Ad Hoc Commentary – wrapping up 2015
Our outlook for 2015 can be found here:
https://tradehaven.net/ad-hoc-commentary-2015-outlook-destroying-europe-and-another-bank-bailout/
We were pretty spot on except on the S&P500. But we remember that we got out of our S&P500 on late Feb:
“…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 meager profit and get out…”
https://tradehaven.net/ad-hoc-commentary-the-sp500-will-probably-peak-here-for-now/
And we said it looks like a good buy in late Sep:
“…At this moment, the S&P500 look increasingly like a good buy…”
https://tradehaven.net/ad-hoc-commentary-has-the-world-reached-its-credit-limit-no-the-spx-looks-like-a-good-buy/
Figure 1: S&P500 in 2015. It failed to decisively break-through the end-Feb peak, and then started to climb only after end-Sep.
Now, onto oil, oil remained mostly below 60 dollars for the whole of 2015 as we expected it to:
“…1.The Russians at war if oil stays below the 200-month-moving-average of 60 dollars (it likely will)…” https://tradehaven.net/ad-hoc-commentary-2015-outlook-destroying-europe-and-another-bank-bailout/
Figure 2: WTI Oil tried to break 60 dollars in spring, but failed decisively as summer approached.
In fact, with oil at these levels, yours truly expect Saudi Arabia to get destabilized too. As we wrote in early Feb:
“…A new King would usually need to gain legitimacy among his subjects and it would not be surprising if there we see new-found assertiveness. Perhaps when WTI hits $35 US dollars…”
https://tradehaven.net/ad-hoc-commentary-russia-vs-saudi-arabia-pipeline-wars/
As expected, Russia went into Syria as it became clear that oil will not go above 60 dollars. Now that oil is at 35 dollars, we would likely see Saudi Arabia getting embroiled in some external geopolitics to distract the masses.
On USD strength, we have the DXY showing USD strength relentless march in the first quarter, and USD had since consolidated her gains:
Figure 3: DXY showing USD strength (higher means USD stronger) in 2015.
We see that Asia and Latin America suffered from contagion in the USD strength:
Figure 4: ADXY showing USD strength (lower means USD stronger) in 2015.
Figure 5: LACI showing USD strength (lower means USD stronger) in 2015.
And on Sep 18, we said that Janet Yellen honeymoon ends, after which she would need to find buyers for US treasuries, the next trading day US 10y swap spread inverted and we are officially seeing the beginning of the US sovereign debt crisis:
https://tradehaven.net/ad-hoc-commentary-yellen-honeymoon-ends/
“…Yellen will likely have a nice honeymoon until late 2015, at which point she would likely need to find buyers in the bond markets…” https://tradehaven.net/ad-hoc-commentary-the-wooden-horse-year-greeks-gave-franco-german-a-wooden-trojan-horse/
Figure 6: US 10y swap spread turns negative on Sep 21 signaling that the public sector’s creditworthiness is worse than the private sector’s.
And last but not least, Malaysia: “…Closer to Singapore, yours truly expect 2015 to be a very difficult one for Malaysia. Oil prices should stay low. The 1MDB quasi-sovereign wealth fund seems to be shrouded in secrecy and could very well turn into a real crisis both in politics and USDMYR…”
A chart of USDMYR will suffice:
Figure 7: USDMYR is above 4.3. This level was last reached during the Asian Financial Crisis of 1997/1998.
Now that we have closed the 2015 chapter, it is worth asking ourselves what will 2016 and beyond bring? Yours truly believes that the awakening of robots is the main drama that would unfold in the coming years. The future of capital looks ever brighter because capital can now have a true alternative to human labor. On the flip side, the future of employment looks ever bleaker. Despite the rosy headline job numbers, in truth good middle income jobs are being replaced by low quality jobs since the great recession and this trend should continue as more work gets automated. Productivity gains in both white-collar and blue-collar work would surprise many. Unless we have a revamp of morals and ethics, it is likely that nearly all the future productivity gains from robotics will accrue to corporate profits as opposed to labor. Bowley’s Law postulating proportion of GNP from labor is constant, will be thrown out the window because labor will unlikely capture any of these productivity gains regardless of how we adjust the numerator or denominator for inflation – be it CPI, GDP deflator, or a combination of them. We will talk more about markets in 2016. For now, Happy New Year to all.
Good luck in the markets.
Ad Hoc Commentary – wrapping up 2015
Our outlook for 2015 can be found here:
https://tradehaven.net/ad-hoc-commentary-2015-outlook-destroying-europe-and-another-bank-bailout/
We were pretty spot on except on the S&P500. But we remember that we got out of our S&P500 on late Feb:
“…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 meager profit and get out…”
https://tradehaven.net/ad-hoc-commentary-the-sp500-will-probably-peak-here-for-now/
And we said it looks like a good buy in late Sep:
“…At this moment, the S&P500 look increasingly like a good buy…”
https://tradehaven.net/ad-hoc-commentary-has-the-world-reached-its-credit-limit-no-the-spx-looks-like-a-good-buy/
Figure 1: S&P500 in 2015. It failed to decisively break-through the end-Feb peak, and then started to climb only after end-Sep.
Now, onto oil, oil remained mostly below 60 dollars for the whole of 2015 as we expected it to:
“…1.The Russians at war if oil stays below the 200-month-moving-average of 60 dollars (it likely will)…” https://tradehaven.net/ad-hoc-commentary-2015-outlook-destroying-europe-and-another-bank-bailout/
Figure 2: WTI Oil tried to break 60 dollars in spring, but failed decisively as summer approached.
In fact, with oil at these levels, yours truly expect Saudi Arabia to get destabilized too. As we wrote in early Feb:
“…A new King would usually need to gain legitimacy among his subjects and it would not be surprising if there we see new-found assertiveness. Perhaps when WTI hits $35 US dollars…”
https://tradehaven.net/ad-hoc-commentary-russia-vs-saudi-arabia-pipeline-wars/
As expected, Russia went into Syria as it became clear that oil will not go above 60 dollars. Now that oil is at 35 dollars, we would likely see Saudi Arabia getting embroiled in some external geopolitics to distract the masses.
On USD strength, we have the DXY showing USD strength relentless march in the first quarter, and USD had since consolidated her gains:
Figure 3: DXY showing USD strength (higher means USD stronger) in 2015.
We see that Asia and Latin America suffered from contagion in the USD strength:
Figure 4: ADXY showing USD strength (lower means USD stronger) in 2015.
Figure 5: LACI showing USD strength (lower means USD stronger) in 2015.
And on Sep 18, we said that Janet Yellen honeymoon ends, after which she would need to find buyers for US treasuries, the next trading day US 10y swap spread inverted and we are officially seeing the beginning of the US sovereign debt crisis:
https://tradehaven.net/ad-hoc-commentary-yellen-honeymoon-ends/
“…Yellen will likely have a nice honeymoon until late 2015, at which point she would likely need to find buyers in the bond markets…” https://tradehaven.net/ad-hoc-commentary-the-wooden-horse-year-greeks-gave-franco-german-a-wooden-trojan-horse/
Figure 6: US 10y swap spread turns negative on Sep 21 signaling that the public sector’s creditworthiness is worse than the private sector’s.
And last but not least, Malaysia: “…Closer to Singapore, yours truly expect 2015 to be a very difficult one for Malaysia. Oil prices should stay low. The 1MDB quasi-sovereign wealth fund seems to be shrouded in secrecy and could very well turn into a real crisis both in politics and USDMYR…”
A chart of USDMYR will suffice:
Figure 7: USDMYR is above 4.3. This level was last reached during the Asian Financial Crisis of 1997/1998.
Now that we have closed the 2015 chapter, it is worth asking ourselves what will 2016 and beyond bring? Yours truly believes that the awakening of robots is the main drama that would unfold in the coming years. The future of capital looks ever brighter because capital can now have a true alternative to human labor. On the flip side, the future of employment looks ever bleaker. Despite the rosy headline job numbers, in truth good middle income jobs are being replaced by low quality jobs since the great recession and this trend should continue as more work gets automated. Productivity gains in both white-collar and blue-collar work would surprise many. Unless we have a revamp of morals and ethics, it is likely that nearly all the future productivity gains from robotics will accrue to corporate profits as opposed to labor. Bowley’s Law postulating proportion of GNP from labor is constant, will be thrown out the window because labor will unlikely capture any of these productivity gains regardless of how we adjust the numerator or denominator for inflation – be it CPI, GDP deflator, or a combination of them. We will talk more about markets in 2016. For now, Happy New Year to all.
Good luck in the markets.
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