Dow Jones Index, Hedge Funds, and Crude Oil
Apart from my English, some viewers seem to be interested in the Economic Armageddon or the link between the NYSE index, the asset volume of the hedge funds, and the crude-oil price.
Apart from my shaky manipulation of English words, my idea is based on a theory, in this case, the catastrophe theory.
The nature allows a day, a week, a month, and a year to proceed at a fixed pace, respectively. However, any natural or human phenomena will collapse or explode at a certain moment in the middle of the day, the week, the month, of the year when a hidden parameter reaches a certain critical level.
That is why one day suddenly you discover that all your efforts have come to naught or produce such an amount of fruits, even in human relationships or faith in God.
SECTION I: GENERAL RULES IN THE HUMAN SPHERE
You can start business which will grow and advance following general rules in the human world which itself is a system.
(Click for a larger view)As long as a system is alive or functioning effectively, any element within it can increase its volume till it enters the downturn phase. The rise and fall is a rule in the human world.
But, there is another case as follows:
(Click for a larger view)In short, some conditions allow the “volume” to sustain the higher level until the system itself breaks or disappears. It looks like a material life of a very lucky and very rich man. He can hold his big assets until his death, but, of course, not beyond it.
Anyway, those conditions are embodied in the form of, or as the balance between the Sustaining Force and the Downward Force which should include a factor "a" as will be discussed below.
SECTION II: DOW JONES INDUSTRIAL AVERAGE
(Click for a larger view)http://ja.wikipedia.org/wiki/%E7%94%BB%E5%83%8F:DJIA_historical_graph.svg
Now you may wonder if DOW Index follows the rise/decline rule or the rise/upkeep rule.
If you can technically, scientifically and philosophically predict the future trend, it may be very helpful for prevention of the New Great Depression.
But, the hedge fund industry also shows the same growth path:
(Click for a larger view)http://www.bis.org/publ/cgfs29g.pdf
Now you may wonder if Assets under Management of hedge funds follow the rise/decline rule or the rise/upkeep rule.
SECTION III: War In IRAQ and Index Sustenance
In 2003, the Dow Jones Index might have started to follow the rise/decline rule:
(Click for a larger view)http://www.djindexes.com/
But, it actually held on. The NYSE index rather started to follow the rise/upkeep rule.
You can see the reason below:
(Click for a larger view)http://www.meti.go.jp/committee/summary/0004464/g80422a02j.pdf
In the above figure, the bars show money flow into the hedge fund market and the line graph shows cumulative assets in the market.
You can see that just in 2002 when the US military invasion of Iraq was discussed and speculated, the Dow Index began to fall.
But in 2003 when the US military invasion of Iraq actually took place, the hedge fund market got boosted enough to stop the downturn momentum of the New York Stock Exchange and rather sustained and heaved the Dow Index.
However, this bolstering force by the hedge funds looks like decreasing since 2007 in terms of leveraged buyout.
(Click for a larger view)http://www.meti.go.jp/committee/materials/downloadfiles/g71221d02j.pdf
As the subprime loan market has also collapsed, the hedge funds are now operating in the crude oil market. The oil prices being kicked up, consequently, keep the high-level of funds’ assets which in turn bolsters the Dow Jones Index.
(Click for a larger view)http://www.theoildrum.com/node/3960
SECTION IV: Catastrophe Theory
“Catastrophe theory, which was originated with the work of the French mathematician René Thom in the 1960s, and became very popular due to the efforts of Christopher Zeeman in the 1970s, considers the special case where the long-run stable equilibrium can be identified with the minimum of a smooth, well-defined potential function (Lyapunov function).
Small changes in certain parameters of a nonlinear system can cause equilibria to appear or disappear, or to change from attracting to repelling and vice versa, leading to large and sudden changes of the behaviour of the system. However, examined in a larger parameter space, catastrophe theory reveals that such bifurcation points tend to occur as part of well-defined qualitative geometrical structures.”
http://en.wikipedia.org/wiki/Catastrophe_theory
In the following equation,
Y = X**3 + a*X,
Where X**3 = X*X*X,
The value Y will, of course, change with the value X. But this change is very smooth.
But, if the coefficient "a" is also changed, the change of Y along with a change in X will drastically change.
In this case, we can say that the value of "a" is a factor to cause a catastrophe in Y while X smoothly changes as before.
When the Dow Index is Y, the hedge funds assets are "a" rather than X.
When the hedge funds assets are Y, the crude oil price is "a" rather than X.
But, the identity and behaviors of the contents of “a” for each equation representing each "Y–X" relationship are yet to be studied and analyzed before a real catastrophe comes.
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That is all for today.
But, remember, the Dow Jones Index supported by hedge funds that are in turn bolstered by the high crude oil price should not be respected.
It is because there must be some hidden parameter “a” for each of them.
And, this "a" can be a key to the Economic Armageddon I discussed yesterday.
But, can wisdom of any super-rich people in the world work to avoid the Armageddon?
Or do they think that they will become more richer after the Economic Armageddon?
Gentlemen, it is Armageddon; there is no future beyond that, though you may try to be a king in the Stone-Age-like world after that.
(Japan’s Prime Minister Mr. Yasuo Fukuda is now in Italy as preparatory operations for G8 Summit to be held in Japan.
But his approval rating is now so low in Japan that the public NHK TV station cannot broadcast it to the general public.
While newspapers and other media have intently reported his approval rating falling down to 20%, the NHK TV news programs have never presented the result of a survey it must have conducted.
What do you think about it, if you are involved in the politics-media-bureaucracy circles? Is our Prime Minister so vulnerable?
The general public is a master and a prime minister is a servant in principle.
That is why I am serving you with all the data above presented in this blog…
Anyway, until the new US President is elected this November, incumbent Japanese Prime Minister Mr. Fukuda will not take any decisive action, in my humble view.)
Mat 20:28 Even as the Son of man came not to be ministered unto, but to minister, and to give his life a ransom for many.
Mat 20:29 And as they departed from Jericho, a great multitude followed him.