Sunday, June 21, 2015

Doing nothing is actually doing something

I've been crazy busy this week with work and other things, hence the lack of posts! I know I usually try to post once a day, but I really do feel that the markets and getting more and more... meh. I've not much content to make snide commentary on these days, so I'm working on other topic ideas that are more general. I've got 74 draft articles now and it's hard to decide which ones I should finish!

Anyway, it's been a while since I wrote a post regarding my thoughts on the current state of the markets and what I have been up to, so maybe now is a good time to think about things.

The US market looks insane to me. Valuations are crazy. Stock prices are going up because of massive share buybacks fueled by cheap debt caused by a paradoxical fed policy of having low interest rates but inflation. It's all nonsense to me. Upside looks capped and bleak, while downside looks deep and plentiful. There is absolutely nothing to be excited about unless you dare to play short.

In Singapore, the stock market seems to have stalled a bit. I've always been in the camp that the STI has been fairly valued, so how much of a "correction" or "crash" we get, I don't know. We're just collateral damage to whatever happens to the bigger stock exchanges elsewhere.

Bond yields have been flying all over the place as of late, and though I think we take another plunge down in yields as a "risk-off" trade, it's not a trade that I would have high conviction and want to be in. To me, going long bonds now is like trying to pick up pennies in front of a steamroller. The benefits aren't worth the risk. If yields rise quickly, it might be a good time to lock in some money for the short-term though, like 1-2 years. Maybe I'll put some cash into some SSBs that I can redeem anytime.

I'm quite contrarian with my view of the USD. Many people are expecting that the USD is taking a breather before it continues pushing up, but I think the rally is over and done and we see a weakening USD. Why? Historical reference, but hey, who knows, maybe this time is really quite different. With that train of thought, I also think that we see a lot of commodities bottoming out.

Gold and Silver both look ready to start a bull market, especially after both of them have surpassed most previous bear markets in terms of depth and duration. Sentiment is still horrible and I am thinking of loading up on a bit more physicals as my net worth has increased since the last time I bought precious metals.

Basically, I don't have a very pretty view of things. Over the next year I think basically everything turns to shit.

Given that I have such a view, what am I doing?

Well, I've been stepping away from the markets. That doesn't mean that I'm out of the market. It just means that I am not being so aggressive and I am channeling more of my funds into cash rather than other sorts of assets. I'm just busying myself with work and juicing up my savings. All my savings would help me buy a small place and move out when the time is right. Of course, this is if my thesis of "everything turns to shit" really does happen and property prices crash. My mental attention has been channeled towards finish reading many of my books, as well as to get some of my things on my "to-do list" done. I've actually been really busy learning a new language.

Maybe Greece exits the Euro, crashes Europe, causes collateral damage to the US, followed by a global fallout and then we have a nice big generational opportunity to accumulate depressed assets. Now, that would be ideal for me.

I was just reading how any investor who isn't retiring soon should always hope for the biggest and nastiest financial crisis ever, since it is in the accumulator's favour to buy assets when they are cheap. I agree, and I am patiently waiting for the nasty to come.

The question is not "if" it comes, it is "when" it comes. And hopefully I will be ready and waiting.

6 comments:

  1. I agree doing nothing is often a very valid option in investing as it is not only about how much money you can make, but how much money you don't lose.
    Based on the regression to the mean (nature's way of levelling the playing field) a correction is going to happen. Just when nobody knows. Better be prepared than sorry.
    Physical silver does indeed look like having a promising risk/reward ratio right now.

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    1. Hey Andy, agreed. I always try to think about covering my downside and then letting the upside take care of itself. Physical silver looks so great now! I'm wondering if I should get another pile of 10 oz bars!

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  2. Just wondering why you are predicting a property crash? Yes the feds will be raising the rates in September but the prices right now have already been so depressed. Also the SG gov should be relaxing the tight property curb next year. Of course all these are just guesswork. Would like to know your opinion. Thanks!

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    1. Hi Anon,

      I don't know where all the rumours of "removing tightening measures after elections" rumours are coming from and from all the rhetoric that I am hearing, I don't see any hints at all that cooling measured will be eased. In fact, it sounds to me like these measures will be here to stay.

      Government policies aside, supply is hitting the market while foreign renters are drying up. I think the rate hike is a small factor compared to those. Those who would be catastrophically affected by a minor rate hike were too leveraged to begin with anyway.

      I should be writing a post on my more updated thoughts about the property market soon!

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  3. after one too many zero hedge articles, I am holding a lot of cash now, waiting eagerly for the crash

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    1. Hey Joel,

      You and I both man, haha. I'm trying to be less binary about my situation, which is why I still have stock holdings, but it is a small portion of my entire portfolio. I am holding onto a lot of cash now as well.

      Who knows how long it might take for an opportunity, but even a broken clock is right twice a day.

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