Making a home run

Asianmacro has not posted since the 1st week of May to smell the roses into early summer and also in travels across Europe.  Looking back in the past where I have been in the futures open outcry pit, a bank market maker and then proprietary trader, followed by stints as a hedge fund portfolio manager … I came to realise that the most amount of money is only made slowly over time when you can sit comfortably on a position and for your investment thesis to bear out (*assuming that you have correctly done your homework and not stopped out way beforehand).

This meant that position sizing must be such that for longer term trades to bear out and perform well to make that home run, it must not be over-leveraged such that you cannot sleep at night with all the gyrations and noise that the market will invariably move like a butterfly flapping its wings at the slightest breeze!

Notice how Warren Buffet always appear to be such an investment stud with most of his positions reaping home runs more often then not and covering his losses or ”mistakes” elsewhere.  Mr. Buffet has the ultimate advantage in having a ”cheap & almost free float” of investment capital via the perennial annuity premiums collected from his insurance business (where the cost is even lower than deposits obtained by banks who similarly will lever up to make loans & other investments).  This allowed him to almost ”never cut loss or stop out of his positions” and we all know that even a broken clock will tell the correct time twice in a day … Mr. Buffet can in fact be proven right most often than not as ”in the long run, we are all dead” does not apply to his investment style.

Asianmacro certainly do not have the good fortune of owning an insurance company and also with the capital size of Mr. Buffet.  Nevertheless, as highlighted above, from the 20 years of cutting my teeth and learning from the losses made while accepting with humility that I was probably more lucky than smart with my winners … In any given year, there are probably about 1-3 real serious tradable themes that you can express via a trade that is ”medium” term of 3-12 months of more in investment horizon that will be the 10-baggers.   Most of the other time when you are fiddling & twiddling your fingers, you should not be doing anything much unless you have the systems, tools, inclination and skills to do some short term noise & gyration trading … you could be expending more energy than ever for very small incremental returns.

If you look at my postings this year, my 3 medium term thematic trades consistently were:

  1. Long USD preferably via DXY futures on medium term U.S. economic recovery.
  2. Short AUD/USD where the lucky chaps down under end their spell of good fortune.
  3. Short China and/or underperformance of Asian equities.

They have all performed well YTD 2013 and there is no reason to close out the trades or a change in the theme.

Asianmacro will probably be eating, drinking, lazing and snoozing a lot more over summer.  But will try to wake up from my stupor now & then and post again (*on shorter term gyration noise opportunity) and potential medium term thematic trades as I start my re-assessment for H2 2013 into 2014 outlook in deploying my capital again.

Good luck!

 

 

 

*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

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The EUR/AUD FX Cross and VXO alarm bells are ringing

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Illustration 1: EUR/AUD FX cross exhibit high correlation & R-square with VXO … predictive ability of unknown stresses ahead in financial markets when both heads higher?

There are a number of price movements of various financial instruments that Asianmacro had observed before that I simply do not have a logical explanation that satisfy either a scientific mathematical finance approach or a qualitative explanation.  Perhaps I do not have the eloquence nor knowledge of those strategists or economist in coming up with convincing arguments for everything that happens since my pursuit is simply on whether to buy, sell or hold in making profits as the sole objective.

One phenomena that I chance upon is the propensity for EUR/AUD FX cross together with VXO (http://www.cboe.com/micro/vxo/) to always head higher when markets enter into some uncertainty especially when negative events start occur or develop in the financial markets.

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Illustration 2: EUR/AUD FX cross heads higher post Gold collapse since 12 April 2013 & Boston bombings …. sign of potential further negatives ahead to develop in markets?

I will be very cautious and on a somewhat ”sell risk on rally” mode across various asset classes especially stocks and commodities as this unexplained EUR/AUD & VXO indicator is flashing on my radar screen.  Whether it is due to AUD/USD coming off and under pressure due to poor China economic data (http://www.scmp.com/business/money/markets-investing/article/1215611/investors-dump-stocks-poor-china-economic-data) …. or EUR/USD heading higher … Damn how can that be with uncertainty in EU still smarting from Greece, Cyprus, …… ?  It does not matter … I rather be lucky than smart!

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

Bird Flu .. better be worried … How can Singapore stock market be unconcerned?

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Illustration 1: Bird flu onset in Jan 2003 … Hang Seng & Straits Times Index plunge 15% to March-April 2003

Asianmacro remembered the dark days of SARS / bird flu onset circa January 2003.  That was when there was a real sense of doom that is palpable in the air,  especially in Singapore where NOBODY ever voluntarily wears a mask over one’s nose and mouth when he/she has a cold or flu (unlike in Japan or Hong Kong) … you can actually see people in that period in 2003  (if you are lucky to spot a few brave ones out doing grocery shopping!) wearing them.

From Illustration 1, both Hang Seng and Strait Times index plunged about 15% within the next 2 months.  There is a new strain of bird flu with some deaths reported in China http://uk.reuters.com/article/2013/04/05/uk-birdflu-idUKBRE93402H20130405.  Hang Seng is currently off by 600 points (approx -3%) while Straits Times is holding up very well and off only -0.10%.  Looks like there must be a lot of ‘safe haven’ flows buying into Singapore stocks holding them up according to all the brokers!

Maybe it is an opportune time to remind ourselves, firstly, Singapore is not as good a safe haven as before both from an economic, political and geographical stand point.  Secondly, when it comes to bird flu, it is different from bringing your money over from Cyprus, Luxembourg or any other tax-haven of dubious origins to Singapore as the bird flu virus do not differentiate between Hong Kong or Singapore.  In fact, Singapore as a major transportation hub and also with a great number of its residents doing business in China and its companies depending on China, it is just as exposed to Hong Kong to such an exogenous event.

As the 2003 SARS / Bird Flu impact on Singapore stocks has proven before … this time, it shall not be any different.  Anybody who claimed otherwise had better remember the last episode.  as Singapore stocks is far too high up to justify its insulation from what that is panning out whether this bird flu is going to get worse or better, you can be sure that it is not going to get any better first and China always play down negative events!

Short SIMSCI April futures at current 372 level to 360 region as this represent a good risk-reward proposition now!  *This is either a hedge against your underlying cash stocks or outright bet on a decline.

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

Be warned ! …. the Ting Hai (丁蟹) effect may kick in

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*Saving General Yang — comes out on 4 April 2013

 

If you think that the weaker than expected China Manufacturing PMI (official figures or those of HSBC) released in Asian morning were the catalysts for the risk off move lower in Asian stocks and AUD FX …. wait till the ”Ting Hai (丁蟹) effect” kicks in if this time is no different from the past!

 

The person and event to watch is Adam Cheng Siu-chow.  Whenever Cheng’s films hit movie and TV screens, the Hang Seng index tends to collapse.  Cheng’s next movie — Saving General Yang — comes out on 4 April 2013.

 

Cheng had shows airing during the Asian financial crisis of 1998 and the tech bubble burst of 2000.  The market fell during 11 of 17 of his television shows since 1992.  It seems that the markets do worse when the series / shows are more tragic.  (*Do note that Saving General Yang is pretty gory and tragic!).

This phenomenon is called the ”Ting Hai (丁蟹) effect” http://en.wikipedia.org/wiki/Ting_Hai_effect named after one of Cheng’s characters who makes money by shorting derivatives and stocks.

 

Check out the unbelievable statistics of the market risk off downturn from Adam Cheng:

1990s

  • October 1992: The drama series Greed of Man made its debut on TVB. During the time it was broadcast, the Hong Kong’s Hang Seng Index dropped 598 to 600 points
  • November 1994: Instinct (笑看風雲) made its debut on TVB. The Heng Sang Index fell more than 2,000 points.
  • September 1996: Once Upon a Time in Shanghai (新上海灘) premiered on TVB. The Hang Seng Index fell 300 points.
  • June 1997: Cold Blood Warm Heart (天地男兒) made its debut on TVB. The Hang Seng Index accumulated 735 points in losses.
  • December 1997: Legend of Yung Ching (江湖奇俠傳) was followed by a fall of 1.4% in the Hang Seng Index.
  • June 1999, Lord of Imprisonment (神劍萬里追) was followed by a fall of 6.5% in the Hang Seng Index.

2000s

  • September 2000: A loose sequel of The Greed of ManDivine Retribution aired on ATV. Due to the Tech stock bubble at the time, the Hang Seng Index fell an accumulated 1,715 points, with other stock markets around the world falling as a result also.
  • March 2004: Blade Heart (血薦軒轅) premiered in Hong Kong, the Hang Seng Index fell 550 points over 3 days due to high oil prices and instabilities in the Middle East.
  • October 2004: The Conqueror’s Story (楚漢驕雄) premiered in Hong Kong, followed by a 198-point drop in the Heng Seng Index on the day of the premiere.
  • March 2005: The Prince’s Shadow (御用閒人) broadcast of the first episode, the Hang Seng dropped 100 points by noon, then rose back 90 points by the end of the day.
  • July 2007: Return Home (香港傳奇-榮歸) broadcast and the market to fell 1,165 points.
  • March 30, 2009: The King of Snooker (桌球天王) premiered in Hong Kong. The Heng Seng Index fell 663.17 points.

 

Asianmacro is not superstitious by nature and correlations does not infer causality. However if a sufficient number of people choose to believe in this mumbo jumbo ”Ting Hai (丁蟹) effect”, it might just become a self fulfilling prophecy and the markets de-risk and takes on a life of its own …..

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.