Tuesday, December 23, 2008

The Joseph cycle - Simon Sim (2004 edition)

I happened to come across a copy of the famous book by Simon Sim - The Joseph Cycle (2004 edition) while browsing through the Singapore section of the national library. Much to my surprise, there are a lot of gems and treasures hidden among the singapore section, which I had always avoided till yesterday. There are old copies of company annual reports, industry and market analysis, accounting standards in singapore, local tax guide, local real estate reports and even those very old stock investment and company info for singapore context. You should go and take a look one day.

Anyway, Joseph cycle is actually a cycle that Simon Sim discovered. It bares resemblance to the biblical character Joseph, who being a slave, was made to oversee the entire Egpyt planning because he interpreted a dream by the ruling Pharoah satisfactorily. The interpretation is that for 7 years, there will be abundance, followed by another 7 years of scarcity. Simon Sim discovered that the market works pretty much on the same basis too.

Starting on 1959 where Singapore achieved independence, he counted in cycles of 14 years, with 7 years of bull and 7 years of bear runs. 1959 is regarded as the bottom by him. Here's a quick run through the years:

1959 - Cycle's bottom
1966 - Cycle's top
1973 - bottom
1980 - top
1987 - bottom
1994 - top
2001 - bottom
2008 - top
2015 - bottom
2022 - top

Here's the graphical representation overlaid on the STI chart that I did on excel. I would say that he is more and less correct on the mega trend of STI based on his 7 years of lean and 7 years of fat years.

I found a website where it was mentioned that he invested $400,000 into the market when last mentioned at 2004, which he will sell in 2007/2008. He would have made a handsome profit if he really invested in STI around 1300 in 2001 and ride the bull trend around 2007/2008 at the peak STI level of 3900 thereabouts. That's roughly 300% increment or about 16-17% compounded annually. This means that his $400,000 could become $1,200,000 - no mean feat.

Now if he is right about the Joseph cycle, then 2015 will be the bottom of the cycle. There should be some unexpected news that will change the bear phase back into the bull phase. He mentioned that the first 1 to 2 years of the bull phase (i.e. from 2015 to 2022), it will be a very quiet though the best time to buy.

A few thoughts comes immediately to mind:

1. If Simon Sim is right, then there will be more shakes in the market for another 7 years or so. This will really shake any bulls left, leaving the strongest behind. Will I be shaken out of it? People say that they are long term investors, but until the true test comes, it's all just empty talk and brave promises. Am I willing to hold for 14 years or so to ride the full potential of my investments?

2. I wonder what happened to the $400,000 investments that Simon Sim put into the market back in 2001-2004. Did he really managed to make a 300% returns by believing in his mega trend timing?

It's good to bare it all and answer the first question honestly.


PanzerGrenadier said...

Dear LP

Here's wishing you a Merry Christmas and a Happy New Year!

Be well and prosper. :-)

Regarding the Joseph Cycle, reading Nicholas Nassim Taleb's Fooled by Randomness and The Black Swan makes me sceptical of the correlation of such cycles. Indeed, one can ride on a bull run and profit if one exits the market, but then the perpetual problem is what will you do with your spare cash then? Invest in t-bills now yielding 0.40% or fixed deposits at 1%+.

The human tendency is to go back into the market only to risk being wiped out by a Black Swan during a unforseen bear cycle?

Be well and prosper. :-)

Createwealth8888 said...

Hi Brolp,

I believe in market cycle and one can profit from the cycle knowledge and like fishing, knowing the tide cycle make the difference.

Merry Christmas

la papillion said...

Hi PG,

When I read the book by Simon Sim, I also remembered what NNT said in his books. Basically I had the feeling that Simon only mentioned events that correlate to his cycles but ignored all the rest. It's very apparent when he quoted all the incidents that the magic number 7 appears. Those that do not have the magic number are not listed, giving the illusion that the number 7 is magical.

Oh well.

la papillion said...

Hi bro8888,

My investment philosophy is still forming, so hard for me to comment on whether I believe in market cycles or not, haha!

Anonymous said...

yo.. i read the book.

U could email him n ask him your questions. btw he teaches his version of TA too. His course is over 3k. I.. did not attend.

His STI prediction of 4300 is based a lot on fibo. Did not turn out that way. 1 level short of it, so it ended up around 3900.

For me personally ( and i think the cycles suggest it too) know when u buy, when to sell. I told my frens that too. Those we are going in long now. I told them, pls remember when to take profit. And to actually do so. They have benefited with TA from me and im happy that I shared.

la papillion said...

Hi charlesming,

For me, it's a guide too, not like I'm going to treat his levels or even his years seriously.

But your idea of actually taking profit is good. Nobody should ignore TA without seriously understanding it first :)

K said...

Bottom coming this year? Better sell everything and move back to the kampung! :P