Research Articles

We are on our way to Greenwich to see the time laboratory, the conventional origin of time. We came for business to London, but the history of the place is too big to restrict the travel to just work. For more than two years, we have to address the issue of alternative research, challenging conventional thought, understanding sentiment and a host of other ideas. We asked many questions. But the only question that really bothers or concerns the human today is the question of time.

I have the privilege of working very close to the city center and since the city is surrounded by hills, as you move away from the center, the altitude keeps rising. This gives me a chance to see a big 600-year-old church surrounded by long pine trees and celebrated by a huge metal statue of an armed king riding a horse, ready for battle. The view, a few 100 meters away, keeps looking at me from the office window. Matei Corvin the Hungarian king defended the country in 1458-1490 from the Ottoman Empire (1299-1923). The Ottoman Empire is viewed as an offshoot of the Mongol Empire.

The Oct low we talked about held against all odds. A strange time cycle held against all conventional knowledge, which failed. And now that 2008 comes to end, we can sum up a few gaps in generational thinking which concerns us as a society and as economic beings. On one hand, the experience is overwhelming because the ideas overlap most areas of study viz. economics, finance, history, psychology, mathematics, sciences, time cycles and art. But on the other, it’s no short of a revolution in research to be able to comprehend, interpret and derive applied predictive tools from such a vast scale of research areas. It may take another generation for us to look for convergence in ideas. And there are things we may never understand. But then it’s the quest that leads to solutions and differentiates one society from the other.

Conviction is a strange thing, it tests you, your determination, your homework, your skill, how individual you are and how patient you are wearing the fool’s crown. It does one more thing, it makes you extremely individual, probably alone (when you are right), screaming sell at a top and buy at a bottom. But then markets are strange beings, the top is followed by another top and bottom by another low. The line between conviction and foolishness becoming blurred every time the prices move against you

This is a harsh reality, but masses don’t understand cycles and the uncanny asset linkages. The fact is that we at Orpheus too are also scratching the surface. Though there are market timing models, timing the market in future with a small time window of a few days, is a skill we look up to. As of now, we know only a few who can do this consistently. We attempted timing the market with a calendar month in July when we talked about October lows. And it was only in our last email that we mentioned that the cycle low was still unwinding and October lows could be marginally breached. The reality is that Dow’s 10th October low still stands firm. And the marginal breach we talked about did not happen on Dow but on S&P.

October lows have extreme sentiments linked to them making them great multi-month, multi-year and in some cases multi-decade bottoms. We are nearing October 2008. If this looks like just another calendar date, think again.

These are the famous words of Geologist Kenneth Deffeyes voiced in FEB 2006. Though the expert reiterated later saying that the words he said were a bit harsh, the quote anyway found its way to the top list of 2007 quotes. Books and cover stories highlight a mass psychology extreme. We call it a cover story indicator. Economist came up with a cover story on Dollar doldrums four times since 2004. Every time the cover page story hit the stands, dollar strengthened by 10-15%. Such inverse behavior of markets unlike what a reputed respected magazine suggests highlights how mass psychology works. If more than a million readers of Economist know that dollar is going down, most likely we will have a surprise, as a million people can not make a killing together speculating on the dollar. Same way, if the OIL expert writes a book about OIL crisis, most probably we are near an intermediate top. This is what happened, as OIL is much below the top and now other experts pen out stories about OIL.

Ziar Financiar, July 20, 2006