Goodbye 2017

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Investing around the world is much like discussing money issues with your spouse. It can be difficult sometimes. The bulls and bears are still arguing over a number of issues – never mind. The year is ending soon and it is always easier to look back after the fact. Well, money this year would have been to load up everything in January and then go on vacation. It was as easy as pie. Risk assets for the most part of 2017 performed well, the zombie economy improved, the “grass-eating” North Koreans failed to puke the markets with their missiles and inflation was benign according to the central bankers. Commodities range-bound and bond yields did not surprise anyone.

No one knows. I certainly do not know what is going to happen in 2018. As an early Christmas present, here are some of the bets on my wish list and you have to grab the rest especially the sh*t list at my private client talks. Higher volatility will rear its ugly head. There will be a reversion towards making sense. The US dollar is going higher in 2018. If there is ever going to be another big blow off, I will simply trade it. Meanwhile, mutual fund companies will be sending out their annual marketing reports to clients detailing their “blockbuster” year and hype the call for more money. The problem for traditional models is the world is so synchronized that a correction in one market or asset class will lead to downturns elsewhere.

I had a client a couple of years ago who refused to heed my advice about the US dollar. He thought he knew better than me. He was betting that the US dollar would “collapse”. The media is partly to blame, because sensational stories sell advertising and the nonsense will easily grab the attention of young investors who are entering the market for the first time. I told him that was not going to happen and urged him to buy dollars. He piled his own life savings into all sorts of “anti-dollar” trades. He bragged about the fortune he was going to make. We met up for coffee at a mall yesterday. He was a little embarrassed.

We discussed a couple of things on the markets while sipping our coffee. We are still in this rotational game. Beware the fires of hell in the emerging markets. Some EM countries are facing potentially destabilizing developments politically. Think outside of the box in terms of compass and map. The real economy has not improved much. Half-baked governments which are concerned about re-elections do not seem to care although they have created inequality on a grand scale.

Buttcoin is now sucking money in from all over the world, and the speculators are even using credit cards, mortgaging their houses or selling other stuff to finance buying. As I am not a lucky poker player and with a few gray hairs on my head, I will continue to watch the party from the sidelines. Any asset that makes you so much money in one year is going to create great interest, as was the case during the internet bubble. Many analysts today are too young to remember what happened during the dot-com crisis and other crashes. There is a chance that we wake up one morning and Buttcoin is no more.

Most fund managers heading into 2018 are exposed heavily to the stock markets although some markets are currently priced as high risk, low-probability-of-reward speculations. What will make money for us in 2018 is with the risk factor in mind, what I have been doing for years, searching the world for niche absolute return strategies across changing market conditions. “I eat my own cooking!”

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