Smith, Pareto and the divergence debate

Life is all about making sense of information. This information could be personal, economic, or societal kind. When we comprehend information, we make a decision, which we assume to be positive. So at a certain level we are trying to understand performance and how to perform as individuals and make performant choices? Performance assumes a kind of order. We try to create order in minds from disorder in the external world. This disorder could also be called divergence.

Divergence is a phenomenon seen in nature and markets. It is something that needs explaining and can be ineffable at times. It is linked with change or rate of change, fast and faster change. How fast can a price asset grow or decay? Divergence is also assumed to have a non normal aspect. It happens less than normal. Normality assumes that markets and 90% of its components move higher together or vice versa. Divergence is different from normality and could indicate change, a potential reversal. Divergence is also known as non confirmation in technical analysis. Divergence also creates news, as something that is non normal is strange and worth talking about. Divergence can be seen in information, data, and patterns. Divergence is studied and researched. It is a system that can be built as a strategy.

Adam smith (1723-1790) talked about the invisible hand, what we don’t know, something unpredictable, a kind of divergence. Vilfredo Pareto (1848-1923) talked about non homogeneous wealth allocation. 80% of the wealth is with 20% of people. This unequal allocation was a divergence.

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Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Alrroya

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