TOL @ Nov 4, 2018
Time To be Nimble?
As mentioned last week, I was expecting a spike in the markets from the "New Money From The New Month". Now that we have seen that spike in the markets, I'm expecting the market to correct for a few days, before the "Buybacks" start kicking in again.
In addition, the markets were ecstatic when Trump tweeted that he had "a long nice call with Xi". And thereafter, it was also reported that Trump had supposedly ask his Secretaries to draft an agreement to end the Trade Conflict (although it was subsequently denied by Larry Kudlow).
IMHO, I think Trump called Xi with the intention of only propping up the US markets before the mid-term election. I dont see them signing an agreement at the G20 at the end of November but with Trump, anything is also possible.
Anyway, I took the chance to unload some equities over the past few days. I dont think that the Trade Conflict will end (unless both the US & China, can fnd a face-saving way of telling their own citizens that they have gotten what they want although both sides have not really budged at all).
In addition, the Iran Sanctions will be kicking in soon although some countries have already received exemptions.
And finally, you have the close Mid-Term elections.
Now that I have raised some Cash, I may go shopping should the market plunge again. However, I need to remind myself to be a bit more patient this time, as "cheap can become much cheaper in a free falling market".
Weekly Risk Management Progress Report:-
1. Reduce Equities: Making Progress (decreased from 41% to 33% of Liquid Assets)
2. Buy Inverse ETFs and Puts - No Progress (Sold LABD)
3. Increase "USD/HKD/Gold" - Slight Progress (25% to 26%)
Market Risk Indicators
1. Euphoria: 7 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Fund Flows;
2. Credit Problems: 8 (Very Good: 1; Very Bad: 10) - Housing, Subprime Auto; Student Loans; Credit Cards; Junk Bonds; EM USD Loans;
3. Recession: 8 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; Trade War; 2019?;
4. Liquidity: 7 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?; EM; Italy;
5. Inverted Yield: 8 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion; US 10 Years < US 2 Years; Expecting 2019 to 2020
6. Valuation; 8 (Safe 1: PE15; Danger 10: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela; Russia
Total: 53 out of 70 (76%); (Safe: 50%; Danger: 80%)
Commodities: Risk-Off (Data from Commodities Live)
1. WTI Oil - Lower. US$62.86 from US$67.68 last week from US$69.37 two weeks ago; Support: US$58; US$34; Resistance: US$75, US$105
a. Trade Wars will reduce demand for Oil? -100k bpd?
b. Stockpiles: 2.5b barrels;
c. US SPR: 679m barrels (33 days); To sell 190m over 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. China (4th largest producer; largest importer) - Reserve life: 10 to 6 years
f. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
g. IEA: Lowest amount of new discoveries; Supply shortage in 2020?
h. Saudi: Aramco's IPO 2019?; +300k bpd; No more Spare capacity;
i. China: SPR reached 51/90 days; 2018 Imports to decrease?
j. Libya: -850k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria -300k bpd; Iraq +500k bpd; Kurdistan -350k bpd; US +400k bpd to +1m bpd in 2019;
k. Venezeula: -1.2m bpd; Worst Case -2m bpd supply (50% cut by 2020)?
l. Iran: -1.6m bpd by 1Q, 2019
m. Russia, Saudi, US - no more spare capacity?
n. Winter: lower demand for oil
viewtopic.php?f=33&t=7550&start=210
2. Gold - Flat. US$1235 from US$1236 from US$1230
Support: $1150; $1050; Resistance: $1400
a. Global 33k tons; US 8 t; China 5k t; IMF 3k t; Germany 3k t
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, down each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: 2Q 2018: China +5%; India -8%;
k. Central Banks: +22% yoy; Russian, Turkey, Khazakhstan & India
l. U.S. government holds 261.5m ounces at book value of US$42m
m. China: Reserves 185m oz; 400m oz ground; Output decreased 6% yoy
n. Strong Selling by Gold ETFs
viewtopic.php?f=33&t=7589&p=202084#p202084
3. Silver - Higher. US$14.75 from US$14.72 from US$14.65
a. Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
b. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
c. Demand: 1.2b ounces in 2015;
d. Supply: 0.9b ounces in 2015.
e. 4th year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50 t0 70; Currently 76, 50% higher than average
k, Production declining
l. Demand: 40% Investments / Speculation; 60% Industrial
m. About 1b ounces stored in China; 1 Year Production
n. How will US tariffs on Solar Panels affect silver prices?
viewtopic.php?f=33&t=7589&p=202084#p202084
4. Platinum - Higher; US$872 from US$836 from US$834
a. 28% for jewelry
b. 42% for diesel catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper
h. Diesel cars losing market share
i. Strong demand from vehicles destroyed by Hurricanes (1m cars)
j. 70% of supply is from South Africa
5. Zinc - Lower; US$2549 from US$2654 from US$2627
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. Breakpoint: High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: DB Base Metal (Zinc, Aluminum & Copper); MMG
viewtopic.php?f=33&t=367&start=208.
6. Copper - Higher; US$2.82 from US$2.75 from US$2.78
a. Higher inventories at LME
b. China - 50% of global consumption
c. China - Lower Power Grid demand
viewtopic.php?f=33&t=5598&p=215285#p215285
7. Aluminium - Lower; US$1979 from US$1991 from US$2009
a. Sanctions on Rusal has removed 7% of world's supply
8. Uranium - Flat; US$27.90 from US$27.80 from US$27.70
a. Breakeven: US$40 per lb; Long-Term Contract - 2x Spot
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global Supply: 158m lbs pa; 15% from decommisioned weapons
d. Global Demand: 190m lbs pa to 300m lbs pa (2030)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 3m lbs pa; Starting 21/54 reactors? Currently, only 9
g. No. of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 452
h. 56 new reactors being built; 481 planned;
i. China: 35 existing plants; Building 21; To build 177 more?
j. India: 22 existing nuclear plants; Building 5; To build 64 more?
k. 75% long-term contracts expiring between 2017-25
l. 200 European nuclear reactors will be shut down over the next 25 years
m. France: Reduce nuclear to 50% from 75% by 2025 and closure of 20
n. Nuclear Treaty - US pulling out
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. US: Nuclear - 20% of electricity; 99/447 Plants; 25% drop by 2025; Two Year Moratorium on Closure
r. Supply: 50k tons; Demand: 68k tons; 2k tons enriched for weapons
s. 1b pounds to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs around 650,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% uranium; Demand 50m lbs pa
v. Uranium from Sea Water; Viable at US$180/kg (US$80/lbs); Timing?
w. Glut at 15m pounds (23 reactors for 1 year)
x. Cameco mothballed McArthur River & Key Lake; 10% world's supply
y. Kazatomprom, world's second largest, cut production by 20% for 3 yrs
z. Russia banning export of Uranium?
8. Cobalt; Lower; $23.93 ($52750/t) from $27.56 ($60750/t) from $26.31 ($58,000/t); Low $10; High US$43
a. Electric Vehicles (8 kg), Smartphones (8 grams), Jet Engines; Gigafactories
b. Congo: Supplies >50% world's supply; Child Labor?
c. Demand: 8% to 10% pa
d. Shortage: 2022 and beyond
e. Cobalt Reduced EV is 5-10 years away? Musk: Reducing Cobalt in Tesla;
f. 2018: 1m EVs (10k tonnes); 2027: 27m ( 27m tonnes)
g. Target: 2018 - US$62,000/t; 2022 - US$44.000/t
9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
Equities - Risk-On/b] (Data as of Saturday every week)
1. US Equities - Higher. 2723 from 2659 last week from 2768 two weeks ago
a. Support: 2740; 2560; Resistance: 3000; Fwd PE 16
b. Traded LABD (Biotech Inverse 3x)
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Higher. 26486 from 24718 from 25561
a. Support: 24500, 23500; Resistance: 28400; 31600;
b. Bought Guoco Group (0053)
c. Sold Sands China (1928)
d. Sold Sunny Optical
e. Sold AAC
f. Sold SJM
g. Sold Galaxy
h. Sold MMG
i. Sold Yangzhou Coal
j. Sold 2/3 Tencent
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Higher. 2676 from 2599 from 2550
a. Support: 2450; Resistance 2900; 3300; 3600
b. Sold 1/2 A50 (2822) listed in HK
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Higher; 3116 from 2972 from 3063
a. Resistance 3850
b. Bought UOL
c. Sold Genting Singapore
d. Sold OUE
e. Sold Gallant Venture
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Higher. 22244 from 21185 from 22532
a. Forward PE 13
b. Resistance 25000
c. No Trade
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Higher; 1714 from 1683 from 1732
a. No Trade
viewtopic.php?f=10&t=6292&start=30
[b]Currencies- Risk Off (Data from XE.com)
1. USD to JPY - JPY Weaker; 113.22 from 111.99 last week from 112.41 two weeks ago
a. 52 week range is 76 to 126
b. Aging Population
c. High Debt Ratio
d. Why is it a Safe Haven ?
viewtopic.php?f=32&t=4205&start=180
2. SGD to MYR - SGD Stronger; 3.0276 from 3.0238 from 3.0173
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Stronger; 0.7211 from 0.7030 from 0.7141
a. The range is 0.70 (2016) to 1.10 (2011)
b. Commodity Currency
c. I need to diversify my AUD into another currency
viewtopic.php?f=32&t=5256&start=130
4. AUD to SGD - AUD Stronger. 0.9916 from 0.9731 from 0.9837
a. The range is 0.98 (2016) to 1.36 (2012).
b. I would choose the AUD over the SGD
5. AUD to MYR - AUD Stronger. 3.0021 from 2.9408 from 2.9686
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Stronger. 1.1388 from 1.1341 from 1.1464
viewtopic.php?f=32&t=5523&start=100
7. USD to HKD - HKD Stronger. 7.8223 from 7.8407 from 7.8394
a. 52 week range is 7.7452 - 7.8530
b. USD Peg band: 7.75 to 7.85
c. Will they remove the peg to the USD during the next crisis?
d. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40
8. USD to MYR:- MYR Stronger. 4.1625 from 4.1850 from 4.1576
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
viewtopic.php?f=32&t=397&start=9. USD to SGD:-
9. USD to SGD:- SGD Stronger; 1.3751 from 1.3843 from 1.3778
a. High 1.70 (2004); Low 1.20 (2011)
b. Am very uncomfortable holding the currency of a small country
viewtopic.php?f=32&t=136&start=100
10. USD to CNY:- CNY Weaker; 6.8910 from 6.9458 from 6.9292
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
11. GBP to USD:- GBP Stronger; 1.2973 from 1.2782 from 1.3024
a. Brexit; Politics;
viewtopic.php?f=32&t=333&start=80
12. GBP to MYR:- GBP Stronger; 5.3998 from 5.3510 from 5.4152
13. Dollar Index - USD Weaker 96.54 from 96.83 from 95.98
viewtopic.php?f=32&t=7616&start=60
Others
Sentiment - Complacent?
Headwinds
i) Derivatives (US$700t);
ii) Debts (US$237t, 318% GDP);
iii) Corporate Debt (US$50t); US Corp Debts (US$6t)
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)
vi) Bitcoin (US$200b)
vii) US Pension Short-Fall: US$385b
viii) NPLs at European Banks: EUR$1t
ix) China's Bond Market: US$12t (third largest)
Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks: US$120b 2Q, 2017 (-10% qoq; -6% yoy); US$3.2t since 2009; i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016
m. Private Equities: US$600b Cash
Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants
HK Properties
1. Vacancy tax
2. 9000 vacant apartments
3. CLSA, UBS and Citi - Prices may drop 10% to 15% by end 2019
4. Rising Interest rates
5. Slowing Economy / Trade War
6. Depreciating Yuan
7. Weak Stock Markets
Spore Properties
1. 60,000 Units of Supply (7 years Supply of 6500 Homes per year )
Malaysian Properties
1. NAPIC: Overhang - 29,200 units (2018) vs 20,800 (2017) vs 13,400 (2016)
2. Overhang would be greater if Serviced Residence and SOHOs are included
Yield on 10 Year US Treasuries - Higher; 3.21% from 3.08% last week from 3.19% two weeks ago
a. Resistance 3.3%
Yield on 2 Year Treasuries - Higher; 2.90% from 2.81% from 2.90%
Interest Rates:-
a. Expecting US Interest Rates to slowly rise over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. US rate hike in Dec, 2018? Three in 2019? One in 2020?
d. Argentina's Intertest Rate: 60%
e. Turkey's Interest Rate: 24%
f. Ukraine's Interest rate: 18%
viewtopic.php?f=16&t=7319&p=221670#p221670
JNK (SPDR Barclays High Yield Bond ETF) - Higher; 35.13 from 35.09 from 35.37
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Higher; 84.27 from 84.23 from 84.90
Baltic Dry Index - Lower; 1470 from 1516 from 1576; Low 290; High 2330 (2013)
The above is to from help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments
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