In line with our expectations (to be honest even greater than our expectations) fourth-quarter Japanese gross domestic product proved to be much weaker than expected with the contraction of -0.4% being twice as large as the market expected. In addition, Japan posted extremely weak industrial production, further highlighting growth concerns. As I have been stating time and time again and as many people have been trying to fault, the Japanese economy is in a lot of trouble and this highlights it. A country with flat inflation, decreasing growth and a contracting GDP is far from healthy. The market finally came to terms with this and with expectations that the bank of Japan would have to act that its next meeting, Japanese equities rallied their most in a single day since 2008. I am happy with this outcome as this is indeed what we expected yesterday when we recommended to the community that they take advantage of this fact and take buy positions on CFD’s on Japanese equities. I hope some of you took advantage of this as anyone who did would have potentially made a maximum of 14X their investment on such a trade.
The second piece of data which actually surprised me and much of the market was the Chinese trade balance data. While China did in fact post a better trade surplus than expected, it’s imports and exports both declined by a far greater margin (manyfold) than analyst estimates. The shocking thing about this is that rather than being affected by this, as they should be due to their trade relationship with the world’s second-largest economy, both the New Zealand and Australian dollars rallied. I guess the driving factor behind this was that following the extremely weak Japanese GDP, the hopes of stimulus from the BOJ drove risk appetite.
In addition the Chinese yuan strengthened by the most in a decade after the People’s Bank declared their commitment to defending the currency from speculation and fixed it at a stronger rate. In short, they mean business and they have the reserves and firepower (over US$3 trillion in liquid assets) to defend their interests beyond the assault of all speculators no matter how large.
Oil and European equities also showed strong performances today following their Asian counterparts and the market showed very little risk aversion and renewed risk appetite. Could this be a turn around? Too early to say after one day, but it has been a very promising rally, far too strong to simply call a correction.
I’m happy to report that as of writing this, the community trading account on HF is back in profit. By saying this I mean that even if I were to now close all of the three red trades that we currently have, we would have more equity than the sum of all the deposits. In short since Tuesday of last week when we had a drawdown in excess of 50% and had to start hedging using 20% of our total margin, we have wiped approximately $30,000 worth of unrealised losses ( which would have been in excess of $70,000 had we not hedged) and are now back in profit. This is a tremendous result for us and showed that we are able to survive when margin trading, even in irregular market cycles. Of course the scorned creature residing in me cannot help himself but point out that on Tuesday our position on HF was in a worse position than on a certain other network as it had damaging USDJPY buys at 300X leverage rather than 25X and starting at 120.8 instead of the mid 118s. These trades also got SL’d on both platforms. However, had we been allowed to login and close profitable EURUSD to sell when we wanted to (and clearly posted our intention to) and been allowed to hedge, the account on that other network would also be in a very healthy position as of right now. They key point here is that we are not talking about a hypothetical situation. The proof that we could have done this lies in front of you by how we managed our account on HF. So this other network that finally had to admit that it banned me from the trader to prevent me from opening new trades to “protect copiers” did far from protecting you. I guess the profit that they had from taking the opposite positions to us (which they would have had to surrender had we opened hedges) was more important to them than the safety of your equity. Incidentally I also wish to point out that, judging from the statistics that other people have provided for me (since I cannot login myself to verify the situation),a certain group of unpleasant people still have 13% of my equity (which while not a major amount is still larger than the average man’s monthly salary). In short I want to point out the obvious fact to everyone at this time that had accounts not been sabotaged by preventing access to the trader and performing new trades, none of the equity on the other platform would have been lost and we would be in a very similar situation to on HF. I want to leave you all with that as food for thought so that you realise that a certain group do not have your interests at heart and may happily throw you in front of a bus if it serves their purposes. In my opinion, you should not trust these people with a single cent after they admitted to their sabotage.
The remaining highlight of the day will be Draghi speaking. I believe that there is a high possibility that he will do everything in his power to try and lower the euro as at these current levels it is virtually killing everything the ECB hopes to achieve. They will never meet their inflation targets with the euro this strong against the dollar and oil at its current prices. They need to cheapen the euro. On the other hand following his failure to deliver in December, after promising the market that he had the tools, the will and the means to do everything necessary to ensure that the inflation target was met, investors may be sceptical to take his words seriously. Therefore I may consider entering with a smaller position as I did not feel comfortable entering with our other positions which I already closed in profit. Given the uncertainty in the market it would have been very foolish to blindly go into that speech being short on €2 million.
In addition, as risk appetite has returned (as mentioned previously) the New Zealand dollar and Australian dollar had strengthened and gained ground against the US dollar. I’ll be looking for opportunities to go short on these pairs. Perhaps tomorrow will present these opportunities, as always I will post any moves that I make on twitter.
Good luck to everyone,
P.s. As many of you know we made our twitter private 3 days ago. If you are not able to access it, please leave me a message here and I will approve the follow.
P.s.s I am not going to make this blog private. I do not care if a certain group are reading. What can they do at this point? They already stole my money and slandered me. Let them and the world read about what they did and feel ashamed of it. While telling the truth, I have nothing to fear from these people.