RBS prop desk: Sheer Lunacy Staring at the Heavens

RBS Prop Trading Desk: Sheer Lunacy Staring at the Heavens 07/07/2010
www.markettiming.nl...

Hey all, a real cool read that I'm surprised hasn't appeared on ATS yet. At least I couldn't turn it up in a search! The title is a weird bit of doublespeak, given the article if anything ascribes, to the heavens, a source of order, quite opposite of lunacy, but doublespeak from bankers is surely nothing new, no?

The doc is "research" (marketing) material published by some blokes from the prop desks at RBS. They do a bit of correlation on major equity indexes vs. moon cycles and model out a trading strategy based, more or less, on buying on the new moon/selling on the full. They provide charts illustrating the result of this strategy, and it may shock you!


An excerpt:
Figure 2 presents the study
of S&P 500 index versus moon phases for the period since 1928 till 2010. Having
invested £1,000 in S&P in 1928, by now would outcome in holding £63,864 worth
portfolio, while by implementing the proposed moon trading strategy, the value
of portfolio would have been £1,502,689.

So as you pick your jaw off the floor, try not to think of all that time reading your horoscope and the big nothing you have to show for it, perhaps except for an overcomplicated love life. Ha.

No doubt many of you are not surprised. Any market-minded ATS reader is likely aware of astrology's strange-bedfellow relationship with the voodoo science that is market timing. But we do not normally see these trends put into writing by a fairly respectable prop desk and published. This is a territory more often trekked by the likes of Arch Crawford, whom for the unknowing, spent a good part of 2001 playing chicken little over what he believed would be a Mars/Uranus driven crash, centered around 10/2001, that ominously came true as a weak market collided with 9/11.

See his newsletter from sept 01, 2001.
www.astromoney.com...

The RBS memo covers this Mars/Uranus crash and also alludes to the ongoing Cardinal Cross and squaring of the heavens. Though i am hardly an astrologer myself, I can say without doubt this alignment has brought to me great difficulty. This is not helped buy my being an Aries/Taurus cusp (or Pisces/Aries cusp, according to new math).

Regardless of myself, the stock market has been quite bizarre throughout this phase as well. Earnings driven volatility in the equities market is overshadowing what appears to be a new pattern emerging with gold and a firm second shoulder for 2010 in the indexes. The dropping dollar is also being ignored and written off to the old market up-dollar down correlation that is obsolete in today's High Frequency markets. And the Cardinal cross, perhaps not coincidentally, will come to a complete end with the new moon on the night of 08/09/10 (*cough* illumnati number freaks *cough*) a day before the next meeting of the FRB FOMC. Yes, the meeting that everyone expected, back in the April bull season, would bring the first rate hike but now is poised to bring another dreaded round of Quantitative Easing.

YOWZA! so much potential.


edit: admin pls feel free to move to diff forum should you deem appropriate



[edit on 3-8-2010 by chaeone86]

reply to post by chaeone86


zzzZZZzzz anybody out there? this is some pretty cooooool stuff.

lol so disappointed!

Originally posted by chaeone86
reply to post by chaeone86

 

zzzZZZzzz anybody out there? this is some pretty cooooool stuff.

lol so disappointed!

they just want you to tell them what stock to buy, when, and why,

this was only a few very cool whys.

whats supposed to happen on 08/09/10. ? is this gonna be another crash?

can we make it interesting and be a bit more specific? let speculate on the most likely potentialitys to occur on said date,

what stocks do you think is going to crash the hardest?

reply to post by pryingopen3rdeye


Haha, thats the funny part- is this memo illustrates in very plain terms how easy it can be to outperform the market using moon phases as buy/sell triggers.

as we read in the pdf-
1,000 of S&P index bought in 1928 and HELD to today would equal 63,000.
1,000 of S&P index bought in 1928 and TRADED according to this strategy (Buy new moon/Sell Full moon) would equal roughly 1,500,000.

thats beating the S&P of the market by 22X or %2200. pardon my mental math, these are all approximations.

Lets add another layer to that- An adept trader will know just as much when NOT trade (or short, if they're risk-tolerant) as when to buy/sell. This helps the adept trader avoid losses sustained trading in a mostly down market.

Below appears an adjusted chart based on RBS's strategy. Just for fun, lets imagine the best trader in the world, or a very good one for that matter, uses the moon phase as a default trigger while still trading on the overall market. This trader does not short a falling market, rather sells at a maximum profit, holds cash in a weak/falling market, and buys at the bottom. Pretty darn simple

Also for kicks, I've pegged the 2009 Year end of Berkshire stock (so, in effect, Warren buffets legendary stock picknig) to show what can be acheived by trading this strategy, plus stock picking, which implies our stocks will do better than the S&P overall, amplifying the effect of the strategy.

[atsimg]http://files.abovetopsecret.com/images/member/6e6d74acab5c.jpg[/atsimg]

pretty amazing how much of a difference acting on one superstition makes!

reply to post by chaeone86


Drat. anyone know how i can resize that pic w/o corruption? stupid formatting!

here is the full size
media.abovetopsecret.com...&action=view&id=111749]Pic link