Lessons of 2015 : Faces of Fear

What have we learnt in the short span of the first 3 weeks of 2015 besides the different faces of fear ?

Our heads and hearts started the year with oil prices, interrupted by the Paris terrorism activities which was then followed by an abrupt decision by the Swiss National Bank to end their support for the EUR. In between we had another plane crash, Boko Haram taking over large tracts of Nigeria, Japanese hostages held for ransom and banking stocks down a lot after dismal earnings.

All this in the face of diverging central banks and their policy actions as economic growth in the G3 tears and China posts their weakest growth in 24 years.


And we have the Chinese stock market looking like this.

shcomp daily

And Poland launches a full scale investigation into why half their mortgages are financed in CHF, about half a million homes in danger, and the same for Romania too. http://www.ft.com/intl/cms/s/0/fb92b4a8-a0c9-11e4-b8b9-00144feab7de.html#axzz3PR3weQgk

In Asia, we have India and Indonesia the expected outperformers while the USDMYR has hit a 6 year high, with markets now turning highly skeptical on central banks.

For the first time, I am reading the FT promote gold ownership on incompetent central banks and monetary dysfunction.

“Government lie; bankers lie; even auditors sometimes lie; gold tells the truth.” – Lord Rees Mogg

There is just too many factors to consider that is leading to just pure FEAR.

Things that I have learnt so far this year.

  1. That Keep Well Clause is not holding up. Kaisa bonds, running on their keepwell clauses now appear to be subordinated to onshore debt. The answer is not apparent with the verdict hanging on a thread in the days ahead but it is a buyers-beware market.
  2. Pegs are not forever. Anything that is artificially induced will only come to an end eventually.
  3. Central banks work for their respective countries and shareholders. The Swiss do not owe it to the world to keep the peg against the EUR. Not especially when they have been subject to such torment on money laundering and tax evasion scrutiny out of the West. Now is payback time.
  4. Central banks lie. Yes. SNB was vociferously defending their peg just days before the UNPEG. Now currencies and markets head the other way when central bankers come out to speak just like it did for the MYR yesterday. USDMYR ZETI
  5. Unemployment hitting.
    Suncor cuts 1,000 jobs, takes $1-billion out of 2015 budget
    Schlumberger Fires 9,000
  6. Richest one per cent will own more than the rest by 2016
    Median household income has continued to decline in the U.S
    Bernie has worked out that 2017 is exactly 1984 years after the death of Christ. 1984 being Orwell’s novel following Animal Farm.
  7. Loose monetary policies will achieve nothing in the end.

I really do not know what to make of this, to be absolutely honest.

I know I have said this for over 2 years, the crisis of confidence, the futility of currency wars and the widening disparity, but it has not exactly worked out for me except that now I know that I have to just be slightly ahead of the herd in the days ahead.

The manifestation of fear comes in a myriad of different ways that we will be unable to foretell nor circumvent. Keeping light and nimble is perhaps the safest bet unless you fear losing out on that little profit.

And yes, I will be trading for an ECB stalemate.