Archive for May, 2016

SP 500 lower highs pattern

Posted: May 17, 2016 in Uncategorized

This is the one year chart (Japanese candlesticks) of the SP500

There is quite a similarity in the pattern before the sell off of August and January – it has always just preceded by a two to three lower highs pattern/lower lows.

Going by statistical analysis we could be in for quite a brutal June/July. Not a prediction…just a warning.

PS Not included also the first top goes in three (the top was 2,130, May 21, 2015)…so one more top around 2,080/2,100 could still be expected – but there is quite a bit of weakness around.

Capture Decreasing pattern


2016: The return of Gold?

Posted: May 16, 2016 in Uncategorized

After a few years of pain…gold in 2016 has been the asset to be in 2016!

On the back of negative rates and the Reserve Banks that seems to have start to run out of ammunition the gold holding have increased by one quarter between investors.

Quite a few pro gold position

  • Interest rates increase bets  in US  where 75% at the start of the year…now just 4% (US rate hikes means stronger dollar and so weaker gold)
  • Negative rates have made quite a few investors scared – both as it shows that the Central Banks are running out of ideas and as “value refuge”
  • Volatility in general

For my point gold is a quite good for diversification.

Moreover, as I say from 2013, pay attention to the 1970s

1970 Gold Ounce USD35

1974 Gold Ounce USD 195

1976 Gold Ounce USD 100 (equivalent to a now $900/950…but the drop did not arrive there – probably as there is too much uncertainty in the world))

1980 Gold Ounce USD 920 (equivalent to now almost $9,000 – or even 12,000 (!!!!!) if you take into account inflation

Still hopefully this will not repeat o the letter…if gold goes to $12,000 something really bad would have happened. But a strong multi year rally could really be in the cards

Last year the great Chinese stock market blew up. As I told a few months ago the same money went into commodities trading.

Now history is repeating. The government put some brakes on…but there is no substance in the rally and iron ore already collapsed from $70 in April to $55 with strong repercussions on BHP and Co.

If you did not see it coming as I did it, you are in good company. The Australian Budget model is based on iron ore at $55. And it is already failing.

My issue is why we pay those consultants so much, when the Budget model fails in a few days where you just needed to google it to understand what was happening?

Cold War Reloaded

Posted: May 14, 2016 in Uncategorized

It is from 2013 that I rant about the we are in a new cold war.

In effect all started just post the Soviet era where the US promised not to expand NATO at the border of Russia (and specially not within the ex USSR) if the USSR stood down.

Since 1995 there has been a steady infiltration of the US/NATO on the border of Russia.

Now unfortunately the new anti ICBM station in Romania is the last straw.

Now the treaty against tactictal nukes will be shelfed (in reality was already in its way out…it blocks US and Russia developments while China is building up its stock).

So we are in a new arms race (including quite a few next generation nukes).

As the Romans was saying…who is beneffitting from this?

Well as the Governments know that the Reserve Banks praactically exhausted their tools…this is none the else that Quantitative Easing number 4.

But the last time they did something similar unfortunately was 1938….you know how it ended.

The next US President will be very important. More than you think. And Hillary Clinton is more dangerous…in the political circus her nickname is Killary…and she is fully supported by the military industry lobbies. Plus Trump already extended an olive branch to Putin

And President Roosevelt was Democrat as Killary

In the last years the Growth stocks were the best and value managers got battered.

Even if I do not like this distinction…a manager should be able to pick up a switch in the market between the two styles… can you pick it?

Let’s see (US Data) .

In 2015/2016 companies have beaten their EPS targets *Earning per shares) relatively easily (68%). But the revenue have been a miss (only 46%) .

It is every hard to justify this (recently happened only in 2009 just post GFC).

Naturally one would think the BUYBACKA are the culprit…but raw data do not support this thesis.

It is actually more likely to be the Margins. Margins are always bigger in Growth Stock (make it easy…Apple can charge whatever he wants for its iPhones).

If you dissect in 2015/16 only 39% of the Value shares beat their revenue targets, while Growth shares beat it by 68%.

In the last data set there is a shift where the Value shares are growing their Margins (and sales) and Growth are lowering their Margin.

A bit early to call…but YES there could be a shift going on.

Is your adviser able to pick it?

In a surprise move the European Parliament suspended the works to grant travel VISAs for Turkish people unless all the 72 conditions are met.

So the Turkish blackmail is fully exposed to the masses:

The Financial Times yesterday posted an article “Turkey demands  EU to handover Euro 3 Billions for the refugee” (directly to turkey, not via UN agencies).

and also

Bhuran Kasu (AKP Party officer and adviser to President Erdogan) tweeted even more clearly ““The European Parliament will discuss the report that will open Europe visa-free for Turkish citizens. If the wrong decision is taken, we will unleash  the refugees!” (translated from Turkish).

Another conspiracy theory…busted…all real! Plutocracy at work!

Visionary thinking

Posted: May 11, 2016 in Uncategorized

Last week I was in Sydney having lunch with Alex Pollack, CEO of Loftus Peak – a manager

specialist in listed disruptive business model.

It is interesting to see what are the ramification of technological change.

We were discussing the advent of the autonomous electric cars in the next 20 years.

The consequences are mind boggling!

The car has always been thought as private mean of transport due to the personal driving and insurance issues. In reality for 50% of the time your car is just …doing nothing.

Fast forward, in 2035 the car could be just a commodity, while you just rent for the weekend the special car – be it a Ferrari or a Toyota Hilux if you go camping.

This would mean that there would be circa 50% less cars in the developed countries as people do not need anymore the car for the commute (if still there will be a commute as internet will allow many people to work remotely).

The automobile industry would suffer a lot as there are lower volumes.

In effect it will happen to what already happened to the newspaper/media like Fairfax.

But also commodities as there will be less need of steel and oil (between the electric cars and the less number of cars).

There will be consequences also for the US Dollar. The US Dollar as reserve currency status depends a lot on the petrodollar concept initiated in the 1970s between the US and Saudi Arabia and already fading.

Practically there will be consequences everywhere and the highlights above are just the point of an iceberg.

As changes goes, this trend will be subtle…until explode. And when it explodes if you are in the wrong sector or listed shares the consequences will be terrible.

These changes are everywhere. Changes are not bad as there are numerous solid opportunities (well not too many in Australia)- but almost in a Darwinian way, who will not foresee and adapt…will be extinct (or at least the investor portfolio)




Can Clinton stop an idea?

Posted: May 6, 2016 in Uncategorized

Now that Trump is the Republican nominee everybody says that Clinton will have an easy win.

I would not be that sure. Trump represents an idea. The idea that the USA (and the West) is now governed by a self serving plutocracy that care nothing about the average person.

And no one represents better the establishment than Clinton with all her multi milllion dollar speeches to banks, corporations and governments.

I would not surprise if Trump now start moderating his speeches and also if the voters of Sanders (the other anti establishment candidate)  go to Trump.

As thousand of bombs show that you cannot kill an idea (reference to Al Qaeda and IS), also Trump represents a (very different) idea.

So the battle Trump vs Clinton will be just decided in November, regardless of what the polls say.

King Erdogan of Turkey

Posted: May 5, 2016 in Uncategorized

Just  when things started to settled nicely for President Erdogan as he won the blackmail affair with Merkel (Europe)…Another problem is rising. He is ousting PM Davutoglu as he wants more power.
The PM Davutoglu was the architect of the Europe deal and not anymore playing obedient lapdog.

That Europe agreed to an undemocratic blackmail is terrible. I saw the rise of Turkey back in 2010.

That President Erdogan will be free to do what he wants is scary. Already the comment of Turkey prepared to invade Syria in self defence (supposedly from IS) has been met by the word of Russian FM Lavrov. He said that Russia would consider it an hostile invasion   and Russia has already the assets in place to deny that.

Bloomberg – Australia’s Budget 2016: Winners and Losers

Quick and easy