TOL @ Mar 10, 2019
Beginning Of The Big One?
The markets have been down over the past few sessions.
Some of my friends are no longer so confident after chasing this rally. Others are still pretending to put up a brave front but are secretly hoping for a rebound so that they could sell.
I'm also starting to hear comments that this could be the beginning of the big one, similar to the time around last X'mas.
Intuitively, I think that this is not the beginning of the big one. The big boys still have some Cash and the Central Banksters still can lower rates and print money. Main Street is still not bleeding yet.
At the same time, if you a fan of "CANSLIM", you should be selling now as the "Market Direction" is not in your favor.
At this point in time, my gut feel is that there's still no catalyst for a strong plunge yet.
An earnings recession may be on the way but it may still take some time to arrive. Europe and China may be in trouble but that would also take a few months to materialize. The USD is still not that high and so are Oil prices.
This is barring a major natural catastrophe, a flash crash or any other unexpected sudden violent event.
Therefore, I may still continue to buy but the story must be a very convincing one.
Weekly Risk Management Progress Report:-
1. To Reduce Equities: No Progress (11% from 11% last week, of Liquid Assets);
Goal: Zero Equities before the next recession (2020-2021?)
2. To Diversify From Asian Equities: Progress (70% from 71% last week)
Goal: To reduce percentage of Asian Equities to 50%
3. To Buy Inverse ETFs and Puts - Waiting for "M" on charts.
Goal: To have a sizable short position going into the next recession
4. To Increase "USD/HKD/Gold" - No Progress ( at 28%)
Goal: To be in safe havens before next recession; (HKD may be repegged)
5. To Reduce Number Of Counters To 8: No Progress (11 from 11 counters last week). Goal: To focus on 5 to 10 counters that have convincing stories
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: 8 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?; EM; Italy;
5. Inverted Yield: 7 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion; US 10 Years < US 2 Years; Expecting 2019 to 2020
6. Valuation; 7 (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) - Iran; South China Sea; Europe; Russia; Saudi Arabia
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)
Commodities: Mixed (Data from Commodities Live on March 09)
1. WTI Oil - Lower. US$55.98 from US$57.37 last week from US$57.51 two weeks ago; Support: US$43; US$34; Resistance: US$75, US$105
a. Trade Wars will reduce demand for Oil? -500k bpd?
b. Global 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 2021? -1.3m bpd (35% cut in supply)
i. China: SPR 51/90 days; 2019 imports to decrease?
j. Libya: -850k bpd; Brazil +200k bpd; Canada -325 bpd; Nigeria -300k bpd; Iraq -150k bpd; Kurdistan -350k bpd; US +1m bpd; russia -500k;
k. Venezeula: -1.2m bpd; Worst Case -2m bpd supply (50% cut by 2020)?
l. Iran: -0.7m bpd to -1.6m bpd by 1Q, 2019? 6 months exemption from Nov
m. Winter: lower demand for oil; Glut in US?
n. OPEC: Heavier Crude; More Processing;
o. US: Lighter Crude and Lower Sulphur; Glut in Gasoline
viewtopic.php?f=33&t=7550&start=210
2. Gold - Lower. US$1299 from US$1310 from US$1326
Support: $1150; $1050; Resistance: $1400
a. Global 33k tons; US 8k 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; 33k tons; Russian, Turkey, Khazakhstan & India
l. U.S. government holds 260m 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 - Lower. US$15.36 from US$15.47 from US$15.80
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 - Lower; US$819 from US$868 from US$833
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. 70% of supply is from South Africa
6. Palladium - Lower; US$1472 from US$1487 from US$1451
a. Support: US$930; US$500; Resistance: $1600 (Citi)
b. Catalytic Converters (Petrol Cars), Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 10% in 2019
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. 8th Annual supply deficit;
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
j. China - Pollution Programs
k. Supply Deficit: 1m Ounces in 2019
l. Global Stockpiles: 10 to 18m ounces (2 Year Demand)
m. Julius Baer 2020 Target: $1000
7. Zinc - Lower; US$2717 from US$2798 from US$2703
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.
8. Copper - Lower; US$2.90 from US$2.96 from US$2.95
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
9. Uranium - Flat; US$28.00 from US$28.00 from US$28.70
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: 46 existing plants; Building 11; 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. Apr 14, 2019: US requires 25% local production; Higher electricity cost
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?
11. Cobalt; Flat; $14.97 ($33,000/t) from $14.97 ($33,000/t) from $14.06 ($31,000/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. Glencore - stockpiling till June 2019 (radioactivity); 25% Global Supply
g. Target: 2018 - US$62,000/t; 2022 - US$44.000/t
12. If there's a crash, Commodities would not be spared
10. The strong USD is also not good for Commodities
Equities - Risk-Off (Data as of Saturday every week)
1. US Equities - Lower. 2743 from 2804 last week from 2793 two weeks ago
a. Support: 2320; Resistance: 2820; 3000; Fwd PE 16
b. No Trade
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Lower. 28228 from 28812 from 28816
a. Support: 24500, 23500; Resistance: 29000; 31200; 31600;
b. No Trade
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Lower. 2970 from 2994 from 2804
a. Support: 2450; Resistance 2900; 3300; 3600
b. No Trade
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Lower; 3196 from 3220 from 3270
a. Resistance 3850
b. Sold some HPL (Dont understand why Wheelock is pulling out of 68 Holdings)
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Lower. 21206 from 21603 from 21426
a. Forward PE 13
b. Support 19000; Resistance 25000
c. BOJ owns > half government bonds and 75% of ETFs
d. No trade
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Lower; 1680 from 1701 from 1721
a. No trade
viewtopic.php?f=10&t=6292&start=30
Currencies- Risk-Off[b] (Data from XE.com on March 01)
1. USD to JPY - JPY Stronger; 111.13 from 111.87 last week from 110.87 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 ?
e. Stronger Yen will not be good for Exports and Japanese Equities
viewtopic.php?f=32&t=4205&start=180
1a. 100 JPY to MYR - JPY Stronger; 3.68 vs 3.64
2. SGD to MYR - SGD Weaker; 3.0073 from 3.0126 from 3.0134
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Weaker; 0.7045 from 0.7108 from 0.7111
a. The range is 0.70 (2016) to 1.10 (2011)
b. Commodity Currency
c. To diversify my AUD into what currency?
viewtopic.php?f=32&t=5256&start=130
4. AUD to SGD - AUD Weaker. 0.9574 from 0.9613 from 0.9622
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 Weaker. 2.8794 from 2.8961 from 2.8996
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Weaker. 1.1232 from 1.1374 from 1.1321
viewtopic.php?f=32&t=5523&start=100
7. USD to HKD - HKD Weaker. 7.8500 from 7.8487 from 7.8488
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 Weaker. 4.0874 from 4.0786 from 4.0776
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 Weaker; 1.3591 from 1.3526 from 1.3531
a. High 1.70 (2004); Low 1.20 (2011)
b. Am uncomfortable holding the currency of a small country
viewtopic.php?f=32&t=136&start=100
10. USD to CNY:- CNY Weaker; 6.7215 from 6.7048 from 6.7203
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
11. GBP to USD:- GBP Weaker; 1.3015 from 1.3241 from 1.2975
a. Brexit; Politics;
viewtopic.php?f=32&t=333&start=80
12. GBP to MYR:- GBP Weaker; 5.3200 from 5.3953 from 5.2907
13. Dollar Index - USD Stronger; 97.36 from 96.27 from 96.76
viewtopic.php?f=32&t=7616&start=60
[b]Others
Sentiment - Complacent?
Headwinds
a. Derivatives (US$700t);
b. Debts (US$237t, 318% GDP);
c. Corporate Debt (US$50t); US Corp Debts (US$9t)
d. Institutional Investors (US$0.5t)
e. ETFs AUM (US$3.4t)
f. Bitcoin (US$200b)
g. US Pension Short-Fall: US$385b
h. NPLs at European Banks: EUR$1t
i. China's Bond Market: US$12t (third largest)
j. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
k. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016
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
i. US Household Net Worth (US$90t)
j. EM Consumption
k. 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
a. Vacancy tax
b. 9000 vacant apartments
c. CLSA, UBS and Citi - Prices may drop 10% to 15% by end 2019
d. Rising Interest rates
e. Slowing Economy / Trade War
f. Depreciating Yuan
g. Weak Stock Markets
h. Justin Chiu (CK Asset): 10-20% drop; Outskirt Nanos (30% drop)
Spore Properties
a. 60,000 Units of Supply (7 years Supply of 6500 Homes per year )
b. Unsold residential units doubled to over 34,000 in 2018
Malaysian Properties
a. JPPH: Overhang - 30,115 units (2018) vs 20,304 (2017)
b. Overhang would be greater if Serviced Residence and SOHOs are included
China Properties
a. 20% of Urban Housing is vacant (65m homes)
b. In 2018, nationwide ASPs have climbed by 15% to a record high
c. Since 2015, Tier One cities have risen by 55%
d. Since 2015, Tier Two cities have risen by 35%
e. Government targeting annual increase of 7% to 10%
Yield on 10 Year US Treasuries - Lower; 2.63% from 2.73% last week from 2.68% two weeks ago
a. Resistance 3.3%
Yield on 2 Year Treasuries - Lower; 2.46% from 2.52% from 2.52%
Interest Rates:-
a. Expecting US Interest Rates to slowly rise over next 2 years
b. About US$9t or about 23% of the world’s bonds have negative yields
c. US Rate Hike: Two 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) - Lower; 35.40 from 35.69 from 35.53
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Lower; 85.10 from 85.74 from 85.42
Baltic Dry Index - Lower; 657 from 658 from 630; 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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