.BX, EPUT.BX, ETAC.BX, UAMT.BX, COMPA.BX, APOM.BX, MECF.BX, COMI.BX)

CHANNELS.BVB on FRIDAY covers the Late Economic Sector cycle including Energy, Staples, Pharma, Utilities and Chemicals sector stocks. REUTERS RIC - (SNPP.BX, ROMP.BX, OILT.BX, PTRI.BX, PEXI.BX, ENPL.BX, TSEL.BX, MOPN.BX, BERS.BX, ALUM.BX, OLTC.BX, ALRO.BX, OTSP.BX, AMSL.BX, AZOM.BX, VNCA.BX, PPLS.BX, MJMR.BX, SIZA.BX, CBCM.BX, ZIMC.BX, PCLR.BX, ATBE.BX, SCDB.BX, BIOF.BX, DAFR.BRQ)

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ALPHA.INDIA - TOP INDICES AND STOCKS TURN UP

ALPHA is a pair trading, long only and short only strategy product based on TIME fractals.  Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

TIME ARBITRAGE portfolio has five pairs now viz. Reliance - Nifty, CNXIT-Nifty, TCS-Nifty, CNXIT-Infosys, Nifty-ONGC. The above tracker will be updated on a daily basis. The freshly opened trades will have the shortest holding periods. The type of trade will be depicted in the degree i.e. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. CNXIT/INFOSYS means LONG CNXIT, SHORT INFOSYS. This also means +A-B. When the pair inverts to INFOSYS/CNXIT, it would mean SHORT CNXIT, LONG INFOSYS meaning -A+B.

LONG ONLY, SHORT ONLY portfolio covers NIFTY, CNXIT, NSEBANK, RELIANCE, INFOSYS, ONGC, CIPLA, ICICI BANK, HDFC BANK, TISCO.

STOP LOSS AND EXITS are activated at 4%

Please feel free to mail us for any clarifications.  *This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


ALPHA.ROMANIA - TRANSGAZ GIVES A "BUY SIGNAL"

ALPHA is a pair trading, long only and short only strategy product based on TIME fractals.  Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

TIME ARBITRAGE portfolio has five pairs now viz. BRD-BET, BETXT-SNP, SIF2-SIF5, BRD-BETXT, BET-SNP. The above tracker will be updated on a daily basis. The freshly opened trades will have the shortest holding periods. The type of trade will be depicted in the degree i.e. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. BRD/BET means LONG BRD, SHORT BET. This also means +A-B. When the pair inverts to BET/BRD, it would mean SHORT BRD, LONG BET meaning -A+B.

LONG ONLY, SHORT ONLY portfolio covers SIF2, SIF5, BRD, ERST, TGN. BET, BETFI, BETNG, BETXT, SNP.

STOP LOSS AND EXITS are activated at 4%

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

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CHANNELS.INDIA - EARLY ECONOMIC

SUMMARY: DLF DAILY (DLF) The B wave up should complete near current levels, after which we could see a sharper downmove to validate the potential DOUBLE TOP pattern. HDFC DAILY (HDFC) 75 days of sideways action above open gap levels. No clear sign of a trend yet. HDFC BANK DAILY (HDBK) Same 75 days of sideways action. ICICI BANK DAILY (ICBK) Prices continue to move in a sideways action in the 600-800 price range. STATE BANK OF INDIA DAILY (SBI) The sideways, choppy action keeps us up but topping than otherwise. INFOSYS DAILY (INFY) Prices are pushing higher to complete the intermediate impulse up. Key resistance levels lie at 2,250. TATA CONSULTING SERVICES DAILY (TCS) Our ALTERNATE scenario sees this as a completing C wave up. RSI non-confirmation also suggests an exhausting upmove. Key resistances lie at 590. MAHINDRA DAILY (MAHM) Moving average crossover is ready to turn negative. TITAN INDUSTRIES DAILY (TITN) The choppy action continues. Prices are still above neckline levels. UNITECH DAILY (UNTE) Prices continue to hold below previous high levels. Momentum non-confirmation suggests weakness in the price action.

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CHANNELS.INDIA is our second perspective product published on MONDAY, WEDNESDAY and FRIDAY. The report uses conventional technical tools and covers most top traded stocks. The report illustrates key price levels, price targets, price projections and time turn windows. WAVES.INDIA, CHANNELS.INDIA are bundled together as PERSPECTIVE products. Unlike WAVES which focuses more on blue chips, CHANNELS covers the other mid cap and small cap stocks also. CHANNELS.INDIA carries the Early Economic cycle sector components, which includes FINANCIAL and DISCRETIONARY sector stocks, the Mid Economics cycles sector which includes INDUSTRIAL sector stocks and the Late Economic Sector cycle including ENERGY, STAPLES, UTILITIES, PHARMA, CHEMICALS sector stocks. REUTERS EARLY ECONOMIC RICS DLF.NS, HDFC.NS, HDBK.NS, ICBK.NS, SBI.NS, INFY.NS, TCS.NS, MAHM.NS, UNTE.NS, TITN.NS REUTERS MID ECONOMIC RICS ASOK.NS, TAMO.NS, CROM.NS, BHEL.NS, LART.NS, MTNL.NS, IDEA.NS, BRTI.NS, RLCM.NS, TATA.NS REUTERS LATE ECONOMIC RICS ONGC.NS, RLIN.NS, NTPC.NS, ACC.NS, HALC.NS, TISC.NS, ABUJ.NS, CIPL.NS, RANB.NS, ITC.NS

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The Performance Cycle

Performance cycles not only work at all time degrees but also challenge the idea of hedging.

We were the first ever in the world to talk about long India and short China on 21 Feb 2009. We were also the first to publish long Nikkei-short BVSP Brazil, long Russia - short Nikkei, long India - short Nikkei and long Nikkei - short China in a paper on performance cycles co-authored by Ionut Nistor and me, published in the Kyoto University Journal in Mar 2009. We gave two time frames for pair performance. One was multiple months and one performance cycle extended for years till 2013-2015. We also said that the Goldman BRIC Model was broken if BRIC country performance with the Japanese region was polarized. All the pairs registered gains and were up 27% (long Nikkei, short BVSP Brazil), up 14% (long Russia, short Nikkei), up 51% (long India Sensex, short Nikkei), up 59% (long Nikkei, short Shanghai composite). We have enclosed the paper as a weblink here. The.BRIC.Model.100209

It was kind of shocking both for the academicians and for the capital market participants. A few even thought of such work as unworkable strategies. These were a few remarks posted below the article in business standard.

Suki - “How would you rate the Precision high quality engineering skills in India vs that of China? Who is going to be the better supplier of precision products in the future? Are Indians less quality conscious than China, overall and specifically in industry?”

Nano - “will there be a market for Tata’s Nano, or it will ever be successful to compete against the Japanese or Korean car models? Where will India find enough resource to feed its growing population in the future? Yahoo, oracle, IBM, Cisco and other American software companies will out of business soon, where will India be as software subcontractor? The fact speaks to itself; India can’t build anything that is useful, not even toys! Money is a king at this difficult economic time, and china has more than 1.3 trillion US dollars reserve and India has basically none. The author of this article does not understand economic issue. Chinese consumer market is much bigger than India.”

Keith - “I don’t know what it is about Indians that they enjoy putting down China so much. For China’s point of view, India isn’t worth making comparisons with. You never see many if any Chinese making these pointless comparisons. We just don’t care if Indians have to go to work in their software houses riding on mules on cracked roads, nor would we care if they went to work in Rolls Royce’s on roads paved in gold.”

John - “The Chinese has observed that while South Korea like to over-glorify their past, India has a tendency to over-glorify their future. How long have you been talking about the great India-surpass-China miracle? Where was that “21st century belongs to India”? Talking about a great future does not bring a great future, no matter which “model” you used in your predictions. Instead of spending years writing papers on how India will triumph in the future, why don’t you guys spend a few minutes thinking about how to make India work, today.”

Mark - “Sorry, with all the capitals running out of India, I don’t see infrastructures being belt with bare hands. Short India, short China, long USA.”

We tried explaining that performance cycles work in both directions in favor and against China. This is what we said “Performance cycles are mathematical. The comparison is quantitative, which can have qualitative reasons. A few years back, it was long China – short India. The qualitative reasons could have been different in that case. If population and consumption was key, there would have been no east-west dominance cycles. East was historically more populated then the west. Consumption is a creation of modern economics. Population and consumption or anything else cannot change performance cyclicality. Any small country with 1/100 the population of CHINA can outperform CHINA in percentage terms for a certain period.”

The idea of a preordained cyclicality of performance working in markets challenges many economic think tanks dedicated to researching and forecasting the same. Performance cycles based on time fractals simplifies too much for the linear time generation of researchers to accept. Our idea is still not about dissuading researchers from conventional research but embracing something so repetitive and structured as time fractals also know as time cycles. The cyclicality in markets between regional indices is a new thought even for macro funds playing between regions. How many funds do you know doing pair trading strategies between Japan and the BRIC countries? And how many investors do you know putting money in such funds? Even if there are funds doing this there is still little credit given to time and its cyclicality.

There is another reason why the idea escapes the majority. The one who understand performance also consider it as just one cycle not two, three or many. Human mind is predisposed to linearity. This is why psychologists call humans as shortsighted. There was no way behaviorologists would have called us myopic, if we could see cycles. Our inability to see cycles is at the core of behavioral finance and psychological errors. We see only one up part of the cycle not two. We comprehend performance more than underperformance. We buy winners and sell losers. If we would have comprehended that today’s losers are tomorrow’s winners, we may be selling winners and buying losers. Above this we rarely look at both winners and losers together. For the majority today performance is secular not cyclical. This is why investors fail to comprehend how long India - Short China and Short China - Long India can make money. For example HDFC BANK and ICICI BANK pair. One may believe HDFC BANK to be a sector leader a notch ahead of ICICI BANK. With this information in the background a strategy of short HDFC – long ICICI BANK may be ridiculous. How can be buy and sell two highly correlated assets? We assume statistical correlation above time. We don’t realize that correlation like everything else is cyclical and changes with time. Take two time series and compare them over multiple time frames and you will see differing correlation values. Beta, the highly touted hedge ratio suffers from the same problem. Take beta values for various time frames on two data series and you will see fluctuating values. Majority of our investment problems do exist because we don’t want to admit cyclicality, which exists everywhere and at all levels of time.

The over discussed long India and short China pair can validate this. The pair made 55% since we mentioned about it early this year. The maximum return that could have been captured between the two indices was 60% in 173 calendar days during 09 Mar 2009 - 31 may 2009. One had to invert the pair from 31 may 2009 till 12 July 2009 for 90 days Shanghai composite outperformed BSE SENSEX by 21%. From 12 July to 30 Aug, it was long India and short China again for 48 days delivering 22%. This was a classic example how Chinese and Indian performance was shifting in a cycle from one to the other. We can illustrate this same performance cycle on larger time. 31 July 1994 till 03 Jun 2001 (seven years) China outperformed India by 100% (annualized 14%). 03 June 2001 till 31 mar 2006 the performance cycle shifted (five years) in favor of India which outperformed china by 279% (Annualized 55%). We can go to a weekly cycle or daily performance cycle and show the same shifting performance cycles between the two regions. Performance is cyclical and predictable.

Performance cycles challenge the idea of a hedge like nothing else. We talked about it briefly in our India H2 2009 outlook. Any pair which delivers 20-30% annualized returns is an opportunity to invest and not to hedge. If strange sounding pairs between regions can deliver such returns, a hedging exercise built around avoiding a loss or gain is counterintuitive. No wonder hedging is a cumbersome exercise when not based above the underlying cycle. We also have beta tracking techniques, which is constant adjusting of two legs to keep them of similar value. We calculated the BETA of the BRIC country indices and Japan with the MSCI world index. Nikkei and Bovespa had the closest betas compared to the world index. Close betas warranted a value hedging and not beta hedging. This means that the Nikkei - Brazil pair also delivered 18% annualized. Performance cycles make a strong case against conventional hedging. This is no surprise. Hedging without an understanding of Time fractals is an illusion.

Mukul Pal

(With additional contributions by Anna Maria Michesan)

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