Archive for the ‘Uncategorized’ Category

The 15th October I told the clients that we would have issues – even telling them that we could see the low of February.

Unfortunately I was right, even if I hoped for a V style correction – now it is almost certain will be W style.

This correction is doing a lot of damage. When it will finish? Good question – most probably end of November – where Trump-Xi probably will agree to an armistice  in the trade wars.

Unfortunately we are at the edge of the end. Usually the market bull ends in a sharp correction (now, than a sharp bounce and then the end. Probably by Q2 2019 (March-May 2019).

Bear market does not mean a Global Financial Crisis 2 – that was a systemic failure.

An average Bear market last 13 months and it is defined by top to bottom loss of over 20%. Usually the market than recovers in two to three years.

The best way to address a bear market is

  • Not panic
  • Diversification
  • Cash aside to buy good companies at great price
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Platinum, with Magellan and few others, is one of the premier Australian international fund. It actually was the first great Australian managed international fund.

Its shares have been going nowhere (mostly down) as the performance are lagging Platinum International 6.4% vs 19% MSCI Index, Asia 4.9% vs 10%. On a six month basis is even negative.

This shows great resilience of Platinum in front of a retail client.

A smart manager can see that the market is frothy and we are heading for a cliff. So it has to prepare the portfolio for the next cycle as he has a precise view of the risks and potential future.

But it also suffers backlash from clients (as cash outflows) as the retails clients see cheap ETF alternative as winners.

In the long run smart managers like Platinum, or Magellan are winners. But retail clients even if he knows that money (specially super) is for the long run – often say so, but see it differently.

This is a conundrum for the smart manager. and it is always sign of real skill to stay the course even in the face of market backlash.

US yield break out!

Posted: October 4, 2018 in Uncategorized

Finally the US 10 year broke with decision the previous top!

It is at 3.18% with a target 4.5%. Inflation will come!

But ..wait a minute…the market did not collapse!!

In reality if you analyse the last bond bear market 1952-1980 (yes that far away) there are takes.

1. 1952_1972 the market went more or less up

2. 1972_1980 the market went in dive…but only after the USD leaving the gold standard, oil embargoes, Nixon etc.

3. It is so far away that so many lot things changed.

In effect a few other events have to happen to start a crisis.

But they are all there…oil, Trump, trade wars. So maximum alert.

Many institutions will start to pay attention to 3.5% _3.8%.

One sure consequence is that the mortgage interest rates will go up and Australian real estate down.

President Trump at the U.N.

Posted: September 27, 2018 in Uncategorized

President Trump went at the UN and they laughed at him.

 

Actually there is nothing to laugh. He made clear his “America First” idea, chose us of them kind of politics and refusal of international rules.

He also mostly praised regimes with an authoritarian bent (Saudi Arabia, Israel, Poland etc) and kind of avoided mentioning more democratic regimes like France and Germany.

It all had of a kind of flavor of Germany and Italy early 1930 (rise of the fascism).

Even the tariff war with China is slightly developing in a more military war. The US sanctioned the Chinese military as they bought Russian jet fighters and the Chinese forbid the USS Wasp from making a stop in Hong Kong.

Thucydides, a old Greece historian, said about the Peloponnese wars, quoting

“it was the rise of Athens and the fear that it instilled in Sparta that made the war inevitable”.

A lesson from 2400 years ago eerily sound familiar. For the record, Sparta, the old power, won at great cost.

Tariffs getting serious

Posted: September 18, 2018 in Uncategorized

President Trump unleashed another round of tariffs hitting even American  people. China has been answering quite softly – kind of wait and see approach for the US Congress (if Democrats wins the House, President Trump would be blocked).

But I would imagine that China patience is wearing thin – especially as Trump keep on saying….their market is a disaster, while ours is near the top.

Also statistically the US market loses before US Congress elections and then more than recover after the election.

So – time to be alert.

US election – Congress

Posted: September 10, 2018 in Uncategorized

The all -important US Congress election are at the door.

 

My most likely outcome scenarios are

  1. Senate stay Republican and House goes Democrat. At current standing this scenario has 50% chances of happening. It is a positive scenario for stocks.
  2. Both Senate and House goes Democratic – this will be temporarily negative for the S market/bond/dollar. Apart hating Trump the Dems are not united on anything….so the backlash should be temporary. This scenario stands at 35%
  3. Both House and Senate stays Republican. This is an unlikely scenario (15-20%) that would favor Republican sectors (banking, defence etc) vs Dem stocks (Auto, infrastructure, hospitals)

I am not pro President Trump – but I am neutral – trying to stand by the facts.

Notwithstanding the media and the consequences President Trump is correct in attacking China whatever the consequences.

An unofficial document has been leaked from China, known has the Green Book. The Green Book details the underlying goals of the Made in China 2025 plan (which does not have goals) . The goals, if achieved, would virtually annihilate any tech and new technology competition in China. The goals is to achieve 56% of the world market of integrated circuits (so all technology) by 2025 and 80% of the entire domestic market by 2030.

This would bring a destruction (wipe-out level) of industries and jobs like it happened in steel and solar. Chinese companies backed by government subsidies, cheap funding from State Owned Enterprise and sometime dodgy behavior would wipe out the Western economies and Western jobs.

Unfortunately, the President is more right than President Obama and all the other leaders. It is a fight to the death.