Archive for the ‘Time Triads’ category

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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.

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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


Redefining Intermarket Analysis

What is Victor Niederhoffer’s historical validation for naïve reasons?
When do fundamentalists and market technicians in consensus?
Are there things even consensus can’t solve?
How does divergence look explainable on a hidsignt basis?
What is the real challenge when it comes to market divergence?
Why do Elliotticians despite such sharpness in pattern recognition lack the command on intermarket picture?

“Elliotticians tag, ‘we are here’ by drawing a fractalled contour of a wave structure. They count it, label it and point ‘we are going here’ in 2012. Even Elliotticians despite such sharpness lack the command on intermarket picture. We decided to understand intermarket failure. We took 55 assets from the following asset classes; metals, energy, agro, bonds, currency, equity, and benchmarked all of them against ….”

Why does Murphy call the study intermarket analysis not intermarket cycles?
Are markets not supposed to do what they are doing?
Can intermarket failure be explained?

The latest time triads explains intermarket failures. You can download the report from the following links.

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


Top underperformer Spain wins

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.


How did the worst performer Spain reach so far?

Spain beat Germany to book first ever World Cup final slot.

source: wikipedia

This is what we said on 14 Jun

“We don’t want to make it all work and no play. So on a lighter note, here goes the sports bet. Brazil, Germany, Italy have been in the top 3 positions, 9, 10 and 7 times respectively since 1930s. This makes them the top rankers. Performance cycles suggest that top rankers disappoint and worst rankers surprise as performance reverses. The question of value for money does not come from picking a previous winner but one who has more odds against it.”

Time Triads, Time Fractals, Time Arbitrage, Econohistory, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on Time patterns, Time forecasts, 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.

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Did behavioral finance get it wrong?

Human beings may not be nice and dumb

Herbert A Simon got the Nobel Prize for economics in 1978 for his research on decision making process within economic organizations. Herbert is considered one of the most influential social scientist of 20th century. A study of history of behavioral finance also cites his 1955 paper “A behavioral model of rational choice” (1955) as the first thought which started it all.

Though the paper starts with the need for a revision of the economic model which assumes that the economic man is rational, has knowledge, computational skills, is well organized with stable system of preferences, can plan alternative courses of action, reach highest attainable point on preference scale but clearly states that the aim of the paper is not to discuss these doubts, or to determine whether they are justified but to think about a revision, a direction towards a better economic model. The author did not mention irrational or ‘not rational’ anywhere in the paper. The author mentions that entities may possess a hierarchy of rational mechanisms and comparing computation (computer) with humans is very difficult, as both may get labeled as a moron in a different situation. This should shock some of the behavioral finance believers who have accepted clichés like “Human beings are nice and dumb” by Terry Burnham (Harvard) and have started to believe that it is more about irrationality than rationality.

Herbert’s bounded rationality is a concept at the soul of behavioral economics. Daniel Kahneman (Nobel Prize winner 2002) proposes bounded rationality as a model to overcome some of the limitations of the rational-agent models in economics. Putting simply bounded rationality suggests that there is never enough knowledge to take decisions and hence the limitations in decision making. Unlike Daniel, Gerd Gigerenzer, a German psychologist argues that heuristics (thumb rules) should not lead us to conceive of human thinking as riddled with irrational cognitive biases, but rather to conceive rationality as an adaptive tool that is not identical to the rules of formal logic or the probability calculus. Gerd suggested that bounded rationality was misinterpreted by behavioral finance.

Did behavioral finance gurus got it all wrong? Did they just over emphasized the limitations of human decision making instead of working on a model as Herbert intended? Was it easier to deal with limitations than work on a rational thought model? Does this prove that fundamentalists are indeed correct in suggesting that behavioral finance is the great story of human errors?

It was not just the fundamentalists but even Gerd who mentioned about the behavioral finance over elaboration of human decision making limitations and the human inability to cope with optimized thinking. Gerd talks about simple alternatives to a full rationalizing analysis and how simple heuristics frequently lead to better decisions than the theoretically optimal procedure. After you read Gerd, heuristics suddenly start to sound better than what behavioral finance made it out to be - just an error.

This is not the first time great ideas have been ignored. Herbert’s initial thoughts on Artificial intelligence were ignored for 7 years. But the paper which I feel has not got its due attention in economics and psychology is the one he wrote in 1962 on the ‘Architecture of complexity’.

In that paper, he said that complexity frequently takes the form of hierarchy. Systems are hierarchic systems independent of specific content. Systems are interrelated at higher and lower levels. There are elementary subsystems. He detailed hierarchical social systems, biological, symbolic, self reproducing systems and even hierarchic structures in social interactions. Complexity had to evolve from simplicity. This was Herbert’s attempt to explain power law distributions (exponentiality in nature). Path of construction of a complex system is through the theory of hierarchy. If time is indeed a triad and hierarchical, we can easily comprehend Herbert’s architecture of complexity.

Can behavioral finance also suffer from bounded rationality? Claiming humans to be irrational when they were the ones who created such great things in the first place (including markets), the irrationality does not seem to add up somewhere. So the few questions for behavioral finance could be linked with the order. Can behavioral finance define and quantify long reversals in markets? Are these long reversals recurring? How different are these long reversals from the subject of time cycles (order) written over the last few hundred years? If investor autonomy is worthless (Benartzi, Thaler), finding Peter Lynch is tough (Hersh Shefrin) how can investors chose between passive index alternatives? Is there an order between passive index performances? Is this performance cyclical? If market success connected to addition and subtraction (Thaler, Lamont) what is the mathematics in long reversals and behavioral finance? We got the idea of irrationality but where is the model of rationality which Herbert proposed? How does behavioral finance change if time is the order Herbert was mentioning?

The Architecture of Complexity
A behavioral model of rational choice

For more information on Time Triads mail us at [email protected]

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.

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Crude - The leg down

Trif Rares, the contibuting columnist for the Waves Energy. Rares got interested in forex trading and followed it up with an early interest in technical analysis. While practicing technicals he covered many other global assets and found similar patterns and formations across global assets. This is when he moved to Elliott Wave analysis. Now he specializes in energy assets. Rares graduated in finance and followed it up with post graduate studies in management. He combines Elliot Wave with classical technical analysis tools. He correctly depicted the May 2010 top in Oil and is forecasting a large multi year bottom in natural gas. You can follow up his work on Ticks Global and Orpheus Energy Research reports.

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. 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 and sentiment indicators. REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL


Ranking Social Mood

Quantifying social mood is the next step after Behavioral finance and Socionomic theory.

The last time we made a case in favor of football compared to baseball under the backdrop of Robert Prechter’s Socionomics, the study of human social behavior. Immediately after the post I was corrected by experts from Socionomics explaining why football was also a bullish sport like baseball.

These were their observations, “Mukul, we’re going to tentatively label Soccer, or Football, a bull market sport unless evidence shows otherwise. We first toyed with the idea that attendance figures of the World Cup might give us a clue as to determine if Soccer is a bull or bear market sport. The only correlation we found is that attendance size is relative to the host country. For example, attendance in England (1966) is much higher than Chile (1962). Next, we followed the history of soccer, from its primitive conception to the present and found that the game was allowed by authorities and official rules were adopted during bull markets. On the flip-side, England banned the sport during the bear market of 1314. But to make things more confusing, Queen Elizabeth I banned the sport in 1517, but it was not rigorously enforced. Soccer Stars: Pele is heralded as the best soccer player on the planet and his career was during the bull market from 1957-1971. There is physical contact in soccer but not to the same degree as compared to American football, Hockey or Rugby.”

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To read the complete report with rankings and historical performance cycles on top social mood indices subscribe to Time Triads. For more information on Time Triads mail us at [email protected]


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.

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Long football, short baseball

Just like everything else even big ticket sports outperform and underperform each other cyclicality, owing to time cycles.

Economics is at the soul of everything including big ticket sports. Now that football is the number 1 sport in the world, the growth might look obvious. But it has taken more than a few decades for football to attain this cult. Was it chance that we reached here to a 1 billion audience, was it smart visionaries that made it happen or was it social behavior?

Robert Prechter’s Socionomics challenges the standard presumption that social mood is buffeted by economic, political, cultural trends and events. News of such events affects the social mood, which in turn affects people’s penchant for investing, spending and the sports that they enjoy. What Socionomics proposed was that social mood was patterned and was a natural product of human interaction. It’s the social moods trend that determines the character of every social action including the sports that we watch and make popular. Measuring popularity of sport may be tricky. What could be the measure of success for any sport? Is it attendance, ratings, salaries of players, records? It’s all of them and more.

A recent study conducted by MLBAmerica.com showed that baseball did not rank number one on the list of favorite sports for 13 to 17 year olds. It didn’t rank second, third or fourth. It was ranked fifth. behind basketball, football, soccer, and hockey. Baseball is slowly but surely falling behind in the ranks of other sports. Sixty-eight percent of youth said that the main reason they don’t like baseball was because it was boring. This is not what the future is made off. The attendance growth relatively or absolutely is bound to drop. Now one may say, in retrospect it all looks fine. You should read Prechter’s pioneering studies in Socionomics and you will read repeated forecasts of selling baseball clubs, taking profits on baseball cards, signing long term contracts for players and crash of salaries and celebrity values. Prechter saw it coming and he was right on target.

Baseball was on one side and on the other we now have Pele, Zidane and Maradona featured in the Louis Vuitton ad with “three exceptional journeys. One historic game”. One can really see the value shifting from baseball to football. Socionomics explains how sports can provide a background for extreme emotions. Despite how it sounds, football was classified as a bear market sport and baseball a sport for bull markets. In the bull market good guys are the good guys while in bear markets bad guys are the good guys. This may all look so subjective, but violence in sports can be measured. Boxing is more violent than say a match of basketball, it’s clear.

Sports can also be judged for the level of contact. How many red cards did you see in the first few matches? All of them according to me were reasonable. Red cards and yellow cards is a violence check. Baseballs’ positive correlation to Dow and footballs’ negative correlation are easy to prove, when you see Dow 10,000 for more than a decade, all when football was thriving. The characterization seems reasonable.

More than the characterization, it’s the cyclicality of the whole thing which seems hard to counter. FIFA is trying to come out clear after a history of corruption. This was a similar story with baseball as it was reinventing itself in its hay days. Now the records are more in football than baseball. Consistent new records are an expression of exponentiality. Socionomics refers to this exponentiality as the wave theory. We plotted the rankings for the top winners Germany, Italy, Brazil, England, Argentina and Spain over the history of world cups. Exponential growth in points in favor and against was a standard norm.

Exponentiality just like everywhere else in nature also drives cyclicality in sports. A growth in performance of one team is at the expense of less relative growth or decay of the other. What can be seen on the big picture as a growth in football came at the expense of baseball. And this can be understood at the level of performance of Germany vs. Brazil or Italy vs. France. Unfortunately sports data is not as comprehensive as stock market data. This makes ranking processes and workings to prove performance cyclicality shallow.

We don’t want to make it all work and no play. So on a lighter note, here goes the sports bet. Brazil, Germany, Italy have been in the top 3 positions, 9, 10 and 7 times respectively since 1930s. This makes them the top rankers. Performance cycles suggest that top rankers disappoint and worst rankers surprise as performance reverses. The question of value for money does not come from picking a previous winner but one who has more odds against it. This why Argentina with a 4 time rank in top 3 and England with just 1 win since 1930′s makes them good potential best value pick. Social behavior like everything is mathematical, but then mathematics cannot give as much pleasure as a world cup final. It’s sometime good to just enjoy.

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Inputs from Ben and Euan from Socionomics

Mukul, we’re going to tentatively label Soccer, or Futbol, a bull market sport unless evidence shows otherwise. Read below to see our analysis. If you come across any evidence supporting the case that it is a bear market sport, please let us know.

We first toyed with the idea that attendance figures of the World Cup might give us a clue as to determine if Soccer is a bull or bear market sport. The only correlation we found is that attendance size is relative to the host country. For example, attendance in England (1966) is much higher than Chile (1962).

Next, we followed the history of soccer, from its primitive conception to the present and found that the game was allowed by authorities and official rules were adopted during bull markets. On the flip-side, England banned the sport during the bear market of 1314. But to make things more confusing, Queen Elizabeth I banned the sport in 1517, but it was not rigorously enforced.

Soccer Stars: Pele is heralded as the best soccer player on the planet and his career was during the bull market from  1957-1971.

Conclusion: Soccer is a bull market sport but no more than basketball, baseball or golf. There is physical contact in soccer but not to the same degree as compared to American football, Hockey or Rugby.

Considerations for further study: Attendance figures of English soccer leagues adjusted by population.

Sources: World Cup: http://www.fifa.com/worldcup/archive/index.html
Timeline: http://www.my-youth-soccer-guide.com/soccer-history-timeline.html
Pele: http://en.wikipedia.org/wiki/Pel%C3%A9

Thanks,
Ben and Euan

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To read the complete report with rankings and workings on exponentiality subscribe to Time Triads.

Time Triads, Time Fractals, Time Arbitrage, Econohistory, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on Time patterns, Time forecasts, 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.

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The failed state


The failure of state is a cyclical event connected with debt. The reason we are never prepared to handle it is because we as a society are cycle blind.

A search on “state”, “failed state” will bring out search results like real estate, United States, state insurance, anything but the idea of state. It’s not only on the world wide web, but even real societies that still struggle to accept the idea of a failed state. Now that Hungary’s potential default is in news, the question how the state managed to fail is pretty relevant.

Why does a state fail? What does failure encompass? Is it just about payment defaults, cutting pensions, being unable to generate jobs or growth, failing the poor, failing the trust of its own people or it something cyclical? It’s not the first time politicians failed the people. In an article written by Martin Armstrong in 1991 ‘The Cycles of Political and Economic Change’ in the Cycles magazine, the author quotes Cicero before the senate of Rome in 63 BC. “The budget should be balanced, the treasury should be refilled, public debt should be tempered and controlled, and the assistance to foreign lands be curtailed lest (we) become bankrupt.”

Armstrong wrote in 1991 “These words serve as a fresh reminder of cycles, no matter how much we believe things have changed, indeed, much remains the same” Looking at the current state of affairs, the only thing which comes back is the cycle. The issue of debt has been with man from the beginning of time. Though popular belief holds that prostitution is the oldest profession, the banker (money lender) is truly the oldest profession.  Man’s history of debt is a history of crisis. Virtually every known war has been fought for economic reasons, usually disguised by some noble saying or religious slogan. But without hardship or greed, there would be no incentive for war.

The Soviet Union break up was a direct result of economics and the crisis is debt that the communist government managed to create. The American Revolution was fought for economics. Saddled with escalating debt, England levied excessive taxes on it’s colonies. Worst yet, it demanded that the colonies pay all taxes in gold, while England paid for colonial goods in copper. The king sought to bleed colonies to reduce his debt at home. That unfair policy, born from a crisis in debt, sparked the American Revolution.

Raymond Wheeler’s 300 year cycles based on his many years of research into cultural cycles and the recurring cultural curve mentioned that culture is revived in a Renaissance of classical, idealistic themes. Tyranny prevails as the state becomes dominant over the individual. During “cold” epochs, civil rebellion ushers in democratic reform and a revival in importance of the individual.

Thomas Jefferson said, “Man cannot be trusted with the government of himself.” History has answered Jefferson a thousand times with a cycle of unqualified regularity. No matter how noble a form of government starts out to be, it always degenerates into the very thing it was created to replace. I believe there are more instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.

All forms of governments start our as benevolent seeking to correct the evils of its predecessor. But given enough time “silent encroachment” takes place.  Looking at history, mankind acts like a dog chasing its own tail, running around in endless cycles.

End of Roman Empire, the year 476 is generally accepted as the formal end of the Western Roman Empire. That year, Orestes refused the request of Germanic mercenaries in his service for lands in Italy. The dissatisfied mercenaries, led by Odoacer, revolted, and deposed the last western emperor, Romulus Augustus.

The fall of the Ottoman Empire can also be attributed to the failure of its economic structure, with the size of the empire creating difficulties integrating its diverse regions economically. Also, the empire’s communication technology was not developed enough to reach all territories. In many ways, the circumstances surrounding the Ottoman Empire’s fall closely paralleled those surrounding the decline of the Roman Empire, particularly in the ongoing internal tensions. Similar internal tensions brought the Spanish empire down.

The failure is connected with mass psychology, which at one stage wants to be lead and at one state wants to be lead. The failure is linked with problems of a large economy which fails to grow beyond a stage and starts to exhaust. But more than anything the failed state is connected with the failure of character of our leaders, who start on a good note but end up undoing the same good intentions. A failure of state starts with debt and ends with debt. The best part is that it’s all cyclical, forecastable and hence avoidable to the extent of reduced pain. The worst part, majority of us move up and down as the time cycle dictates, punishing us for being cycle blind.

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