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I recently decided to try CSI’s Unfair Advantage. I don’t feel qualified to
get involved in the most recent dialog between Robert Bianchi and Mark
Brown, but I thought it might be interesting to some to hear what CSI has
said that might bear on some of the issues.
I’m still learning my way through UA so I’m not vouching for the accuracy of
what CSI says -- maybe later on, though 8-). I take the responsibily if I
mis-state or mis-interpret CSI's words. Also, please note that I have no
connection to CSI other than as a user of their data, which I then export to
SuperCharts for my assessment of their services. I don’t use their charting
tools and cannot comment on them.
To start with, Mark Johnson <janitor@xxxxxxxxxxxx> on Thu, 10 Jun 1999
11:56:29 –0700 wrote:
>>Good old CSI certainly believes their Perpetual Contracts are lots
>>"better" than continuous contracts. <<
Referencing and quoting from some things I’ve gotten them, CSI says
Perpetual Contracts may be “better” for some purposes, but certainly not for
all cases. For instance, they “cannot be traded directly, and can only be
used as a guide for overall market direction”. And (with a bow to cp for an
earlier comment of his), “They should not be heavily relied upon in
examining agricultural markets where different supply-and-demand conditions
may affect the distinct old and new crops”.
CSI does say they “provide an accurate view of the market’s characteristic
waveform over time that is ‘perpetual’ in nature”. And, they “are more
likely to exhibit statistical stationarity than, say, a Gann contract”.
Along the same lines, “The Perpetual Contract is the only the only viable
approach that can focus upon a fixed period forward in time and therefore
achieve a substantial level of statistical starionarity.” And, “it offers
flexibility to focus on near or far contracts as single independent series
for analysis purposes. For example, an analyst could pair off far-forward
future hogs against nearby corn (the raw material needed to produce the
hogs) to study the dependent impact of these two commodities on each other.”
Actually, CSI suggests that back- or forward-adjusted contracts (not
Perpetual) “offer the most flexibility for the user”, meaning this is so for
many general, typical purposes.
MJ also wrote:
>>In 1982 the continuous contract prices are around 120 .... but the futures
>>themselves traded around 300. What a "lie" the continuous contract is
>>telling. <<
Yes, it is a “lie” if you need the actual prices in your trading. But IMO it
should be looked at as a lie of our own choosing. I think CSI is saying this
in their explanations of different methods, and their suggestions as to
which method(s) to avoid and which could be used for a variety of purposes.
Roger D. Rines" <rdrines@xxxxxxxxxxx> addressed this very point (I think)
when he wrote in his own post concerning continuous contracts:
>>This all works because all my signals depend on relative price changes,
>>not absolute prices. Negative prices are fine. The day to day
>>marked-to-market changes in equity are based on price *changes*, not
>>absolute price. <<
Mark also writes:
>>And plenty of commodities have continuous contracts that INCLUDE NEGATIVE
>>NUMBERS! Horrors! <<
I think CSI agrees that negative numbers can be a serious problem depending
upon what traders are doing. Therefore, because of “the strong chance that
an inflation-sensitive market could produce negative price quantities into
the past” which “could discredit the accuracy” of the results, they offer a
subset of adjusted contracts they call Proportional Back Adjusted (aka ratio
adjusted). These are back- or -forward adjusted series that adjust “by
increasing or decreasing successively further distant contracts by a
percentage to raise or lower the entire history by the same proportion”
instead of by the better known actual price difference between one contract
and the prior older one. CSI says that “Proportionally adjusted series
prepared through ratio multiplications cannot go negative, so there is never
a need to elevate a series out of negative territory.” I have no experience
with this method of adjusting. Would someone who has care to comment? How
well does it work? How do your results differ (for better or worse) from
other methods?
Now, I could not help but notice how CSI was slammed in some quarters.
Perhaps there is truth in all that; I don’t know because my experience with
them is too recent and limited. A few points, though:
- There is a Rudi. He is the one I was put in touch with when I first
inquired at CSI. Our contact has been only via e-mail. He was very helpful
in answering my initial questions and arranged for me to receive the UA
package. I know nothing about him beyond that.
- Later, I had a major problem; I accidentally corrupted many of the
database files -- and I emphasize it was my own dumb doing -- so I contacted
customer service for help. I got responses reasonably fast. They were
helpful, although some of the answers were a little vague or missed the
point of a question a bit and I still want to ask some more questions. But
so far, I can’t complain.
- The software has some nice features I’m glad to have. The main thing I
like is the ease and flexibility in calculating contracts in various
formats, detrending the data, using the splicing options at rollover, and
the ability to choose exactly when I want rollovers to occur. There have
been some comments about needing such options to do these things, and I
think UA has a nice capability.
- There are some things that I hoped or even expected to get that are not
there. For instance, it is not as easy as I hoped (at least in the version I
have) to download updates every day, recalculate contracts that need it, and
export the updates into SuperCharts. Perhaps I’ve missed something or
expected too much?
- Finally, I most emphatically agree that despite whatever provocation Bob
thought he had to be upset -- and I, too, have run into some very upsetting
customer situations in my time -- his alleged response is very
unprofessional and, if true, something he should regret and apologize for.
BTW, please don’t let my 2 cents here restart this subject -- this comment
is not the main purpose of my post, but I do feel strongly about it and
can’t resist saying it.
Jim
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