Time Travel

A Time of Gifts tells the story of a traveller walking across Europe after World War One.

What struck me was how mixed and cosmopolitan cities were back then. Several languages were spoken in Prague for example, amongst them German.

A few weeks ago I met a man who was born just before the second world war in Koenigsberg, nudging up against the Russia and the Baltic.

I knew German was widespread, but never realised Germany itself stretched so far. Then I wondered, present day Germany is known for a wide variety of cryptic dialects - how would the Koenigsberg dialect have sounded?

I didn't have to wonder long. My pals have a penchant for Yiddish.

The usual 'cone-igs-berg' apparently would have sounded more like 'kay-nigs-berg'.

Then something clicked. I used to happily listen to Yiddish chatter in New York and understand a fair bit (or at least imagine I did).

Rather than being plain wrong, perhaps the American way of pronouncing German names ('cone-ig' vs 'kay-nig' for example) preserves the dialects of German speaking Jewish immigrants from long forgotten communities in Eastern Prussia or present day Poland and Russia.

'A Time of Gifts' gives a window into that period before darkness covered much of it for good. Less than ideal, but things seemed to work - until everything was torn asunder by the holocaust.

~

Switching gears, I noticed something extremely interesting in Brazil.

The Brazilian Bovespa index looks like this on Yahoo!

I recall emerging market trouble presaging the trouble in '08; and I definitely remember the bounce back as I benefitted from it.

But I am not much of an economic historian and I am forgetful.

Happily, not much seemed to have happened in Brazil before '08, right?

How about looking at the index through the lense of a Sharpe Trajectory?

Mid '93 to mid '94 is when all the action happened.

After a brief Google search, it seems that Brazilian inflation was massively reduced during the same period with the 'Plano Real'.

What do the Sharpe trajectories show us?

Firstly we find the mean return of the index.

We detrend each return, so that the average return is zero.

Then the returns are cumulatively totted up.

Because the mean is zero the trajectory has to begin and end at zero.

The detrended returns also mean that we can make apples to apples comparisons over time.

Recent events don't blot out previous events, we have effectively created a visual time machine.

The Brazilian bull market of '93/'94 was spectacular. Returns were consistently above the average of the next 20 years.

Economists do get things right every now and again!

Draw your own Sharpe trajectories here.

For example,

1) Load 'INDEXBVSP' from Yahoo!
2) Write this code 'weight.INDEX
BVSP = 1;'
3) Hit 'Back Test'

Enjoy.