Winston's Investment Ideas 04 (Oct 15 - May 19)

Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Sep 03, 2017 12:47 pm

TOL @ Sep 03, 2017

September.jpg


New Money From the New Month

It's a new month again so new money would be flowing into the markets again. Therefore, we should see a spike in the markets, unless the Fund Managers have already spent their reserved cash a few days back, when North Korea launched it's missiles over Japan.

Anyway, the markets have been a bit choppy and I have started to raise Cash again. Any spike in the markets should probably be regarded as a "Selling Opportunity" now.

At the same time, since there's still no fear in the air yet, it's still not the time to aggresively buy any leveraged Inverse ETFs yet.

As mentioned, I've no doubt that Trump now wants a regime change in North Korea. And it's likely that he will take action within the next few months before the North Korean's missiles can reach the US.

The North Korean 70th Anniversary parade is coming up on Sep 9, 2017 and that would be a good time for Trump to take any action if he wants to.

If not, he will probably have to wait till Feb 8, 2018, when the North Korean Armed Forces would be celebrating their 70th Anniversary.

Anyway, in my Market Indicators below, I have raised "Geopolitical Issues" to "9" as I'm now expecting a regime change in North Korea very soon.

Finally, I need to remind myself to buy more USD as well as further reduce my exposure to Equities. And I'm not sure that Precious Metals and Commodities would be a safe haven in the event of a war with North Korea.


Market Risk Indicators: Close to Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Find Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$47.33 from US$47.87 last week from US$48.70 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$3.07 from US$2.89 from US$2.89. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1330 from US$1296 from US$1290. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$17.72 from US$17.06 from US$16.96
Sold PSLV (Sprott's Physical Silver)
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Higher; US$1011 from US$977 from US$982
Sold PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Lower. US$129 from US$131 from US$128
Low: US$127; US$120; High: US$175; US$300 (2011). Sold JO
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. Bumper Brazilian Crop: +1.1m bags; December 2017:
x. 2017-2018 Robusta: Production of 2.9m bags; Backwardation; Higher Prices?
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3202 from US$3067 from US$3138
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$978 from US$930 from US$925
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, 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: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher. 2477 from 2443 last week from 2426 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Sold JO (Coffee ETN)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27961 from 27848 from 27048
a. Support: 27100; 26450; 25000; Resistance: 28200; 28600
b. Sold Citic Resources, CR Phoenix Healthcare, MMG, Sinopec, BBMG & CNOOC
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3367 from 3332 from 3269
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Sold Wing Tai

5. Japan Equities - Higher. 19691 from 19470 from 19730
a. Vested 7315 (Japan Inverse ETF) listed in HK

6. Malaysian Equities - No Trade


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 110.12 from 109.66 last week from 109.03 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1496 from 3.1428 from 3.1468

3. AUD to USD - AUD Stronger. 0.7930 from 0.7908 from 0.7925
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Flat. 1.0751 from 1.0752 from 1.0808
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.3871 from 3.3793 from 3.4009
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - 0.6129

7. AUD to EUR - 0.6657

8. EUR to USD - EUR Stronger. 1.1913 from 1.1740 from 1.1762
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Stronger; 5.0879 from 5.0517 from 5.0376

10. USD to HKD - HKD Weaker. 7.8248 from 7.8234 from 7.8222
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

11. USD to MYR:- MYR Stronger. 4.2705 from 4.2732 from 4.2918
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Stronger; 1.3560 from 1.3597 from 1.3636
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Stronger; 6.5613 from 6.6596 from 6.6750
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Stronger. 1.2939 from 1.2837 from 1.2884
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Stronger. 5.5258 from 5.4860 from 5.5280
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 92.65 from 92.52 from 93.52
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, 6.4m houses
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 (50% of China mortgages) lending 90% of new mortgages to first time buyers
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Lower. 2.17% from 2.19% last week from 2.19% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.26 from 37.13 last week from 36.81 two weeks ago

9. Baltic Dry Index - Lower; 1184 from 1200 last week from 1247 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. Japan Topix Inverse 1x ETF (7315) listed in HK
b. DBXT S&P Inverse 1x ETF listed in Singapore
c. EUM (Emerging Market Inverse 1x) listed in US
d. HDGE (Ranger Bear Equity) listed in US
e. RWM (Russell 2000 Inverse 1x) listed in US
f. SPXS (S&P Inverse 3x) listed in US

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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winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Sep 10, 2017 9:08 pm

TOL @ Sep 10, 2017



3Q Window Dressing?

We will be touching Window Dressing time soon. So will the Fund Managers be actively dressing things up or will they be "hands-off" this round?

Intuitively, I think that this Window Dressing season would be muted again. This is because the markets are quite high already. In addition, the Fund Managers may want to also conserve some cash, in case there's any owndraft.

As for North Korea, I have not seen any problems yet. However, this issue will be hanging over the markets until there's a regime change, which I'm expecting. Trump will never allow them to have an ICBM that can reach the US Mainland.

As mentioned, I have been managing my risks by:-
1. Raising Cash
2. Reducing Equities
3. Increasing USD and HKD; Reducing MYR, SGD and AUD
4. Increasing Inverse ETFs, (Still not the time to buy Leveraged Inverse ETF yet)
5. Reducing Commodities. (Neutral on Gold, Silver & Platinium)

And on the horizon, we have the following:-
1. Sep12: iphone8
2. Sep 20-21: FOMC Meeting
3. Sep 22: OPEC meeting
4. Sep 24: Germany's Election

Finally, I've not change my market indicators below. So I may still be doing some very short term Equities trading (withing 2 days) whenever there's any opportunity.


Market Risk Indicators: Close to Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Find Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$47.33 from US$47.87 last week from US$48.70 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$3.07 from US$2.89 from US$2.89. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1330 from US$1296 from US$1290. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$17.72 from US$17.06 from US$16.96
Sold PSLV (Sprott's Physical Silver)
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Higher; US$1011 from US$977 from US$982
Sold PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Lower. US$129 from US$131 from US$128
Low: US$127; US$120; High: US$175; US$300 (2011). Sold JO
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. Bumper Brazilian Crop: +1.1m bags; December 2017:
x. 2017-2018 Robusta: Production of 2.9m bags; Backwardation; Higher Prices?
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3202 from US$3067 from US$3138
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$978 from US$930 from US$925
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, 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: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Lower. 2461 from 2477 last week from 2443 two weeks ago.
a. Support 2400; Resistance: 2650;
b. No Trade
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Lower. 27668 from 27961 from 27848
a. Support: 27100; 26450; 25000; Resistance: 28200; 28600
b. No Trade
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Flat. 3365 from 3367 from 3332
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Lower. 19275 from 19691 from 19470 from 19730
a. Sold 7315 (Japan Inverse ETF) listed in HK; No Liquidity. Wide Bid Ask Gap.

6. Malaysian Equities - No Trade


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Stronger. 107.40 from 110.12 last week from 109.66 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1373 from 3.1496 from 3.1428

3. AUD to USD - AUD Stronger. 0.8106 from 0.7930 from 0.7908
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0838 from 1.0751 from 1.0752
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.4003 from 3.3871 from 3.3793
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Stronger. 0.6136 from 0.6129

7. AUD to EUR - AUD Stronger. 0.6719 from 0.6657

8. EUR to USD - EUR Stronger. 1.2064 from 1.1913 from 1.1740
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 5.0604 from 5.0879 from 5.0517

10. USD to HKD - HKD Stronger. 7.8085 from 7.8248 from 7.8234
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

11. USD to MYR:- MYR Stronger. 4.1947 from 4.2705 from 4.2732
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Stronger; 1.3369 from 1.3560 from 1.3597
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Stronger; 6.4596 from 6.5613 from 6.6596
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Stronger. 1.3215 from 1.2939 from 1.2837
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Stronger. 5.5432 from 5.5258 from 5.4860
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 91.09 from 92.65 from 92.52
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, 6.4m houses
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 (50% of China mortgages) lending 90% of new mortgages to first time buyers
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Lower. 2.17% from 2.19% last week from 2.19% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.26 from 37.13 last week from 36.81 two weeks ago

9. Baltic Dry Index - Lower; 1184 from 1200 last week from 1247 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. Japan Topix Inverse 1x ETF (7315) listed in HK
b. DBXT S&P Inverse 1x ETF listed in Singapore
c. EUM (Emerging Market Inverse 1x) listed in US
d. HDGE (Ranger Bear Equity) listed in US
e. RWM (Russell 2000 Inverse 1x) listed in US
f. SPXS (S&P Inverse 3x) listed in US

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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viewtopic.php?f=26&t=3168

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User avatar
winston
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Joined: Wed May 07, 2008 9:28 am

Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Sep 17, 2017 9:55 am

TOL @ Sep 17, 2017

Complacency.png


Complacency?

The US Markets are touching record highs on hopes of tax reform.

And supposedly, they would be providing details of the tax reform within two weeks, including how they would be paying off their massive debts.

I'm not sure how this would episode would end but didnt he also said the following?
1. On my first day, I will brand China a Currency Manipulator
2. We will build a wall and Mexico will pay for it
3. We're going to repeal Obamacare and we're going to replace it.
Blah Blah etc.

Anyway, US Equities saw some inflows recently and I have decided to sell half of my Inverse ETFs in HDGE (Ranger Equity Bear) and RWM (Russell 2000 Inverse), while I observe things.

My Strategic Allocation remains as follows:-
1. Reduce Equities
2. Raise Cash
3. Diversify Currency Risk
4. Raise Precious Metals Allocation
5. Trade Commodities at extremes
6. Buy Leveraged Inverse ETFs only on extreme fear
7. Continue to trade any Short term Opportunities (less than a two weeks)

For this week, I did the following:-
1. Bought Zhaojin Mining 1818 in HK; Largest goldminer in China
2. Bought PPLT ( Physical Platinum); Risk - Automobile slowdown,
3. Bought PKB (Building & Construction); Harvey, Irma and Infrastructure Program
4. Bought GBP with AUD; Diversification; 30% rise in two years
5. Sold 1/2 RWM (Russell Inverse); Small Caps strong; Tax Reform
6. Sold 1/2 HDGE (Ranger Bear); Tax Reform
7. Sold Wheelock in Spore; Not expecting a delisting unless market plunges > 20%

Over the next two weeks, we have the following:-
1. Sept 20-21; FOMC meeting; Not expecting them to raise interest rates. In fact, they may not even raise interest rates in Dec. using the 2 hurricances as excuse. This may mean that Equities could remain elevated, the USD could weaken and Commodities may rise further.
2. Sept 22: OPEC Meeting; Not expecting much. Oil is trending higher and could go up more if there's any supply disruption;
3. Sept 24: Germany Election. If Merkel wins, I may look at European stocks again.
4. Sep 30: 3Q Window Dressing; Expecting it to be muted.

Finally, there's no change to my Market Indicators below so I may do some very short term trades whenever any opportunity arises.


Market Risk Indicators: Close to Danger Zone
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Find Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Higher. US$49.87 from US$47.33 last week from US$47.87 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
q. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$3.01 from US$3.07 from US$2.89. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1325 from US$1330 from US$1296. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$17.67 from US$17.72 from US$17.06
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Lower; US$971 from US$1011 from US$977
Bought PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Higher. US$141 from US$129 from US$131
Low: US$127; US$120; High: US$175; US$300 (2011). No Trade
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. Bumper Brazilian Crop: +1.1m bags; December 2017:
x. 2017-2018 Robusta: Production of 2.9m bags; Backwardation; Higher Prices?
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Lower; US$3033 from US$3202 from US$3067
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Lower; US$919 from US$978 from US$930
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, 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: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher 2500 from 2461 last week from 2477 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought PKB (Building & Construction)
c. Bought PPLT (Physical Platinum)
d. Sold 1/2 RWM (Russell 2000 Inverse)
e. Sold 1/2 HDGE (Ranger Bear)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27808 from 27668 from 27961
a. Support: 27100; 26450; 25000; Resistance: 28200; 28600
b. Bought Zhaojin Mining
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3354 from 3365 from 3367
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Sold Wheelock

5. Japan Equities - Higher. 19910 from 19275 from 19691
a. No Trade

6. Malaysian Equities - No Trade


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 111.01 from 107.40 last week from 110.12 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1190 from 3.1373 from 3.1496

3. AUD to USD - AUD Weaker. 0.8020 from 0.8106 from 0.7930
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0779 from 1.0838 from 1.0751
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3620 from 3.4003 from 3.3871
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Weaker. 0.5901 from 0.6136 from 0.6129;
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Weaker. 0.6702 from 0.6719 from 0.6657

8. EUR to USD - EUR Weaker. 1.1968 from 1.2064 from 1.1913
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 5.0158 from 5.0604 from 5.0879

10. USD to HKD - HKD Weaker. 7.8166 from 7.8085 from 7.8248
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

11. USD to MYR:- MYR Stronger. 4.1914 from 4.1947 from 4.2705
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3437 from 1.3369 from 1.3560
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.5433 from 6.4596 from 6.5613
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Stronger. 1.3585 from 1.3215 from 1.2939
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Stronger. 5.6930 from 5.5432 from 5.5258
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 91.69 from 91.09 from 92.65
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xv) MS: Expects prices to rise by 10% by end 2018
xvi) Recent collective sales displaced some 1,500 home owners across seven projects
xvii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, 6.4m houses
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.20% from 2.17% last week from 2.19% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Lower. 37.17 from 37.26 last week from 37.13 two weeks ago

9. Baltic Dry Index - Higher; 1361 from 1184 last week from 1200 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. EUM (Emerging Market Inverse 1x) listed in US
c. HDGE (Ranger Bear Equity) listed in US; Sold half
d. RWM (Russell 2000 Inverse 1x) listed in US; Sold half
e. SPXS (S&P Inverse 3x) listed in US

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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viewtopic.php?f=26&t=3168

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User avatar
winston
Billionaire Boss
 
Posts: 118527
Joined: Wed May 07, 2008 9:28 am

Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Sep 24, 2017 1:13 pm

TOL @ Sep 24, 2017

Natural-Disaster.png


Investing After Natural Disasters

One medium term trend that I have been focussing, is the rebuilding and reconstruction
from the three Hurricanes.

Estimates for the cost of Hurricane Harvey’s damage, range from US$65b to US $190b. Meanwhile, Hurricane Irma damage could end up costing between US$50b and US$100b.

Hurricane Harvey supposedly destroyed about 40,000 houses and around 400,000 vehicles in Houston alone. Hurricane Irma supposedly damaged another 300,000 vehicles.

In addition, Puerto Rico’s damage from Hurricane Maria could top $30 billion.

As for Mexico City, I have not seen the damage report but supposedly 3000 buildings have
been destroyed.

The three Hurricanes and Mexican earthquake above will provide a lot of rebuilding and reconctruction projects over the next 2-4 years. Therefore, I have recently invested in :-
1. PKB (Rebuilding and Reconstruction ETF)
2. DBB (Base Metals ETF - Aluminum, Zinc and Copper)
3. MMG (1208; listed in HK; Copper (Peru). Zinc (Australia). Lead & Molybenum)

And Hurricane season is still not over yet, not to mentioned other potential disasters eg. California fire.

Meanwhile, we also have the various "One Belt One Road" projects around the world as well
as the new Xiong An city that is being built outside of Beijing.

For next year, we will probably have the US$1b Trump infrastructure project kicking off.
And in Autumn, it's back to Hurricane season again ...


Market Risk Indicators: Close to Danger Zone
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks;
Fund Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans;
Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Higher. US$50.64 from US$49.87 last week from US$47.33 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
q. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.95 from US$3.01 from US$3.07. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1301 from US$1325 from US$1330. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$17.05 from US$17.67 from US$17.72
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Lower; US$933 from US$971 from US$1011
Bought PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Lower. US$135 from US$141 from US$129
Low: US$127; US$120; High: US$175; US$300 (2011). No Trade
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. Bumper Brazilian Crop: +1.1m bags; December 2017:
x. 2017-2018 Robusta: Production of 2.9m bags; Backwardation; Higher Prices?
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3062 from US$3033 from US$3202
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Flat; US$919 from US$919 from US$978
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, 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: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
j. Demand from vehicles destroyed by Hurricanes
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Flat. 2502 from 2500 last week from 2461 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought PSLV (Physical Silver)
c. Bought DBB (Base Metals - Aluminum, Copper & Zinc)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27881 from 27808 from 27668
a. Support: 27100; 26450; 25000; Resistance: 28200; 28600
b. Bought MMG (1208); Copper; Zinc; Lead; Molybenum
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Flat. 3353 from 3354 from 3365
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Traded Yanlord Land

5. Japan Equities - Higher. 20296 from 19910 from 19275
a. No Trade

6. Malaysian Equities - Bought Ekovest and DNEX


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 111.99 from 111.01 last week from 107.40 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1106 from 3.1190 from 3.1373

3. AUD to USD - AUD Weaker. 0.7953 from 0.8020 from 0.8106
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0713 from 1.0779 from 1.0838
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3301 from 3.3620 from 3.4003
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Weaker. 0.5866 from 0.5901 from 0.6136
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Weaker. 0.6635 from 0.6702 from 0.6719

8. EUR to USD - EUR Stronger. 1.1986 from 1.1968 from 1.2064
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Stronger; 5.0207 from 5.0158 from 5.0604

10. USD to HKD - HKD Stronger. 7.8081 from 7.8166 from 7.8085
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

11. USD to MYR:- MYR Stronger. 4.1883 from 4.1914 from 4.1947
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3471 from 1.3437 from 1.3369
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.5919 from 6.5433 from 6.4596
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3564 from 1.3585 from 1.3215
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.6844 from 5.6930 from 5.5432
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 91.90 from 91.69 from 91.09
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xv) MS: Expects prices to rise by 10% by end 2018
xvi) Recent collective sales displaced some 1,500 home owners across seven projects
xvii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, 6.4m houses
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures introduced in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.25% from 2.20% last week from 2.17% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
d. Peru reduced interest rates by 25 bps from 3.75% to 3.5%
viewtopic.php?f=16&t=7319&start=70


8. JNK (SPDR Barclays High Yield Bond ETF) - Higher; 37.19 from 37.17 last week from 37.26 two weeks ago

9. Baltic Dry Index - Higher; 1470 from 1361 last week from 1184 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. EUM (Emerging Market Inverse 1x) listed in US
c. HDGE (Ranger Bear Equity) listed in US
d. RWM (Russell 2000 Inverse 1x) listed in US
e. SPXS (S&P Inverse 3x) listed in US


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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viewtopic.php?f=26&t=3168

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winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Oct 01, 2017 9:21 am

TOL @ Oct 01, 2017

October.jpg


New Money From The New Month

Happy October!

It's a new month again so new money would be flowing into the markets again. Therefore, we should have at least one spike next week unless the fund managers have already spent their cash reserves in advanced, for Window Dressing.

Anyway, we are touching the most dangerous time of the year and it's always around this time that there's a hiccup in the markets. And if you add in some Geopolitical Risk, Earnings Disappointment, Stupid Tweet etc, then it can be quite a recipe for disaster.

At the same time, we have the Perma Bulls who are talking of a "Melt-Up", possibly from Tax Reforms, Repatriation, Trump's Infrastructure Program etc.

In view of the above, I'm reminding myself to have a more balanced outlook. It's still not the time to aggressively short the market yet and this grinding can go on for a while longer.

It's then probably safe to pursue any Momentum Opportunity or Short Term ideas but with a tight Trailing Stop Loss.


Market Risk Indicators: Close to Danger Zone
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Find Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Higher. US$51.63 from US$50.64 last week from US$49.87 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
q. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$3.02 from US$2.95 from US$3.01. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1283 from US$1301 from US$1325. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
n. Mid-Term Bullish but Short Term Bearish?
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.69 from US$17.05 from US$17.67
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Lower; US$915 from US$933 from US$971
Bought PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Lower. US$128 from US$135 from US$141
Low: US$127; US$120; High: US$175; US$300 (2011). No Trade
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. 2017-2018 Brazilian: Bumper; +1.1m bags; December 2017:
x. 2017-2018 Robusta: Deficit; -200k bags; Backwardation; December 2017;
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3153 from US$3062 from US$3033
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. I will be stopping the monitoring of Palladium on a weekly basis. However, whenever I see any interesting articles on Palladium, I will still be filing them at:-
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher. 2519 from 2502 last week from 2500 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Sold 1/2 PSLV (Physical Silver)
c. Sold 1/2 PPLT (Physical Platinum)
d. Sold 1/2 DBB (Base Metals - Aluminum, Copper & Zinc)
e. Sold 1/2 EUM (Emerging Markets Inverse)
f. Sold RWM (Russell 2000 Inverse)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27554 from 27881 from 27808
a. Support: 26900; 26450; 25000; Resistance: 28200; 28600
b. Traded MMG (1208); Sold 1/2 Zhaojin (1818)
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3349 from 3353 from 3354
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Higher. 20356 from 20296 from 19910
a. No Trade

6. Malaysian Equities - No Trade


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 112.45 from 111.99 last week from 111.01 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Flat; 3.1106 from 3.1106 from 3.1190

3. AUD to USD - AUD Weaker. 0.7844 from 0.7953 from 0.8020
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0644 from 1.0713 from 1.0779
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3112 from 3.3301 from 3.3620
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Weaker. 0.5857 from 0.5866 from 0.5901
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Stronger. 0.6639 from 0.6635 from 0.6702

8. EUR to USD - EUR Weaker. 1.1813 from 1.1986 from 1.1968
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 4.9872 from 5.0207 from 5.0158

10. USD to HKD - HKD Weaker. 7.8106 from 7.8081 from 7.8166
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

11. USD to MYR:- MYR Weaker. 4.2212 from 4.1883 from 4.1914
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3570 from 1.3471 from 1.3437
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.6506 from 6.5919 from 6.5433
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3389 from 1.3564 from 1.3585
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.6529 from 5.6844 from 5.6930
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 93.06 from 91.90 from 91.69
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xv) MS: Expects prices to rise by 10% by end 2018
xvi) Recent collective sales displaced some 1,500 home owners across seven projects
xvii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xviii) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) 600k houses in planned supply; Altogether, 6.4m houses
vi) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
vii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
viii) March 2017: Approved property loans +3% y-o-y (RM11.43b)
ix) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
x) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xi) KL: Unsold units +51% qoq and 81% yoy
xii) Selangor: Unsold units +10% qoq and 240% yoy
xiii) Johor: Unsold units +17% qoq and +35% yoy
xiv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xv) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures introduced in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.33% from 2.25% last week from 2.20% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher; 37.32 from 37.19 last week from 37.17 two weeks ago

9. Baltic Dry Index - Higher; 1356 from 1470 last week from 1361 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. EUM (Emerging Market Inverse 1x) listed in US; Sold 1/2
c. HDGE (Ranger Bear Equity) listed in US; Sold 1/2
d. SPXS (S&P Inverse 3x) listed in US


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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viewtopic.php?f=26&t=3168

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User avatar
winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Oct 08, 2017 9:37 am

TOL @ Oct 08, 2017

higher.jpg


Grinding Higher

The US markets have been grinding higher and it would be interesting to see whether it's due to the "new money from the new month" or other catalysts.

In addition, the Warren Buffett interview is getting people to think seriously about the effects of tax reforms.

Basically, if you are an American and sitting on some capital gains, you may not want to sell your Equities until next year, as you could be paying less "Capital Gains Tax" from Tax Reforms.

At the same time, if you are an American and sitting on some capital losses, you may want to seriously think about realizing your losses now, as you will have a higher offset now before Tax Reform.

Therefore, US stocks that are doing well may go higher until next year, while stocks that are performing badly may go lower.

In view of the above, it's probably still safe to trade for the short-term. However, October is a very dangerous month historically.

And if we can survive the next few weeks, the Santa Rally would be coming around mid-November.

Over the next few weeks, we have the Chinese Congress on Oct 18 and the Japanese election on Oct 22. I'm not expecting anything out of the ordinary from these two events.

Trades for the week:-
b. Bought IBB (Biotech); Continuation of Obamacare for the time being
c. Sold 1/2 PSLV (Physical Silver) listed in the US; Weaker than expected
d. Sold EUM (Emerging Markets Inverse) listed in the US; Inflows;
d. Added to SJM (0880) listed in HK; Bridge in early 2018; New Casino in 3Q 2018
e. Bought back Hotung listed in Singapore; Dropped 15% from high of Sin$2.44

Market Risk Indicators: Close to Danger Zone
1. Euphoria: 8 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Find Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform (Oct 1); Deregulation
7. Geopolitical Issues: 9 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 52 out of 70 (74%); (Safe: 50%; Danger: 80%)


Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$49.22 from US$51.63 last week from US$50.64 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 765 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Harvey: 2m bpd refining capacity taken offline
q. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.87 from US$3.02 from US$2.95. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 190
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects from NAFTA renegotiations?
j. Yoy inventories has declined every single week this year
k. Insiders are buying their own stock at several natural gas companies
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1279 from US$1283 from US$1301. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
n. Mid-Term Bullish but Short Term Bearish?
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$16.84 from US$16.69 from US$17.05
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Higher; US$919 from US$915 from US$933
Bought PPLT( Sprott's Physical Platinum)
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

6. Coffee (Arabica) - Higher. US$130 from US$128 from US$135
Low: US$127; US$120; High: US$175; US$300 (2011). No Trade
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras recently
m. Record Arabica crop in 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017?
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
w. 2017-2018 Brazilian: Bumper; +1.1m bags; December 2017:
x. 2017-2018 Robusta: Deficit; -200k bags; Backwardation; December 2017;
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3245 from US$3153 from US$3062
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. 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: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

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. 2549 from 2519 last week from 2502 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought IBB (Biotech); Continuation of Obamacare
c. Sold 1/2 PSLV (Physical Silver)
d. Sold EUM (Emerging Markets Inverse)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 28458 from 27554 from 27881
a. Support: 26900; 26450; 25000; Resistance: 28600
b. Bought SJM (0880)
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Markets Closed. 3349 from 3349 from 3353
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Bought Hotung

5. Japan Equities - Higher. 20691 from 20356 from 20296
a. No Trade

6. Malaysian Equities - No Trade


Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 112.65 from 112.45 last week from 111.99 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1082 from 3.1106 from 3.1106

3. AUD to USD - AUD Weaker. 0.7776 from 0.7844 from 0.7953
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0610 from 1.0644 from 1.0713
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.2976 from 3.3112 from 3.3301
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Stronger. 0.5950 from 0.5857 from 0.5866
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Weaker. 0.6627 from 0.6639 from 0.6635

8. EUR to USD - EUR Weaker. 1.1733 from 1.1813 from 1.1986
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 4.9758 from 4.9872 from 5.0207

10. USD to HKD - HKD Stronger. 7.8060 from 7.8106 from 7.8081
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

11. USD to MYR:- MYR Weaker. 4.2409 from 4.2212 from 4.1883
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3644 from 1.3570 from 1.3471
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.6548 from 6.6506 from 6.5919
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3069 from 1.3389 from 1.3564
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.5422 from 5.6529 from 5.6844
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 93.80 from 93.06 from 91.90
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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 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


4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
xiii) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
xiv) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xv) MS: Expects prices to rise by 10% by end 2018
xvi) Recent collective sales displaced some 1,500 home owners across seven projects
xvii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xviii) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) 600k houses in planned supply; Altogether, 6.4m houses
vi) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
vii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
viii) March 2017: Approved property loans +3% y-o-y (RM11.43b)
ix) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
x) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xi) KL: Unsold units +51% qoq and 81% yoy
xii) Selangor: Unsold units +10% qoq and 240% yoy
xiii) Johor: Unsold units +17% qoq and +35% yoy
xiv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xv) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures introduced in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices have been up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.36% from 2.33% last week from 2.25% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher; 37.18 from 37.32 last week from 37.19 two weeks ago

9. Baltic Dry Index - Higher; 1382 from 1356 last week from 1470 two weeks ago; Low 290; High 2330 (2013)

10. I'm vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. EUM (Emerging Market Inverse 1x) listed in US; Just Sold 2nd Half; Not vested
c. HDGE (Ranger Bear Equity) listed in US; Sold 1/2
d. SPXS (S&P Inverse 3x) listed in US


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


Please Note:-

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Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

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User avatar
winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Oct 15, 2017 9:44 am

TOL @ Oct 15, 2017

momentumtrading.jpg


Momemtum Trading?

The US market has continued it's grind higher and unless there's a sudden Black Swan event ( eg. North Korea, Impeachment, Massive Natural Disaster etc), I think that it can continue it's climb till at least early January.

Why early January? It's because the Americans who are sitting on some capital gains now, may decide to sell only in January (instead of now), hoping that there would be US Tax Reform. That would probably be a 10% savings in taxes unless you are making much more than that before January 2018.

In the meantime, we will probably also get some buying from the coming "US Earnings Season" and thereafter, "Year End Window Dressing".

In view of the above, I think that it''s still quite safe to do some short-term "Momentum Trading" with the usual Risk Management rules eg. Trailing Stop-Loss, Position Sizing etc.

In addition, there's probably nothing much to worry about over the next few weeks:-
1. Oct 18: Chinese Congress; The Chinese markets should be safe till then;
2. Oct 22: Japanese Election; Abe should win. But happens if he loses?
3. Oct 27: Malaysian Budget; Goodies before election;

Trades for the week:-
a. Bought China Mobile (0941) listed in HK; China Tower IPO?; A Shares IPO?
b. Bought Petrochina (0857) listed in HK; Expecting Oil to rise
c. Bought WH Group (0288) listed in HK; 8% correction in 2 days is excessive
d. Bought JO (Coffee) listed in US; Support around US$125
e. Bought XAR (Aerospace & Defense) listed in US; N Korea; Iran; US$700b Budget
f. Bought Genting Msia listed in KL; Outlet Mall, 80% Gaming Expansion, Theme Park
g. Traded OIH (Oil Services) listed in US; Weaker than expected
h. Sold 60% of IBB (Biotech) ;isted in US; Weaker than expected; Trumpcare
i. Sold 1/4 PPLT (Physical Platinum) listed in US; Weaker than expected
k. Sold DBB (Base Metals) listed in US; Weaker than expected

Market Risk Indicators; Reduced Geopolitical Risk and Recession Risk by one notch;
1. Euphoria: 8 (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: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (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: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 50 out of 70 (71%); (Safe: 50%; Danger: 80%)


Commodities: Risk-On (Data from Commodities Live)

1. Oil - Higher. US$51.41 from US$49.22 last week from US$51.63 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd; Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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, 748 vs 316 in May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$3.00 from US$2.87 from US$3.02. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 190
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030: Demand 2% pa. LNG demand 4.5% pa
l. What are the effects from NAFTA renegotiations?
j. Yoy inventories has declined every single week this year
k. Insiders are buying their own stock at several natural gas companies
l. Unusual warm weather for October
m. When Clean Power Plan is repealed, would natural gas suffer ?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1305 from US$1279 from US$1283. 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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
n. Mid-Term Bullish but Short Term Bearish?
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$17.44 from US$16.84 from US$16.69; Vested PSLV
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% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Higher; US$949 from US$919 from US$915; Vested PPLT
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

6. Coffee (Arabica) - Lower. US$127 from US$130 from US$128; Vested JO
Low: US$125; US$120; High: US$175; US$300 (2011).
a. Coffee is the 2nd most traded commodity after crude oil; US$19b trade
b. Europe: largest importer, 1/3 world’s consumption.
c. Brazil: biggest coffee producer, 1/3 world’s coffee
d. USA imports US$4b of coffee yearly
e. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
f. Supply: 152m bags;
g. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
h. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
i. By 2050, suitable land in Central America halved and demand doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Columbia: Crop Issues
l. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
m. Break Point: High US$300 (Apr 2011); Low US$112 (Feb 2016)
n. Growth: USA +1.5% from 4.4%; China +5%; India +4%
o. US: Hot Brew: -3% yoy; Cold Brew: +80% yoy;
p. Illy: Rebalancing in 2017?
q. Arabica: Surplus 3.7m bags
r. Robusta: Deficit 3.8m bags
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Lower; US$3242 from US$3245 from US$3153
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.

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. 2553 from 2549 last week from 2519 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Traded OIH (Oil Services) listed in US; Weaker than expected
c. Bought JO (Coffee) listed in US; Support around US$125
d. Bought XAR (Aerospace & Defense) listed in US
e. Sold 60% of IBB (Biotech) kisted in US; Weaker than expected; Trumpcare
f. Sold 1/4 PPLT (Physical Platinum) listed in US; Weaker than expected
g. Sold DBB (Base Metals) listed in US; Weaker than expected
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 28476 from 28458 from 27554
a. Support: 26900; 26450; 25000; Resistance: 28600
b. Bought China Mobile (0941) listed in HK; China Tower IPO; A Shares IPO
c. Bought Petrochina (0857) listed in HK; Expecting Oil to rise
d. Bought WH group (0288) listed in HK; 8% correction in 2 days is too excessive
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3391 from 3349 from 3349
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Higher. 21155 from 20691 from 20356
a. No Trade

6. Malaysian Equities:-
a. Bought Genting Msia; Growth: Outlet Mall, 80% Expansion, Theme Park


Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Stronger. 111.83 from 112.65 last week from 112.45 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1237 from 3.1082 from 3.1106

3. AUD to USD - AUD Stronger. 0.7875 from 0.7776 from 0.7844
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0640 from 1.0610 from 1.0644
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.3240 from 3.2976 from 3.3112
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Weaker. 0.5915 from 0.5950 from 0.5857

7. AUD to EUR - AUD Stronger. 0.6638 from 0.6627 from 0.6639

8. EUR to USD - EUR Stronger. 1.1859 from 1.1733 from 1.1813
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Stronger; 5.0064 from 4.9758 from 4.9872

10. USD to HKD - HKD Weaker. 7.8070 from 7.8060 from 7.8106
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

11. USD to MYR:- MYR Stronger. 4.2201 from 4.2409 from 4.2212
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Stronger; 1.3517 from 1.3644 from 1.3570 from 1.3471
a. High 1.70 (2004); Low 1.20 (2011)
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Stronger; 6.5803 from 6.6548 from 6.6506
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Stronger. 1.3318 from 1.3069 from 1.3389
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.6227 from 5.5422 from 5.6529
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Weaker. 92.85 from 93.80 from 93.06
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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

4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) Unexpected relaxation of the curbs, implies market is weaker than expected
vi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
vii) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viii) Glut of unsold homes eased by 21% in 1H 2017
ix) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
x) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xi) MS: Expects prices to rise by 10% by end 2018
xii) Recent collective sales displaced some 1,500 home owners across seven projects
xiii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xivi) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
ii) Properties purchased on DIS between 2010 and 2014, are now on the market
iii) 600k houses in planned supply; Altogether, 6.4m houses
iv) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
v) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
vi) KL: Unsold units +51% qoq and 81% yoy
vii) Selangor: Unsold units +10% qoq and 240% yoy
viii) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Lower. 2.27% from 2.36% last week from 2.33% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Yield on 2 Year Treasurues - 1.49%

8. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70

9. JNK (SPDR Barclays High Yield Bond ETF) - Flat; 37.18 from 37.18 last week from 37.32 two weeks ago

10. Baltic Dry Index - Higher; 1485 from 1382 last week from 1356 two weeks ago; Low 290; High 2330 (2013)

11. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. HDGE (Ranger Bear Equity) listed in US; Sold 1/2
c. SPXS (S&P Inverse 3x) listed in US


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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viewtopic.php?f=26&t=3168

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User avatar
winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Oct 22, 2017 8:32 am

TOL @ Oct 22, 2017

Flash Crash.jpg


Flash Crash

It's been a while since we have had a Flash Crash and we have now forgotten that the markets can also go down as fast as it can go up.

Anyway, we have had a small taste of it in HK this week. For no reason, the Hang Seng index dropped >600 points on Thursday. That was a major move and it caught everyone by surprised.

In view of the above, I have decided to raise my Cash level again. I'm very uncomfortable with what happened in HK and if that can happened in a strong bull market with most market players very confident that the Chinese markets would be supported due to the Chinese Congress, anything can really happen after the Chinese Congress next week.

Similarly, it's also a strong bull market in the US with most market players expecting the market to grind higher on Tax Reform, Earnings Beat and Bankster's Liquidity. So will a Flash Crash also take everyone by surprised in the US?

In addition, Little Rocket Man has been very quiet lately. Maybe he has been asked by China to wait until after the Chinese Congress before playing with his toys again.


Trades for the week:-
a. Sold 1/2 WH Group (0288) listed in HK
b. Sold 1/2 SJM (0880) listed in HK
c. Sold 1/2 Tencent (0700) listed in HK
d. Sold China Mobile (0941) listed in HK
e. Sold Petrochina (0857) listed in HK
f, Sold 1/2 XAR (Aerospace & Defense) listed in US
g. Sold JO (Coffee) listed in US
h. Sold IBB (Biotech) listed in US
i. Sold PKB (Rebuilding & Reconstruction) listed in US
j. Sold Genting Msia listed in KL
k. Sold Ekovest listed in KL
l. Sold DGB Asia listed in KL


Market Risk Indicators; Reduced Geopolitical Risk and Recession Risk;
1. Euphoria: 8 (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: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (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: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 50 out of 70 (71%); (Safe: 50%; Danger: 80%)


Commodities: Risk-On (Data from Commodities Live)

1. Oil - Higher. US$51.70 from US$51.41 last week from US$49.22 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd; Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd; Kurdistan -350k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.91 from US$3.00 from US$2.87. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 185
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030: Demand 2% pa. LNG demand 4.5% pa
l. What are the effects from NAFTA renegotiations?
j. Yoy inventories has declined every single week this year
k. Insiders are buying their own stock at several natural gas companies
l. Unusual warm weather for October
m. When Clean Power Plan is repealed, would natural gas suffer ?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1282 from US$1305 from US$1279. 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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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. Germany has brought back 674 tonnes of gold
n. Mid-Term Bullish but Short Term Bearish?
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$17.06 from US$17.44 from US$16.84; Vested PSLV
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% 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

5. Platinum - Lower; US$926 from US$949 from US$919; Vested PPLT
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

6. Coffee (Arabica) - Lower. US$125 from US$127 from US$130; Vested JO
Low: US$125; US$120; High: US$175; US$300 (2011).
a. Coffee is the 2nd most traded commodity after crude oil; US$19b trade
b. Europe: largest importer, 1/3 world’s consumption.
c. Brazil: biggest coffee producer, 1/3 world’s coffee
d. USA imports US$4b of coffee yearly
e. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
f. Supply: 152m bags;
g. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
h. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
i. By 2050, suitable land in Central America halved and demand doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Columbia: Crop Issues
l. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
m. Break Point: High US$300 (Apr 2011); Low US$112 (Feb 2016)
n. Growth: USA +1.5% from 4.4%; China +5%; India +4%
o. US: Hot Brew: -3% yoy; Cold Brew: +80% yoy;
p. Illy: Rebalancing in 2017?
q. Arabica: Surplus 3.7m bags
r. Robusta: Deficit 3.8m bags
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Lower; US$3102 from US$3242 from US$3245
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.

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. 2575 from 2553 last week from 2549 two weeks ago.
a. Support 2400; Resistance: 2650;
b, Sold 1/2 XAR (Aerospace & Defense) listed in US
c. Sold JO (Coffee) listed in US
d. Sold IBB (Biotech) listed in US
e. Sold PKB (Rebuilding & Reconstruction) listed in viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 28487 from 28476 from 28458
a. Support: 26900; 26450; 25000; Resistance: 28800;
b. Sold 1/2 WH Group (0288) listed in HK
c. Sold 1/2 SJM (0880) listed in HK
d. Sold 1/2 Tencent (0700) listed in HK
e. Sold China Mobile (0941) listed in HK
f. Sold Petrochina (0857) listed in HK
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3379 from 3391 from 3349
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Higher. 21458 from 21155 from 20691
a. No Trade

6. Malaysian Equities:-
a. Sold Genting Msia listed in KL
b. Sold Ekovest listed in KL
c. Sold DGB Asia listed in KL


Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Weaker. 113.87 from 111.83 last week from 112.65 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1108 from 3.1237 from 3.1082

3. AUD to USD - AUD Weaker. 0.7853 from 0.7875 from 0.7776
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0666 from 1.0640 from 1.0610
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3177 from 3.3240 from 3.2976
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Stronger. 0.5955 from 0.5915 from 0.5950
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Stronger. 0.6645 from 0.6638 from 0.6627

8. EUR to USD - EUR Weaker. 1.1816 from 1.1859 from 1.1733
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 4.9928 from 5.0064 from 4.9758

10. USD to HKD - HKD Stronger. 7.8028 from 7.8070 from 7.8060
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

11. USD to MYR:- MYR Weaker. 4.2257 from 4.2201 from 4.2409
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3584 from 1.3517 from 1.3644
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.6194 from 6.5803 from 6.6548
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3188 from 1.3318 from 1.3069
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.5741 from 5.6227 from 5.5422
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 93.39 from 92.85 from 93.80
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b
xxi) Cash Levels of Fund Managers: 4.7% (lowest in 2.5 years)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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

4. 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


5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) Unexpected relaxation of the curbs, implies market is weaker than expected
vi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
vii) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viii) Glut of unsold homes eased by 21% in 1H 2017
ix) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
x) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
xi) MS: Expects prices to rise by 10% by end 2018
xii) Recent collective sales displaced some 1,500 home owners across seven projects
xiii) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xivi) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
ii) Properties purchased on DIS between 2010 and 2014, are now on the market
iii) 600k houses in planned supply; Altogether, 6.4m houses
iv) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
v) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
vi) KL: Unsold units +51% qoq and 81% yoy
vii) Selangor: Unsold units +10% qoq and 240% yoy
viii) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
xv) Prices up 8.5% since Jan 2017 and were 21.6% higher y-o-y in June
xvi) Nov 2016 ABSD - Foreigners: 15% to 30%; Locals (Non 1st Time): 8% to 15%
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.38% from 2.27% last week from 2.36% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Yield on 2 Year Treasurues - Higher; 1.58% from 1.49%

8. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70

9. JNK (SPDR Barclays High Yield Bond ETF) - Flat; 37.32 from 37.18 last week from 37.18 two weeks ago

10. Baltic Dry Index - Higher; 1578 from 1485 last week from 1382 two weeks ago; Low 290; High 2330 (2013)

11. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. HDGE (Ranger Bear Equity) listed in US; Sold 1/2
c. SPXS (S&P Inverse 3x) listed in US


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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viewtopic.php?f=26&t=3168

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User avatar
winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Oct 29, 2017 9:24 am

TOL @ Oct 29, 2017

November.jpg


New Money From The New Month

It's going to be a new month again, so new money would be flowing into the markets again.

Therefore, we should have at least one spike in the markets next week, unless the Fund Managers have already spent their Cash Reserve in advance, on Friday.

When you see the movement in AMZN, MFST, GOOG etc, you cant help but wonder where did those money come from. And if the action in the Big Techs on Friday was not euphoric, I dont know what is.

In view of the above, I have increased my Euphoria Risk Indicator below, to 9 from 8. My overall Market Risk Indicator is now 73%. It's still below the danger zone of 80% but we are getting there..

For next week, we have the following:-
1. Who will Robert Mueller arrest on Tuesday and how would that affect the Trump Admin?
2. Will the current Spain Crisis become something bigger?
3. When will Little Rocket Man play with his toys again now that the China Congress is over?

Finally, I still think that markets are safe until early January, due to Tax Reform. However, a Flash Crash cannot be ruled out and if one does happened before January, it should be bought. (Cask kept aside are for such an event)

Also, I need to double-ckeck that my usual Risk Management rules are in placed:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f. Position Sizing
g. Trailing Stop Loss

Trades for the week:-
a. Bought China Mobile (0941) listed in HK
b. Sold WH Group (0288) listed in HK
c. Bought Genting Msia listed in KL
d. Bought JD.com listed in US


Market Risk Indicators; Reduced Geopolitical Risk and Recession Risk;
1. Euphoria: 9 (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: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (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: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)


Commodities: Risk-On (Data from Commodities Live)

1. Oil - Higher. US$53.81 from US$51.70 last week from US$51.41 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd; Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd; Kurdistan -350k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - will no longer be monitoring on a weekly basis
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1265 from US$1282 from US$1305. 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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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?
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.74 from US$17.06 from US$17.44; Vested PSLV
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% 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

5. Platinum - Lower; US$917 from US$926 from US$949; Vested PPLT
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

6. Coffee - No longer monitoring on a weekly basis
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3168 from US$3102 from US$3242
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.

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. 2581 from 2575 last week from 2553 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought JD.com
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Lowerr. 28439 from 28487 from 28476
a. Support: 26900; 26450; 25000; Resistance: 28800;
b. Sold 1/2 WH Group (0288)
c. Bought China Mobile (0941)
htttp:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3416 from 3379 from 3391
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Higher. 22008 from 21458 from 21155
a. No Trade

6. Malaysian Equities:-
a. Bought Genting Msia listed in KL


Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Weaker. 114.14 from 113.87 last week from 111.83 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.0961 from 3.1108 from 3.1237

3. AUD to USD - AUD Weaker. 0.7643 from 0.7853 from 0.7875
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0471 from 1.0666 from 1.0640
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.2418 from 3.3177 from 3.3240
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Weaker. 0.5836 from 0.5955 from 0.5915
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Weaker. 0.6582 from 0.6645 from 0.6638

8. EUR to USD - EUR Weaker. 1.1613 from 1.1816 from 1.1859
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Weaker; 4.9254 from 4.9928 from 5.0064

10. USD to HKD - HKD Weaker. 7.8038 from 7.8028 from 7.8070
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

11. USD to MYR:- MYR Weaker. 4.2414 from 4.2257 from 4.2201
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Weaker; 1.3699 from 1.3584 from 1.3517
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Weaker; 6.6529 from 6.6194 from 6.5803
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3096 from 1.3188 from 1.3318
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.5545 from 5.5741 from 5.6227
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Stronger. 94.96 from 93.39 from 92.85
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b
xxi) Cash Levels of Fund Managers: 4.7% (lowest in 2.5 years)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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

4. 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


5. Properties

a. Spore Properties - Slow Rise?
i) Prices declined by 12% since 2013
ii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iii) Americans became the 2nd most frequent buyers of high-end homes
iv) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
v) Glut of unsold homes eased by 21% in 1H 2017
vi) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
vii) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
viii) MS: Expects prices to rise by 10% by end 2018
ix) Recent collective sales displaced some 1,500 home owners across 7 projects
x) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xi) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until General Elections ?
i) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
ii) Properties purchased on DIS between 2010 and 2014, are now on the market
iii) 600k houses in planned supply; Altogether, 6.4m homes
iv) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
v) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
vi) KL: Unsold units +51% qoq and 81% yoy
vii) Selangor: Unsold units +10% qoq and 240% yoy
viii) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 1H 2018 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J

d. HK Housing - No longer monitoring on a weekly basis
viewtopic.php?f=10&t=7785&p=202051#p202051


6. Yield on 10 Year US Treasuries - Higher. 2.41% from 2.38% last week from 2.27% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Yield on 2 Year Treasurues - Higher; 1.59& from 1.58% from 1.49%

8. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70

9. JNK (SPDR Barclays High Yield Bond ETF) - Lower; 37.23 from 37.32 last week from 37.18 two weeks ago

10. Baltic Dry Index - Lower; 1546 from 1578 last week from 1485 two weeks ago; Low 290; High 2330 (2013)

11. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. HDGE (Ranger Bear Equity) listed in US
c. SPXS (S&P Inverse 3x) listed in US


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


Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

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viewtopic.php?f=26&t=3168

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It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston
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Re: Winston's Investment Ideas 04 (Oct 15 - Dec 17)

Postby winston » Sun Nov 05, 2017 3:40 pm

TOL @ Nov 05, 2017

caution.jpg


Time For Caution?

About 80% of the S&P 500 companies have already reported their earnings. So what could be the next catalyst for the US markets to move higher?
1. Tax Reform? But this will still be not sorted out for another few weeks
2. 4Q Window Dressing? But this will only start in a few weeks too

In the meantime, everyone is quite worried that the market is over-valued. And the only thing holding up the US markets now, is the hope of Tax Reform.

Even then, I'm expecting a flood of seling on Jan 02, 2018 as a lot of Amercians are not selling now, as they would have to pay about 10% more Capital Gains tax if Tax Reform does actually get passed.

For next week, we have Trump coming to Asia. Not expecting much from his trip. Maybe he may trip? In addition, is Mueller building an impeachment case against him ?

Trades for the week:-
a. Bought Standard Chartered (0288) listed in HK
b. Traded China Mobile (0941) listed in HK
c. Traded MMG (1208) listed in HK
d. Sold Tencent (0700) listed in HK
e. Bought Ekovest listed in KL
f. Traded IWCity listed in KL
g. Sold 1/2 JD.com listed in US


Market Risk Indicators; Reduced Geopolitical Risk and Recession Risk;
1. Euphoria: 9 (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: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 6 (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: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea (Sep 9, Feb 8); Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)


Commodities: Risk-On (Data from Commodities Live)

1. Oil - Higher. US$55.73 from US$53.81 last week from US$51.70 two weeks ago Support: US$42; Resistance: US$80
a. Glut 0.5m bpd; Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
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) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO delayed to 2019?; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 3 months extension on May25?; Cap on Libya & Nigeria;
m. Libya: -400k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd; Kurdistan -350k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
viewtopic.php?f=33&t=7550&start=210

2. Gold - Higher. US$1271 from US$1265 from US$1282. 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, decreased each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; 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?
viewtopic.php?f=33&t=7589&p=202084#p202084

3. Silver - Higher. US$16.85 from US$16.74 from US$17.06; Vested PSLV
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% 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 - Higher; US$923 from US$917 from US$926; Vested PPLT
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$3208 from US$3168 from US$3102
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. If there's a crash, Commodities would not be spared
7. The High USD is not good for Commodities


Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher. 2588 from 2581 last week from 2575 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Sold 1/2 JD.com
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 28601 from 28439 from 28487
a. Support: 26900; 26450; 25000; Resistance: 28800;
b. Bought Standard Chartered (0288) listed in HK
c. Traded China Mobile (0941) listed in HK
d. Traded MMG (1208) listed in HK
e. Sold Tencent (0700) listed in HK
htttp:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3372 from 3416 from 3379
a. Support at 2950; 2450; Resistance 3600; 3900
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade
viewtopic.php?f=10&t=6828&start=110

5. Japan Equities - Higher. 22539 from 22008 from 21458
a. No Trade
viewtopic.php?f=10&t=7138&start=200

6. Malaysian Equities; 1741
a. Bought Ekovest listed in KL
b. Traded IWCity listed in KL
viewtopic.php?f=10&t=6292&start=30


Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Stronger. 113.68 from 114.14 last week from 113.87 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1080 from 3.0961 from 3.1108
viewtopic.php?f=32&t=136&start=110

3. AUD to USD - AUD Stronger. 0.7665 from 0.7643 from 0.7853
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0438 from 1.0471 from 1.0666
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.2434 from 3.2418 from 3.3177
a. The range is 2.20 (2008) to 3.41 (2017)

6. AUD to GBP - AUD Stronger. 0.5862 from 0.5836 from 0.5955
a. Converted some AUD to GBP; 30% rise in 2 years; Diversification

7. AUD to EUR - AUD Stronger. 0.6584 from 0.6582 from 0.6645

8. EUR to USD - EUR Stronger. 1.1641 from 1.1613 from 1.1816
viewtopic.php?f=32&t=5523&start=100

9. EUR to MYR - EUR Stronger; 4.9259 from 4.9254 from 4.9928

10. USD to HKD - HKD Stronger. 7.8030 from 7.8038 from 7.8028
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

11. USD to MYR:- MYR Weaker. 4.2436 from 4.2414 from 4.2257
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

12. USD to SGD:- SGD Stronger; 1.3649 from 1.3699 from 1.3584
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

13. USD to CNY:- CNY Stronger; 6.6491 from 6.6529 from 6.6194
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

14. GBP to USD:- GBP Weaker. 1.3076 from 1.3096 from 1.3188
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

15. GBP to MYR:- GBP Weaker. 5.5335 from 5.5545 from 5.5741
a. Which is worst - Brexit or Malaysian Election?

16. Dollar Index - USD Weaker. 94.78 from 94.96 from 93.39
viewtopic.php?f=32&t=7616&start=60


Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts
xi) CDS: US$500m (excluding SME)
xii) Additional US$13t debt as foreign exchange derivatives excluded

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)
XX) Texas Rebuilding: US$120b
xxi) Cash Levels of Fund Managers: 4.7% (lowest in 2.5 years)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b


3. 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

4. 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


5. Properties

a. Spore Properties - Slow Rise?
i) Prices declined by 12% since 2013
ii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iii) Americans became the 2nd most frequent buyers of high-end homes
iv) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
v) Glut of unsold homes eased by 21% in 1H 2017
vi) Homes Sold: 6905 2Q2017 vs 6945 2Q 2103 (highest quarterly)
vii) Mar 2017: Stamp Duty reduced from 4 to 3 years; Tax reduced to 12%, 8% and 4% for the first, second and third year respectively.
viii) MS: Expects prices to rise by 10% by end 2018
ix) Recent collective sales displaced some 1,500 home owners across 7 projects
x) MS: Unsold inventory has fallen to a record 22-year low of 17,000 units
xi) OCBC: Prices flat in 2017 and to appreciate 3% to 8% in 2018
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until General Elections ?
i) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
ii) Properties purchased on DIS between 2010 and 2014, are now on the market
iii) 600k houses in planned supply; Altogether, 6.4m homes
iv) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year
v) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
vi) KL: Unsold units +51% qoq and 81% yoy
vii) Selangor: Unsold units +10% qoq and 240% yoy
viii) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 1H 2018 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, 100 years to recover investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
v) Big 4 Banks (50% of mortgages) lending 90% of new mortgages to first time buyers
vi) Momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian
vii) Cooling measures in Chongqing, Nanning, Nanchang, Changsha and Xian
viewtopic.php?f=10&t=8150&start=30J


6. Yield on 10 Year US Treasuries - Higher. 2.33% from 2.41% last week from 2.38% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Yield on 2 Year Treasurues - Higher; 1.61% from 1.59% from 1.58%

8. 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. US Feds: Rate Hike in Dec 2017? Three rate hikes in 2018? Two in 2019?
d. Bank of England raised rates by 25 bps
viewtopic.php?f=16&t=7319&start=70

9. JNK (SPDR Barclays High Yield Bond ETF) - Lower; 37.00 from 37.23 last week from 37.32 two weeks ago

10. Baltic Dry Index - Lower; 1496 from 1546 last week from 1578 two weeks ago; Low 290; High 2330 (2013)

11. Vested in the following Inverse ETFs:-
a. DBXT S&P Inverse 1x ETF listed in Singapore
b. HDGE (Ranger Bear Equity) listed in US
c. SPXS (S&P Inverse 3x) listed in US


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


Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page
You do not have the required permissions to view the files attached to this post.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118527
Joined: Wed May 07, 2008 9:28 am

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