TOL @ Apr 01, 2018
New Money From The New Month
It's a new month again and new money would again be flowing into the markets.
Therefore, we should get at least one spike in the markets next week, unless the Fund Managers have already spent their money in advance on Thursday, for Window Dressing.
Anyway, over the next two weeks, I'm expecting the US markets to be treading water, until about April 13th, the start of the US Earnings season.
As for the Trade War between the US and China, I'm still not expecting a full blown one.
In view of the above, I may still buy on any sharp dip but will not chase any rip.
Market Risk Indicators
1. Euphoria: 7 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Fund Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Subprime Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (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?;
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; 7 (Safe 1: PE15; Danger 10: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 7 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela; Russia
Total: 50 out of 70 (71%); (Safe: 50%; Danger: 80%)
Commodities: Risk-Off (Data from Commodities Live)
1. WTI Oil - Lower. US$64.89 from US$65.81 from US$62.24 last week from US$62.14 two weeks ago; Support: US$58; Resistance: US$66
a. Glut 0.5m bpd; Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels;
c. US SPR: 679m barrels (33 days); To sell 190m over 8 years. Released 1m;
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells;
f. US: Active rigs doubled, Currently, 743 vs 316 in May 2016
g. China (4th largest producer; largest importer) - Reserve life: 10 to 6 years
h. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO: 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2018 Imports to decrease?
l. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd; Kurdistan -350k bpd; US +1m bpd (2019)
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +1m bpd 2018
n. Venezeula: -250k to -700k; Worst Case -2m bpd supply (50% cut by 2020)?
viewtopic.php?f=33&t=7550&start=210
2. Gold - Lower. US$1325 from US$1347 from US$1314. Record US$1920.
a. Global 33,000 tons; US 8000t; China 5000t; IMF 3000t; Germany 3000t
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: H 2017: -14%; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
l. U.S. government holds 261.5m ounces at book value of US$42m
m. Mid-Term Bullish but Short Term Bearish?
n. China: Reserves 160m oz; 400m oz ground;
o. US: Reserve 260m oz
viewtopic.php?f=33&t=7589&p=202084#p202084
3. Silver - Lower. US$16.34 from US$16.56 from US$16.34
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
viewtopic.php?f=33&t=7589&p=202084#p202084
4. Platinum - Lower; US$937 from US$950 from US$951
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. Demand from vehicles destroyed by Hurricanes (1m cars)
j. 2016: 17.5m cars sold in US
5. Zinc - Higher; US$3278 from US$3218 from US$3255
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)
viewtopic.php?f=33&t=367&start=208.
6. Copper - Higher; US$3.02 from US$2.98 from US$3.11
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. Uranium - Lower; US$21.10 from US$21.85 from US$21.90
a. Breakeven: US$40 per lb
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: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 21/54 reactors? Currently, only 5
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term contracts expiring in 2017-18; 75% between 2017-2025;
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. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. New technology to mine Uranium from sea water? Cost and How Soon?
w. Glut at 15m pounds (23 reactors for 1 year)
x. Cameco, world's largest, mothballed mine for 10 mths; 10% world's supply
y. Kazatomprom, world's second largest, cut production by 20% for 3 years
8. If there's a crash, Commodities would not be spared
9. The High USD is not good for Commodities
Equities - Risk-On ( Data as of Saturday every week )
1. US Equities - Higher. 2641 from 2588 last week from 2752 two weeks ago.
a. Support 2560; 2400; Resistance: 2900
b. Sold SINA
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Lower. 30093 from 30309 from 31502
a. Support: 26900; Resistance: 38,000; 43,000
b. Sold Fosun (0656)
c. Sold ICBC (1398)
d. Sold AAC (2018)
e. Sold Ping An (2318)
f. Sold Tencent (0700)
g. Bought Zhaojin (1818)
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Higher. 3169 from 3153 from 3270
a. Support: 3210; 2950; 2450; Resistance 3600
b. Sold A50 (2822) listed in HK
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Higher; 3428 from 3421 from 3512
a. Sold HK Land
b. Traded Creative
c. Traded OCBC
d. Sold jardine Strategic
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Higher. 21454 from 20618 from 21676
a. No Trade
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Lower; 1863 from 1865 from 1846
a. No Trade
viewtopic.php?f=10&t=6292&start=30
Currencies- Risk-Off (Data from XE.com)
1. USD to JPY - JPY Weaker. 106.29 from 104.73 last week from 105.98 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. Nikkei down 14% this correction
viewtopic.php?f=32&t=4205&start=180
2. SGD to MYR - SGD Weaker 2.9477 from 2.9779 from 2.9666
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Weaker; 0.7681 from 0.7697 from 0.7713
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 Weaker. 1.0071 from 1.0125 from 1.0165
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. 2.9684 from 3.0152 from 3.0157
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Weaker. 1.2324 from 1.2356 from 1.2290
viewtopic.php?f=32&t=5523&start=100Flat. EUR to MYR -
7. EUR to MYR - EUR Weaker; 4.7629 from 4.8403 from 4.8047
Flat. USD to HKD - HKD Stronger. 7.8186 from 7.8210 from 7.8178
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40
9. USD to MYR:- MYR Stronger. 3.8647 from 3.9175 from 3.9095
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Macquarie: 4.90 (Dec 31, 2017)
d. UOB: 4.35 (July 2017)
e. When is the right time to diversify from the MYR?
viewtopic.php?f=32&t=397&start=60
10. USD to SGD:- SGD Stronger; 1.3111 from 1.3155 from 1.3179
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
11. USD to CNY:- CNY Stronger; 6.2741 from 6.3033 from 6.3306
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
12. GBP to USD:- GBP Weaker. 1.4014 from 1.4134 from 1.3945
a. Brexit; Politics;
viewtopic.php?f=32&t=333&start=80
13. GBP to MYR:- GBP Weaker. 5.4149 from 5.5368 from 5.4518
a. Which is worst - Brexit or Malaysian Election?
14. CHF to MYR:- CHF Weaker; 4.0519 from 4.1356 from 4.1063
15. Dollar Index - USD Stronger. 89.97 from 89.44 from 90.21
viewtopic.php?f=32&t=7616&start=60
Yield on 10 Year US Treasuries - Lower. 2.74% from 2.81% last week from 2.84% two weeks ago
a. Low 1.32%; High 2.69%.
Yield on 2 Year Treasuries - Higher; 2.27% from 2.25% from 2.29%
Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70
JNK (SPDR Barclays High Yield Bond ETF) - Higher; 35.85 from 35.62 from 35.97
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Higher; 85.64 from 84.92 from 85.80
Baltic Dry Index - Lower; 1005 from 1117 from 1150; Low 290; High 2330 (2013)
The above is to 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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