Top down, bottom up approach
to Investors Sentiment tracking by Proactive Structural
Simulation, Forecast of Rate
cuts, Housing, Credit, Financial Crisis, Recession , Bail Out, Stimulus Impact
on Dow Jones, S&P 500 , NASDAQ Indices Pricing Mechanism ,Arbitrage, Day Trading, Momentum Trading Volume
relationships and Component stock
Pricing Simulation Forecasts TW master hands controlling Global economic
recession, financial crisis Optimal Long/Short ETF and Indices, S & P 500 E-MINI Futures risks hedging
Strategy Maximize Risks Adjusted Return
Tracking Monetary Economic,
Fiscal Policy, Dollar currency Speculation , Housing
market, US Credit crisis, unemployment S&P price and Trading volume
impact on component stocks
performance (
full day workshop ) S & P 500 index futures OSA
forecasts and full day strategic
long/short ETF forecast workshop
Dr. Warren Huang,
Founder, OSA, USA wh3928@yahoo.com www.osawh.com
Abstract
This paper
demonstrated Huang¡¯30 years pioneering proactive structural behavior arbitrage
assets ( equities, bond, commodities, housing ) pricing mechanism research, teaching, consulting for China , Taiwan, US 15 cities 30 million high net worth individual and
institutional investors, fund managers
through integrating last 30 years macro, financial , industrial economic
and investors daily trading volume
( confidence ) data into real
time stock indices and its
component portfolios earning performance, stock prices and commodities ,
housing price mechanism Operations Simulations Analysis (OSA).
These asset prices simulators have been used for tracking global central banks monetary, economic, fiscal policy , financial systemic stability risks , Basel II Risk,
corporate scandals applications . It
quantify and compensate financial system and specific noise (
uncertainties), identify the real
time global financial, housing,
commodities market asset prices
bubbles deferential due to speculation resulted mispricing ( over and underpricing in
interest rate, currency, inflation,
housing, equities price bubbles and earning announcement ) in last 20 years global mortgage, credit, financial crisis, economic recession
systemic risks , corporate
scandals cycle months, years
ahead of the emerging boom and bust, bull, bear market trend to maximize risks adjusted strategic indexing ETF
arbitrage return for global asset allocation . These Proactive APT simulator compensate current APT and CAPM systemic noise due to betting on the
wrong side of monetary policy,
interest rate impact on assets
price.
Huang extended proactive structural OSA arbitrage asset
pricing to macro, financial, industrial econometrics
integration into real time investors speculation behaviors tracking misprcing
(over and underprice) through Exponential GARCH estimation and Granger causes,
consequences co-integration . It
simulate US Fed monetary,
economic, fiscal policy rate cuts,
bail out, credit , financial crisis recession impact on dollar currency,
unemployment, inflation, interest rate on
housing price, mortgage default , financial crisis, consumer, business
demand impact on economic
recession, oil, commodities, metal asset price mechanism and
Dow Jones, NASDAQ, S&P 500
index, its banking, finance, high tech, retail energy, biotech component
stocks earning, performances.,
He
warned on 2007 Peking university
International financial engineering risk management June 2007 and on Wall Street Journal Market beat blog since Sept. 2007
and March 5, 2008 on China Fund
World 2008, Shanghai Conference
that US housing price slump , credit crisis continue into first half 2009 ,lead to consumer,
business spending plunge 3.5 %, ISM and consumer confidence drop to 36, jobless
rate soared to 7- 8 % repeating 1980 style
double dip recession, with banking, finance, housing investment banks loss trillion dollars MBS, CDO, hedge
fund writedown, banking, finance, mortgage stock down 70- 90 %, drag US and global stock 50-70 % bear markets correction, S&P and
Dow Jones, NASDAQ plunge 50 % , Dow entering 6500- 7000 NASDAQ entering 1200-
1500, SP 500 entering 700- 800 recession trading range starting Dec 2008
through March 2009 ( Taiwan, Hong Kong, India stock indices down 70 %) in
recession bear market correction
and the overpricing of US high flier Google, Apple, Goldman Sach, China
PetroChina, Sinopec, and Bear
Stearn 29 billion hedge fund failure ,
rescue Fannie Mae, Freddie Mac , Lehman, AIG , Citigroup mortgage , credit
crisis, with average error below
1.5 %, correlation over 0.98.
Our Proactive structural macro, financial housing bubble simulation forecast
predicted last year that QE2 will only help boost commodity , stock prices by 30
%, CPI triple, and hurt real economy GDP. will not help lift housing market and
GDP to avoid double dip, GDP only up 0.3 % in 1Q, 1.3% in
2 Q and will plunge below 1 % ,June ISM plunged from 55 to 50.5 recession level
, June consumer spending drop 0.2 % unemployment will be rebound above 9.2 %.
Global Exit strategy rate hikes and Housing, debt bubble burst crisis lead US economy to slow
in the second half 2011, below 1%, facing double dip risks, follow Euro debt crisis, and China, US, China,
Asian slowdown, Dow Jones to test 9900- 11000, SP test 1100- 1200, Nasdaq test
2500- 2600
This work also extend proactive arbitrage pricing into financial market behavior , tracking
forecast by introducing stock indices and stocks trading volume ( investor confidence)
relationship into price, return forecast with correlation constant greater 0.98
, average error below 2 %
S & P 500 E-mini future hedging strategy http://www.optionsxpress.com/welcome/tour/trade/futures/sp500.aspx?SessionID=
Keyword: emerging market behavior finance arbitrage assets prices bubble, financial crisis US mortgage
default corporate scandals ETF indexing arbitrage , systemic noise risks global stock indices trade volume/price relations
Dr. Warren Huang
(黃華南博士)
Pioneer, proactive
structural dynamic global inflation, macro economy, daily financial markets
interest rates, currency, stock, bond, derivatives, housing,
commodities, oil asset pricing and risks valuation markets
fundamentals price mechanism, accurately warned
on Wall Street Journal Market beat Blog Sept.19, 2007
and Mar
5, 2008 masterclass workshop China fund world 2008, Pudong,
China to Goldman Sach managing directors JPM, UBS and 150
China QDII/QFII fund managers
that US Fed aggressive rate
cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost
consumer spending on gasoline and jet fuel summer, demand, driving gasoline ,
heating oil to 415, oil price to 121-145, commodity price
double, will peak out as US
dollar rebound follow Fed ending rate cuts cycle , can not
stop
sub-prime crisis spreading, regional housing price slump 30-50
% and credit crisis, crunch crisis continue through 2009 drag economy into
2009 repeating 1980 double dip
inflationary recession resulted trillion housing and stock market
loss and US, global stock indices and oil, commodities ,
metals price bubble burst bear market 50-70 % , Dow Jones
test 6000- 7000 NASDAQ PLUNGE
testing 1100-1250- and high fliers (GOOG,
PTR, AAPL) , IT, retail stocks facing 50-- 70 % correction,
with banking, finance, housing share price plunge 70- 90 %, dollar making to new
low 85- 90 Yen, commodity prices doubled, and bubble burst plunge
50-70 % % in recession widening bond
, CDS spread and failure in MBS/CDO,
Bear Stearn 30 billion dollar MBS hedge fund
and government steps rescue, Lehman bankruptcy, Fannie Mae, Freddie Mac
AIG, bail out, despite
Fed rate cuts
. , oil price plunge from 147 to 40, copper plunged from 350 to 115,
corn from 600 to 350, He also warned top global QFII management on Peking Univ June 2007 International Financial Engineering Conference
that China overheated
housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity,
China
Banking housing, stock markets follow US
housing price slump, recession, bear market correction, drag China GDP plunged
to 6.8 % 4Q 2008,will test 6 % first half 2009 and stay above 8 % second
half 2009 due to and China 568 billion
infrastructure and 10 industrial sector stimulus program maintain 2009 GDP at
7.5 % and stabilize stock markets,
Shanghai traded 1500- 2100 through 09 until
economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing
prices still up 0.5 % , FIXED investment , consumer spending still up 22
%, first 9 month GDP still up 9.9 %, CPI drop to 1.2% in Dec 2008 % after
China peoples Bank cut 2 % rate after 6 rate hikes, 16 bank deposit
rat hike to 17.5 %. China raise its M2 money supply growth
to 12 % 17.5 Dec. 2008
, Wall Street Journal Real Time
Economics Blog- October 17, 2008 at
US Sept. consumer
confidence plunge to 38, ISM manufacturing purchaser index plunge to 43 and
jobless rate to 6.1 % and Dow Jones plunged 40 % third quarter GDP
contract 0.3 %core inflation up 2.9 %, warned, predict by me Sept. 2007 on this
blog that US housing slump continue , will entering double dip
inflationary recession 3Q 2008 despite rate cuts, stimulus, bail out plan and
extends into deeper recession contracting by 2 % in $Q 2008 and 1Q 2009,
resulted by full impact o business, consumer spending decline due to 6.5
% jobless and 20 % housing slump, 40 % stocks market loss
The real causes of current mortgage, credit, financial crisis and
recession are due to poor financial, monetary policy decision modeling in asset
pricing and risks valuation mechanism, MBS, CDO , the burst of super
housing, commodities asset price bubbles caused by 7 year longest expansive
excessive money supply, easy credit policy .
Global central banks, financial markets financial decision still rely on 30
year old probabilistic, statistical Capital Market Asset Pricing (CAPM) and
macroeconomic modeling, ignoring asset price impact on inflation and financial,
housing , MBS, CDO prices.
Predicted
by Dr. Warren Huang, pioneer of Proactive Global Asset Pricing Mechanism ,
June 2007 , Beijing, Wall Street Journal Economic, Market Beat
Blog Aug.2007 and March 5, 2008 Pudong, China Fund World 2008
to 200 global top investment banking, fund managers that Global Housing price bubble
burst, prices plunge 30 % into 2009, drag global economy into recession
and stocks bond, oil, commodities, metals ,Derivative Asset Prices
Bubbles Burst with 50 % Price Correction Cause Credit, Financial Crisis and
Economic Recession, ( As Dow Jones, SP 500, NASDAQ
drag global stock indices plunged more than 50 % into 2002 recession low ,( Dow
Jones after current consolidate in 8000- 9000 will test 7000, NASDAQ test
1250, S&P test 700 low, oil price plunged 55 % from 147 to 64£¬Gas oil from1300 to 600 , corn from 800 to 350, cotton
from 80 to 43 , gold from 1050 to 650 as global economy enter deep
recession by year end, despite US 700 billion and ECB 2.3 trillion
bail out to stabilize credit crisis
details on www.osawh.com/Fedcrisab.htm
www.osawh.com/mortdefa.htm
www.osawh.com/commody.html
www.osawh.com/centmaf.html
Dr. Warren Huang (üSÈAÄϲ©Ê¿) Pioneer, proactive structural
dynamic global inflation, macro economy, daily financial markets interest rates,
currency, stock, bond, derivatives, housing, commodities, oil asset pricing and
risks valuation markets fundamentals price mechanism, accurately warned on Wall
Street Journal Market beat Blog Sept.19, 2007 and Mar 5, 2008
masterclass workshop China fund world 2008, Pudong, China
to Goldman Sach managing directors JPM, UBS and 150 China QDII/QFII fund
managers that US Fed aggressive
rate cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost
consumer spending on gasoline and jet fuel summer, demand, driving gasoline ,
heating oil to 415, oil price to 121-145, commodity price double, will peak out
as US dollar rebound follow Fed ending rate cuts cycle , can not stop sub-prime
crisis spreading, regional housing price slump 30-50 % and credit
crisis, crunch crisis continue through 2009 drag economy into 2009 double
dip inflationary recession resulted trillion housing and stock market
loss and US, global stock indices bear market 50 % , Dow Jones test
7000- 8000 NASDAQ PLUNGE testing 1250-
1500 and high fliers (GOOG, PTR, AAPL) , IT, retail stocks facing
correction, with banking, finance, housing share
price plunge 70- 90 %, dollar making to new low 90 Yen,
commodity prices doubled, and bubble burst plunge 50 % in recession widening bond , CDS spread and failure in MBS/CDO, Bear
Stearn 30 billion dollar MBS hedge fund and government steps rescue Fannie Mae, Freddie Mac
bail out, despite Fed rate cuts . He also warned top global QFII management on Peking Univ
June 2007 International Financial Engineering Conference that China
overheated housing, stock market wealth gain resulted inflation over 8.7 % will
lead to China Peoples Bank credit tightening to remove excessive liquidity,
Banking housing, stock markets follow US housing price slump, recession, bear
market correction, with Shanghai A testing 1800 through early
2009 until economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing
prices still up 3.5 % , FIXED investment , export growth and consumer
spending still up 26 %, first 9 month GDP still up 9.9 %, CPI up 7 %
despite China peoples Bank 6 rate hikes, 16 bank deposit rat hike
to 17.5 %. China need to further cut its M2 money supply growth from 15 %
to 12 % next year to achieve housing price cut of 30 %, CPI to 4 %, GDP to 8 %
to achieve soft landing and start of bull market stock rally.
We must tracking into the root causes of current which was caused by out dated monetary policy and unreliable CAPM financial decision models which created housing bubble burst and asset prices bubble burst trillion dollar market loss due to bet on the wrong side of macro, financial economy and investment scenario.
I have been warning global economist, market analysts in China, US, Asian, European central banks, financial market risk management conferences that global central banks, financial market decision models still using 30 year old classical monetary economic theory with monetary policy based on conventional money supply growth tie in CPI inflation and GDP , ignoring financial, industrial assets ( oil, commodities, housing, equities, bond ) prices impact on CPI, and scenario resulted underestimate the asset prices bubbles impact on macro, financial, industrial markets, resulted bubble burst, run away inflation, credit , financial crisis, recession..
While the financial market decision models supported scenario still rely on classical capital market asset price model based on statistical, probability models fail to relate macro, financial, industrial economic impact on daily asset prices, resulted betting on the wrong scenario , trillion dollar market loss
Even 100 % efficient market with all the market information can not stop speculators using daily investors sentiments ( government ,business, economic information ) to push overheated bubbles to burst and financial crisis.
Only Proactive structural monetary , economic, fiscal policy to include asset pricing mechanism into inflation, interest rates, and using top down, bottom up approach in asset pricing mechanism, tracking monetary, economic, fiscal policy and impact on macro, financial, industrial economic and daily asset prices and investors sentiment can track, predict last 20 year global financial crisis, recession.
details on http://www.osawh.co,/cnetmaf.html http://www.osawh.com/mortdefa.htm
http://www.osawh.com/econ.htm http://www.osawh.com/GCaptbj.html http://www.osawh.com/value.html