Will Chinese Astrology make you Rich?

您好,新年快樂,

monkey

Year of the monkey

There is no issue with your browser, this is hello and Happy New Year in Chinese.
The New Year kicks off officially on Monday the 8th but I wanted to be early.

This New Year will be that of the Monkey as you may have guessed. The Chinese follow a bizarrely-modified Lunar calendar by also adding one solar month in the equation (lunar months are only 28 days long). That explains why the New Year day changes every year. They have 12 animals symbolising the zodiacs: rat, cow, tiger, rabbit, dragon, snake, horse,goat, monkey, chicken, dog and pig.
People born in the years 1920, 1932, 1944, 1956, 1968, 1980, 1992, 2004, 2016 are monkeys.

If you do not know what sign you are, here it is*:

chinese sign

The animal in you

Nostradamus
With a new year come predictions about everything and believe it or not, about the markets. A good macro-analysis should incorporate a few economic, political, sentiment drivers. The sentiment indicators do not include, in general, astrological signs.

But should we really care about the position of the moon or that of Uranus? What can we expect in the markets according to our Chinese friends?
Well, if you believe that astrology drives returns, then 2016 could be an average year, according to this chart by The Economist – note though that 2015 was the year of the goat and it turned out OK with the US markets roughly flat (S&P500 down -0.7%), Europe up mid single digit while the Chinese stock market itself was a roller-coaster but ended up 9% for the year.

stock market and Chinese sign

Monkey business

2008 was the year of the rat and equities plunged 40%. 2011 was the year of the rabbit and global stocks fell that year. 2013 was an excellent year, with the Dow up more than 20% and yet it was the year of the snake! Recent years hardly seem to validate the Chinese visions. Maybe we need to look into more details because there must be more subtleties to this?
Looking for experts, I found that Feng Shui experts could help us. What can they tell us then? I have selected the main inputs of Raymond Lo, Feng Shui expert, in his paper.

“The Year of the Monkey, 2016, in the Hsia calendar, is symbolized by two elements – with Yang fire sitting on top of metal. I can expect 2016 will be comparatively less violent than 2014 and 2015. It will be easier to reach agreements and treaties to resolve conflicts and struggles.

Regarding the economy, fire element is often the driving force behind the stock market. The industries that will perform well in the year of the Monkey will be industries related to Fire and Water elements. Fire industries are energy, stock market, finance, entertainment. Water element is referring to transport, shipping, communication. In general, the Yang Fire Monkey year is symbol of optimism and flexibility and progress.”

The portfolio created by Lo would be buying many of the industries that fell sharply over the past 2 years. Chinese Astrology in 2016 is contrarian.
Contrarian Investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time.

'When you said you're a contrarian, I just assumed you meant your investment style, Mr. Kobenz.'

Contrarian at work

Does it mean we should rely on astrology to manage our money?
While famously John Pierpoint Morgan (the man who built JP Morgan) had an astrologer on staff, apparently saying that “Millionaires don’t use astrologers, but billionaires do.”, several studies have failed to show that astrology-based returns were more than random events.
What it meant is that there is no proof that astrology adds value.

Furthermore, in 2007, the very aptly named Professor Wiseman and The British Association for the Advancement of Science asked a professional investor, a financial astrologer and a five-year old child to invest a fictional £5000 on the FTSE100. The investor chose shares on the basis of his experience, the astrologer based her decisions on the ‘birthdate’ of companies and the child chose her shares randomly. The child lost the least amount of money and the financial astrologer made the largest losses.

jp morgan

JP Morgan and the Wiseman study

Conclusion
新年快樂 again.
Astrology was not proven so far to be reliable in forecasting markets. However, it may have an impact on some market operators. This is because investors are emotional and do not always rely on facts.

 

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