THE ECINYA MARKET BAROMETER is meant to encapsulate our view in...

THE ECINYA MARKET BAROMETER is meant to encapsulate our view in a relatively simple picture. However, we urge caution and warmly recommend that you continue to read our text offerings, as the nuances and caveats are often important. Remember our aim, as expressed in the ABOUT ECINYA pages, is to make you think about your money because no one cares as much about it as you do, not even the best stockbroker in the world, whomever he is.

Ecinya was for a long time a devotee of the Economic Clock, but over the past few years we have found that the correlation between economic growth, stock market cycles, real estate prices, interest rates, commodity prices, and overseas reserves has been volatile and often ambivalent. So we have developed our Barometer.

Reading the Barometer

The shaded area within the two quadrants is our range of reasonably foreseeable expectations for the next 2 months. The shaded area can be wider or narrower indicating a broadening range of market expectations. The narrower the wedge the greater is our level of certainty. The wider the wedge the outlook is less certain. The direction of the arrow is an indication of momentum. The arrow can have three reference points - pointing left our expectations are that local markets will weaken, pointing right that they will strengthen, and arrowed at both ends the market risk is evenly balanced. You could also say that the right arrow reflects a positive bias, the left arrow a negative bias, and arrowed at both ends a neutral bias.

Outside the quadrants the expression soft landing could also be called on trend growth or equilibrium. As we move away from the centre on the right we move towards everlasting prosperity. During this time we believe that marginal investments should be divested by you to less sensible buyers, leverage and absolute debt levels should be reduced. This can be referred to as risk management, so that wealth created can be preserved. I believe that it was Baron Rothschild that said hanging on to wealth was harder than making it.

The left hand side represents the opportunity cycle, provided you didn´t go broke between 10 and 3. During this phase businesses should be well capitalized, efficient people and processes put in place etc, and as the arrow reverses or stabilises with a point at each end, then leverage and debt levels can be increased. Interest rates should be lower in this phase and these lower rates could be locked in, in whole or in part.

Around the perimeter of the semi-circle we have inserted four spaced words - pessimism, skepticism, optimism and euphoria. These are the four stages of a bull-market (or in retracement the stages of a bear-market) as enunciated by John Templeton -a famous fund manager in the 60´s and 70´s- and which form part of the Ecinya investment and trading rules. Bull markets, are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.

Of course, you can take the barometer above and create your own view from time to time to enable you to think about the world ahead in context of your present position. Create it now and review it in the future, you may be a talented forecaster!


Exercise Caution In Your Affairs.

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A picture says 1000 words,

hehehe.