Amazon’s Free Fall
Even if cause and effect works and Jeff Bezos’ clashing with Donald Trump might seem like a reason for the technology giant losing USD 35 billion since the election date, there is a scientific explanation to all this.
– Amazon stock price had moved up from USD 300 to USD 675 in 2015.
– Since Aug 2015 the stock price was ranked above 80 on Jiseki Ranking.
This meant that the stock was a top performer among US 500 stocks. Though the ‘Rich can get Richer’ and winning stocks can continue to win, but our research suggests that the probability of a top performer to stay at top reduces with time.
After 12 months the probability for a winner to stay a winner drops below 70%, after 24 months the probability falls below 60%, invariably reaching to less than 50% in a period more than 36 months. So from August 2015 to November 2016, though Amazon continued to ride on the “Rich get Richer” wave, the mathematical chance of it continuing to do so dropped with every passing month. Now, whether we blame it on Donald Trump, or see the science beyond the cause and effect is a personal choice we can make.
Afterall relying on the news is not an objective method to understand stock price movement. Anything can happen to the stock price from here; it can tank or can turn around and go higher. Running after a single stock is shooting in the dark. This is why beating the market is a tough feat. RMI portfolios outperform the market, because they don’t run after stocks, but allocate probabilistically.
Jiseki Cycles are seasonal patterns of growth (strength) or decay (weakness) in variables (assets). They are derived from relative percentile rankings from 1 to 100. 100 is top relative performance and 1 is worst performance. 80-100 group components are referred to as ‘Growth’ components while 0-20 components are referred to as ‘Value’ components. Though in the short term ‘Growth’ and ‘Value’ can continue to trend i.e. Growth can continue to trend up, while Value can continue to drift lower, over the longer term period, ‘Value’ reverts and changes the trend to relative outperformance i.e. the “Poor get Richer”, while ‘Growth’ peaks and starts underperforming i.e. the “Rich stop getting Richer”.