Writting at 45,000 feet, would feel like a jet setting ceo were i not sitting in economy next to 2 football fans and a crying baby.Anyway it lets me pass the time by writting (slowly) about some issues now that the first month of the year has come to an end.
January was a one off and I do not think it all sets the tone for 2016. The risk aversion, panic and massive sells off did not sustain. Indeed solid employment data from the us, uk and stimulus from the BOJ and 6.8% growth from China shows that while things may not be as perfect as everyone had hoped, they are doing well and there is hope at the end of the tunnel. Proof of this s( and i believe numbers are the best evidence) should be the sharp turn around in January of our Etoro account that went from a -35% return for the month to a 25+% gain. Or our strong performance on HF which saw us post profits of 15% for our first month of trading there, despite all our problems.
Will the JPY lose its haven status in 2016?
The main thing I wish for you all to ponder over this afternoon (and i want to keep an eye out for this change as well) is what the BOJs latest action means. (N.b. Do not believe all the BS that it shocked the market, if someone as primitive as mysef has been calling this since November, do not believe for one second that any of the institutions were caught off guard). Returning to the mater at hand, the BOJ have made it clear they want a weak Yen. This is important to Japanese inflation, exports etc. when the USDJPY goes below 120 it hurts Japan at these fragile times and the boj has made it clear that they will keep cutting rates into further negative territory as required to leep the yen weak. In short the days of sustained yen strength are over and are unlikely to come back.
But what we have as a result of this is another issue. Where do haven seekers go from here? Haven seekers used to love the chf and jpy due to current accounts and status as a safe currency. When the snb made rates negative, the chf lost some of this status as investors do not want to effectivey be charged for holding a currency. The same will be true for the yen. Due to negative rates, it will lose some appeal as a haven refuge due to the cost of using it as such. (Incidentally longs against the yen will also refund larger amounts from now on as a result of these cuts).
The UK will outperformthis year
With regards to the UK. Inflaion due on Feb 16th will be firmer than expected in my estimation. I base this due to 1.) the price of sterling falling a lot which will negate the effects of oil somewhat. 2.) larger employment leading to more spending. 3.) the healthy housing market. When this happens people will see how cheap the Stering is and will likely buy it back to its fair value of about 1.50 (based spreads between two gear generic govt bonds). And before all the “pros” jump on this and start calling me wrong:
1.) you ridiculed me in august 2015 for saying the fed would hike in December. Who was right?
2.) you ridiculed me since Novemeber for saying the BOJ would act at its jan meeting. Who was right?
3.) you ridiculed me in december for saying the rnbz would cut. Who was right?
I am saying now that the Sterling will outperform the other majors in 2016 and thhe BOE will move at the end of the year. (You can begin ridiculing again)
Some people have been asking me if we could have avoided the events of December and the answer is no. And as for the other people on Etoro who want to claim they are different. Yes you are. There are NO other people like us on Etoro. We go for 1,000s of percent a year. We consider a 10% month a failure. Sure you may have lost only 15% in Demeber but these people make less than 5% on their best months. The sheer fact that someone on a 14% annul return was comparing his risk and drawdown to someone on a 2000% return should show you just how dellued these people are.
We can never be a 100% safe account. We can not go for 4000 percent in a year and not take big risks. I wish we could but we can not. Its easy for people like to critisize because they are not the same as us, they have never turned 10k into 300k. We try to make wealth, they try to guard it. The fact is they all laughed in December but had 15 random and most unlikely events not have unravelled at the same time, i would have made half a million dollars from 10k in less than 9 months. Something none of these people can even comprehend (hence why they are so eager to just get an extra 100 a month….). What went wrong, just to name a few (and all in those 6 weeks):
1.) russia going into syria
2.) turkey shooting down a russian plane
3.) russia threatening turkey
4.) sanctions on iran lifted
5.) oil hitting a 15 year low
6.) commodities doing the same
7.) circuit breakers in shanghai throwing the markets into panic (twice!) before being suspended.
8.) a warmer than usual winter.
9.) saudi tensions with iran.
10.) uk bringing forward the eu referendum.
11) boj easig in dec by a tiny amount and saying no more would happen (which we know now they did).
12) draghi losig control of the ecb in december and failing to deliver.
13) opec abandoning its quotas
How unlikely was just one of these things, let alone all 13… And there is so much more.
So no we can never be 100% safe because chasing insane returns means heavy investments that leave us exposed when freak things like this happen. Do not expect 4 figure returns with no risk. That is unreasonable and shows ignorance of markets and investment.
Right, back to the movies,
P.s. From tomorrow will start writting a weekly outlook for the week ahead. Hopefully it will prove useful to the community.