My Big Picture in 5 minutes

While working on a report, I received a call from a dear friend who was in a very foul mood. Like some others, he bailed out of all his stocks after Trump was elected. After all, Trump was supposed to puke the stock markets around the world. “Why the hell are stocks still going up?” I calmed him down and told him that well, in a bull market, it does not matter if the news is good or bad, stocks rise. In the bear market, they fall whether news is good or bad. I have learned that markets will always do whatever they have to do to screw most people. For this decade, that meant markets rising when the gloom and doomers believed another crash was on the horizon. The market is always right, even if all the prices appear wrong. It must all be punishment for sins committed in our previous life. So, is it better to just turn off the TV and read some novel? Do I know something that the big boys who probably read, write and speak better than me, do not? Clearly, my investors know whe...

In Davos, Alibaba founder and Executive Chairman Jack Ma spoke openly and at length about some of the key challenges facing the world, delivering a stream of perspectives and guidance. Jack Ma is one of China’s richest men, as well as one of the wealthiest people in Asia, with a net worth of $50.5 billion, as of January 2018. He has become a global icon in business and entrepreneurship, one of the world’s most influential businessmen, a philanthropist known for expounding his philosophy of business, and a leading innovation visionary. He was ranked 2nd in Fortune’s 2017 “World’s 50 Greatest Leaders” list. I learned a lot from this VIDEO .     

Away from the ups and downs in the crazy markets, I found this video inspirational enough to keep me going. In this interview, billionaire Private Equity titan and co-founder of The Carlyle Group, David Rubenstein discusses to be successful is to work hard in all three parts of life. David also talks about how most rich are unhappy and to pursue meaning in life instead. Hope you will enjoy the  VIDEO .

In a new opinion piece published by Project Syndicate Friday, Nouriel Roubini (nicknamed “Dr. Doom”) said blockchain’s potential has been overstated while condemning the notion that cryptocurrencies could replace fiat currencies as “utterly idiotic.” Roubini has made harsh public comments about Bitcoin before, calling it a “Ponzi game” and a bubble, but his latest piece broadens the attack to include the underlying technology. Roubini had became famous mostly for predicting the economic crisis and housing bubble crash of 2007-2008. Besides teaching at New York University’s Stern School of Business and serving as chairman of the economic consultancy Roubini Macro Associates, he is also a frequent figure on financial mass media. You can read his harsh stuff  HERE .            Elsewhere, Bitcoin prices and the value of other cryptocurrencies dropped on Friday as Tokyo-based Coincheck Inc. revealed that as much as $530...

Well, as it turned out, it was not Trump who rattled markets in Davos, but rather Treasury Secretary Steve Mnuchin. The greenback, already on a spiral lower, sank to a three-year low after Treasury Secretary Steven Mnuchin said a weaker dollar was good for US trade. Whether a weak dollar policy was the intended message or not, the fact that Mnuchin made the comments was not lost on the market. Here is the VIDEO . The comments depart from the strong dollar policy of Treasury secretaries before him, going back to Robert Rubin in the Clinton administration. ECB’s Mario Draghi hit back and spat out these words: ‘’the exchange rate has moved due to exogenous reasons that have to do with communication. Not by the ECB, but by someone else. This someone else’s communication does not comply with the agreed terms of reference.’’ Here is the VIDEO . Rushing in later was President Trump who told CNBC, ‘’the dollar is going to get stronger and stronger and ultimately I want to see a stro...

7:00 am: Call me a nerd because I do not usually watch weekend football matches on TV. Spent the weekend perusing hundreds of technical charts for clues. Back to another hectic working day for me. The market action so far this year is certainly bad news for the gloom and doomers out there. A second Great Depression is still possible. I never claim to have “everything”. I am not a PhD holder because almost all economic and financial theories are crap. What I know is I work to keep my analysis free of commercial bias. At the current market levels, taking profit is looking clever by the minute. 7:30 am: Picked up an interesting email from a worried client on China’s economic problems. The bearish stuff in his email is an old story. China is a “mess” but it might not be as bad as you think. Come on, the whole world is a mess despite soaring stock markets.     8:45 am: While having a quick breakfast, picked up an interesting news article on gold. Do not take too lar...

Someone had sent me this stuff earlier and I found it interesting. Yukon Huang thinks that China’s economy is extremely unconventional. Unsurprisingly, then, that nearly all the conventional economic wisdom we hear about this economy particularly the two hugely popular poles of opinion that treat it as either an unstoppable force or a crisis-in-waiting is wrong. Here is the PODCAST .

The calm (before the storm?) is sending markets on an unimpeded path higher. It is a stark contrast from the past couple of years, where political upheavals and hawkish central bank talk sparked sudden selloffs or quick reversals in the most-loved securities. On my radar screen, stocks ended the week well. The S&P 500 is now up 7.4% this year, Emerging Markets up 10% and European markets up 8%. US Treasuries have held to the 2.6% level. Some of us just hate it when they happen so fast that they are unable to get in at decent prices. Unsurprisingly, defensive assets have been complete dogs over the last 12 months and people are not thinking defensively. Elsewhere, whatever way you look at it there has been substantial fund flows into emerging market equities. Bespoke Investment Group indicates that we are now at 445 days since the last 3%+ pullback (a record), 575 days since the last 5%+ pullback (18 days from a record), 712 days since the last 10%+ pullback (not close to...

Do you experience FOMO (Fear of Missing Out)? Investors tend to get complacent and whenever things do start to turn, there will be a parade of talking heads on stock market television telling us not to worry, which can make the complacency worse. I bet that you will certainly learn something from Howard Marks, co-founder and co-chairman of Oaktree Capital Management, the world’s largest distressed debt manager. Howard Marks is one of the world’s most well-known value investors. He always does an excellent job describing key value investing concepts and providing commentary on the current state of the economy and the markets. Here are the links to the videos: VIDEO Part 1 . VIDEO Part 2 . VIDEO Part 3 .                                                                        ...

I was working on an article and then this interesting Bloomberg TV interview crossed my desk. Billionaire hedge-fund manager and Bridgewater Associates founder Ray Dalio said that the bond market has slipped into a bear phase and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years. Well, this is the guy who runs the biggest hedge fund in the world. If you recall, a couple of weeks ago both Bill Gross and Jeff Gundlach, two of the most famous bond fund managers, spoke of the prospect of a bond bear market coming. Bill Gross refined his call by writing how the bond bear had actually begun post-Brexit in 2016. This stuff is crucially important for financial markets, as interest rates are the well spring from which all other market trends arise. Rising interest rates trigger recessions and bear markets. So what the heck are you supposed to do now? For those who love short-term action, keep selling those bond rallies. ...

So far in 2018, those with a herd mentality have been on the winning side, everything has gone in a straight line. I have been riding on the bullish wave as well. I am looking to add positions on dips in the coming weeks. Of course, nothing will go up in a straight line forever. Generally, when people are happy and confident, something wrong happens. So be careful out there. Hey, I am not suggesting that a crash is coming tomorrow. Never mind. From the economy to the Fed and rising interest rates, four small-cap specialists reveal what surprises they think 2018 might have for investors.  Here is the VIDEO .

I found this excellent piece of interview with Ken Rogoff, originally published in the Swiss Business newspaper Finanz und Wirtschaft by editor Christoph Gisiger interesting. Of course, I do not agree with every point in the article which has been shortened slightly for easy reading. Rogoff is the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. He served as Chief Economist at the International Monetary Fund. He is a senior fellow at the Council on Foreign Relations, and serves on the Economic Advisory Panel of the New York Federal Reserve. Does that mean we do not have to worry anymore of another financial crisis? Of course, there are still issues with the Eurozone. But the only country which is sort of in a different place in the cycle and which is important is China. China is probably the place most at risk of having a significant downturn in the near term. It is certainly the leading candidate for being at the center of the ...

The US government partially closed at midnight on Friday. Oh no! So it happened again. The most powerful country in the world did not manage to renew another short-term government funding extension. Since 1976, there have been almost 20 previous occurrences. However the world or rather the markets never collapsed. Who cares then especially in the current bullish environment? After all, we have been trained to believe that geopolitical turmoil is merely an opportunity to pick up bargains. This is 18th time since the modern budget process began with the Budget Act of 1974 that the federal government has entered a shutdown. On average, the 17 previous shutdowns lasted just under 7 days, though they have been longer in recent decades. The four shutdowns since 1990 have lasted slightly under 11 days on average. The longest shutdown in history, lasting 21 days, came in 1995-1996. Most of these shutdown were not severe, with 10 of the 17 lasting five days or fewer, and eight lastin...

It is easy to find anything negative to say about the US dollar these days. According to Bespoke Investment Group, with just over a week left to go in the month, the US Dollar Index is already down more than 1.7% on the year. That is a pretty big decline for a currency, but if you remember last year, the US Dollar Index kicked off 2017 with a decline of 2.6% in January, in what was its worst opening month to a year since 1987. The chart below shows the US Dollar Index's historical returns for the month of January going back to 1968. As shown, the back to back 1%+ January declines has happened just three other times. The other three periods were 1972-1973, 1986-1987, and 2011-2012. Well, there are a huge amount of people ready with “I told you sos” whenever the US dollar is dropping without knowing what is happening in the bigger picture. The silly memes on Twitter start to do the rounds again. Fundamentally, I could quite easily build a bullish case as much as ...

Today is another busy day for me. Never mind. The world has become risk seeking instead of risk averse. It appears that many investors seem to be more worried about missing out than worried about losing their money. The same must-buy mentality that existed in Bitcoin at the top now rules stock markets. Why not? Brokers are raising price targets. After being absent for a decade, the “dumb money” is finally coming back into the markets. “Dumb money,” as all seasoned veterans know, are individual retail investors and they have a bad habit of only buying at market tops. Stock markets are accelerating so we know that a reversion towards the mean is inevitable at some stage. If the next correction is led by Wall Street it will have a knock-on effect on other markets. It has the capacity to lead to a choppy medium-term correction that could last months with higher volatility. Things will have a shake out and I am looking to buy on dips for new money. Elsewhere, in this VIDEO , ...

This item by Prashant Gopal for Bloomberg crossed my desk and may be of interest to some clients. Here is a part of the article: When real estate investors get this confident, money manager James Stack gets nervous. US home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They are now an endangered species. Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red… You can read the rest of the article HERE .  

Miller Value Partners’ Bill Miller holds the record for being the only mutual fund manager to beat the market for 15 years in a row. One way he did it is by investing in new technologies that the Wall Street establishment thought were crazy at the time – Amazon, Google and Facebook among them. Miller founded Miller Value Partners in 2016 after a 35-year career at Legg Mason. Miller’s overall firm manages $2.2 billion, including separate accounts for high net worth individuals and mutual funds. I hope you like the VIDEO .

Doing stupid things is what most individual investors throughout history have always specialized in. They seldom learn from their mistakes. If they decide to hitch a ride on a bubble when it is on the way up thanks to the greed factor, make sure they remember to bring a parachute for when it inevitably pops. Some investors and traders who were “born” in the markets after the Great Recession in 2008 have made good money from risk assets over the years thanks to the massive money creation by the self-serving central bankers who do not eat and drink based on their official inflation numbers. So, they have no experience whatsoever with losing money in investments.   Those investors have not lived through the financial market crashes such as the dot-com crash of 2000-2002. I was there when the tech stocks crashed to earth. At the peak of the crazy party, I could still remember that anything that was vaguely related to the internet was enough to impress the pretty girls at the bar...

The fears of hedge fund troubles will never go away. Most experts agree that hedge funds are part of the solution for any well-diversified portfolio. But still, some local private and other institutional investors are reluctant to use them, even if their regulations allow. For some, hedge funds are synonymous with “risk”. Indeed, hedge funds have been featured regularly in the mainstream news, and not surprisingly much of the reporting in the media has been negative or rather sensational in my view. Of course, a few investors from my meetings are ahead of others that they have already gained some real investment experience with hedge funds. Hedge funds may invest and trade in many different markets, strategies and instruments with various risk characteristics. Hedge funds employ innovative trading strategies. Their strategies can include taking both long and short positions, using leverage and derivatives. Some may only consist of a small investment team or may depend on...

I am going to take it very light and easy today. One thing I learned from my decades of experience in global financial markets is that rational investors should never over-react to anything. I have met many new people in the last couple of months in my continuing effort to expand my business empire. I can tell you that some of them are the coolest people I have ever met. They are very successful in what they are doing. Yes, I have learned a few tricks from them. Their faith in me is rather touching. In some meetings, I was asked about my background. I would consider myself as an investment practitioner, a consultant for individuals and private institutions and financial writer – stuff that were completely unimaginable when I was a kid growing up in a small town. My job can feel very easy especially when and where even garbage stocks just continue to go up. I started from the rock bottom and I did not have the backing of some well-connected half-baked politicians. I eat my own...