TOL @ Nov 3, 2019
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 next week unless the fund managers have already spent their cash in advance. (Dont forget that the Cash Levels at most US Mutual Funds are very high, at 4% to 5%).
Thereafter, the markets are hoping that:-
1. Phase One of the Trade War would be signed on Nov 17
2. US Earnings would keep the rally going and
3. If there's a plunge, QEs by the US Fed, ECB and BoJ, will save the markets
I would not be surprised if the PPT has been pumping the markets up recently as there is a need to divert public attention from the botched strategy of withdrawing from Northern Syria and the current impeachment process.
My strategy remains cautious:-
1. Selling into the rally
2. Raising Cash
3. Managing Risk
4. Monitoring Position Size
5. Monitoring Trailing Stop Loss
6. Having a Time Expiry on trades
etc.
I'm fully aware that I missed out on some small gains (especially when we may have the traditional Santa Rally) but it's a risk that I'm willing to take, in view of the following:-
1. Worsening global economy
2. Erratic US President
3. Various geopolitical issues (including any revenge by ISIS, Iran)
4. Brextit (probably a non-event as the UK economy is now only a fraction of it's past)
5. Various trade wars (China, EU, Japan-Korea etc)
6. Impeachment Of Trump
etc.
This not mean that I will not be trading any convincing story. It only means that I will be thinking a few times before I pull my next trigger. It also means that I may not think twice about pocketing any small profits.
Weekly Risk Management Progress Report:-
1. To Monitor Exposure To Equities: Neutral (22% from 37% of Liquid Assets three weeks ago)
Goal: 10% exposure to Equities before the next recession (2020-2021?); Maximum 30%;
2. To Diversify From Asian Equities: No Progress
Goal: To reduce percentage of Asian Equities to around 50%
3. To Buy Inverse ETFs and Puts - Bought 7500 (Inverse HK 2x)
Goal: To have a sizable short position going into the next recession
4. To Increase "USD/HKD/Gold" - No progress. Still at about 30%.
Goal: To be in the safe havens before next recession; (HKD may be repegged)
5. To Reduce Number Of Counters: Progress (19 from 33 three weeks ago)
Goal: To focus on about 8 to 12 counters only
6. To Minimize Industry / Sector Risk / Country Risk
a. Heavy exposure to Asian Based Equities
Goal: To diversify across various sectors and countries
Market Risk Indicators
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; EM USD Loans;
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; Trade War; 2019?;
4. Liquidity: 7 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?; EM; Italy;
5. Inverted Yield: 7 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion; US 10 Years < US 2 Years; Expecting 2019 to 2020
6. Valuation; 7 (Safe 1: PE15; Danger 10) PE S&P, Nadsaq; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - Iran; South China Sea; Europe; Russia; Saudi Arabia; Iran;
Total: 51 out of 70 (73%); (Safe: 60%; Danger: 85%)
Commodities: Risk-Off (Data from Commodities Live on Nov 1 @ 9.00 PM)
1. WTI Oil - Lower. US$54.75 from US$56.66 last week from US$53.72 two weeks ago;
Support: US$43; US$34; Resistance: US$75, US$105;
a. Trade Wars reducing demand for Oil; -1m bpd?
b. US: Stockpiles: Reducing?
c. US SPR: 679m barrels (33 days); To sell 190m barrels over 8 years;
d. US imports 8m bpd (Total demand of India & Japan combined);
e. US: Lighter Crude and Lower Sulphur; 2018 Production +17% yoy;
f. US Break-Even; Permian: US$35 to US$50; Shale: US$50
g. US Shale Debt: US$9b maturing in 2019; US$137b to mature between 2020-2022
h. China (4th largest producer; largest importer); Reserve Life dropped from 10 to 6 years; Ban on Petrochemical Cars in 5-10 years? Quotasj
i. China: SPR 51/90 days; 2019 imports to decrease?
j. IEA: Glut in 2020
k. Saudi: Aramco's IPO; -1.3m bpd (35% cut); Fiscal Break-Even US$85;
l. EV: -350k bpd?
m. Opec: Cut 2.3m bpd since Nov 2018; 9 months extension (April 2020)
viewtopic.php?f=33&t=7550&start=210
2. Gold - Higher. US$1510 from US$1507 from US$1493;
Support: $1240; $1150; $1050; Resistance: $1575; $1775; $1830;
a. Global 33k tons; US 8k t; China 5k t; IMF 3k t; Germany 3k t
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex
d. China: PBOC has been buying gold over the past few months
e. Demand from Muslim countries as Gold is now a halal investment
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, down each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. China: Jewelry: +3% yoy; Industrials -10% yoy; PBOC: 2.4% forex reserves vs US 74%; Retail; Safe Haven: RMB lost 1/3 vs Gold since Jun 2007;
k. Global Demand: China +5%; India -8%;
l. Central Banks: +70% yoy; 33k tons; Poland, Turkey, Khazakhstan & India
m. U.S. government holds 260m ounces at book value of only US$42m
n. China: Reserves 185m oz; 400m oz ground; Output decreased 6% yoy; Added 100 tons since Dec 2018
o. Russia: US$109b worth of gold
viewtopic.php?f=33&t=7589&p=202084#p202084
3. Copper - Lower; US$2.64 from US$2.68 from US$2.64;
a. Higher inventories at LME
b. China - 50% of global consumption
c. China - Lower Power Grid demand
viewtopic.php?f=33&t=5598&p=215285#p215285
4. No longer monitoring Palladium, Cobalt, Uranium, Silver, Platinum and Zinc on a weekly basis
Equities - Risk-On (Data as of Saturday every week)
1. US Equities - Higher. 3067 from 3023 last week from 2986 two weeks ago;
a. Support: 2750; 2320; Resistance: 3025; 3260; PE 18
b, Sold Kraft Heinz (KHC)
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Higher. 27101 from 26667 from 26720;
a. Support: 25500, 24500, 23500; 22000;
b. Resistance: 27300; 29000; 31600;
c. Bought 7500 (2x Inverse Hang Seng)
d. Sold 1/2 MMG (1208)
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Higher. 2958 from 2955 from 2938;
a. Support: 2450; Resistance 3300; 3600
b. No Trade
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Higher; 3229 from 3185 from 3114;
a. Resistance 3850
b. Bought HPL
c. Sold Venture
d. Sold Jardine Strategic
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Higher. 22851 from 22780 from 22493;
a. Forward PE 13
b. Support 19000; Resistance 25000
c. BOJ owns > Half government bonds and 75% of ETFs
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Higher; 1593 from 1570 from 1571;
a. Sold Genting Malaysia
b. Sold 1/4 Genting Berhad
c. Sold Hume Industry
d. Sold Gabungan AQRS Warrants
viewtopic.php?f=10&t=6292&start=30
Currencies - Risk-Off (Data from XE.com on Nov 01 @ 8.50 PM)
1. USD to JPY - JPY Stronger; 108.19 from 108.61 last week from 108.41 two weeks ago;
a. 52 week range is 76 to 126
b. Aging Population
c. High Debt Ratio
d. Why is it a Safe Haven ?
e. QE Infinity?
viewtopic.php?f=32&t=4205&start=180
2. SGD to MYR - SGD Weaker; 3.0666 from 3.0716 from 3.0675;
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Stronger; 0.6892 from 0.6827 from 0.6855;
a. The range is 0.70 (2016) to 1.10 (2011)
b. Commodity Currency
c. To diversify my AUD into what currency?
viewtopic.php?f=32&t=5256&start=130
4. AUD to SGD - AUD Stronger; 0.9361 from 0.9305 from 0.9351;
a. The range is 0.98 (2016) to 1.36 (2012)
5. AUD to MYR - AUD Stronger; 2.8709 from 2.8577 from 2.8679;
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Stronger. 1.1131 from 1.1118 from 1.1173;
viewtopic.php?f=32&t=5523&start=100
7. USD to HKD - HKD Stronger. 7.8372 from 7.8379 from 7.8438;
a. USD Peg band: 7.75 to 7.85
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
8. USD to MYR:- MYR Stronger. 4.1653 from 4.1864 from 4.1854;
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
viewtopic.php?f=32&t=397&start=9
9. USD to SGD:- SGD Stronger; 1.3584 from 1.3631 from 1.3641;
a. High 1.70 (2004); Low 1.20 (2011)
b. Am uncomfortable holding the currency of a small country where a catatrophe can wipe them out but Singapore has been managing it's finances well.
viewtopic.php?f=32&t=136&start=100
10. USD to CNY:- CNY Stronger; 7.0418 from 7.0707 from 7.0821;
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
11. GBP to USD:- GBP Stronger; 1.2941 from 1.2836 from 1.2975;
a. Brexit
viewtopic.php?f=32&t=333&start=80
12. GBP to MYR:- GBP Stronger; 5.3909 from 5.3736 from 5.4283;
13. Dollar Index - USD Weaker; 97.44 from 97.60 from 97.28;
viewtopic.php?f=32&t=7616&start=60
Others
Sentiment - Complacent?
Headwinds
a. Derivatives (US$700t);
b. Debts (US$247t, 320% GDP);
c. Corporate Debt (US$50t); US Corp Debts (US$9t)
d. Institutional Investors (US$0.5t)
e. ETFs AUM (US$3.4t)
f. Bitcoin (US$200b)
g. US Pension Short-Fall: US$385b
h. US Social Security & Medicare Short-Fall: US$100t; 2034 Bankrupt; US$3t US Treasuries
i. NPLs at European Banks: EUR$1t
j. China's Bond Market: US$12t (third largest)
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Japanese government’s debt highest in the world: 1.1 QUADRILLION yen (about USD $10 trillion), twice the size of its entire economy.
m. US Student Debt: US$1.7t
viewtopic.php?f=16&t=8930&start=140
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$16t as of Aug 16, 2019)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Equities US$600b Cash
l. Money Market (US$3.4t); US$3.9 @ Sub-Prime Crisis; Lowes US$2.6t;
m. ECB: Interest rates at -0.05%; QE: Eur 20b/ month starting Nov 2019;
viewtopic.php?f=16&t=8940&start=30
Warning Signs
1. Bearish Divergence - Small Caps
2. Narrow Participation - New Highs
3. Inverted Yield
4. Weak Transportation Numbers - Dow Theory
5. Strong Precious Metal Sector
6. Weak Manufacturing Numbers
7. Insiders Selling: US$26b till date; Highest US$37b in 2000
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
viewtopic.php?f=16&t=7547&start=120
Properties
a. I'm no longer closely monitoring Properties in HK, China, Malaysia and Singapore.
b. I believe that the properties in these countries will not be going anywhere over the next few years.
Yield on 10 Year US Treasuries - Lower; 1.70% from 1.79% last week from 1.75% two weeks ago
Yield on 2 Year Treasuries - Lower; 1.55% from 1.62% from 1.57%;
Interest Rates:-
a. About US$13t or about 1/3 of the world’s bonds have negative yields
b. US Rate Hike: Two more 25 bps cut by end 2019?
c. 6 Developed market and 13 EM central banks to ease in 2H 2019
viewtopic.php?f=16&t=7319&p=221670#p221670
JNK (SPDR Barclays High Yield Bond ETF) - Lower: 108.19 from 108.86 from 108.47;
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Lower; 86.81 from 87.39 from 87.09;
Baltic Dry Index - Lower; 1731 from 1785 from 1855; Low 290; High 2330 (2013)
The above is to from help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments
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