Monday, November 11, 2013

Early Nov updates

Well, honestly, things seem to be going as my predictions said they would be. US dollar has strengthened remarkably, however equities didn't really go down as much as I expected. Resilient sods. Gold has been rightly monkey hammered down by the stronger USD. The USD seems to be going in a small upward correction now... or maybe it's consolidating before it flash crashes? Anyway, so far most of my predictions are going as I thought it would be.

If what I think is going on happen continues, we should be seeing gold prices get hammered a bit more, with the US dollar going up, before we get a nice reversal. This time, I'm expecting the drop of the USD to also coincide with a drop in the equity markets. Though the relationship has been rather inverse because of the new normal, I think things are changing from then. The markets aren't sure anymore is bad news is still good news, and good news isn't great news anymore. Good news is now bad news, while bad news is good news? Soon, both good news or bad news will be bad for the US economy, especially when things are in free fall. Honesty, the ONLY way I see things picking up for the US economy is that if QE is actually increased. Logically, this is an absurd idea, but with Yellen up front, who knows what she's going to do.

My plan is to wait for gold to dip and start to recover, buy in a fraction more to DCA down my initial positioning cost, and hope things go as planned. If the market really starts to look like panic, I will be liquidating my EM bonds, HY bonds, EM equities, Asia equities first. If shit really starts to fit the fan, my developed equities as well as my Corp bonds and SG real estate are going to move into cash as well. I'll likely only be holding onto Intl Bonds, Inflation bonds and gold. As different as a lot of asset classes have their correlations now, I think when things goes south, a lot of them will have positive correlation... downwards, and I don't want to be caught in having to sit through that storm and watch my asset values bob up and down. I rather exit with a loss small and enter back when most of the move is done so that I can capture upside and reduce downside risk.

Now, my current portfolio is actually doing worse than my benchmarks that I look at. I think that the Nikko portfolio C is actually my closest contender is terms of a robust 60/40 portfolio that I would even consider to put my money in for the long term. However, I still believe that I have an edge over that portfolio, mainly for a few reasons. Firstly, I'm not restricted to hold onto underperforming asset classes by a mandated percentage with it is obvious that a storm is coming. Next, I have more asset classes to increase diversification and probability of weathering tougher economic scenarios. Finally, my asset classes are equal weighted, instead of market-cap weighted, which I have a strong belief will outperform a market-cap weighted allocation.

Below is my current portfolio, I think it looks pretty well diversified, isn't it! As much as I gripe about my portfolio being underwater, it's honestly less than 1% down on cost, which includes sales charges. In fact, it is probably valued exactly as what it would be with sales charges, haha. Therefore, my portfolio pretty much hasn't moved much.



Oh yes, I am also following the Short Side of Long, who is actively watching the commodities market. When commodities start breaking out, which I actually also assume to be midway towards down the decline of the dollar, I shall also be entering with perhaps a slightly larger speculative position. Commodities hasn't been performing for the past 2-3 years, so I think it looks quite about ready to recover.

As of now in my CFD account, I'm looking for intra-day or short swings to go on, as well as shorting the S&P when technicals are in my favour. Like what Dale is guessing, I also have a strong inclination to believe that there is going to be a serious market correction in the US indices by the end of the month, and it think sacrificing 1% of account every other day to get an anchor and feel of how the indices are doing will really help me enter the market short when things starts to tank.

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