Rainer's Investment Insights

Rumours are flying over Greece's impending bankruptcy (again) and Germany's politicians shouting their mouths off over what Athens will or will not get (concessions, extensions, more money, more time...). Spain is banning  to go short on equities. China's economy  is still slowing down, oil prices fall and the USD goes into overdrive.  All that jazz while Yahoo!Finance is frozen stiff, stuck on Friday's figures, not revealing to us ordinary folks the damage being inflicted right now. With the bad stuff piled up suitably, the 'news' of old news, in the meantime, has created a bloodbath in the market streets from Sydney to Frankfurt.  It is 10:00 p.m. in Singapore now, and the losses amount to -4%.  Efficient markets my foot! The world was a piece of cake till Thursday last week.  Now we're going through probably the worst day year to date as far as I recall.  But what will come of it?  Mercury retrograde, is a time when you should not trust any...

S&P500, 5-day view, "jumping the gun" as early as Tuesday... THE FIVE-DAY VIEW:  In a race, the rally since Thursday last week would be deemed a 'false start' and participants would be disqualified, coming out of the blocks 3 days early. - I say, 'false start' because,  the outcome of Greece's second election attempt was NO foregone conclusion. Yet markets rallied!  In the financial world, however, such a 'false start' will be attributed to luck,  as long as the result confirms investors' anticipations, - or bad timing if the markets were to go down after that! DAX - moving up hesitantly Comparing the two charts on the left, you will note that the S&P500 (chart above) leads the DAX (second chart) by at least 2 days: S&P 500 starts its rally on Tuesday, the DAX waits till late Thursday.  The medium-term technical picture suggested that the DAX had been leading the US by as much as 2 weeks. A deviation from that pattern is ...

The world of investors is occupied by many kinds of people. We sort of accept that not all of them are infallible, super intelligent, visionary, -  full of integrity and purpose. That is why some of our investment guru's, probably fed up with their students' notorious retention levels (= 3%, statistically proven!) of even the most carefully structured and passionately delivered lecture, decided to get their own back by createing catch phrases, simplistic axioms, mystic syllables. Here a few samples: "Sell when others are greedy, buy when others are fearful " (Warren Buffet); "Sell in May and stay away until St. Leger's Day." (old English phrase describing the habits of London's City boys who leave stock markets in favour of horse racing season, the last race being on St. Leger's day in the autumn.) "Buy the Rumour, Sell the Fact" , don't know who said it first, but am sure it was a highly enlightened but vindictive teacher. ...

USD retraces 61.8% of total downside in 2010-11 Currencies have played a crucial part in the game of asset rotation in recent years. Their movement provide insight into longer term trends that help assess medium term opportunities in the financial markets. The USD is now at a crucial level that just might dictate the next turn of events: We are at 61.8 Fibonacci Retracement level of the complete downside move that lasted from first week of June 2010 to first week of May 2011. With the RSI indicator extremely oversold, after a momentous rally these last few weeks, chances are that at this level investors are offered a few choices. Gold prices also have been languishing as every attempt to rally has been thwarted by investors' preference for currencies, and we have seen markets taking quite a plunge during May. Time to Asset Rotate? SELL THE DOLLAR AND ROTATE BACK INTO RISK ASSESTS? I would be very surprised if investors did not at least give a good try, European labour pains...

Short Term Market Anxieties  Since early May, financial markets, globally, show only one direction: DOWN. In a dominant show of foreign investment changing hands (from strong to weak), markets find 100% correlation - for a short term.  The downward pressures were worst in the last 2 weeks. NASDAQ & BOVESPA, two leaders on the way down STI and SWISS, less downside but currency weak Light Glittering at the end of the tunnel?  Punters are finding temporary solace in gold now. This is where it gets intriguing (...goes against the established pattern).  Last week, as many markets suffered their worst days YTD, gold suddenly raced up by some 5% (green arrow) even against a strong USD. 1-Year View: Gold's volatile path with winners and losers aplenty! Ever since the summer 2011, gold prices sold off in huge, volatile steps from the lofty USD 1800 range to below USD 1530 just last week. The remarkable comeback in the last 3 days says someth...

We have updated our Asset Allocation Model to December 2012.  To view please click here. 

It is happening again: The Singapore Dollar is reaching 'danger zone' highs. For years now we Singapore Dollar investor have been struggling to harvest the gains around the world, as our currency has strengthened enormously.  After a historic agreement on supporting the USD (- on a trade weighted level) versus a world currency in October last year, this stress situation has eased off. SGD-USD range still holding, BUT... From the 9-month chart you can see, that since the agreement, the most the SGD was allowed to buy was about 80.6 US cents, after which the MAS would take action to soften the currency's appeal.  But every time we get back up to this level, its 'goose bumps time': will the currency break out of range?  What will happen if it does, i.e. will the SGD again become the target of the 'risk averse' investor and surge much higher? Will the STI start looking even more listless?  Do we have to change strategies from global to local again, just wh...

Does this sound right? "The German DAX suffered 3% losses yesterday (23rd April 2012), - because  France's voters are yet to decide on their next president Spain slips back into recession, even after successful bond auctions in both countries The Dutch government collapses as it cannot find support for its austerity measures." Even in an interconnected world like ours you would expect that the markets displaying the 'cause' (nominated as such by our media) of the sell off would suffer the greatest losses.  Instead, it was the financial market of the strongest economy in Europe, which suffered most. Viewed scantily, investors may dismiss it as the kind of incongruity that so often seems to plague financial markets.  The real reason is more likely that foreign investors are focusing on Germany above all other European economies and then realise that her position is not insulated, let alone divorced of the problems of her neighbours. Germany is slowly waking...

4 Weeks Without Blog Update!   Sorry... I deliberately remained silent on market events during the always tricky Mercury Retrograde phase. After weeks of uncorrelated stock market movements - mostly of little importance, it is only now that we are seeing signs of investor sentiments turning and better evidence of changing prospects   In our ActiveManagement approach, we made changes on March 15 & 16, switching about 50% of equity holdings to safety.  It is was a very selective process as the peak in prices was in large caps mainly, with small and micro caps still on a trajectory for higher highs.  The proceeds of our profit taking exercise were used to buy mostly US bonds, AA+ and better, and globally diversified bonds, which in the past tended to be inversely correlated to stocks. We could have done a bit more: tech stocks continued to rise, and single country funds like Thailand and Philippines.  But the risks would have been much higher and - th...

'TARP', 'QE1', 'QE2', "Dollar Swap Line", 'LTRO' -  These are acronyms and financial jargon for liquidity injections into the financial market place since 2009.  Liquidity to the down and wavering financial markets is like VIAGRA to a similar category of down and outs.  And I am not trying to make fun of those who (think they) need that pill. It is uncanny though that people use it under similar emotional stress as financial markets do, gasping for more 'injections from Dr. FED'.  The first round it worked, the second was a flop, the third one? A 50/50 chance it will work again? And create what exactly? The right environment for lasting economic resurgence? Or just another splash of Asset Inflation? Hot air? Just like Viagra does for manhood, liquidity does for artificialy inflated expectations for stock markets. SINCE WE ARE TALKING 'MEDICINES'... If I may say so, the real medicine would need to ensure that wealth is tra...

In November 27th, last year , I wrote about the USD - and the markets when most people saw little hope for Europe, stock markets, and life in general!  Then I stated that such a view is deplorable on a personal level and stupid on a professional level. The universe is neither stupid nor given to despondent states of mind!   A Most Important Change SGD / USD - going from strength to strength since 2008 As a Singapore Dollar investor, we had a tough time over the last few years, extracting gains from other markets, while our own currency was going from strength to strength.  This situation has seen a major change in September last year.  In the aftermath, we learned about its significance from Henderson's Chief Economist, Bill MacQuaker ,who described it as “co-ordinated policy responses from Central banks.” Somehow, these guys (the Central Bankers) agreed to support the USD at a higher level, and - thereby reduce currency volatility, which so often causes havoc...

It is the second day of the Water Dragon Year, - and rightfully (... according to Asian tradition) I should not be working today. The last blog was posted more than a month ago, though not because I was indulging in seasonal laxness: I was attending to client portfolios to make sure we take advantage of the recent opportunities in the market.  And I tended to family obligations for Christmas, hardly something you could seriously call 'indulging'. source: Christian Science Museum , via staticflicks.com As Chinese New Year tradition demands, here is a telling picture of a dragon totally mesmerised by an oversized pearl.   It is a very beautiful sight indeed, but I can't help wondering whether this pearl is a size too big for this dragon?  Will he bite off more than he can chew?  Or are we underestimating the dragon's ability to rule the roost - and businesses in general - as he so often accomplished in past Dragon Years? Yes, you guessed it. We may well...