It is May now and the famous ”Sell in May & Go Away!” mantra always resonate in financial markets. The question this time is a challenging, what to really sell?
The top 10 & bottom 10 performers in global equity indices are shown here. You will notice that the top performers are really those marginal frontier markets mostly that nobody really invest in a big way. While the bottom performers are some of the bigger markets that have sold down substantially already like Nikkei 225 (Japan) and Hang Seng (Hong Kong).
Similarly in currencies below, besides NZD (New Zealand dollar) & Gold that have gained more than 5% against USD, the best spot returns are from relatively illiquid currencies that nobody owns much of; while major currencies like EUR, GBP, CHF are only 1% up for the year which is almost a rounding error.
If there is something that I want really want to sell or short in May, I guess I am now looking at cheap downside bets in NZD, Gold and IDR. Asianmacro never like the frothy levels of milk anyway and prefers soy latte rather than regular milk latte coupled with an exuberant Kiwi banking sector holding up the economy http://blogs.wsj.com/economics/2014/05/06/new-zealand-banks-arent-playing-ball-with-rbnz/ . For Gold, I can find more things that glitters like LED lights & the safe haven bid due to the Russian / Ukraine fears are overplayed. Lastly in the case of IDR, well the Jokowi feel good effect in Indonesia is all but played out. The follow on Presidential elections will take on a more complex Javanese shadow puppet play that will mean more uncertainty http://www.thejakartapost.com/news/2014/05/05/prabowo-desperately-seeking-partners-jokowi-flexes-muscles.html that the markets will not like soon.
Illustration 1: Datta Phuge’s 3.3 kg gold shirt cost him US$250,000 … right before gold’s collapse …. Impeccable wrong timing !
Asianmacro had been busy slaughtering the pigs in the gold market. That is why I was quiet and did not have time to comment on the markets in recent days. The old saying, ”Bulls make money, bears make money, but the pigs get slaughtered!”‘ is always true on Wall Street. The gold bugs that have held onto their End-of-Days view or the debasement of wealth via fiat money explosion due to QE …. whatever theory that you pick … they are all beyond my intellectual comprehension. Asianmacro only know that in the long run, we are all dead and there are just too many stubborn longs out there.
Never had so much fun shorting something that cannot even muster a bounce and the last time it was such must be like 1997 during the Asian financial crisis when Asian currencies and rates move at such speed and pace.
$1250 gold and $18 silver is not unthinkable.
*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.