Winston's Investment Ideas 04 (Oct 15 - May 19)

by **winston** » Sun Jun 18, 2017 12:47 pm

TOL as of June 17, 2017

Chinese Water Torture.jpg

Chinese Water Torture

The markets have been dripping downwards and I think that this may continue for a while longer.

It may start to hurt later, just like a Chinese Water Torture, where that 10,000th drop to hit your face, will probably feel like a stone. Therefore, it's better not to be too complacent in this type of dripping market.

Anyway, the drops now are not big enough for the bargain hunters to come out or for the shorts to cover yet.

However, there are some exceptions eg. Kroeger (KR), where it dropped about 30% in 2 days. It's just too tempting and I have taken a position in it. If it rebounds slightly next week, I will probably sell it.

Finally, my Market Indicators below are still not showing any sign of danger. So I think that it's stilll safe to buy any convincing story. Having said that, I have increased the Liquidity Risk score from 6 to 7, on the worsening Money Supply numbers in China.

Market Risk Indicators: Still not in Danger Zone yet

1. Euphoria: 8 (Low: 1; High: 10) - Inflows into ETFs; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; Factory Output; Housing; Auto; Retail
4. Liquidity: 7 from 6 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Lower Tax Rates; Repatriation of Foreign Funds; Deregulation
7. Geopolitical Issues: Increase to 8 from 7 (Peaceful: 1; War: 10) - North Korea; Syria; Iran; South China Sea; Afghanistan; Europe
Total: 50 out of 70 (71%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data as of Saturday)

1. Oil - Lower. US$44.70 from US$45.91 last week from US$47.78 two weeks ago.
Vested in RH Petrogas; Support: US$48; US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 3Q? Supply 98.3m bpd; Demand 97.9m bpd
b. Global Stockpiles: 2.5b barrels; US: 33m barrels; Industrialized: 292m barrels > 5 yr avg
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; To sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US Oil Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells for activity
f. US Supply: +500,000 bpd
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China Supply: -7%; -300,000 bpd
i. Saudi Aramco's IPO in 2018. Incentive for Saudis to maintain high oil prices
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. Summer driving is here
l. OPEC: Cutting 1.8m bpd; 9 months extension on May 25
m. Libya: +300k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +200k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Refinery maintenance over; Big drawdown of 3.6m barrels
p. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
q. OPEC: Floating oil storage has dropped by one-third in 2017
r. About 10 Very Large Crude Carriers (VLCCs) have been chartered since May, for oil storage
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Flat: US$3.03 from US$3.04 from US$3.01. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation (CNG), Ammonia (Fertiliser), Hydrogen (Chemical Industry), Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Mild weather in February and March caused inventory drawdowns to slow.
j. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1256 from US$1269 from US$1279. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.65 from US$17.16 from US$17.55
Support: US$16.50; Resistance: US$18.50; Range High: US$49
a. Solar Panels, Data Storage, Antibacterial products, Silver Coins, Jewelery etc
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Lower. US$124 from US$127 from US$125
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Higher. US$19.85 (Jun12) from US$19.25 (Jun5) from US$19.25 (May29)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 nuclear reactors will be shut down over the next 25 years, mostly in Europe
viewtopic.php?f=33&t=705&start=80

7. Zinc - Lower; US$2524 from US$2537 last week
a. Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
c. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
d. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$864 from US$857 last week
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared.
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Flat. 2433 from 2432 last week from 2439 two weeks ago.
a. Resistance: 2650
b. Bought Kroeger (KR); Traded SQQQ (Inverse Nasdaq 3x) and TZA (Inverse Russell 3x);
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Lower. 25626 from 26030 from 25924
a. Support: 25000, 23250, 21575; Resistance: 27500; 28200
b. Bought China Construction Bank (0939)
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3123 from 3158 from 3106
a. Support at 2950; 2450; Resistance 3450;
b. Sold A50 ETF (2822) listed in HK
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade

5. Japan Equities - Lower. 19943 from 20013 from 20177; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - No Trade

7. Australian Equities - Sold Bellamy's Australia

8. Korean Equities - Lower; 2362 from 2382 from 2372
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF listed in HK

Currencies- Risk-On

1. USD to JPY - JPY Weaker. 110.75 from 109.74 last week from 109.86 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.0621 from 3.0551 from 3.0735

3. AUD to USD - AUD Stronger. 0.7629 from 0.7566 from 0.7479
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0538 from 1.0421 from 1.0280
a. The range is 0.98 (2016) to 1.36 (2012)

5. AUD to MYR - AUD Stronger. 3.2275 from 3.1833 from 3.1585
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Weaker. 1.1209 from 1.1254 from 1.1344
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Weaker. 7.7908 from 7.7585 from 7.7693
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Weaker. 4.2293 from 4.2073 from 4.2232
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Weaker; 1.3813 from 1.3773 from 1.3739
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Weaker; 6.6763 from 6.6475 from 6.6612
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Stronger. 1.2799 from 1.2802 from 1.2958
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Stronger. 5.4145 from 5.3880 from 5.4724
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Weaker. 97.16 from 97.27 from 96.72
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$225t, 225% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China
i) Debts (US$23t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

d. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

e. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years

3. Tailwinds - Low Interest Rates, Cash Sidelines (US$50t); QE Programs US$18t - US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t); Negative Yield Bonds (US$4t from US$10t); US Foreign Funds Repatriation (US$2.5t); Cash US Corps (US$1t); Cash Japanese Corp (US$2t); Buybacks, US Household Net Worth (US$90t); EM Consumption;

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2-3 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) >80% more homes are being auctioned
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties
i) Knight Frank: Supply of about 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of residential & commercial properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in first 3Qs of 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: 3Q 2016 vs 2Q 2016, total transactions dropped 9.3%
viii) 600,000 houses are in planned supply; Altogether houses total 6.4m
ix) NAPIC: Supply inflated to 94,124 units compared to 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) Residential properties put on auction up 15% yoy
viewtopic.php?f=10&t=4220&start=150

c. China Properties
i) Various new curbs in more than 20 cities
ii) Beijing is +23.5% yoy
iii) Shanghai is +31.2% yoy
iv) Shenzhen is +36.8% yoy
v) Guangzhou is +21.1% yoy
vi) 40% of smaller cities saw their housing investories drop to <12 mths
viewtopic.php?f=10&t=8150&start=30

d. HK Properies
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 96,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 15% in 2017
x) Centaline: Prices to increase 20% by Dec 2019
xi) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xii) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Lower. 2.15% from 2.20% from 2.16%
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to rise slowly over next two years
b. About US$9t or about 20% of the world’s bonds now have negative yields
c. US Feds: Three rate hikes in 2017? Four rate hikes in 2018 ?
d. Yield on 2-year German bonds hit record lows, trading at -90 basis points
e. US feds raised interest rates by 25 bps to
f. HKMA raised its base rate by 25 bps to 1.5%
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Lower. 37.07 from 37.13 from 37.28

9. Baltic Dry Index - Higher; 855 from 849 from 830; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

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viewtopic.php?f=26&t=3168

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by **winston** » Sun Jul 02, 2017 1:50 pm

TOL as of July 02, 2017

July.jpg

New Money From the New Month

It's a new month and new funds would be flowing into the markets again.

Normally, we would have a spike in the markets. However, I have a feeling that the fund managers may have spent their July money in advance, on Weds, June 28 (US Time) due to 2Q Window Dressing.

Therefore, the markets may not be that strong next week. In addition, 2Q Earnings Season is still a while away.

By the way, the action on Nasdaq is a bit strange. The Leaders should not be that weak during Window Dressing season. Perhaps the Hedge Funds are using the opportunity to get out while there are still buyers.

On the horizon, we have the G20 Summit in Hamburg next week. Normally, they would be coordinating their announcements on QE etc but I'm not expecting much this time as the Americans now does not seemed to want to work with the rest of the world.

Finally, my Market Indicators below, are still not showing any sign of danger yet. So it's stilll safe to buy any convincing story.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - Inflows into ETFs; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; Factory Output; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Lower Tax Rates; Repatriation of Foreign Funds; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - North Korea; Syria; Iran; South China Sea; Afghanistan; Europe
Total: 50 out of 70 (71%); (Safe: 50; Danger: 80)

Commodities: Risk-On (Data as of Saturday)

1. Oil - Higher. US$46.33 from US$43.01 last week from US$44.70 two weeks ago.
Sold USO (US Oil ETF); Vested in RH Petrogas; Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing on ly in 2018? Supply 98.3m bpd; Demand 97.9m bpd
b. Global Stockpiles: 2.5b barrels; Industrialized Countries: 292m barrels above 5 year average
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; To sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US Oil Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells for activity only
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China Supply: -7%; -300,000 bpd
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018. i. Incentive for Saudis to maintain high oil prices; How?
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May 25
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Refinery maintenance over; Big drawdown of 3.6m barrels
o. OPEC: Floating oil storage has dropped by one-third in 2017; Currently, about 112m barrels
p. About 10 very large crude carriers (VLCCs) have been chartered since May, for oil storage
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$3.04 from US$2.96 from US$3.03. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation (CNG), Ammonia (Fertiliser), Hydrogen (Chemical Industry), Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Mild weather in February and March caused inventory drawdowns to slow.
j. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1242 from US$1257 from US$1256. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.59 from US$16.64 from US$16.65
Support: US$16.50; Resistance: US$18.50; Range High: US$49
a. Solar Panels, Data Storage, Antibacterial products, Silver Coins, Jewelery etc
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Higher. US$126 from US$123 from US$124
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Flat. US$20.10 (Jun26) from US$20.00 (Jun19) from US$19.85 (Jun12)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. About 200 nuclear reactors around the world will be shut down over the next 25 years, mostly in Europe
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of up to 20 reactors

viewtopic.php?f=33&t=705&start=80

7. Zinc - Higher; US$2759 from US$2702 from US$2524
a. Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
c. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
d. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Lower; US$839 from US$931 from US$864
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. Soyabean: Higher; US$948 from US$910; Sold SOYB (Soyabean ETF)

10. If there's a crash, Commodities would not be spared.
11. The High USD is not good for Commodities
12. Global economy may worsening eg. potential trade wars etc

Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Lower. 2423 from 2438 last week from 2433 two weeks ago.
a. Resistance: 2650; Support 2400
b. Sold USO (US Oil ETF) and SOYB (Soyabean ETF)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 25765 from 25670 from 25679
a. Support: 25000, 23250, 21575; Resistance: 26,0000; 27500; 28200
b. Bought ICBC
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3192 from 3158 from 3158
a. Support at 2950; 2450; Resistance 3450;
b. Sold A50 ETF (2822) listed in HK
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Bought Wilmar. Traded DISA

5. Japan Equities - Lower. 20033 from 20132 from 20133; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - Bought OSK and Felda Global Ventures

7. Korean Equities - Higher; 2392 from 2378 from 2362
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF listed in HK

Currencies- Risk-On

1. USD to JPY - JPY Flat. 111.66 from 111.64 last week from 110.75 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.0902 from 3.0526 from 3.0621

3. AUD to USD - AUD Stronger. 0.7725 from 0.7590 from 0.7629
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0578 from 1.0537 from 1.0538
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.2719 from 3.2134 from 3.2275
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Stronger. 1.1481 from 1.1184 from 1.1209
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Stronger. 7.7682 from 7.7990 from 7.7908
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Weaker. 4.2346 from 4.2359 from 4.2293
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Stronger; 1.3692 from 1.3882 from 1.3813
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Stronger; 6.6309 from 6.7070 from 6.6763
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Stronger. 1.3096 from 1.2716 from 1.2799
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Stronger. 5.5454 from 5.3862 from 5.4145
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Weaker. 95.63 from 97.37 from 97.16
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

d. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

e. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years

3. Tailwinds - Low Interest Rates, Cash Sidelines (US$50t); QE Programs US$18t - US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t); Negative Yield Bonds (US$4t from US$10t); US Foreign Funds Repatriation (US$2.5t); Cash US Corps (US$1t); Cash Japanese Corp (US$2t); Buybacks, US Household Net Worth (US$90t); EM Consumption;

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) >80% more homes are being auctioned
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xii) Land released for 8,125 private residential units (including exec condo) in 2H 2017 vs 7,465 in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties
i) Knight Frank: Supply of about 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of residential & commercial properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in first 3Qs of 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: 3Q 2016 vs 2Q 2016, total transactions dropped 9.3%
viii) 600,000 houses are in planned supply; Altogether houses total 6.4m
ix) NAPIC: Supply inflated to 94,124 units in 2016 compared to 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) Residential properties put on auction up 15% yoy
xii) For March 2017, approved loans for the purchase of property has increased 3% y-o-y to RM11.43bil
xiii) NAPIC: 1Q 2017: 30,000 launched condos; About 5,000 unsold, 2x a year ago, when 5,000 condos launched
xiv) Auctioned residential properties rose 14.4% to 6,225 cases in 1Q 2017
viewtopic.php?f=10&t=4220&start=150

c. China Properties
i) Various new curbs in more than 20 cities
ii) Beijing is +23.5% yoy
iii) Shanghai is +31.2% yoy
iv) Shenzhen is +36.8% yoy
v) Guangzhou is +21.1% yoy
vi) 40% of smaller cities saw their housing investories drop to <12 mths
viewtopic.php?f=10&t=8150&start=30

d. HK Properies
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 96,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 15% in 2017
x) Centaline: Prices to increase 20% by Dec 2019
xi) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xii) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xiii) Bocom: Prices to fall 30% in 6 to 12 months
xiv) Andy Xie: HK properties to drop for 20 years
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Higher. 2.30% from 2.13% from 2.15%
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to rise slowly over next two years
b. About US$9t or about 20% of the world’s bonds now have negative yields
c. US Feds: Three rate hikes in 2017? Four rate hikes in 2018 ?
d. HKMA raised its base rate by 25 bps to 1.5%
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.20 from 37.14 from 37.07

9. Baltic Dry Index - Higher; 920 from 870 from 855; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page.

by **winston** » Sun Jul 09, 2017 4:50 pm

TOL as of July 09, 2017

G1.jpg

Can Things Get Better From Here?

The following has been our Goldilocks investment climate:-
1. Stocks have risen for 8 years
2. Interest rates are still very low
3. Commodities are still quite low, especially Oil
4. The global economy is doing well
5. China still able to manage their bad debts
6. Unemployment is low
7. Food is plentiful. In the developed world, food stamps are also available
8. There are no major wars or natural catatrophe
etc.

The "optimists" says that things can get better because of the various Trump issues:-
1. Lower tax rates in the US
2. Deregulation in the US for the banks, mining companies etc
3. Lower healthcare cost
4. Repatriation of foreign funds
5. US$1t infrastructure spending
etc.

The "pessimists" are saying that Trump will never be able to get his stuff passed by the Senate and the current situation is as best as it can be.

Intuitively, I think that the stuff from Trump will be stuck in the Senate for a while longer.

In view of the above and the volatility in the markets especially in Tech stocks, I have decided to raise Cash again. Recently, I sold 4 Chinese Banks. I may also add to my Inverse ETFs if I start feeling the "fear" in the air.

As for next week, I'm not expecting any meaningful coordinated announcements by the Central Banksters, although they have met in Hamburg recently.

Finally, my Market Indicators below, are still not showing any sign of danger yet. However, I have raised the "Recession" risk to 7 from 6, as China Housing and US Auto is slowing down. Anyway, it's stilll safe to buy any convincing story but for the short term only.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - Inflows into ETFs; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 from 6 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe
Total: 50 out of 70 (71%); (Safe: 50; Danger: 80)

Commodities: Risk-Off (Data as of Saturday)

1. Oil - Lower. US$44.36 from US$46.33 last week from US$43.01 two weeks ago.
Sold USO (US Oil ETF); Vested in RH Petrogas; Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing only in 2018? Supply 98.3m bpd; Demand 97.9m bpd
b. Global Stockpiles: 2.5b barrels; Industrialized Countries: 300m barrels above 5 year average
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; To sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US Oil Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells for activity only
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China Supply: -7%; -300,000 bpd
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018; Incentive for Saudis to maintain high oil prices; How?
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May 25
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Refinery maintenance over; Big drawdown of 3.6m barrels
o. OPEC: Floating oil storage has dropped by one-third in 2017; Currently, about 112m barrels
p. About 10 very large crude carriers (VLCCs) have been chartered since May, for oil storage
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.86 from US$3.04 from US$2.96. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation (CNG), Ammonia (Fertiliser), Hydrogen (Chemical Industry), Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Mild weather in February and March caused inventory drawdowns to slow.
j. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1212 from US$1242 from US$1257. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$15.59 from US$16.59 from US$16.64
Support: US$16.50; Resistance: US$18.50; Range High: US$49
a. Solar Panels, Data Storage, Antibacterial products, Silver Coins, Jewelery etc
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Higher. US$129 from US$126 from US$123
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Flat. US$20.35 (Jul03) from US$20.10 (Jun26) from US$20.00 (Jun19)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. About 200 nuclear reactors around the world will be shut down over the next 25 years, mostly in Europe
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of up to 20 reactors
viewtopic.php?f=33&t=705&start=80

7. Zinc - Higher; US$2787 from US$2759 from US$2702
a. Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
c. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
d. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Lower; US$837 from US$839 from US$931
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. Soyabean: Higher; US$1001 from US$948 from US$910; No trade

10. If there's a crash, Commodities would not be spared.
11. The High USD is not good for Commodities
12. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Flat. 2425 from 2423 last week from 2438 two weeks ago.
a. Support 2400; Resistance: 2650;
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Lower. 25341 from 25765 from 25670
a. Support: 25000, 23250, 21575; Resistance: 26,0000; 27500; 28200
b. Sold ICBC, CCB, BOC and ABC
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3218 from 3192 from 3158
a. Support at 2950; 2450; Resistance 3450;
b. Sold A50 ETF (2822) listed in HK
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade; Hotung is doing well

5. Japan Equities - Lower. 19929 from 20033 from 20132; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - No Trade

7. Korean Equities - Lower; 2380 from 2392 from 2378
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF listed in HK

Currencies- Risk-On

1. USD to JPY - JPY Weaker. 113.39 from 111.66 last week from 111.64 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.0833 from 3.0902 from 3.0526

3. AUD to USD - AUD Weaker. 0.7640 from 0.7725 from 0.7590
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0513 from 1.0578 from 1.0537
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.2400 from 3.2719 from 3.2134
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Weaker. 1.1455 from 1.1481 from 1.1184
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Weaker. 7.7729 from 7.7682 from 7.7990
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Weaker. 4.2402 from 4.2346 from 4.2359
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Weaker; 1.3754 from 1.3692 from 1.3882
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Weaker; 6.6625 from 6.6309 from 6.7070
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Weaker. 1.2957 from 1.3096 from 1.2716
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Weaker. 5.4924 from 5.5454 from 5.3862
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Stronger. 96.01 from 95.63 from 97.37
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

d. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

e. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years

3. Tailwinds - Low Interest Rates, Cash Sidelines (US$50t); QE Programs US$18t - US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t); Negative Yield Bonds (US$4t from US$10t); US Foreign Funds Repatriation (US$2.5t); Cash US Corps (US$1t); Cash Japanese Corp (US$2t); Buybacks, US Household Net Worth (US$90t); EM Consumption;

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) >80% more homes are being auctioned
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xii) Land released for 8,125 private residential units (including exec condo) in 2H 2017 vs 7,465 in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties
i) Knight Frank: Supply of about 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of residential & commercial properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in first 3Qs of 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: 3Q 2016 vs 2Q 2016, total transactions dropped 9.3%
viii) 600,000 houses are in planned supply; Altogether houses total 6.4m
ix) NAPIC: Supply inflated to 94,124 units in 2016 compared to 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) Residential properties put on auction up 15% yoy
xii) For March 2017, approved loans for the purchase of property has increased 3% y-o-y to RM11.43bil
xiii) NAPIC: 1Q 2017: 30,000 launched condos; About 5,000 unsold, 2x a year ago, when 5,000 condos launched
xiv) Auctioned residential properties rose 14.4% to 6,225 cases in 1Q 2017
viewtopic.php?f=10&t=4220&start=150

c. China Properties
i) Various new curbs in more than 25 cities
viewtopic.php?f=10&t=8150&start=30

d. HK Properies
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 96,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 15% in 2017
x) Centaline: Prices to increase 20% by Dec 2019
xi) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xii) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xiii) Bocom: Prices to fall 30% in 6 to 12 months
xiv) Andy Xie: HK properties to drop for 20 years
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Higher. 2.39% from 2.30% from 2.13%
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to rise slowly over next two years
b. About US$9t or about 20% of the world’s bonds now have negative yields
c. US Feds: Three rate hikes in 2017? Four rate hikes in 2018 ?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Lower. 36.83 from 37.20 from 37.14

9. Baltic Dry Index - Lower; 822 from 920 from 870; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page.

by **winston** » Sun Jul 16, 2017 9:48 am

TOL as of July 16, 2017

earnings-season.jpg

US Earnings Season

It's the start of US Earnings Season so the US markets may be "safe" for a while more. This is because the analysts would normally project low earnings estimates, so that the companies can easily beat those low projections.

In addition, the USD has been quite weak, so the multinationals could be reporting better numbers.

However, the there could be two issues this Earnings Season:-
1. The Energy sector may surprised on the downside, as Oil has been quite weak recently
2. The markets are quite high so everything has to be perfect ie. beating estimates, forward projections intact etc.

Anyway, the US markets is now dominated by the big techs and as long as they can beat the low estimates and project acceptable forward growth, everything should be quite ok.

One of the ways that I have tried to hedge against the weak USD is to look at the Commodities area. Recently, I have initiated a position in Silver through SLV. On hindsight, I should have chosen PSLV, the Physical Silver ETF.

Finally, my Market Indicators below, are still not showing any sign of danger yet. Therefore, it's stilll safe to buy any convincing story but probably only for the short-term.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - Inflows into ETFs; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe
Total: 51 out of 70 (73%); (Safe: 50; Danger: 80)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Higher. US$46.69 from US$44.36 last week from US$46.33 two weeks ago.
Sold USO (US Oil ETF); Vested in RH Petrogas; Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 2018?
b. Global Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 266m
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; To sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US Oil Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells for activity only
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China (largest importer): Supply: -7% (-300,000 bpd); Demand 1H 2017: +14%
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018; Incentive for Saudis to maintain high oil prices; How?
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May 25; Cap on Libya & Nigeria?
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Gradual drawdown?
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$2.98 from US$2.86 from US$3.04. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1229 from US$1212 from US$1242. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$15.96 from US$15.59 from US$16.59; Vested in SLV
Support: US$15.20; Resistance: US$18.50; High: US$49
a. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery etc
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Higher. US$134 from US$129 from US$126
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Flat. US$20.40 (Jul10) from US$20.35 (Jul03) from US$20.10 (Jun26)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 nuclear reactors will be shut down over the next 25 years, mostly in Europe
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of 20 reactors
viewtopic.php?f=33&t=705&start=80

7. Zinc - Flat; US$2786 from US$2787 from US$2759
a. Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
c. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
d. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$857 from US$837 from US$839
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Higher. 2459 from 2425 last week from 2423 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought SLV (Silver)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 26389 from 25341 from 25765
a. Support: 25000, 23250, 21575; Resistance: 26,0000; 27500; 28200
b. No trade
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3222 from 3218 from 3192
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade; Traded Hotung

5. Japan Equities - Higher. 20119 from 19929 from 20033; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - No Trade

7. Korean Equities - Higher; 2415 from 2380 from 2392
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF) listed in HK

Currencies- Risk-On

I will be using the numbers from XE.com instead of Yahoo from this week onwards.

1. USD to JPY - JPY Stronger. 112.52
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1272

3. AUD to USD - AUD Stronger. 0.7833
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0762
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3,3637
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Stronger. 1.1524 from 1.1455 from 1.1481
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Stronger. 7.8040
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Stronger. 4.2952
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Stronger; 1.3735
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Stronger; 6.7748
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Stronger. 1.3098
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Stronger. 5.6257
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Weaker. 95.15 from 96.01 from 95.63
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

d. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

e. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM bond funds net outflows pf US$70m vs inflows of US$1.8b the previous week
v) July 5: EM equity funds inflows of US$438 million vs inflows of US$2.5b the prrvious week
vi) Cumulative inflows into EM bond and equity funds this year, still stands at over US$100 billion

3. Tailwinds
i. Low Interest Rates
ii. Cash Sidelines (US$50t)
iii. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
iv. Negative Yield Bonds (US$6t from US$10t)
v. US Foreign Funds Repatriation (US$2.5t)
vi. Cash US Corps (US$1t)
vii. Cash Japanese Corp (US$2t)
viii. Buybacks
ix. US Household Net Worth (US$90t)
x. EM Consumption

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) Auctioned homes: +80% yoy
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xii) Land released for private residential units (including exec condo) in 2H: 8125 vs 7,465 in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - weak until General Election ?
i) Knight Frank: Supply - 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in 9 months 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
viii) 600,000 houses in planned supply; Altogether, houses total 6.4m
ix) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) March 2017: Approved property loans +3% y-o-y (RM11.43b)
xii) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xiii) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
viewtopic.php?f=10&t=8150&start=30

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 96,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties - Going nowhere
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
xi) Second referendum on Brexit?
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Lower. 2.33% from 2.39% from 2.30%
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to rise slowly over next two years
b. About US$6t or about 15% of the world’s bonds now have negative yields
c. US Feds: Rate Hike in Dec 2017? Four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.12 from 36.83 from 37.20

9. Baltic Dry Index - Higher; 888 from 822 from 920; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Jul 23, 2017 12:12 pm

TOL @ July 23, 2017

FoMo.jpg

Fear Of Missing Out (FOMO)

The US markets have been climbing steadily for the past 1.5 months and the experts" are now using words like "melt-up" (not "melt-down"), to describe the current euphoric investment climate.

And whoever that has been shorting the markets especially the tech counters, has been decimated.

So can this rally really continue forever and that the tech counters can really fly to the moon?

Intuitively, I think that things can still be hunky-dory in the short term. People are afraid of missing out on the rally and so they will buy on any dips and hold through any minor corrections.

However, one fine morning, someone will wake up and ask himself, "Why am I holding AMZN at PE 180 with Revenue Growth of only 20%?". And when that happens, the stampede will be fast and furious.

As far next week, the big techs will be reporting as follows:-
Monday, July 24: Alphabet Inc. (GOOGL)
Wednesday, July 26: Facebook, Inc. (FB)
Thursday, July 27: Amazon.com, Inc. AMZN

Finally, my Market Indicators below, are still not showing any sign of danger yet. Therefore, it's stilll safe to buy any convincing story but probably for the short-term only.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - Inflows into ETFs; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$45.70 from US$46.69 last week from US$44.36 two weeks ago Vested in RH Petrogas; Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 2018?
b. Global Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 266m
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; Trump to sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells; Active rigs doubled, 765 vs 316 May 2016
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China (largest importer): Supply: -7% (-300,000 bpd); Demand 1H 2017: +14%
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018; Incentive for Saudis to push prices up; Cutting 1m bpd?
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May 25; Cap on Libya & Nigeria?
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Gradual drawdown?
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.95 from US$2.98 from US$2.86. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1254 from US$1229 from US$1212. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$16.47 from US$15.96 from US$15.59; Vested in SLV
Support: US$15.20; Resistance: US$18.50; High: US$49
a. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Higher. US$136 from US$134 from US$129
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Flat. US$20.25(Jul17) from US$20.40 (Jul10) from US$20.35 (Jul03)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 nuclear reactors will be shut down over the next 25 years, mostly in Europe
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of 20 reactors
viewtopic.php?f=33&t=705&start=80

7. Zinc - Lower; US$2753 from US$2786 from US$2787
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Lower; US$843 from US$857 from US$837
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Higher. 2473 from 2459 last week from 2425 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Traded JJG (Grains ETF)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 26706 from 26389 from 25341
a. Support: 25000, 23250, 21575; Resistance: 27500; 28200
b. No trade
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3238 from 3222 from 3218
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - No Trade; No trade

5. Japan Equities - Lower. 20100 from 20119 from 19929; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - Added to OSK; Sold Felda Global Ventures

7. Korean Equities - Higher; 2450 from 2415 from 2380
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF) listed in HK

Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Stronger. 111.13 from 112.52 last week
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1458 from 3.1272

3. AUD to USD - AUD Stronger. 0.7911 from 0.7833
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0775 from 1.0762
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.3891 from 3,3637; Converted some AUD to MYR
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Stronger. 1.1666 from 1.1524
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Weaker. 7.8090 from 7.8040
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Stronger. 4.2843 from 4.2952
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Stronger; 1.3619 from 1.3735
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Stronger; 6.7693 from 6.7748
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Weaker. 1.2995 from 1.3098
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Weaker. 5.5682 from 5.6257
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Weaker. 93.96 from 95.15 from 96.01
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
viii) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
ix) NIFD: 1/3 of new state firm's debts was used to repay old debts
The leverage ratio compares total debt to assets or gross domestic product.

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

d. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

e. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
i. Low Interest Rates
ii. Cash Sidelines (US$50t)
iii. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
iv. Negative Yield Bonds (US$6t from US$10t)
v. US Foreign Funds Repatriation (US$2.5t)
vi. Cash US Corps (US$1t)
vii. Cash Japanese Corp (US$2t)
viii. Buybacks
ix. US Household Net Worth (US$90t)
x. EM Consumption

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) Auctioned homes: +80% yoy
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xii) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - weak until General Election ?
i) Knight Frank: Supply - 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in 9 months 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
viii) 600,000 houses in planned supply; Altogether, houses total 6.4m
ix) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) March 2017: Approved property loans +3% y-o-y (RM11.43b)
xii) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xiii) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xiv) KL: Unsold units +51% qoq and 81% yoy
xv) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xiv) Of these unsold stocks, 70,722 units, or 66% were still under construction.
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 96,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties - Going nowhere
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
xi) Second referendum on Brexit?
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Lower. 2.24% from 2.33% last week from 2.39% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next two years
b. About US$6t or about 15% of the world’s bonds now have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.32 from 37.12 last week from 36.83 two weeks ago

9. Baltic Dry Index - Higher; 964 from 888 last week from 822 two weeks ago; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Jul 30, 2017 10:19 pm

TOL @ July 23, 2017

Discipline.jpg

Stay Disciplined

Some of the brand-named stocks have been weak recently eg. MO, SBUX, GOOG, TWTR, AMZN and DPZ.

Normally, I would be buying the dips and that has proven to be the right strategy for the past few years.

However, this round, I'm reminding myself to stay disciplined and to only buy if:-
1. The story is very convincing,
2. The valuation is "fair" and
3. The trading period is very short, say withing 3 weeks

In this type of markets, it's very easy to be complacent, especially when you are sitting on some Cash and the markets have been grinding higher. Do not take a bull market as your stock-picking skills.

Even with my "discipline", I ended up buying a couple of counters recently:-
1. JJG (Grains ETF)
2. China Aviation Oil
3. Wilmar
4. Ekovest
5. TMC Life
6. OSK
7. Felda Global Ventures - sold
8. SLV (Silver ETF) - sold
9. Zijin - sold
10. A50 ETF 2822 - sold

It's imperative that I not allow myself to be carried along by the euphoria but to always step aside to check the valuation and charts before buying.

As for next week, there are no major events except for the circus in the White House.

Finally, my Market Indicators below, are still not showing any sign of danger yet. Therefore, it's stilll safe to buy any convincing story but probably for the very short-term only (within 2 weeks).

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - ETF Inflows; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Higher. US$49.80 from US$45.70 last week from US$46.69 two weeks ago Vested in RH Petrogas; Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 2018?
b. Global Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 266m
c. US SPR: 700m barrels; To sell 190m barrels from 2017-2025; Trump to sell half now?
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells; Active rigs doubled, 765 vs 316 May 2016
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China (largest importer): Supply: -7% (-300,000 bpd); Demand 1H 2017: +14%
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018; Incentive for Saudis to push prices up; Cutting 1m bpd?
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May 25; Cap on Libya & Nigeria?
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Gradual drawdown?
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.93 from US$2.95 from US$2.98. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1269 from US$1254 from US$1229. Record US$1920.
Vested - Physical Gold Coins;
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, cooled off each year. 2017: 700 tonnes; 2020: 900 tonnes
i. China Demand: Since 2013, tumbled 32.9% from 940 tonnes to 630 tonnes last year
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$16.73 from US$16.47 from US$15.96; Sold SLV
Support: US$15.20; Resistance: US$18.50; High: US$49
a. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
b. Demand: 1.2b ounces in 2015
c. Supply: 0.9b ounces in 2015
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Coffee (Arabica) - Higher. US$138 from US$136 from US$134
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the most traded commodity in the world, following crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

6. Uranium (U3O8 UXC) - Flat. US$20.50 (Jul24) from US$20.25 (Jul17) from US$20.40 (Jul10)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 nuclear reactors will be shut down over the next 25 years, mostly in Europe
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of 20 reactors
viewtopic.php?f=33&t=705&start=80

7. Zinc - Higher; US$2780 from US$2753 from US$2786
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$880 from US$843 from US$857
a. Support: US$600; US$500; US$200; Resistance: US$800; US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL (not vested)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Lower. 2472 from 2473 last week from 2459 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought JJG (Grains ETF); Sold SLV (Silver ETF)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 26979 from 26706 from 26389
a. Support: 25000, 23250, 21575; Resistance: 27500; 28200
b. Traded Zijin
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3253 from 3238 from 3222
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Bought China Aviation Oil

5. Japan Equities - Lower. 19960 from 20100 from 20119; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - Bought Ekovest and TMC Life Science

7. Korean Equities - Lower; 2401 from 2450 from 2415
a. Expecting Trump to take action against North Korea within 2 years
b. Vested 7326 (Inverse KOSPI ETF) listed in HK

Currencies- Risk-On (Data from XE.com)

1. USD to JPY - JPY Stronger. 110.68 from 111.13 last week from 112.52 two weeks ago.
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Stronger; 3.1552 from 3.1458 from 3.1272

3. AUD to USD - AUD Stronger. 0.7989 from 0.7911 from 0.7833
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0840 from 1.0775 from 1.0762
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.4221 from 3.3891 from 3,3637;
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Stronger. 1.1749 from 1.1666 from 1.1524
viewtopic.php?f=32&t=5523&start=100

7. USD to HKD - HKD Weaker. 7.8100 from 7.8090 from 7.8040
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

8. USD to MYR:- MYR Stronger. 4.2837 from 4.2843 from 4.2952
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

9. USD to SGD:- SGD Stronger; 1.3570 from 1.3619 from 1.3735
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

10. USD to CNY:- CNY Stronger; 6.7369 from 6.7693 from 6.7748
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

11. GBP to USD:- GBP Stronger. 1.3134 from 1.2995 from 1.3098
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

12. GBP to MYR:- GBP Stronger. 5.6259 from 5.5682 from 5.6257
a. Which has more effect? Brexit or Malaysian Election?

13. Dollar Index - USD Weaker. 93.26 from 93.96 from 95.15
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
viii) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
ix) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) The existing stock of unsold homes may take 2 years to sell
v) Americans became the 2nd most frequent buyers of high-end homes
vi) More than 800 condo units were resold at a loss in 2016 as economy slows
vii) Prices fell 3% in 2016 for third straight yearly decline
viii) Auctioned homes: +80% yoy
ix) Unexpected relaxation of the curbs, implies market is weaker than expected
x) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
xi) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xii) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - weak until General Election ?
i) Knight Frank: Supply - 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of properties from 1Q 2016 unsold
iii) Volume and Value of transactions declined 14% and 11%, in 9 months 2016
iv) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
v) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
vi) Properties purchased on DIS between 2010 and 2014, are now on the market
vii) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
viii) 600,000 houses in planned supply; Altogether, houses total 6.4m
ix) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
x) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
xi) March 2017: Approved property loans +3% y-o-y (RM11.43b)
xii) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xiii) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xiv) KL: Unsold units +51% qoq and 81% yoy
xv) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xiv) Of these unsold stocks, 70,722 units, or 66% were still under construction.
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties - Going nowhere
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
xi) Second referendum on Brexit?
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Higher. 2.29% from 2.24% last week from 2.33% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next two years
b. About US$6t or about 15% of the world’s bonds now have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
d. Brazil reduced interest rate by 100bps to 9.25%
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.41 from 37.32 last week from 37.12 two weeks ago

9. Baltic Dry Index - Lower; 942 from 964 last week from 888 two weeks ago; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Aug 06, 2017 1:30 pm

TOL @ Aug 6, 2017

Commodities.jpg

Hot Commodities?

I have been focussing on Commodities recently, for the following reasons:-
1. Weak USD
2. Increasing Demand
3. Supply Deficit
4. Increasing Prices
5. Still Reasonably Priced
6. Long Cycle

However, my trading results so far, have been quite inconsistent.

I need to constantly remind myself to cut my losses quickly (within 2 to 3 days) and never to carry any losses over the weekend.

I need to be also aware that it may be beyond my circle of competence and that it's a bit risky, as the US markets are opened while I'm sleeping, making it very difficult to react to any breaking news.

Anyway, I still think that Commodities could be more rewarding than Equities going forward, despite the mentioned issues above.

As for next week, there's nothing much on the horizon except for the OPEC Meeting and the clowns in the White House.

My Market Indicators below, are still not showing any sign of danger yet. Therefore, it's stilll probably safe to trade any convincing story but for the very short-term only (within 1 week).

At the same time, I'm raising Cash whenever I can. My objective is to have only a 10% exposure to Equities when the plunge happens.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - ETF Inflows; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$49.53 from US$49.80 last week from US$45.70 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 266m
c. US SPR: 700m barrels; To sell 190m barrelsover next 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells; Active rigs doubled, Currently, 765 vs 316 May 2016
f. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
g. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
h. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
i. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
j. China: SPR reached 51/90 days; 2017 Imports to decrease?
k. OPEC: Cutting 1.8m bpd; 9 months extension on May25; Cap - Libya & Nigeria
l. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
n. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.78 from US$2.93 from US$2.95. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1258 from US$1269 from US$1254. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.26 from US$16.73 from US$16.47;
Bought PSLV (Sprott's Physical Silver)
Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
a. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
b. Demand: 1.2b ounces in 2015; Supply: 0.9b ounces in 2015
c. Fourth year of deficit
d. 35% (7700 metric tons) for Electronics
e. 25% (5500 metric tons) for Bullions & Coins
f. India imports more Silver than the US
g. JPM has 67m ounces
h. High Gold/Siver Ratio: 50% higher than average
i, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - US$968
Bought PPLT( Sprott's Physical Platinum)
a. 28% for jewelry
b. 42% for catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper

6. Coffee (Arabica) - Higher. US$140 from US$138 from US$136
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

7. Uranium (U3O8 UXC) - Flat. US$20.15 (Jul31) from US$20.50 (Jul24) from US$20.25 (Jul17)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 European nuclear reactors will be shut down over the next 25 years
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of 20 reactors
x. New technology to mine Uranium from sea water? Cost and How Soon?
viewtopic.php?f=33&t=705&start=80

8. Zinc - Higher; US$2816 from US$2780 from US$2753
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

9. Palladium - Lower; US$875 from US$880 from US$843
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

10. If there's a crash, Commodities would not be spared
11. The High USD is not good for Commodities
12. Global economy may worsening eg. potential trade wars etc

Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher. 2477 from 2472 last week from 2473 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought PPLT (Sprott's Physical Plantinum) and PSLV (Sprott's Physical Silver); Traded TEVA; Sold JJG (Grains ETF);
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27563 from 26979 from 26706
a. Support: 25000, 23250, 21575; Resistance: 28200
b. Bought Standard Chartered; Traded Citic Resources
viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3262 from 3253 from 3238
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Sold China Aviation Oil and Wilmar

5. Japan Equities - Lower. 19952 from 19960 from 20100; No Trade
a. Stronger Yen is a concern.

6. Malaysian Equities - Sold Ekovest and TMC Life Science

Currencies- Mixed (Data from XE.com)

1. USD to JPY - JPY Flat. 110.60 from 110.68 last week from 111.13 two weeks ago.
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1502 from 3.1552 from 3.1458

3. AUD to USD - AUD Weaker. 0.7938 from 0.7989 from 0.7911
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0786 from 1.0840 from 1.0775
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3967 from 3.4221 from 3.3891
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Stronger. 1.1836 from 1.1749 from 1.1666
viewtopic.php?f=32&t=5523&start=100

7. EUR to MYR - 5.0645;

8. USD to HKD - HKD Weaker. 7.8183 from 7.8100 from 7.8090
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

9. USD to MYR:- MYR Stronger. 4.2790 from 4.2837 from 4.2843
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

10. USD to SGD:- SGD Weaker; 1.3583 from 1.3570 from 1.3619
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

11. USD to CNY:- CNY Stronger; 6.7198 from 6.7369 from 6.7693
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

12. GBP to USD:- GBP Weaker. 1.3084 from 1.3134 from 1.2995
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

13. GBP to MYR:- GBP Weaker. 5.5983 from 5.6259 from 5.5682
a. Which is worst - Brexit or Malaysian Election?

14. Dollar Index - USD Stronger. 93.54 from 93.26 from 93.96
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
viii) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
ix) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - weak until General Election ?
i) Knight Frank: Supply of 44,000 high end condos in KL as of 1H 2016
ii) NAPIC: About 23% of properties from 1Q 2016 unsold
iii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iv) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
v) Properties purchased on DIS between 2010 and 2014, are now on the market
vi) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vii) 600k houses in planned supply; Altogether, houses total 6.4m
viii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
ix) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
x) March 2017: Approved property loans +3% y-o-y (RM11.43b)
xi) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xii) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xiii) KL: Unsold units +51% qoq and 81% yoy
xiv) Selangor: Unsold units +10% qoq and 240% yoy
xv) Johor: Unsold units +17% qoq and +35% yoy
xvi) Of these unsold stocks, 70,722 units, or 66% were still under construction.
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties - Going nowhere
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
xi) Second referendum on Brexit?
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Lower. 2.26% from 2.29% last week from 2.24% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Lower. 37.22 from 37.41 last week from 37.32 two weeks ago

9. Baltic Dry Index - Higher; 1023 from 942 last week from 964 two weeks ago; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Aug 13, 2017 7:51 am

TOL @ Aug 13, 2017

Risk Management.png

Risk Management

As the US and HK markets are getting volatile from the North Korean issue, it may be time to revisit my notes on managing risks:-
1. Global Diversification
2. Asset Class Diversification
3. Diversity of Industry & Company Exposure
4. Currency Hedging
5. Tactical Asset Allocation
6 . Inverse ETFs and Put Warrants

If war with North Korea does really break-out, it's very likely that all stock-markets would drop simultaneously. Therefore, I should try to have as little Equities as possible for the time being.

I've already reduced my Equities exposure to about 5% of my portfolio and it's getting quite difficult to reduce it further. Therefore, the only way forward, is probably to try to protect it further, by adding some more Inverse ETFs.

Currently, I already have a 4% exposure to Inverse ETFs (S&P 500, Emerging Markets and Tokyo). The risk to adding more Inverse ETFs, is that Liquidity is still abundant and I may be caught in any "melt-up" in the final stages of the strong bull-rally. The "M" or "Triple-Top" have still not appeared on the charts.

While I'm reducing my exposure to Equities while increasing my exposure to Inverse ETFs, I may buy some Equities in the Defence Industry eg. Lockheed Martin (LMT) or Raytheon (RTN).

With regards to Gold and other Precious Metals, it would normally spike during periods of uncertainty. However, I'm not too sure that it will go anywhere this time, as it has risen quite a bit over the past month:-
1. Gold has risen about 8%
2. Silver has risen about 12.5% and
3. Platinum has risen about 10%

As Precious Metals have a habit of being sold down violently, I have decided to take profits on my Silver (SLV & PSLV) and Platinum (PPLT) ETFs. I may buy them back again if there's any retracement. ASt the same time, I will continue to keep my physical Gold holdings, which I bought close to the bottom around the year 2000.

BTW, a few "experts" have mentioned that one should have about 5%-15% of one's portfolio in Gold. Currently, my Gold holdings is at only 3%. Therefore, I should try to increase my exposure to Gold on the next dip. Not too sure what I would like to buy yet ie. PHYS, GDX, GDXJ, SGDM or SGDJ.

As for Currencies, the safe haven used to be the Yen, USD and the CHF. However, in the event of any war with North Korea, I'm not too sure that the JPY would be a safe haven anymore. Anyway, I should try to move some more of my MYR, AUD and SGD, into the USD and CHF. Not too sure about the EUR yet.

It may also be time for me to trade the HSI Bear Puts, in addition to HSI Bull Calls. It's now no longer a one way trip upwards.

Finally, I'm not expecting war with North Korea to break out so soon, unless North Korea makes a preemtive strike. As it is, the third US aircraft carrier is still not in place yet.

At the same time, I have no doubt that Trump will attack North Korea while they still do not have the capability to reach the US.

Anyway, the 70th Anniversary of the DPRK is coming up on Sep 8, 2017. That would be a good time for Trump to rain some "fire & fury" if diplomacy cannot work by then.

If nothing happens on Sep 8, 2017, then there's also the 70th Anniversay DPRK Armed Forces Celebration on Feb 8, 2018.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - ETF Inflows; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$48.77 from US$49.53 last week from US$49.80 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in late 2017?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
c. US SPR: 700m barrels; To sell 190m barrels over next 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells;
f. US: Active rigs doubled, Currently, 765 vs 316 May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 9 months extension on May25; Cap - Libya & Nigeria
m. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Hurricane Season coming soon
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Higher: US$2.99 from US$2.78 from US$2.93. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1295 from US$1258 from US$1269. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$17.08 from US$16.26 from US$16.73;
Sold PSLV (Sprott's Physical Silver)
a. Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
b. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
c. Demand: 1.2b ounces in 2015; Supply: 0.9b ounces in 2015
d. Fourth year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Higher; US$988 from US$968 last week
Sold PPLT( Sprott's Physical Platinum)
a. 28% for jewelry
b. 42% for catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper

6. Coffee (Arabica) - Flat. US$140 from US$140 from US$138
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

7. Uranium (U3O8 UXC) - Flat. US$20.50 (Aug07) from US$20.15 (Jul31) from US$20.50 (Jul24)
Vested Cameco (CCJ)
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global production: 158m lbs pa; 15% of Supply from decommisioned weapons
d. Global Demand: 160m lbs pa to 225m lbs pa (2025)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 13 lbs pa; Starting 26/54 reactors? Currently, only 3 online
g. Number of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 456
h. 61 new reactors under construction; 149 planned; How many would be built ?
i. China: 35 existing plants; Building 21; 2017: 7 Ready: To build 177 more?
j. India: 22 existing nuclear plants; Currently building 5; To build 64 more?
k. 25% long-term supply contracts expiring in 2017-18; 75% between 2017-2025;
l. Russia withdrew from Nuclear deal in Oct 2016
m. Paris Climate Deal - how will it affect Nuclear Energy?
n. Some buyers are locking in long term contracts at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. Nuclear: 20% of the electricity generated in the U.S
r. Supply: 50k tonnes; Demand: 68k tonnes; 2k tonnes enriched for weapons
s. 1b pounds has to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% of its uranium requirements
v. 200 European nuclear reactors will be shut down over the next 25 years
w. French law: To reduce the nuclear proportion to 50 per cent from 75% by 2025 and closure of 20 reactors
x. New technology to mine Uranium from sea water? Cost and How Soon?
viewtopic.php?f=33&t=705&start=80

8. Zinc - Higher; US$2902 from US$2816 from US$2780
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

9. Palladium - Higher; US$894 from US$875 from US$880
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

10. If there's a crash, Commodities would not be spared
11. The High USD is not good for Commodities
12. Global economy may worsening eg. potential trade wars etc

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Lower. 2441 from 2477 last week from 2472 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Sold TZA (Small Cap Inverse 3x), PSLV (Sprott's Physical Silver), PPLT (Sprott's Physical Platinum) and TEVA;
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Lower. 26884 from 27563 from 26979
a. Support: 27100; 26300; 25000; Resistance: 28200
b. Sold Naga Group and Standard Chartered;
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Lower. 3209 from 3262 from 3253
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Bought DBXT S&P 500 Inverse ETF

5. Japan Equities - Lower. 19730 from 19952 from 19960;
a. Bought 7315 (Japan Inverse ETF) listed in HK

6. Malaysian Equities - Sold 1/3 OSK and PECCA

Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Stronger. 109.06 from 110.60 last week from 110.68 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Flat; 3.1495 from 3.1502 from 3.1552

3. AUD to USD - AUD Weaker. 0.7855 from 0.7938 from 0.7989
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0713 from 1.0786 from 1.0840
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3741 from 3.3967 from 3.4221
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Weaker. 1.1762 from 1.1836 from 1.1749
viewtopic.php?f=32&t=5523&start=100

7. EUR to MYR - EUR Weaker; 5.0531 from 5.0645;

8. USD to HKD - HKD Flat. 7.8186 from 7.8183 from 7.8100
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

9. USD to MYR:- MYR Weaker. 4.2953 from 4.2790 from 4.2837
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

10. USD to SGD:- SGD Weaker; 1.3637 from 1.3583 from 1.3570
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

11. USD to CNY:- CNY Stronger; 6.6653 from 6.7198 from 6.7369
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90
12. GBP to USD:- GBP Weaker.1.3084 from 1.3134 from 1.2995
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

13. GBP to MYR:- GBP Weaker. 5.5983 from 5.6259 from 5.5682
a. Which is worst - Brexit or Malaysian Election?

14. Dollar Index - USD Weaker. 93.07 from 93.54 from 93.26
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
viii) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
ix) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, houses total 6.4m
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. London Properties - Going nowhere?
i) Savills: Prices will not rise until 2019
ii) Hard Brexit: 9,000 jobs axed immediately (1.1m jobs affected)
iii) London's population @ 8.7m. New households @ 50k pa. Supply 20k pa
iv) CEBR: Property prices in London to fall 6% in 2017
v) Molior: Homes built without buyer secured - 10,829; 24% rise yoy
vi) Molior: 2 years to sell homes under construction
vii) Rightmove: Decline of 5% by end 2017
viii) Prices surged about 86% since 2009
ix) Knight Frank: Prices will be flat for 2017
x) Expensive homes in Inner London -4.2% yoy; Cheaper outer suburbs +1.7%
xi) Second referendum on Brexit?
viewtopic.php?f=11&t=3673&start=80

6. Yield on 10 Year US Treasuries - Lower. 2.19% from 2.26% last week from 2.29% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Lower. 36.77 from 37.22 last week from 37.41 two weeks ago

9. Baltic Dry Index - Higher; 1138 from 1023 last week from 942 two weeks ago; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Aug 20, 2017 12:57 pm

TOL @ Aug 20, 2017

Short.jpg

Time To Short The Markets?

The US Markets have been quite weak over the past two weeks. So is it time to start shorting the market?

Intuitively, I think that the fear is still not there yet. In addition, a "solid" reason to sell is also not present. Therefore, there could still be some buyers on any dip.

Having said that, I've "subconciously" accumulated some Inverse ETFs:-
1. Korea Inverse 1x ETF (7326) listed in HK; Recently delisted
2. Japan Topix Inverse 1x ETF (7315) listed in HK
3. DBXT S&P Inverse 1x ETF listed in Singapore
4. EUM (Emerging Market Inverse 1x) listed in US
5. HDGE (Ranger Bear Equity) listed in US
6. RWM (Russell 2000 Inverse 1x) listed in US
7. SPXS (S&P Inverse 3x) listed in US

Therefore, I need to remind myself to wait for the fear to appear first, before further shorting the markets.

In addition, I should also not be buying any leveraged Inverse ETFs, until I'm very sure that the direction is downwards. There's still plenty of Liquidity around and there are still a lot of die-hard bulls out there.

Finally, I should stop buying any Equities for the time being no matter how convincing the story. Instead, I should just put them on my watchlist and monitor them for a while more during this period of uncertainty.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - ETF Inflows; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Flat. US$48.70 from US$48.77 last week from US$49.53 two weeks ago Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in late 2017?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
c. US SPR: 700m barrels; To sell 190m barrels over next 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells;
f. US: Active rigs doubled, Currently, 765 vs 316 May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 9 months extension on May25; Cap - Libya & Nigeria
m. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Hurricane Season coming soon
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Lower: US$2.89 from US$2.99 from US$2.78. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects of NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Lower. US$1290 from US$1295 from US$1258. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
l. U.S. government holds 261.5m ounces at book value of US$42m
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Lower. US$16.96 from US$17.08 from US$16.26;
Sold PSLV (Sprott's Physical Silver)
a. Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
b. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
c. Demand: 1.2b ounces in 2015; Supply: 0.9b ounces in 2015
d. Fourth year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Lower; US$982 from US$988 from US$968
Sold PPLT( Sprott's Physical Platinum)
a. 28% for jewelry
b. 42% for diesel catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper
h. Diesel cars losing market share

6. Coffee (Arabica) - Lower. US$128 from US$140 from US$140
Low: US$127; US$120; High: US$175; US$300 (2011). Not vested
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Higher; US$3138 from US$2902 from US$2816
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$925 from US$894 from US$875
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

12. Uranium: I have stopped monitoring Uranium on a weekly basis. If anyone is interested in Uranium and Nuclear Energy, some info can be found in:-
viewtopic.php?f=33&t=705&p=212235#p212235

Equities - Risk-Off ( Data as of Saturday every week )

1. US Equities - Lower. 2426 from 2441 last week from 2477 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought RWM (Russell 2000 Inverse 1x) and HDGE (Ranger Equity Bear)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27048 from 26884 from 27563
a. Support: 27100; 26450; 25000; Resistance: 28200
b. Sold BBMG and Citic Resources
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3269 from 3209 from 3262
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Sold Best World

5. Japan Equities - Lower. 19470 from 19730 from 19952
a. Vested 7315 (Japan Inverse ETF) listed in HK

6. Malaysian Equities - No Trade

Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Flat. 109.03 from 109.06 last week from 110.60 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1468 from 3.1495 from 3.1502

3. AUD to USD - AUD Stronger. 0.7925 from 0.7855 from 0.7938
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Stronger. 1.0808 from 1.0713 from 1.0786
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Stronger. 3.4009 from 3.3741 from 3.3967
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Weaker. 1.1740 from 1.1762 from 1.1836
viewtopic.php?f=32&t=5523&start=100

7. EUR to MYR - EUR Weaker; 5.0376 from 5.0531 from 5.0645;

8. USD to HKD - HKD Weaker. 7.8222 from 7.8186 from 7.8183
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

9. USD to MYR:- MYR Stronger. 4.2918 from 4.2953 from 4.2790
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

10. USD to SGD:- SGD Flat; 1.3636 from 1.3637 from 1.3583
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

11. USD to CNY:- CNY Weaker; 6.6750 from 6.6653 from 6.7198
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

12. GBP to USD:- GBP Weaker. 1.2884 from 1.3084 from 1.3134
a. Will not be investing in the GBP versus the USD, as I think that it's in a multi-year decline
viewtopic.php?f=32&t=333&start=80

13. GBP to MYR:- GBP Weaker. 5.5280 from 5.5983 from 5.6259
a. Which is worst - Brexit or Malaysian Election?

14. Dollar Index - USD Stronger. 93.52 from 93.07 from 93.54
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020: US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Local Government Debts (US$3t; >30% GDP)
iv) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
v) Bad Debts (US$2t)
vi) US$Debt (US$1.1t)
vii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
viii) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
ix) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$550b; up 20% yoy
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) July 5: EM Bonds funds -US$70m vs +US$1.8b previous week
v) July 5: EM Equity funds +US$438m vs +US$2.5b the previous week
vi) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 11% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, houses total 6.4m
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

e. UK Properties: I have stopped monitoring UK properties on a weekly basis. If anyone is interested in UK properties, some info can be found in:-
viewtopic.php?f=11&t=3673&p=212234#p212234

6. Yield on 10 Year US Treasuries - Flat. 2.19% from 2.19% last week from 2.26% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 36.81 from 36.77 last week from 37.22 two weeks ago

9. Baltic Dry Index - Higher; 1247 from 1138 last week from 1023 two weeks ago; Low 290; High 2330 (2013)

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

Please Note:-

Support the forum button - If you have benefited from the ideas in the forum but have not participated in the discussions, we would appreciate your kind support to defray the expenses of maintaining the forum.

Second Opinion - Please see the "Second Opinion" thread in the "Services for InvestIdeas Members" section, located just below the Miscellaneous Section.
viewtopic.php?f=26&t=3168

Active Topics - Do you know that there's an "Active Topics" button? It's located on the top left hand corner of the Index Page

by **winston** » Sun Aug 27, 2017 8:47 am

TOL @ Aug 27, 2017

Rules.jpg

Breaking Your Own Rules

Last week, I reminded myself to conserve Cash and not to buy any more Equities for the time being.

Instead, I went on a shopping spree and ended up with the following stocks:-
1. Wing Tai listed in Spore
2. Wheelock listed in pore
3. MMG 1205 listed in HK
4. Citic Resources 1208 listed in HK
5. JO Coffee ETN listed in US
6. CR Phoenix Healthcare 1515 listed in HK

The following are my justifications for breaking my own rules:-

1. Improving propery market in Singapore; Deep discount to RNAV
a. Wing Tai - RNAV of Sin$4,40 versus it's current price of Sin$2.17; Delisting?
b. Wheelock - P/B of 0.7; Cheap way to also have exposure to HPL; Delisting?
Will try to keep for at least 6 months

2. Commodities Uptrend; Weak USD; Improving Global Economy
a. MMG - Exposure to Zinc and Copper; One Belt One Road;
b. Citic Resources - Exposure to Oil, Coal and Aluminium; One Belt One Road
c. Coffee ETN JO - Corrected from US$143 to US$128 (10% Correction)
Will try to keep MMG & Citic Resources for 3 months. Will probably sell JO at Resistance 2.

3. Aging Population in China
a. CR Phoenix Healthcare; Largest Hospital Group; 109 Hospitals; Insiders Buying; Will try to keep this as long as possible; Core Holding? Forward PE16?

As mentioned last week, I'm quite wary of a sharp & sudden correction around this time. Hence, I was raising Cash and buying some Inverse ETFs.

However, whenever I'm sitting on too much Cash, my fingers tend to be itchy and I always end up finding some compelling story to deploy those Cash.

Luckily, I do have some Inverse ETFs to hedge against those long bets. Anyway, it could also be a blessing in disguise, as there's still no fear in the air yet and I may be early again with those Inverse ETFs.

Therefore, the Long positions can also hedge against those Inverse ETFs. And the justifications continue ...

By the way, my Market Risk Indicators below are still not flashing any danger yet, so that's another justification to also have some long positions.

Market Risk Indicators: Still not in Danger Zone yet
1. Euphoria: 8 (Low: 1; High: 10) - ETF Inflows; Margin Debts; SWFs; Central Banks
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail
4. Liquidity: 7 (Very Liquid: 1; Tight 100) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds)
5. Inverted Yield: 6 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion
6. Valuation; 8 (Safe: PE15; Danger: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 8 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela
Total: 51 out of 70 (73%); (Safe: 50%; Danger: 80%)

Commodities: Risk-Off (Data from Commodities Live)

1. Oil - Lower. US$47.87 from US$48.70 last week from US$48.77 two weeks ago
Support: US$42; Resistance: US$53
a. Glut 0.5m bpd - rebalancing in 1Q 2018?
b. Stockpiles: 2.5b barrels; OECD: 5 year average dropped from 300m to 220m
c. US SPR: 700m barrels; To sell 190m barrels over next 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; 4100 "Drilled but Uncompleted" (DUC) Wells;
f. US: Active rigs doubled, Currently, 765 vs 316 May 2016
g. China (4th largest producer) - Reserve life fallen from 10 years to 6 years
h. China (largest importer): Supply: -7% (-300k bpd); Demand 1H 2017: +14%
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO in 2018; Incentive to push prices up; Cutting 1m bpd
k. China: SPR reached 51/90 days; 2017 Imports to decrease?
l. OPEC: Cutting 1.8m bpd; 9 months extension on May25; Cap - Libya & Nigeria
m. Libya: +900k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria +225k bpd; Iraq +500k bpd
n. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +0.4m bpd 2017; +1m bpd 2018
o. Venezeula: Disruption of 2m bpd supply (50% cut by 2020)?
p. Hurricane Season
viewtopic.php?f=33&t=7550&start=210

2. Natural Gas - Flat: US$2.89 from US$2.89 from US$2.99. Not vested
a. Support US$2.80; US$1.70; Resistance US$4.00
b. Heating, Cooking, Transportation, Fertiliser, Chemical Industry, Fabrics, Glass, Steel, Plastics Paint etc
c. High: US$13.69 (2008); Low: US$1.61 (March 2015)
d. Natural Gas Rigs: Dropped from 1,606 (2008) to low of 81. Now at 129
e. Panama Canal Expansion: Europe & Asian markets expanding
f. Suppy increasing by 4% pa; Demand growing by 7% pa
g. Natural-gas stockpiles rose 2b cubic feet versus expected 7.8b cubic feet
h. Storage levels is about 15% above the 5 yr average
i. Glut of LNG will persist in the 2020s but the market will tighten in the late 2020s
j. Between 2015 and 2030, global natural gas demand is projected to grow 2% pa k. Between 2015 and 2030, LNG demand is projected to grow 4%-5% pa
l. What are the effects of NAFTA renegotiations?
viewtopic.php?f=33&t=1863&start=130

3. Gold - Higher. US$1296 from US$1290 from US$1295. Record US$1920.
a. Global Gold: 33,000 tons; US 8000 tons; IMF 3000 tons; Germany 3000 tons
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, decreased each year. 2017 - 700t; 2020 - 900t
i. China Demand: Since 2013, tumbled 33% from 940t to 630t last year
j. Global Demand: -14% for 1H 2017; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
l. U.S. government holds 261.5m ounces at book value of US$42m
m. Germany has brought back 674 tonnes of gold
viewtopic.php?f=33&t=7589&p=202084#p202084

4. Silver - Higher. US$17.06 from US$16.96 from US$17.08
Sold PSLV (Sprott's Physical Silver)
a. Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
b. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
c. Demand: 1.2b ounces in 2015; Supply: 0.9b ounces in 2015
d. Fourth year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50% higher than average
k, Production declining
viewtopic.php?f=33&t=7589&p=202084#p202084

5. Platinum - Lower; US$977 from US$982 from US$988
Sold PPLT( Sprott's Physical Platinum)
a. 28% for jewelry
b. 42% for diesel catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper
h. Diesel cars losing market share

6. Coffee (Arabica) - Higher. US$131 from US$128 from US$140
Low: US$127; US$120; High: US$175; US$300 (2011). Vested in JO
a. 150m Americans drink coffee daily (400m cups); World: 2.25b cups
b. USA imports US$4b of coffee yearly
c. Supply: 152m bags; US$19b trade; Deficit 3.5m bags;
d. Demand 155m bags. By 2030, rising to 200m bags; 5% growth pa
e. Arabica (Brazil) - 50m bags; Risk - higher temperatures and pests
f. Robusta (Vietnam: 20% global); Used in Instant Coffee; 40% more caffeine
g. Breaking price for coffee: In 2011, reached US$300
h. Rust Disease in Central America, lowered supply by 30% over past 3 yrs
i. By 2050, suitable land will be halved and demand would have doubled
j. Central America replacing coffee with cocoa, due to climate change
k. Growth: USA +1.5% from 4.4%; China +5%; India +4%
l. Bumper crops in Brazil, Colombia and Honduras
m. Record Arabica crop 2017? Price +30% in US for 2016
n. Robusta crop down 6% yoy; Price +60% in London for 2016
o. Illy: Rebalancing in 2017
p. Brazil: biggest coffee producer, producing 1/3 of world’s coffee
q. Europe: largest importer, accounting for 1/3 of world’s consumption.
r. Coffee is the 2nd most traded commodity after crude oil.
s. Coffee crops to fall 9% in Brazil in 2017; Arabica -13%; Robusta -4%
t. US: Hot Coffee Brew: -3% yoy; Cold Brew: +80% yoy;
u. Brazil & Vietnam: Tightening Inventories; Columbia: Crop Issues
v. 4th straight shortfall; Gap 6.8 m bags in 2017-18 crop year
viewtopic.php?f=33&t=3812&start=80

7. Zinc - Lower; US$3067 from US$3138 from US$2902
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: Teck Resources; DB Base Metal (Zinc, Aluminum & Copper); MMG
viewtopic.php?f=33&t=367&start=208.

8. Palladium - Higher; US$930 from US$925 from US$894
a. Support: US$600; US$500; US$200; Resistance: US$900;
b. Catalytic Converters, Electronics, Dentistry, Medicine, Hydrogen Purification, Chemicals, Groundwater Treatment, Jewelry and Fuel Cells
c. Auto industry consumes 80% of supply
d. Demand by Auto industry doubled in past 10 years
e. Growth Demand: 3% a year for next 4 years
f. Russia and South Africa produced 3/4 of the world's mined palladium supply.
g. Heading toward its 8th annual supply deficit in 2017; 650,000 ounces in 2016
h. Vehicle: PALL; SPPP (Physical Platinum & Palladium)
i. US Auto Sales weak
viewtopic.php?f=33&t=7070&start=10

9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
11. Global economy may worsening eg. potential trade wars etc

Equities - Risk-On ( Data as of Saturday every week )

1. US Equities - Higher. 2443 from 2426 last week from 2441 two weeks ago.
a. Support 2400; Resistance: 2650;
b. Bought JO (Coffee ETN)
viewtopic.php?f=11&t=7643&start=200

2. HK Equities - Higher. 27848 from 27048 from 26884
a. Support: 27100; 26450; 25000; Resistance: 28200
b. Bought Citic Resources, CR Phoenix Healthcare and MMG
http:/in/vestideas.net/forum/viewtopic.php?f=10&t=7470&start=120

3. Shanghai Equities - Higher. 3332 from 3269 from 3209
a. Support at 2950; 2450; Resistance 3450;
b. No trade
viewtopic.php?f=10&t=7190&start=210

4. Spore Equities - Bought Wing Tai and Wheelock

5. Japan Equities - Lower. 19470 from 19730 from 19952
a. Vested 7315 (Japan Inverse ETF) listed in HK

6. Malaysian Equities - Sold OSK and OSK Warrants. I'm not happy with the share performance of OSK despite it's deep discount to RNAV. In addition, I'm also a bit concerned with their MYR9b Melbourne project.

Currencies- Risk-Off (Data from XE.com)

1. USD to JPY - JPY Weaker. 109.66 from 109.03 last week from 109.06 two weeks ago
a. 52 week range is 76 to 126
viewtopic.php?f=32&t=4205&start=180

2. SGD to MYR - SGD Weaker; 3.1428 from 3.1468 from 3.1495

3. AUD to USD - AUD Weaker. 0.7908 from 0.7925 from 0.7855
a. The range is 0.70 (2016) to 1.10 (2011)
viewtopic.php?f=32&t=5256&start=130

4. AUD to SGD - AUD Weaker. 1.0752 from 1.0808 from 1.0713
a. The range is 0.98 (2016) to 1.36 (2012).

5. AUD to MYR - AUD Weaker. 3.3793 from 3.4009 from 3.3741
a. The range is 2.20 (2008) to 3.41 (2017)

6. EUR to USD - EUR Weaker. 1.1740 from 1.1762 from 1.1836
viewtopic.php?f=32&t=5523&start=100

7. EUR to MYR - EUR Stronger; 5.0517 from 5.0376 from 5.0531

8. USD to HKD - HKD Weaker. 7.8234 from 7.8222 from 7.8186
a. 52 week range is 7.7452 - 7.8296.
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40

9. USD to MYR:- MYR Stronger. 4.2732 from 4.2918 from 4.2953
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998);
c. Decoupling of the MYR and Oil?
d. Macquarie: 4.90 (Dec 31, 2017)
e. UOB: 4.35 (July 2017)
viewtopic.php?f=32&t=397&start=60

10. USD to SGD:- SGD Stronger; 1.3597 from 1.3636 from 1.3637
a. High 1.70 (2004); Low 1.20 (2011)
b. Expecting the SGD to drop against the USD over the next few years
viewtopic.php?f=32&t=136&start=100

11. USD to CNY:- CNY Stronger; 6.6596 from 6.6750 from 6.6653
a. Expecting the CNY to continue dropping against the USD
viewtopic.php?f=32&t=7720&start=90

12. GBP to USD:- GBP Weaker. 1.2837 from 1.2884 from 1.3084
viewtopic.php?f=32&t=333&start=80

13. GBP to MYR:- GBP Weaker. 5.4860 from 5.5280 from 5.5983
a. Which is worst - Brexit or Malaysian Election?

14. Dollar Index - USD Weaker. 92.52 from 93.52 from 93.07
viewtopic.php?f=32&t=7616&start=60

Others

1. Sentiment - Complacent?

2. Headwinds

a. Global
i) Derivatives (US$700t);
ii) Debts (US$217t, 327% GDP);
iii) Corporate Debt (US$50t);
iv) Institutional Investors (US$0.5t)

b. China (Warning Signs)
i) Debts (US$33t); 2020 - US$50t
ii) Debt / GDP = 277%
ii) Corporate Debts (US$18t)
iii) Government Debts (US$10.5t);
iv) Local Government Debts (US$3t; >30% GDP)
v) Mortgages: 1/4 Credit; 1/2 New Loans in 2016
vi) Bad Debts (US$2t)
vii) US$Debt (US$1.1t)
viii) Circular 46: Prohibited Accounting Practices reversal by Nov 30
ix) NIFD: Leverage Ratio (Non-financial): 237.5% (1Q) vs 234.2 (4Q)
x) NIFD: 1/3 of new state firm's debts was used to repay old debts

c. US (Warning Signs)
i) Unfunded Debts (US$170t);
ii) Unfunded Liabilities for Medicare, Medicaid; Social Security (US$106t)
iii) Unfunded State Pensions (US$3t)
iv) Unfunded US pensions: US$6t from US$300b in 2007
v) Bank Debts (US$60t);
vii) Current Deficit US$20t
viii) Corporate Debts (US$5.5t);
ix) Household Debts (US$13t);
x Mortgage Debts (US$8t);
xi) Foreigners Holding of US Treasuries (US$6.3t);
xii) Margin Debts: US$600b; About 2% of Market Value only
xiii) US ETFs (US$2.8t); US$7.8t benchmarked to S&P 500
xiv) US Feds Leverage (113 to 1);
xv) StockMarket Cap/GDP (200%);
xvi) Risk Parity Funds (US$500b)
xvii) Revolving Credits (US$1t)
xviii) Hedge Funds: Net leverage 73% while gross exposures is 230%
xix) US Credit Card Debts: US$1.2t (above 2008's level)

d. US (Expected Defaults)
i) Auto Sub-Prime Debts (US$1t); If 30% default: US$300b
ii) Students Loan (US$1.4t, +20% pa, 42m people); If 40% default: US$550b
iii) Junk Bonds ( Maturing 2017-2021) - US$1.5t; If 10% default: US$150b
iv) Oil Debts (US$2.5t); if 10% default: US$250b
v) Fannie & Freddie may need US$100b in next crisis

e. Europe
i) NPLs: US$1.3t
ii) Italian NPLs: US$0.4t (18%)

f. Emerging Markets:
i) US$ Debts (US$10t)
ii) Corporate Debts (US$18t)
iii) Expected Defaults: US$100b (15% of EM debts) in next 4 years
iv) Cumulative inflows into EM Bond & Equity funds this year, > US$100b

3. Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks
i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016

4. Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants

5. Properties

a. Spore Properties - Going Nowhere?
i) Prices declined by 12% since 2013
ii) Developers sold 8,000 homes in 2016 compared to 7400 in 2015;
iii) Supply: 13,000 in 2017; 9300 in 2018; 7300 in 2019
iv) Americans became the 2nd most frequent buyers of high-end homes
v) More than 800 condo units were resold at a loss in 2016 as economy slows
vi) Prices fell 3% in 2016 for third straight yearly decline
vii) Auctioned homes: +80% yoy
viii) Unexpected relaxation of the curbs, implies market is weaker than expected
ix) Developers sold 977 units in Feb 2017, compared with a 382 units in Jan 2017
x) 2100 homes remain unsold in 57 projects; Penalties total about S$647m
xi) Land released: 8125 units in 2H, 2017 vs 7,465 units in 1H, 2017
xii) Glut of unsold homes eased by 21% in 1H 2017
viewtopic.php?f=10&t=7750&start=40

b. Malaysia Properties - Weak until after the General Election ?
i) NAPIC: About 23% of properties from 1Q 2016 unsold
ii) Prices moderated for 4 years, from +11.8% in 2012 to +5.3% in 3Q 2016
iii) Stamp duty for properties > RM1m, raised from 3% to 4%, effective 1/1/2018
iv) Properties purchased on DIS between 2010 and 2014, are now on the market
v) NAPIC: Transactions -9.3% for 3Q 2016 vs 2Q 2016,
vi) 600k houses in planned supply; Altogether, houses total 6.4m
vii) NAPIC: Supply +14% in 2016; 94,124 units in 2016 vs 82,837 units in 2015
viii) 51,453 units of the 94,124 are in the luxury category, indicating over-supply
ix) March 2017: Approved property loans +3% y-o-y (RM11.43b)
x) NAPIC: 1Q 2017: 5000 of 30,000 launched condos unsold; Doubled last year when 5,000 condos launched
xi) Auctioned properties +14.4% to 6,225 cases in 1Q 2017
xii) KL: Unsold units +51% qoq and 81% yoy
xiii) Selangor: Unsold units +10% qoq and 240% yoy
xiv) Johor: Unsold units +17% qoq and +35% yoy
xv) Of these unsold stocks, 70,722 units, or 66% were still under construction
xvi) CBRE: Luxury KL Condos: 52472 (2017) vs 38064 (2016) vs 33064 (2015)
viewtopic.php?f=10&t=4220&start=150

c. China Properties : Correction in 2H 2017 ?
i) Various new curbs in more than 25 cities
ii) In Xiamen, investors have to wait 100 years to recover their investment thru rentals; In SZ, it's 68 years
iii) Rental yields in all first-tier cities < 2%; 9 second-tier cities joined them
iv) Avg new home prices in 70 major cities +10.2% (Jun) vs +10.4% (May)
viewtopic.php?f=10&t=8150&start=30J

d. HK Properies - Correction in 2H 2017 ?
i) Price has surged almost 370% from 2003 to Sep 2015
ii) 18,000 new units completed in 2016.
iii) 34,000 flats in pipeline for 2017; 98,000 units in next 3-4 years (up 40%)
iv) About 7600 people left HK in 2016 vs 7000 in 2015
v) Margins have decreased to 25% from 40%
vi) DB: Prices to drop 11% in 2017
vii) CS: Prices to drop 22% by end 2018
viii) Bocom: Prices to drop 20%-30% by end 2017
ix) Citi: Prices to drop 20% in 2H 2017
x) DB: Prices to drop by 50% in 10 years on ageing population and ample supply
xi) UOBKH: Demand 21,000 pa; Supply 18,000 pa for 2017-19
xii) Bocom: Prices to fall 30% in 6 to 12 months
xiii) Andy Xie: HK properties to drop for 20 years
xiv} Colliers: Prices to drop 5% in 2H 2017
viewtopic.php?f=10&t=7785&p=202051#p202051

6. Yield on 10 Year US Treasuries - Lower. 2.17% from 2.19% last week from 2.19% two weeks ago
a. Low 1.32%; High 2.69%.
b. New regulations on Money Markets are decreasing yield for US Treasuries

7. Interest Rates:-
a. Expecting interest rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. US Feds: Rate Hike in Dec 2017? Two to four rate hikes in 2018?
viewtopic.php?f=16&t=7319&start=70

8. JNK (SPDR Barclays High Yield Bond ETF) - Higher. 37.13 from 36.81 last week from 36.77 two weeks ago

9. Baltic Dry Index - Lower; 1200 from 1247 last week from 1138 two weeks ago; Low 290; High 2330 (2013)

10. Vested in the following Inverse ETFs:-
a. Japan Topix Inverse 1x ETF (7315) listed in HK
b. DBXT S&P Inverse 1x ETF listed in Singapore
c. EUM (Emerging Market Inverse 1x) listed in US
d. HDGE (Ranger Bear Equity) listed in US
e. RWM (Russell 2000 Inverse 1x) listed in US
f. SPXS (S&P Inverse 3x) listed in US

The above is to help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments

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