TOL as of Jul 26, 2015
Trading Against Your Emotion
The markets have been weak over the past few days. Risk-Off seems to be mantra now.
Most of my friends are also scared stiff and wants to be 80% in Cash.
The "experts" are also now talking about the next crash, probably from a Liquidity Crisis ( Bond or ETF ).
But before you frighten yourself, you may want to first consider the track record of the "experts" on Greece and China:-
1. Greece: Didn't these 'experts" say that Greece will cause an European Contagion ? So where are we now ? Has the whole world really collapsed ? How can a country of only 11m people, with 2% of the GDP of Europe and a US$360b debt, bring down the whole financial system ?
2. China: Didn't the "experts" said that the China crash will also trigger the next global depression ? So where are we now ? And some "experts" even compared the charts of the Great Depression vs the current Chinese Crash. While you are frightening yourself, the Chinese market has already rebounded 18%. Do you really want to bet against the determination of the Chinese authorities ?
So could the next crash then really comes from a Liquidity Crunch ? There were already some rumblings of it in the Bond Markets not too long ago but they have since stabilized. As for the ETF, there has been no sign at all yet.
My response is why frighten yourself when there is no "Clear and Present" danger ? Why bother listening to these "experts' when their track record is so very wrong ?
As for myself, I trust only the emotions of my friends as well as my own emotions. When my friends are very frightened and in turn are also making me feel very frightened, then it's time to trade against my own emotions.
At this point in time, most of my friends are quite frightened and they are also starting to make me feel very frightened too.
Commodities:- - Risk-Off
1. Oil - Lower. US$48 from US$51 from US$53
e. US Strategic Petroleum Reserve: 690m barrels out of max 727m barrels
f. US Private Industry Reserves: 485m barrels
g. US Oil inventories: The US glut continues to ease, although at a very slow rate.
h. US Crude output jumped by 300,000 barrels per day
i. Iran will be able to supply 1m bpd; It also has 40m barrels in storage
j. US Oil Capex: US$1t
I will continue to stay away from Oil Services companies as I dont think that this will a "V" recovery,
2. Gold - Lower. US$1099 from USUS$1132 from US$1162. Record US$1920. Vested.
3. Platinum - Lower. US$989 from US$993 from US$1034.
4. Silver - Lower. US$14.71 from US$15 from US$16. Range High: 49
5. Copper - Lower. US$2.39 from US$2.50 from US$2.54
6. Monitoring Commodities. It's cheap, hated, cheap but not on uptrend yet.
Equities - Risk-Off
1. US Equities - Lower. 2080 from 2127 from 2077. No Trade
2. HK Equities - Lower. 25129 from 25415 from 24901. Traded AAC Tech. Sold Nirvana
3. Shanghai Equities - Higher. 4071 from 3957 from 3878; Support at 3400 ? No Trade
4. Spore Equities - Flat. 3353 from 3353 from 3280. Traded JMH
5. Japan Equities - Lower. 20545 from 20651 from 19780. No Trade
,
6. Malaysian Equities - Lower. 1721 from 1727 from 1716. Bought MAA. Sold 1/2 Datasonic
7. Warrants & Inverse ETF - Traded 23103 HSI Put
Currencies- Risk-On
1. USD to JPY - JPY Flat. 124 from 124 from 123. The 52 week range is 76 to 126. Not vested
2. SGD to MYR - MYR Flat. 2.78 from 2.78 from 2.81. Vested in MYR & SGD.
3. AUD to USD - AUD Flat. 0.74 from 0.74 from 0.75. Not vested
4. AUD to SGD - AUD Weaker. 1.00 from 1.01 from 1.01. The 52 week range is 1.02 to 1.36. Vested
5. AUD to MYR - AUD Weaker. 2.78 from 2.81 from 2.82. Vested
6. EUR to USD - EUR Stronger. 1.10 from 1.08 from 1.12. Not vested
7. USD to HKD - HKD Weaker. 7.7516 from 7.7505 from 7.7529. 52 week range is 7.7497 - 7.7677. Vested
8. Dollar Index - USD Stronger. 97.24 from 97.96 from 96.03
Others
1. Sentiment - Complacent
2. Headwinds - Demographics, China Debts (US$5t); Chinese Local Government Debts (US$3t); US Unfunded Debts (US$170t); US Bank Debts (US$60t); Global Debts (US$200t); Fed Leverage (77:1); Global Derivatives (US$700t); Declining Money Velocity; Stock-Market Cap/GDP (200%); Strong USD; Plunging Commodities; Chinese Stocks Margin (300%; RMB 4t); Emerging Markets US Loans (US$6t); China's Corporate Debt (US$16t);
3. Tailwinds - Low Interest Rates, EM Consumption, Liquidity, Cash in Corporations (US$2t); Cash in Short-term Bonds, Buybacks, Presidential Cycle; Low Oil Prices; QE - Europe, Japan & China; US Foreign Funds Repatriation (US$2t)
4. Risk Management - How much cash have you really raised over the past 2 weeks ?
5. Properties
a. Spore - Luxury prices down 20% from 2012 peak and about 40% in Sentosa. Private residential down 4%. About 24,000 private homes are sitting empty.
b. Malaysia - 30% of the high-end condos in KL are vacant ?
c. HK - strong demand for new small and medium sized homes due to developer's financing.
d. China - Stabilizing at higher end ? Still falling at 2nd Tier Cities and lower end ?
6. Yield on 10 Year US Treasuries - Lower. 2.26% from 2.35% from 2.40%. Low 1.64%; High 2.69%
7. Interest Rates:
a. NZ reduced interest rate by 25 bps to 3%
b. Since Jan 1, 2015, about 24 Central Banks around the world have cut interest rates
c. I'm still expecting interest rates to remain low for quite a while more
8. Net Exposure to Equities: 51% (Long 61%; Short 10%) from 55% from 51%
The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Please do use the above comments at your own risk. Please do also feel free to provide me with your kind thoughts and comments
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