Ad Hoc Commentary – the S&P500 will probably peak here (for now)

In our 2015 outlook, yours truly said that the S&P500 will continue to go up this year.  Well, it barely managed to gain 2.88% year-to-date and it is now probably time for us to throw in the towel (for now). So, if you had been sitting through the volatility of January, and am beginning to enjoy making money in February, I am sorry, it is likely time to take meagre profit and get out.


We also mentioned in our outlook that this year is going to be very much like 1997/1998: “…2015 will likely be a repeat of 1997/1998 in the sense that capital is flighting a region: in 1997 Asia, in 2015 Europe…”

Well, some are seeing the same now:

“Do eerie parallels presage new crisis? Satyajit Das
Falling oil, rising dollar and fears over US rate increase present in 1997-98
Mark Twain reputedly stated that history does not repeat but it rhymed. In an eerie parallel to 1997-98, falling commodity — especially oil — prices, a rising US dollar and potential increases in US interest rates may presage a new financial crisis.”


The problem now is that yours truly believe that we might even see capital flighting Asia. Capital is like a dove that fears uncertainty. Uncertainty over the next political tiger to trip in China is probably going to scare the doves because it could mean that the old Buddha could be next in line. This is what pundits should be worried about. This political uncertainty, as opposed to the unfounded fear of the China’s shadow banking, is what matters:

“…when China’s top anti-corruption authority published an article on Wednesday afternoon detailing the evil deeds of ‘Prince Qing’, the internet went into overdrive with theories over who the real target could be.

By far the most popular guess is Zeng Qinghong, vice-president of China until 2008, right-hand man to former President Jiang Zemin and one of the most powerful politicians of modern China…”


“…With the jailing of Bo Xilai and the detention of Zhou Yongkang last year, Zeng Qinghong took over as head of this network of power and influence, opposed to the Xi regime, the source said. Now Xi Jinping is taking action against him, the source said – leaving open the possibility that even Jiang Zemin may be next in line…”


Many Feng Shui masters are saying that this year is going to be more docile compared to last year. If anything is going to be docile this year, it is not geopolitics or politics. The only thing that is probably going to be docile this year is probably S&P500 performance. The strong conviction in the Year of the Horse is probably going to be followed by weak conviction in the Year of the Goat. The Feng Shui masters also mentioned that this could be a year of disease. Well, Ebola had so far followed the script we wrote back in Aug 2014:

“In that case, we should have a reprieve soon, say in Oct 2014, and it [Ebola] will probably come back in a stronger wave in spring 2015.”


Yours truly hope we do not get Ebola coming back in spring 2015. However, it is encouraging to know that Singapore is doing the right thing on quarantine – yours truly hope they put them all in Singapore’s St John Island. As founder Lee Kuan Yew wrote back in December: “Singapore is taking a calibrated, risk-stratified approach. Anyone with unprotected contact with an Ebola-infected patient will be quarantined for the duration of the virus’ incubation period.”


Good luck in the markets.