Ratio Charts

As long term readers of the blog are aware, most of my writing tends to be based upon a "US-centric" version of the markets given our Provident Fund is priced in USD.

In an effort to give a more rounded look at how the markets are doing relative to other currencies, I've developed a series of ratio charts to give readers a greater understanding of where they may want to position their provident fund relative to their currency of choice (as defined by those currencies available within the Provident Fund).

As we all know, the USD has been weak for a number of years. Going forward there is a very real chance that may continue for some time. As such, it is important to understand whether equities are delivering positive performance relative to other currencies available within the Provident Fund.

In other words, if you are an Australian and you have a choice as to whether to position your money within the Provident Fund account into either International Equities (priced in USD), International Bonds (priced in USD), or Australian dollar cash; you would want to know what the relative performance of each is to help with that decision. That is where the ratio charts come in handy.

Here are the following definitions:

$DJW:

The Dow Jones World Stock Index (which I will use as a proxy for the Emirates Provident Fund International equity funds available to invest in).


BWX:

The Lehman International Treasury Bond ETF (which I will use as a proxy for the Emirates Provident Fund International bond funds available to invest in).

$USD

The US dollar currency

$XEU

The Euro currency

$XBP

The British Pound currency

$XAD

The Australian dollar currency

In defining relative performance, I have used the 50 day simple moving average on the daily charts and the 40 week simple moving average on the weekly charts. This will broadly define the "short term direction" and "intermediate-to-longer term direction).


Given the above, here are the ratio charts as of 12 November 2010.


Provident Fund (USD) weekly:



Provident Fund (USD) daily:



Without taking currency into account, International Equities are outperforming both International Bonds and USD cash in both the short and intermediate term.


Provident Fund (British Pound) weekly:



Provident Fund (British Pound) daily:



In both the short and intermediate term, International Equities (priced in USD) are outperforming both International Bonds (priced in USD) and British Pound cash.


Provident Fund (Euro) weekly:



Provident Fund (Euro) daily:



In both the short and intermediate term, International Equities (priced in USD) are outperforming both International Bonds (priced in USD) and Euro cash.


Provident Fund (Australian Dollar) weekly:



Provident Fund (Australian Dollar) daily:



In the short term, International Equities (priced in USD) are outperforming both International Bonds (priced in USD) and Australian dollar cash.

In the intermediate term, the Australian dollar is outperforming both International Equities (priced in USD) and International Bonds (priced in USD).


Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author will reveal his current market positions and holdings but actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. The author is not licensed as an investment advisor in the UAE and therefore cannot provide individual account advice to individuals and/or institutions.

dwaynemalone1@gmail.com