TOL @ July 21, 2019
Why Are You Excited With The Fed's Rates Cut?
The Fed Banksters hinted that they would be cutting rates on July 30-31 and the markets automatically moved higher. It's as if the Plunge Protection Team (PPT) is at work.
Does it seemed logical to you? Is the US economy really in that bad a shape that a 25 bps rate or even a 50 bps, is warranted at this point in time?
What happened to having a 3% margin where the Feds can cut rates by, when a major slowdown occurs?
And is the Fed really independent of the White House, who has doubled down, to force the Feds to cut rates, by saying that the US-China Trade War is still a long way from being settled? What happened to "Trade Wars Are Easy To Win"?
And are the Feds blind to the fact that the tariffs that are currently being imposed, would eventually lead to higher inflation?
Or are those goods that are being subjected to the current 25% tariffs, not in their basket of commodities for the measurement of inflation? If not, what is inside their basket?
As mentioned, I think that the slowdown would only happen after the US election in November 2020.
In the meantime, you will have Trump and the Central Banksters of the world, trying to prop up the stock-markets, at the expense of the savers and retirees of the world.
It's as if the Central Bankster's sole purpose in life, is to prop up the stock-markets. And for whom?
Anyway, I will continue to use any spike in the markets to sell my existing holdings.
And It will take a lot of convincing, for me to buy anything more, in this type of market.
However, it's still not the time to really short the market yet, unless there's a very big spike. And if I do short the markets, it's for trading purposes only.
The PPT and the Central Banksters still have a lot of bullets left to manipulate the markets so you do not want to be going against them at this point in time.
Weekly Risk Management Progress Report:-
1. To Monitor Exposure To Equities: Safe (14% of Liquid Assets)
Goal: Zero Equities before the next recession (2020-2021?); Maximum 25%;
2. To Diversify From Asian Equities: Progress
Goal: To reduce percentage of Asian Equities to around 50%
(China ADRs should be counted as Asian Equities although they are listed in the US)
3. To Buy Inverse ETFs and Puts - Bought 7500 (Hang Seng Inverse 2x)
Goal: To have a sizable short position going into the next recession
4. To Increase "USD/HKD/Gold" - Progress
Goal: To be in the safe havens before next recession; (HKD may be repegged)
5. To Reduce Number Of Counters: Progress (12 Counters)
Goal: To focus only on counters that have convincing stories
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: 8 (Very Good: 1; Very Bad: 10) - Housing, Subprime Auto; Student Loans; Credit Cards; Junk Bonds; EM USD Loans;
3. Recession: 8 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; Trade War; 2019?;
4. Liquidity: 8 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?; EM; Italy;
5. Inverted Yield: 8 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion; US 10 Years < US 2 Years; Expecting 2019 to 2020
6. Valuation; 7 (Safe 1: PE15; Danger 10) 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
Total: 55 out of 70 (78%); (Safe: 50%; Danger: 85%)
Commodities: Mixed (Data from Commodities Live on Jul 19 @ 8.45pm)
1. WTI Oil - Lower. US$55.73 from US$60.35 last week from US$56.82 two weeks ago;
Support: US$43; US$34; Resistance: US$75, US$105;
a. Trade Wars will reduce demand for Oil; -1m bpd?
b. Global Stockpiles: 2.5b barrels;
c. US SPR: 679m barrels (33 days); To sell 190m barrels over 8 years.
d. US imports 8m bpd (Total demand of India and Japan combined);
e. China (4th largest producer; largest importer) - Reserve life: Dropped from 10 to 6 years
f. China: Ban on Petrochemical Cars in 5-10 years? Quotas?
g. IEA: Lowest amount of new discoveries; Supply shortage in 2020?
h. Saudi: Aramco's IPO 2021? -1.3m bpd (35% cut); Fiscal Break-Even US$85;
i. China: SPR 51/90 days; 2019 imports to decrease?
j. Brazil +200k bpd; Canada -325 bpd; Nigeria -300k bpd; Iraq -150k bpd; Kurdistan -350k bpd;
k. Venezeula: -400k bpd to 875k bpd, -17%; Max Production: 2.2m bpd
l. Iran: 2.6m bpd; -400k bpd
m. US Summer Driving season
n. OPEC: Heavier Crude; More Processing;
o. US: Lighter Crude and Lower Sulphur; Glut in Gasoline; +1m bpd
p. EV: -350k bpd?
q. Libya: -850k out of 1.65m bpd?
r. US Break-Even; Permian: US$35 to US$50; Shale: US$50
s. Opec: Cut 2.3m bpd since Nov 2018; 9 months extension (April 2020)
t. Russia: Oil Contamination; -500k bpd; Wants US$60-US$65 Oil
u. US: Stockpiles +22m barrels / week, largest since 1990; Record
viewtopic.php?f=33&t=7550&start=210
2. Gold - Higher. US$1437 from US$1410 from US$1418
Support: $1240; $1150; $1050; Resistance: $1400;
a. Global 33k tons; US 8k t; China 5k t; IMF 3k t; Germany 3k t
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand 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; Russian, 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
o. China: PBOC bought gold over last 6 months
viewtopic.php?f=33&t=7589&p=202084#p202084
3. Silver - Higher. US$16.39 from US$15.16 from US$15.26
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
d. Supply: 0.9b ounces
e. 4th year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50 t0 70; Currently 76, 50% higher than average
k, Production declining
l. Demand: 40% Investments / Speculation; 60% Industrial
m. About 1b ounces stored in China; 1 Year Production
viewtopic.php?f=33&t=7589&p=202084#p202084
4. Platinum - Higher; US$861 from US$822 from US$835;
a. 28% for jewelry
b. 42% for diesel catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper
h. Diesel cars losing market share
i. 70% of supply is from South Africa
5. Zinc - Higher; US$2449 from US$2410 from US$2399;
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. Breakpoint: High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: DB Base Metal (Zinc, Aluminum & Copper); MMG
viewtopic.php?f=33&t=367&start=208.
6. Copper - Higher; US$2.80 from US$2.68 from US$2.66;
a. Higher inventories at LME
b. China - 50% of global consumption
c. China - Lower Power Grid demand
viewtopic.php?f=33&t=5598&p=215285#p215285
7. No longer monitoring Palladium, Cobalt and Uranium on a weekly basis
Equities - Mixed (Data as of Saturday every week)
1. US Equities - Lower. 2977 from 2990 last week from 2942 two weeks ago
a. Support: 2320; Resistance: 3000; 3260; Fwd PE 16
b. No Trade
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Higher. 28765 from 28472 from 28775
a. Support: 26700; 26000; 25700; 25000, 24500, 23500;
b. Resistance: 31200, 31600;
c. Sold Galaxy (0027)
d. Sold SJM (0880)
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Lower. 2924 from 2931 from 3011;
a. Support: 2450; Resistance 3300; 3600
b. No Trade
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Higher; 3378 from 3357 from 3367
a. Resistance 3850
b. No Trade
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Lower. 21467 from 21686 from 21746;
a. Forward PE 13
b. Support 19000; Resistance 25000
c. BOJ owns > Half government bonds and 75% of ETFs
d. No Trade; No Convincing Story
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Lower; 1658 from 1669 from 1683;
a. Bought MAA
b. Traded MNRB
viewtopic.php?f=10&t=6292&start=30
Currencies- Mixed (Data from XE.com on Jul 19 @ 9.15pm)
1. USD to JPY - JPY Stronger; 107.74 from 108.31 last week from 108.04 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; 3.0221 from 3.0266 from 3.0463;
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Stronger; 0.7055 from 0.7001 from 0.7016;
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. 0.9592 from 0.9510 from 0.9521;
a. The range is 0.98 (2016) to 1.36 (2012)
b. I would choose the AUD over the SGD
5. AUD to MYR - AUD Stronger. 2.8983 from 2.8784 from 2.9003;
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Weaker. 1.1225 from 1.1264 from 1.1262;
viewtopic.php?f=32&t=5523&start=100
7. USD to HKD - HKD Stronger. 7.8050 from 7.8224 from 7.7930;
a. 52 week range is 7.7452 - 7.8530
b. USD Peg band: 7.75 to 7.85
c. Will they remove the peg to the USD during the next crisis?
d. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40
8. USD to MYR:- MYR Stronger. 4.1087 from 4.1105 from 4.1340;
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 Weaker; 1.3596 from 1.3584 from 1.3569;
a. High 1.70 (2004); Low 1.20 (2011)
b. Am uncomfortable holding the currency of a small country
viewtopic.php?f=32&t=136&start=100
10. USD to CNY:- CNY Flat; 6.8789 from 6.8787 from 6.8755;
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
11. GBP to USD:- GBP Weaker; 1.2512 from 1.2537 from 1.2542;
a. Brexit; Politics;
viewtopic.php?f=32&t=333&start=80
12. GBP to MYR:- GBP Weaker; 5.1411 from 5.1539 from 5.1853;
13. Dollar Index - USD Stronger 97.12 from 96.93 from 96.94;
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. NPLs at European Banks: EUR$1t
i. China's Bond Market: US$12t (third largest)
j. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
k. Japan govt debt highest in world: 1.1 Quadtrillion Yen (USD $10t), 2x size of its economy
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$12t as of June 20, 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. Negative Yield on some European JUNK Bonds
viewtopic.php?f=16&t=8940&start=30
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
HK Properties
a. Vacancy tax
b. 9000 vacant apartments
c. CLSA, UBS and Citi - Prices may drop 10% to 15% by end 2019
d. Slowing Economy / Trade War
e. Depreciating Yuan
f. Weak Stock Markets
viewtopic.php?f=10&t=7785&start=130
Spore Properties
a. 24,000 Vacant Apartments
b. 52,000 Being Built (2018-2022)
c. 37,800 Unsold Residential Properties @ 1Q, 2019
viewtopic.php?f=10&t=7750&start=190
Malaysian Properties
a. JPPH: Overhang - 32,313 units (2018) vs 20,304 (2017)
b. Overhang would be greater if Serviced Residence and SOHOs are included
c. 2018 Residential Housing overhang: +31%
d. As at Dec 31, 2018, unsold completed residential units including serviced apartment and Soho totaled 45,027 units, valued at RM29.69bil.
e. There is a further 123,234 residential and commercial unsold units under construction as at the end of 2018
viewtopic.php?f=10&t=4220&p=227635#p227635
China Properties
a. 20% of Urban Housing is vacant (65m homes)
b. In 2018, nationwide ASPs have climbed by 15% to a record high
c. Since 2015, Tier One cities have risen by 55%
d. Since 2015, Tier Two cities have risen by 35%
e. Government targeting annual increase of 7% to 10%
viewtopic.php?f=10&t=8150&start=130
Yield on 10 Year US Treasuries - Lower; 2.05% from 2.13% last week from 1.96% two weeks ago
Yield on 2 Year Treasuries - Lower; 1.81% from 1.86% from 1.78%;
Interest Rates:-
a. About US$13t or about 1/3 of the world’s bonds have negative yields
b. US Rate Hike: One 25 bps cut by end 2019?
c. Argentina's Intertest Rate: 60%
d. Turkey's Interest Rate: 24%
e. Ukraine's Interest rate: 18%
f. German 10-year bunds at -0.167% as of May 30, 2019
g. Japanese 10-year JGB at -0.1% as of May 30, 2019
h. 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) - Flat: 108.32 from 108.31 from 109.01;
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Lower; 86.74 from 86.79 from 87.34;
Baltic Dry Index - Higher; 2130 from 1816 from 1700; 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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