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.
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.
There is just too many factors to consider that is leading to just pure FEAR.
Things that I have learnt so far this year.
- 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.
- Pegs are not forever. Anything that is artificially induced will only come to an end eventually.
- 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.
- 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.
- Unemployment hitting.
Suncor cuts 1,000 jobs, takes $1-billion out of 2015 budget
BAKER HUGHES EXPECTS TO CUT 7,000 JOBS IN FIRST QUARTER
Schlumberger Fires 9,000 - 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. - 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.
– Instead of stabilizing the financial market, the Swiss Central Bank (SNB) triggered the biggest chaos in modern FX market.
– 60 billion Euros of stimulus per month = S$10 per European per day.
– More Govt debts yields are now negative (not because of swaps)
The financial system is now a closed system that leads us away from logic and reality.
It’s worth it, the reality hurts.
It is part of what central banks do, they have incentives to misrepresent information in order to manipulate the market’s expectations, as shown in this recent economic article: https://ideas.repec.org/a/bla/coecpo/v32y2014i4p802-810.html
Facing your Fear
“I can’t sleep” answered the nervous one.
“Why not?” asked the friend.
“I am carrying so much cotton that I can’t sleep thinking about. It is wearing me out. What can I do?”
“Sell down to the sleeping point”, answered the friend.
http://www.amazon.com/dp/0471770884
Creating Fear
“The traders hammered the stocks in which they figured would uncover the most stops, and sure enough, prices slid off.”
Everything That You Want Is On The Other Side Of Fear
“The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Always sell what shows you a loss and keep what shows you a profit.”
Deadliest Cocktail: Having No Fear
The automatic closing out of your trade when the margin reached the exhaustion point was the best kind of stop-loss order.
– Jesse Livermore, Reminiscences of a Stock Operator 🙂
Warren Buffet : “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
TH shared a classic quote from WB but my humble self have some reservations.
Bravery and greed in younger years was the reason behind my heaviest defeat in investment; losing multiple years of my job income.
In the past, bonds were too slow for my liking.
Today, I am a faithful reader of TH.
Thanks for the big show of support.
Bonds were too slow for my liking too but I have learnt many lessons in patience and timing which I try to share sometimes.