A Market Turnaround - a Fool's Prayer?
When I open my inbox it is inevitably filled up with messages commenting on past events, facts and figures that are out of date, and old conclusions that have become irrelevant. We have to accept that it is the nature of "news' to age rather quickly nowadays. But some commentators are worse than others, like the investment report sent out Aug 21st, dated end of July recounting events in June...
At the same time, my investors (including me) always expect to receive (and provide) updates that are not only timely, - but also are still relevant at the time when WE read it, ideally. We are so insatiably idealistic in our pursuit of perfection ... while having to grin and bear with limitations.
Gold
1. take profit above 10% gain,
2. target forecast at 1886,
3. the peak at 1911
4. the two-day downfall of some 8%
I have been commenting on gold prices for many months now. The latest comment to a private client went out on the day we intended to take profit and naming a price target of 1886. This target level was topped 48 hours ago, reaching 1911 before immediately retreating. The peak coincided with the lowest feeling of hopelessness in financial markets!
I had WARNED that the end phase of this particular rally will be almost impossible to capture with the tools we have (mutual funds), hence the exit some 10 trading days ago. Over the course of the last 48 hours the gold prices have retreated some $150 (about 8%!), on USD basis. "Why the big sudden drop?" you ask...
Once again, we learn that there are few holidays for the serious investors, trading goes on come rain or shine, debt or war, money or no money! No sooner did gold prices come off their high that investors put in their orders for equities, sell their bonds, and carry traders get ready to pounce on the USD in the hope it will go lower still. The latter is one trade which might not turn out so profitable. It is obvious to most, hopefully, that QE2 was a washout. Financial markets are at levels of August 2010 when QE2 was introduced. Is Mr Bernanke getting ready with the biggest bottle of QE3 champagne, betting on success in the launch of the 'ship to sink all?' The video here shows you that not every ship launch goes smoothly, can even attempt to drown its benefactors and leave an unintended mess. Is this how QE3 will end up?
(WARNING: the uploaded YouTube video has no forecasting qualities of any kind, nor does it answer the question. It's one for you to ponder, - and with a smile - make up your own mind!)
Do we (or the US) really need a QE3 without direction or focus? Are banks expected to increase lending on unsustainably low profit margins? Who should be receiving support? Who should 'pay for it" by way of additional tax burdens? (Mr Buffett is happy to contribute...) Try and get a hole in Jackson's while those discussions rumble on.
Applying Investment Principles
Early in the week I have seen signs of risk appetite returning, with quite a few markets(=Latin America, Hang Seng, Small Caps, etc.) creating higher lows after the initial rebound last week and the resulting pullback. So, when the turn came on Tuesday, my orders for the higher risk profile clients were on THEIR table for authorisation! I made the distinction between higher and lower risk profile clients simply because the volatility remains extreme. In a word, this advance is on somewhat hollow legs and could easily be thwarted by events on Friday evening (Singapore time) when we will hear news on the next plans to be implemented by the FED.
It is somewhat disconcerting that the market appears to have priced in a purely beneficial outcome from any announcement and the launch of any kind of QE3. We therefore will need to stay alert for potential signs of disappointment. Just to make it a little bit tougher, we are celebrating Hari Raya next week, - and I was hoping to take a week off! Not sure whether I can now.
The REAL Turnaround has yet to provide definitive signals. We'll talk again in September!
At the same time, my investors (including me) always expect to receive (and provide) updates that are not only timely, - but also are still relevant at the time when WE read it, ideally. We are so insatiably idealistic in our pursuit of perfection ... while having to grin and bear with limitations.
Gold
 |
| Gold Prices this month: |
2. target forecast at 1886,
3. the peak at 1911
4. the two-day downfall of some 8%
I have been commenting on gold prices for many months now. The latest comment to a private client went out on the day we intended to take profit and naming a price target of 1886. This target level was topped 48 hours ago, reaching 1911 before immediately retreating. The peak coincided with the lowest feeling of hopelessness in financial markets!
I had WARNED that the end phase of this particular rally will be almost impossible to capture with the tools we have (mutual funds), hence the exit some 10 trading days ago. Over the course of the last 48 hours the gold prices have retreated some $150 (about 8%!), on USD basis. "Why the big sudden drop?" you ask...
- Gold nowadays is not just an investment to keep. Prices fluctuate so swiftly and widely that a good trader can make nice profits.
- Gold is also the asset the big traders retreat to when all other assets are viewed as 'too risky', i.e. when the risk does not warrant the potential reward, - while the risk appetite is low.
- it is easily traded, highly liquid (ready buyers/sellers) and so, like this time again, taking profit is followed by a spending spree - back into equities and other promising asset classes.
Once again, we learn that there are few holidays for the serious investors, trading goes on come rain or shine, debt or war, money or no money! No sooner did gold prices come off their high that investors put in their orders for equities, sell their bonds, and carry traders get ready to pounce on the USD in the hope it will go lower still. The latter is one trade which might not turn out so profitable. It is obvious to most, hopefully, that QE2 was a washout. Financial markets are at levels of August 2010 when QE2 was introduced. Is Mr Bernanke getting ready with the biggest bottle of QE3 champagne, betting on success in the launch of the 'ship to sink all?' The video here shows you that not every ship launch goes smoothly, can even attempt to drown its benefactors and leave an unintended mess. Is this how QE3 will end up?
(WARNING: the uploaded YouTube video has no forecasting qualities of any kind, nor does it answer the question. It's one for you to ponder, - and with a smile - make up your own mind!)
Do we (or the US) really need a QE3 without direction or focus? Are banks expected to increase lending on unsustainably low profit margins? Who should be receiving support? Who should 'pay for it" by way of additional tax burdens? (Mr Buffett is happy to contribute...) Try and get a hole in Jackson's while those discussions rumble on.
Applying Investment Principles
Early in the week I have seen signs of risk appetite returning, with quite a few markets(=Latin America, Hang Seng, Small Caps, etc.) creating higher lows after the initial rebound last week and the resulting pullback. So, when the turn came on Tuesday, my orders for the higher risk profile clients were on THEIR table for authorisation! I made the distinction between higher and lower risk profile clients simply because the volatility remains extreme. In a word, this advance is on somewhat hollow legs and could easily be thwarted by events on Friday evening (Singapore time) when we will hear news on the next plans to be implemented by the FED.
It is somewhat disconcerting that the market appears to have priced in a purely beneficial outcome from any announcement and the launch of any kind of QE3. We therefore will need to stay alert for potential signs of disappointment. Just to make it a little bit tougher, we are celebrating Hari Raya next week, - and I was hoping to take a week off! Not sure whether I can now.
The REAL Turnaround has yet to provide definitive signals. We'll talk again in September!
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