ALL THINGS BIG AND SMALL 2.0

  Folk music icon Bob Dylan’s song “The times they are a-changin” has never been more true. We are living in a period of unprecedented geopolitical and economic upheaval-the final consequences of which we are not yet able to discern. Uncertainty is the silent killer of financial markets. But while Uncertainty by itself is bad for the financial markets, the events that unfold during the period of uncertainty can be either good or bad. More US tariffs? Bad. Fed rate cuts? Good. Powell’s term ends in May 2026 and new Trump-appointed Fed Chair leads to even more rate cuts in 2026? Good in the short-term. This leads to heightened inflation and asset bubbles in the long-term? Ultimately bad.   So, today we design a portfolio in which the main objective is to be low risk and yet yield a return that is above the rate of inflation. And we will do an analysis and 1-year ahead forecast for the Portfolio, and use the SPY ETF as a reference benchmark.   We   are not att...

USD/JPY data as of 20 Aug 25 from FRED. USD/JPY is one of the most interesting currency pairs to trade these days, with some opportunities  for short term gains. If we review the MAGA Man's Trade War and Tariff antics, we can see that of all the countries this school yard bully has bullied/cajoled/ran away from, Japan is most at his mercy. (In 2nd place is Europe). China doesn't give a hoot about Trump, India will keep buying Russian oil, the BRICS countries are making good progress in de-Dollarization, Russia will keep pummeling Ukraine. Japan, being the most dependent on the US market for its exports (steel, autos, semiconductors) has a high probability of tipping into a recession. (at least the South Korean economy is more diversified in its export markets)And with a debt/GDP ratio of 260, and rising inflation, there is not much room for fiscal or monetary stimulus. All this will be reflected in a new secular trend for USD/JPY. In this post we will attempt to determine the r...

The chart above shows USD/JPY from 1971 at 6-monthly intervals. It's rather frightening to see that USD/JPY used to be as cheap as 350 Yen to USD1.00. Compared to this the current range of USD/JPY 140 to 150 is fantastic. What has happened to USD/JPY  has also happened to the GBP/SGD and the USD/SGD and now AUD/SGD.  If I remember correctly, in the early 70's GBP/SGD was around 7.00 (today it's 1.73) and USD/SGD was around 3.60. (today it's 1.28). So if you take a long term view and the big picture I would dare to say that exchange rates are a valid and good indicator of the rise and fall of economies. When I  take a look at SGD/AUD, I wonder if the good old days of the Lucky Country  are over. SGD/AUD is now around 1.22 It used to be that SGD/AUD was <1. This brings me to what I quoted from the Bible on this blog in 2008-15 years ago. I was reflecting on the unpredictability of financial markets. The image below is a n-dimensional continuous wavelet transform of ...

Data as of 14 August 2025 If you believe that the US economy still has potential (which I do not) and if you also believe that MAGA Man's antics will not destroy it (which I do not) then you may want to sit on the Dow Jones Index (through an ETF) for a long time. If the $37 Trillion debt, the rout in the Bond Market, de-dollarization, and Stagflation does not deter you, see above for the Support (cut loss if price breaks from above) and Resistance price levels (take profit  if price crosses from below) for the DJI.  How the S/R levels were determined It's rather technical but I shall try to explain in simple language.  We first smoothed and fitted the raw 270 data points time series of the DJI Close price with ARIMA (1,1,1,) We then ran the fitted ARIMA data through 5000 trials of Monte Carlo Simulation to see how it behaved. The post-Simulation data was then put though a Gaussian Mixture Model (GMM) with K=3 components. The highest density interval (HDI) at 60% probabili...

  Data used: Boeing Co. Data as of 17 April 2025 It is true that short-term modeling and predictions of stock prices using just price data is valid and useful. We do not need fundamental data as input variables for short-term predictions. But there are inherent flaws in traditional Technical Analysis (TA). The inherent flaws of traditional technical analysis indicators, such as RSI, MACD, Bollinger Bands, all assume that the relationship between market variables is linear and that data distributions are Gaussian (Normal). But it is well-known that financial markets exhibit non-linear dynamic characteristics with distributions that are not Normal i.e. have more than 1 peak, are highly skewed and have long fat tails (kurtosis). And that the relationship between market variables is highly non-linear.  However, these short-term linear relationships can be modeled with Linear Regression . The Table below shows that Linear Regression, particularly its Boosted version produces the sm...