Improvement Anaysis

On my daily run, I heard a few friends talk about the drug scandal in Indian athletics team. I am sure all of you are aware of the fact that some of our Commonwealth and Asian Games champions have tested positive for banned substances. I remember we had all celebrated their famous wins and this discussion set me thinking.

No this note is not about cheating nor is it about how one is forced to cheat if others in your occupation are cheating and getting away with all the accolades and benefits. This note is about-for lack of a more creative word IMPROVEMENT ANALYSIS. Normally we analyse things only when performance detiorates. We would all be far better off if we took some time to analyse why there is an improvement in performance.

This is not only true in athletics but also in any other area. For eg, in case of our 400m atheletes there was apparently a 1 sec improvement within a short period of time specially after the athletes had visited one of the East European countries. This should have set the alarm bells ringing. Similarly if analysts had taken some time to question the stellar growth rates of Enron instead of acting like their official cheerleaders then things could have been much better.

Closer home, when interest rates kept falling between 2003 and 2008, it was pertinent to ask how much of the increased EPS was due to increase in debt. Debt in some way is akin to steroids and can artificially boost a company's performance but can eventually be deadly when the interest rate cycle turns. Similarly, In so many years of analysing back tested results of trading systems, whenever a system showed a good backtested performance, the first thing I did was to find out whether there was some error in the code. Almost 99% of the times, an abnormally good system is due to some error in code.

I believe that it is beneficial to do a lot of analysis during a period of improvement in performance. Normally, only a detioration in performance results in all kinds of questions and analyis. During good times, most people are too busy rejoicing to worry about asking any questions.

To come back to the market I am short and the market seems to be determined to take me to the cleaners. After opening down it has moved up a little. BTW, given the prop book performance for the year to date, there is no need for any analysis of my performance at all!!!                                               

Current position STT Short, LTT Short.

STT: Will cut short and go long above 5711

LTT: Will just cut short and NOT go long above 5761.