Alpha Pair Tracker

The other running pairs like short carbon emissions ETF and Crude, Short Carbon Emission and AIGI (industrial metals) delivered 1.6% and 8% since 15 July respectively. Long Euro – Short dollar is up 16% and still running. GBP USD and JPY gave first signals of exhaustion against dollar.

During an internal brainstorming session, the question which emerged was “Why should be just look at extreme divergence to short the best and long the worst?” and “Why can’t we say keeps the low divergence pair running, say between wheat and grains (No. 4 and 10)?”

The whole idea of playing extreme divergence is about accepting that one can try understanding that assets have diverged more than normal and the path of least resistance is to low or neutral divergence when for example coffee and zinc reduce the gap from worst and best to somewhere mid way. Working with low divergence pairs or non extreme pairs is like guessing how a backwardation will resolve, very tough.

On a final note, our top ranking coffee was number 2 this week. Sugar assumed the top ranking spot. What a better time to talk about sugar but now. Sugar was in the news and the majority is made to believe that there is no asset better than sugar today. For us at Orpheus, Sugar should not only underperform dollar, but also more than a few global assets over the next few weeks. The latest Alpha carries the pair tracker with updated signals and global asset rankings.

Numeric Ranking

Strategy Update

Sector Cycles

Performance Cycles I

Performance Cycles II

ALPHA is a pair trading, long only – short only strategy and Numeric Ranking product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

Coverage: Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y,  US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).

Performance cycles is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves in a range say from 1 to 30. 1 is top relative performance and 30 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick.

*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

Time is a social construct and we see time through the life and nature around us. Understanding time can not only give a unifying theory to research of a few thousand years, but also help us understand the world we live in. Time evolves, oscillates and continues. Time comes before everything, but we don’t see it. We just feel it. We believe what we see and this is why understanding what we don’t see is a challenge. Understanding time could bring more than a conventional thought down, it’s a revolution, which could rock the very foundation of economic thought or the geometric structures Euclid laid down in 300 BC. We are at the start of the journey, but if time is indeed the real mathematics, we could see high accuracy in time forecasts.

Econohistory is the study of performance cycles between assets. Cycles are the generic name for time fractals. Performance cycles can be studied for any time frame, for as small as a tick data to multiyear time frames. This objective approach to performance cyclicality can explain why intermarket analysis is an area of study? Why bonds and commodities tend to be inversely related? What is the connection of Oil with world markets? Why the world watches DOW sometimes and sometimes a 500 point effect on DOW seems to have no impact? Why correlation between assets moves from near perfect at times to weak correlation at other times? Why the same news has different impact on a stock or market? Why equities and bond trend together and why the relationship decouples sometime? When will inflation become deflation, disinflation, stagflation or hyperinflation? When and why does gold outperform and underperform silver? Econohistory can objectively answer these questions, using performance cycles, time fractals and past data. Economic history is mathematical.

To login to the member’s area or access Orpheus estore click here.

Orpheus Research at Reuters – United Kingdom

Orpheus Research at Reuters – United States

Cornering markets may have come off age, but even today traders dare to take large bets. How safe is it? What do historical cases suggest? Are there any signatures linked with such trades? What does numeric ranking of global portfolio suggest? Time does not differentiate between assets. If coffee is the best in a quarter compared to 54 global assets and Zinc is the worst, it’s easy to make a cross asset case, where we go long Zinc and short Coffee. We initiate the pair today.

To read more about…

Anthony Ward’s 658 million pound cocoa trade and how softs are under extreme buy pressure?
How Hunt brothers cornered the silver market?
How cornering is more about tops than bottoms?
Why there are few attempts to corner gold?
What’s the update on our gold undeperformance case?
What about crude and brent performance cycles?

Read the complete article at Alrroya

..download the latest Alpha Global report from the links below.

The latest Alpha Global carries pair tracker signals, numeric ranking, numeric ranking changes, performance cycles. For more information on Alpha Global mail us at support@orpheus.asia

Performance Cycles – Aggregate Assets

Numeric Ranking Sectors

Performance Cycles – I

Performance Cycles II

ALPHA is a pair trading, long only – short only strategy and Numeric Ranking product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

Coverage: Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y,  US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).

Performance cycles is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves in a range say from 1 to 30. 1 is top relative performance and 30 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick.

*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

Time is a social construct and we see time through the life and nature around us. Understanding time can not only give a unifying theory to research of a few thousand years, but also help us understand the world we live in. Time evolves, oscillates and continues. Time comes before everything, but we don’t see it. We just feel it. We believe what we see and this is why understanding what we don’t see is a challenge. Understanding time could bring more than a conventional thought down, it’s a revolution, which could rock the very foundation of economic thought or the geometric structures Euclid laid down in 300 BC. We are at the start of the journey, but if time is indeed the real mathematics, we could see high accuracy in time forecasts.

Econohistory is the study of performance cycles between assets. Cycles are the generic name for time fractals. Performance cycles can be studied for any time frame, for as small as a tick data to multiyear time frames. This objective approach to performance cyclicality can explain why intermarket analysis is an area of study? Why bonds and commodities tend to be inversely related? What is the connection of Oil with world markets? Why the world watches DOW sometimes and sometimes a 500 point effect on DOW seems to have no impact? Why correlation between assets moves from near perfect at times to weak correlation at other times? Why the same news has different impact on a stock or market? Why equities and bond trend together and why the relationship decouples sometime? When will inflation become deflation, disinflation, stagflation or hyperinflation? When and why does gold outperform and underperform silver? Econohistory can objectively answer these questions, using performance cycles, time fractals and past data. Economic history is mathematical.

To login to the member’s area or access Orpheus estore click here.

Orpheus Research at Reuters – United Kingdom

Orpheus Research at Reuters – United States

The first pair we tested on performance cycles were BOEING vs. OIL in July 2008. Oil was heading into new highs every day and Boeing was underperforming. Time fractals suggested that it was time for the performance cycle to turn in favor of the Industrial major. What happened was historical. The performance cycle we were tracking had a nine month periodicity. Oil crashed from 145 levels to 35 and despite all the negativity on equity Boeing outperformed. The pair made above 30% for the period.

We have come a long way since then. We have managed to reduce holding periods and made the pairs more tradable. We are using many filtering techniques to identify pairs, similar sector, beta sensitivities and pairing stocks against DOW. The latest ALPHA GLOBAL introduces 10 Global pairs, four against DOW Industrials, one pair from Industrial sector (United Tech, Boeing), one from staples (Macdonald’s and Coca Cola), a few cross sector (Boeing and Exxon) and a few cross asset (Dow vs. Oil and Dow vs. Gold). The top running pairs are Boeing vs. Exxon, Dow vs. Exxon, Coca Cola vs. Macdonald’s at 24%, 19% and 6% respectively. We are the only research company in the world to claim that Dow vs. Oil or Dow vs. Gold move in performance cycles at all time frames. Understanding such cyclicality can not only give tradable opportunities but also help in asset selection. To know more on Alpha, performance cycles or time triads write to us or visit econohistory.com, timetriads.com  for primers and other research articles.

To login to the member’s area or access Orpheus estore click here.

ALPHA is a pair trading, long only and short only strategy product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

LONG ONLY, SHORT ONLY portfolio covers DOW, S&P500, SENSEX (INDIA), GOLD, SILVER, EURO DOLLAR, YEN DOLLAR, 10 YEAR US TREASURY BONDS, 10 YEAR GERMAN BUND.

STOP LOSS AND EXITS are activated at 2%

Please feel free to mail us for any clarifications. *This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA

We should admit that it was a pleasant surprise after nearly 10 years of digging price patterns to reach TIME FRACTALS. The latter part of the year will be devoted to explaining ELLIOTT FRACTALS through TIME. The two rules of Elliott i.e. 3 wave is never the shortest and 2 wave does not get into 1 are rules of TIME also seen in Elliott waves. Currently EWT is the closest theory to TIME.

Illustrated below is a small example of a performance cycle between BSE500 (Indian 500 stock composite) and BSE30 (Indian 30 blue chip composite). Performance cycles are the direct proof of cyclicality in time or fractal nature of time. If we can prove that an asset A outperforms and underperforms asset B in a cyclical nature, we are simply proving that a ratio line which has no units of price associated with is has an order associated with it. Why anybody did not see it yet and we are the only one talking about it, because the idea is too simple to be accepted or believed. As we say the idea of time driving markets and nature is ahead of its time.

INDIAN PAIRS

So what is with BSE500 and BSE30? Can you really make money on SHORT BSE500, LONG BSE30? On a primary basis, markets have witnessed about 10 performance tops on BSE500 against BSESN since 2000. Barring one signal, rest all of them came at or near historical tops viz. Mar 2002, Jan 2004, and Jan 2008. Where are we on BSE500 vs. SENSEX now? The performance cycle between BSE500 and SENSEX (BSE30) just like its global peer is at an extreme. This might look coincidence, but even if there is a relative performance cycle between DOW and SENSEX, global equities move together. The broad market indices weakening against blue chip indices don’t excite us. They tell us that the best part of the 2009 bull reprieve is over and whatever reason we may give us, the odds are against us as equity owners. India is a great story. It will be always a great story. But if the broad market depicted by BSE500 decides to falter against top 30 stocks, markets are heading for atleast a month or two of exhaustion. The post Jun low which could push markets higher seems a bit distant at this stage.

There are some extreme variations in results starting 5% to 60% annualized. But the interesting part is that the strategy delivered positive results most of the time. 20% average spot annualized gains are not easy to ignore whether you are fund manager or a trader. Leverage on derivatives makes this simple strategy look too good to be true. We will see how the strategy works out now.

AMERICAN EQUITY PAIRS

Performance cycles can shed some light on where Sensex and global equities are headed. A global pair relationship between S&P500 and DOW 30 illustrates the relationship between broad 500 stocks and 30 blue chips. We write about the two indices and the performance cyclicality between them. The pair hit a CYCLE low, both on an intermediate and primary basis on 23 Nov 2008. This suggested that the broad 500 blue chips could not underperform the top 30 American blue chips any more. Why? Because performance cycles are based on time fractals, there is an order in which broad market performs or underperforms the blue chips. Market turnarounds have a lot to do with the respective dynamics.

When broad markets fall against blue chip, rises become shallow and unsustainable. Another interesting aspect to be observed here is that it’s only now after Nov that the broad market has turned lower against DOW. This removes any doubt for us that the intermediate path of least resistance remains lower not higher for American equities. READ MORE….

CROSS PAIRS

Then there are cross pairs. The anticipated turn on OIL we talked about happened. Prices fell nearly 23% from Jun highs. READ MORE…

METAL PAIRS

In conclusion, pair performance demonstrates the mathematical nature of time and how markets move from disequilibrium to equilibrium oscillating in an ordered fashion. We can keep trying to avoid time, ignore it, but it will continue to manifest in various forms, various global pairs creating risk and return in a fractalled way telling us that SHORTING S&P500 and going LONG DOW may not be such a bad idea after all. READ MORE…

*This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ECONOHISTORY research products.

There are stories about the inverse correlation between SENSEX and the US Dollar Index (USD). The same stories which talk about inverse correlation can also explain perfect correlation, but there is something missing here. First, perfect correlation does not last. Second, if instead of absolute prices if we compare changes between prices, the idea of correlation adorns a new meaning. For us at Orpheus it is not about positive or negative correlation, it is about the cycle of correlation.

The question of when DOLLAR strengthening against SENSEX will start or vice versa is more important than the obvious fact that dollar strengthening affects Sensex inversely. SENSEX pushed 17% higher in dollar terms compared to INR. This was a result of INR weakness against the dollar that was reflected in SENSEX returns.

According to performance cycles, an asset will always outperform or underperform the other asset. This means that there will always be an inverse correlation between any pair of assets if you are comparing performances. So what matters is really not correlation, but which of the assets is outperforming the other and WHEN.

In continuation of the above view we continue to look lower on SENSEX. The current downmove looks like an impulse which should push prices back till open gap levels.

We highlighted a Head and Shoulders pattern on SENSEX and Double Top pattern on NIFTY and BSE OIL. The current report also carries ANTICIPATED AND HAPPENED cases on NIFTY, CNXIT and BSE REALTY, as well as time oscillators updates. Our overall Indian market view remains negative.

Enjoy the latest WAVES.INDIA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

ORPHEUS INDIA RESEARCH WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. 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, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA

Long DOW, Short OIL might seem like a counterintuitive pair after we have already recommended LONG Gold, Short DOW, but the reality is different. Gold and OIL though belong to the same commodity asset class can behave differently. Gold is a crisis commodity and the weekly cycle lows against DOW (SLIDE 1) suggest that even if there is a primary bull reprieve coming on DOW, GOLD may not underperform DOW.

Unlike Gold, OIL has pushed up very fast against DOW. This could be owing to oversold levels, reprieve in recession worries, or simply putting volatility cycles currently ruling OIL. There could be a thousand more reasons to explain why OIL shot up against both Gold and DOW. What really matters is where is the performance cycle between OIL and DOW headed now. We have been in a non accepting mode on OIL since 13 APR, calling the current rally as an UP BUT TOPPING corrective mode. We did not see prices moving above 55, but then market surprised and has moved above to 70. This could be a C/3 leg up, any further move up from here dashes all our exhaustion expectations. However, OIL vs. DOW performance cycle has non confirmed and is suggesting a weakness on OIL compared to DOW. This means that the OIL intermediate topping could be near, as we are not expecting DOW to push up above 8,800-9,000 levels in this leg. If this was not enough, OIL is also topping against Gold. OIL needs magic to sustain and push to further highs now that performance cycles have turned against it and in favor of GOLD and DOW.

Performance cycles are easy to understand, but they become tougher to grasp when you start to explain them fundamentally. The real counterintuitive thinking was not how we can have Long Gold and Short Oil or Long DOW and Short OIL at the same time, but how can we expect a multi month correction on Gold (The Gold collapse) and still expect Gold to outperform DOW. The current report carries updates on CVX,XOM, NATGAS, MCX ENERGY Index, BRT and WTM.

Enjoy the latest WAVES.OIL

ORPHEUS GLOBAL RESEARCH

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

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA

Performance cyclicality was highlighted first time in a recent research paper published at the Kyoto University journal called the ‘The BRICS model from a Japanese perspective’, Nistor, Pal. The paper illustrated performance cycles between Nikkei and the other BRIC countries.

Performance cycles work because assets in a pair underperform and outperform with a cyclical periodicity. The illustrated pair Gold-DOW has seen GOLD underperforming DOW Industrials since MAR 2009 (Fig.1). The larger performance cycle also seems to be turning up in a favor of Gold. This could mean that either DOW should underperform and fall against Gold, Gold should rise or outperform DOW or Gold should fall but less compared to Dow.

The consistent retest of 900 is encouraging for GOLD bulls and with our UP BUT TOPPING view on global equity including DOW, we will not be surprised if GOLD spikes higher next week. The overall view on GOLD still remains in a counter trend up, but above 900 we can’t remain negative on GOLD. There are some over reactive momentum signals also on the intermediate time frame (SLIDE 3).

This is what we said in our WAVES.GOLD report on 10 APR. The GOLD Q2 high.

“Our ‘UP BUT TOPPING’ view witnessed GOLD fall from near 980 levels to the current 870 levels. Orpheus time oscillators consider the Q2 top of GOLD to be in. Any push up now should restrict near 900 levels.”

Now that Gold has pushed up above 900 and GOLD-DOW performance cycles are pointing higher. We would like to see a clear turn back below 900 to be negative. The overall industrial metals case seems to be topping, another reason for us to believe short equity, long Gold pair might be at least worth a perspective watch the week ahead.

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Enjoy the latest WAVES.GOLD

WAVES.GOLD is a perspective product published on Monday and Wednesday. The report highlights GOLD and other precious and base metals. 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, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

REUTERS RICS: XAU=, XAG=, XPT=, CU-NYC, .SPGSIZ, SPGSIA, .NSTL

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Ioan Alin Nistor, Mukul Pal

The ratio line is at 1 now. This means that OIL matches its performance with DOW. The forecast on either DOW or OIL is linked to what this ratio line would do? Will it move up back above 1 or is it going to turn back down? Performance cycles suggest that OIL could underperform DOW for more than the next few months. Only after which we should see a secular BULL on OIL compared to DOW.

Even individually, time oscillators suggest that the best of OIL for Q2 is over (Fig.2) and OIL could be headed down till MAY. Any leg up till 55 should be final before the turn down. This means that we continue to look at a large intermediate bottoming on OIL and not otherwise. We captured MINOR traded moves on RELIANCE, ONGC, VERBUND, CVX and NATGAS. Even on BRT we captured the MINOR C wave up. But we remain unconvinced of a secular up trend on OIL now.

We have carried the various ANTICIPATED AND HAPPENED cases and the latest tracker.

Enjoy the latest WAVES.OIL

ORPHEUS GLOBAL RESEARCH

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

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA

History makes observations regarding consistent economic and cultural growth by being self reliant. Revisiting those lessons might suggest a way out of the ongoing crisis.

I have the privilege of working very close to the city centre and since the city is surrounded by hills, as you move away from the centre, 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 though 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.

During the Renaissance era, the venetians raised great walls around cities threatened by the Mongol empire. The great wall (Qin 221-260 BC) has played a significant role in the Chinese history and defended the country from the same Ottoman Empire. No other culture seems to have adopted walls as enthusiastically as the Chinese, maybe the reason Chinese could retain four thousand years of continuous economic and cultural history.

Starting 1900’s, the republic of China (1912), republic of Turkey (1929), republic of India (1947), the walls are still there but the strategy of war, expansion and protection continue to take different forms. Now we have trade policies, currencies and stock markets. We have a need to grow, to raise payment surplus, to keep inflation lower, and to have a double digit GDP growth.

August 2005, it was all positive stories about China’s extraordinary ability to mobilize workers and capital, tripling of per capita income in a generation, easing 300 million out of poverty and projection of decades of new growth. It was more of competition, India’s inability against China’s ability. India’s lack of subways and a dearth of expressways compared to China’s high tech Beijing.

This was followed by cooptetion with comments like “What makes the two giants especially powerful is that they complement each other’s strengths. China will stay dominant in mass manufacturing, building multibillion-dollar electronics and industrial plants. India is a rising power in software, design, services, and precision industry. What if the two nations merge into one giant “Chindia?” America was expected to make room for China and India. What happened? A majority of us did not see the ongoing struggle for survival over competition and cooptetion stories.

If Thomas Malthus could project the 1929 crisis in 1800’s, it was owing to the population curve he devised. Population curve was popularized and fine tuned by Pierre Verhulst, as the fractal S curve. Barring time, everything has a limit of growth. This suggests that there is a limitation to which even population can work as a growth driver. Conventional thought has population as a constant input in forecasting models. If population will grow, consumption will and if consumption will increase economic growth will follow. The same population curves can explain long pauses in growth despite a booming population and if indeed we have hit a population ceiling, the respective parameter will cease to cause absolute growth or relative growth. Rather it could become a liability. This means that trend forecasts that by mid-century, China should overtake U.S. owing to global output and large internal consumption might be a myth.

Collapse of US economy would see most emerging markets as relative outperformers. This also means that half a million engineers and scientists a year from China and India, vs. 60,000 in the U.S are just numbers. The brains don’t work in depressions and recessions, the stomach does. Population cannot just be a source of instability, but cause instability, if the government can’t provide education and opportunity, which invariably happens.

Consumerism will become a chapter in Econohistory. The old kings did not comprehend this phenomenon, as life was more self sustaining and not about going to the mall. Actually consumerism is nothing but indulgence, like speculation over investment. The current economic times that we live in warrants both consumerism and speculation for profits. This creates larger chaos and larger risks, pushing us again to the self sustaining past. This is why markets can never be efficient, as it is consumerism and speculation that drive it.

In the process of driving the ‘made in China’ consumerism, the country has seen dropping efficiency and increasing wastefulness. More than half of China’s GDP is plowed into commodity, autos and construction. Its factories are known to pollute and are highly inefficient compared to global and Indian manufacturers. More than half of China’s listed companies are known to earn below their actual cost of capital. This is not the case in India. There are numerous studies comparing the better averaging Indian company’s return on capital than their Chinese counterparts.

Conventionalism is a philosophy for an up cycle; it fails miserably when the cycle turns as chaos takes over. Time makes majority look smart at one time and foolish at the other. Dr. Anil K Gupta, author and professor of strategy, University of Maryland said this at a conference in Chicago in May 2007 that “Emergence of China and India is like the emergence of the Internet, here to stay and the only real option for us is to get on board”. The timing to get on board was perfect. The avalanche started after six months.

When a sizeable part of your population is manufacturing oriented, you are in a high risk sector, only if you understand the volatile nature of consumerism and speculation. China hence has a bigger problem at hand than the Indian policy makers. India’s poor got used to living on $1 a day. Above this the cumbersome democracy still has internal ways and means to balance itself compared to China, which attempted selective capitalism. While Chinese leaders might be worrying about how to cope with the ongoing joblessness and protests, India is busy in the election. The time has pushed relative performance in the favor of India, as the challenge of China moving from manufacturing to services faster than India resolves its infrastructure bottlenecks ceases to exist. Building basic infrastructure is a stronger economic activity in tougher times compared to creating a vibrant service sector.

We explained the broken BRIC model first time in Dec 2007 and then we revisited it in May 2008. In a recent paper to the Kyoto University written by Ionut Nistor and me. We used timing models comparing BRIC countries performance against Nikkei. We were forecasting relative performance for 2009-2010 and 2012-2015. Our findings reinforced our initial hypothesis that BRIC is more polarized than the Goldman Sachs’ model assumed. Within BRIC also Russia should outperform Brazil and India should outperform China over the next decade. Like we said earlier, barring time everything has a limit. Chinese outperformance against India can never be linear. The next decade should just prove this, especially now that the ‘Great Wall of China’ is not for the invading Genghis Khan but for happy tourists.