Interesting opinion piece written over a year ago.
Excerpts:
China has never been a normal economy. It experienced an average of nearly 10 percent growth rates for almost four decades, a record; it is the first developing nation to become a great power. So why couldn’t it keep defying expectations?
What some take to be the Chinese economy’s weaknesses have, in fact, been strengths. Unbalanced growth isn’t evidence of a looming risk so much as a sign of successful industrialization. Surging debt levels are a marker of financial deepening rather than profligate spending. Corruption has spurred, not stalled, growth.
Centralized authoritarian power has its benefits, including the ability for those who have it, at least in theory, to correct course rapidly. This has allowed China’s leaders to put the economy on a more sustainable growth path in recent years. The gross domestic product growth rate rebounded last year. Foreign reserves are back up as well. Wages have increased. The recent abolition of term limits for the president and vice-president’s terms gives President Xi Jinping more time and leeway to promote his vision of a more prosperous, modern and powerful China, and with the help of trusted advisers: His former corruption czar, Wang Qishan, is expected to be named vice-president and Liu He vice-premier in charge of the economy.
In reverse chronological order:
ReplyDeleteVEMAX closes the day +0.92% @ 36.22 (versus +1.19%/ +1.3% for ETF counterparts EEM/ VWO), or -0.8% below the April close of 36.51. There's a decent chance it will surpass the April highs next week on its way to challenge the 2018 high of 41.39 later this year.
On Fri, May 3, 2019 at 10:25 AM wrote:
I've reopened positions in ASHR (China 'A' Shares) and FXI (China 'H' Shares), and plan to reopen VEMAX (Vanguard Emerging Markets) at the close.
Am I chasing? Not in my opinion.
(a) I've traded all three assets several times in just the past month, booking short-term gains and/or taking minor losses along the way. Reopening today is just another trade.
(b) All three positions have been/will be reopened below their April highs. In fact, I have at some point closed all three positions well above current levels. For instance, on April 18 I closed ASHR/FXI/ VEMAX @ 30.39/ 45.61/ 36.51, or +3.8%/ +1.6% above current levels for ASHR/FXI, and an anticipated +0.5% above today's close for VEMAX. Had I simply bought and held, where would I be?
(c) The last time I opened VEMAX (April 25), it was at a -0.55% discount to the prior day's closing quote. I then closed the trade (May 1) for a -0.11% loss. I will be reopening today at a +1% (or more) premium to Thursday's close. In other words, I don't view today's reentry as a chase - I'm simply managing a position within acceptable profit/loss variances.
With that out of the way, here's my take:
(a) With the Fed/ jobs report behind us, a great deal of negative event-risk has been removed.
(b) That leaves the US/China trade talks. I view the outcome in terms of positive-event risk for bears.
(c) I sense a buying stampede over the next 1-2 weeks. Sure, I could be wrong - but the point of trading is to take a stand.
What about Bitcoin? I'm really clueless re the asset, but I just reopened a position in GBTC on the intraday gap-down to 7.28. (My last two trades generated gains of about +6% each.)
In reverse chronological order:
ReplyDeleteThank you to all the dip-buyers out there today!
Let's consider for a moment the fallout from the imposition of a 25% tariff on $200 billion of Chinese goods on Friday (which is paid not by the Chinese, but by US importers). If China has in fact backed away from concessions, it's because they're in a strong position. We have no inside knowledge of the cards they hold, but we can infer they're holding one or more that US negotiators are either unaware of, or have mistakenly dismissed.
It would be ironic if by walking away, Chinese negotiators win concessions from the US.
On Mon, May 6, 2019 at 12:42 PM wrote:
SPX has reversed off an overnight low of 2883 (via an ES print) to 2934. In my opinion, close enough to the 2875/ 2925 ideal scenario posted yesterday afternoon.
Emerging markets/ China stocks have recovered half of their opening losses.
I plan to hold all positions for now.
On Mon, May 6, 2019 at 5:57 AM wrote:
You'll recognize the title to Robert Frost's take on hard choices.
I envision two scenarios.
(a) Sharp reversal.
(b) Further selloff.
I remain open to either scenario right now.
On Mon, May 6, 2019 at 2:34 AM wrote:
With four hours to market open in the US, no sign of reversal. I'm caught leaning the wrong way and it's shaping up to be my worst overnight loss since early 2018.
On Sun, May 5, 2019 at 3:31 PM wrote:
The ideal scenario-> ES 2875 (ie, a decline of about -70 points), followed by a recovery to above ES 2925 by Monday.
On Sun, May 5, 2019 at 3:23 PM wrote:
DJIA futures off -400+ points, SPX futures off -40+ points. ES traders obviously view the tariff threat as a negative. In my opinion, the fact that futures have gapped down hard at the open is a plus - it opens the door for capitulation + a reversal by the time US markets open on Monday.
On Sun, May 5, 2019 at 1:58 PM wrote:
My reaction to Trump's latest tweet on trade (raising tariffs from 10% to 25% next Friday)-
I think there's a growing appreciation for the fact that a real deal will take time + acknowledgement that the ‘first take’ may not be as comprehensive as the next take or the final agreement.
Looking at the big picture, that trade talks are even occurring represents tremendous progress.
Traders have reacted positively to every tweet re progress on US/China trade talks – until recently. No one is able to predict how the President’s latest tweet will affect ES (SPX futures) traders in an hour, or traders in Asia overnight, but should the reaction be positive? That’s the kind of reaction the ‘market’ thrives on – the ones that arrive out of left field.
In reverse chronological order:
ReplyDeleteMy stops kicked in around SPX 2883, which went on to print an intraday low of 2867 and has now recovered to 2876.
Still holding VEMAX (Vanguard Emerging Markets), which of course only trades end of day. Unless a sharp reversal takes place in the next 45 minutes, I will be closing those positions as well.
On Tue, May 7, 2019 at 9:41 AM wrote:
I've taken a few stops.
Watching a selloff unfold can be surreal. There's no way to know if we're witnessing a minor pullback, or something worse. Which is why we use stops.
On Tue, May 7, 2019 at 8:30 AM wrote:
On days like this, you'll need to know where your stops are. If/when they trigger, take the hit! Half the time, prices will reverse and I'll wish I had waited. But that pales in comparison to the times I second-guessed my decisions, and allowed a minor loss to become a major loss.
(Should I have closed positions yesterday? In hindsight, sure. But that's like saying I'll always be able to predict market direction.)
Zoom out to the big picture. Markets have climbed almost +25% since Christmas Eve. Is it a problem if they pull back -5% to -10%? No.
I'm still happy with my ytd gains - no longer in the double-digits, but better than average for this time of year. If necessary, I'll close positions end of day to keep it that way!
On Tue, May 7, 2019 at 7:31 AM wrote:
Retesting Monday's lows, this time against the backdrop of near-certain imposition of higher tariffs on Friday.
I'll never cease being amazed at the role luck plays in trading. Today it arrived in the form of a -1.21% closing print for VEMAX (Vanguard Emerging Markets). As of 15 minutes to close I had the fund pegged as a -2.5% setback for the day.
DeleteNow around +8% ytd - however, that still leaves me trailing my benchmark by -5.5%.
Here's the thing - outside of the capital markets, for an 8% return in four-and-a-half months what else could we have invested in on December 31? I can't think of anything. I'm happy with it.
(a) Put/Call 118%
ReplyDelete(b) Fear and Greed 43 (compared to the 70s last Friday)
(c) No one believes there will be a deal on Friday
(d) We had our first -3% pullback in the SPX this year on Tuesday
As pointed out yesterday, luck plays an important role in trading. I'm inclined to press mine.
I think the market wants to rally. Reopening VEMAX (Vanguard Emerging Markets) at the close.
High Noon/ Stage Fright
ReplyDeleteAn actor preparing to go onstage. A speaker waiting his turn at the podium. That's when uncertainty strikes, and fears are entertained. As he strides onstage and proceeds to speak, both begin to recede.
Trade talks are slated to resume today. The uncertainty and the negativity are intense. Traders are selling. I think it's a good time to buy. ASHR/ FXI/ BABA. (Did I open VEMAX a day early? We won't know 'til the close.)
If I'm wrong, I'll manage the trades. But I think it's time to step in.
During the January 2018 run-up in global equities, a few astute market analysts were awaiting a melt-up which never materialized. Global trade tensions in the latter half of 2018 and the first half of 2019 then further dampened prospects for a global rally.
ReplyDeleteHere's the thing. Last week's remarkable showdown between Trump and Xi last week had little effect on the powerful rally off the December lows.
It's not hard to come up with reasons why markets should sell off. Instead, they're looking for reasons to go up.
ES currently -30 points (or about -1%) early in the futures session. While futures do a bad job of predicting where markets will open the following day, the extent to which the numbers contradict my short-term take sharply lowers the odds that my take is correct.
DeleteUnless you're a buy-and-hold investor with a long-term horizon (which I'm not), be prepared to cut exposure on Monday.
Exiting all positions at the close.
DeleteGlobal markets appear set to bounce this morning.
ReplyDeleteNo regrets on my part. Closing all positions yesterday was the correct move for me - the same move that allowed me to bypass most of the -20% decline in late 2018.
Markets have suffered a serious breakdown. Cash is a powerful position at this point. Should indexes begin to show signs of recovery, I have no problem buying back in.
On a 16.5-month timeline, I'm about even with my benchmark. Whereas I closed 2018 with -1.36% loss (versus a -9% loss for VT), I am now ahead only +4.5% ytd (versus +10.6% for VT).
Even the shippers are bouncing today. NMCI is lagging behind, though, because it is such a small company with such a small float that it is not on the radar for any decent hedge fund. They are financially sound, though, and the container shipping rates keep increasing (more cashflow for NMCI). I bought some NMCI yesterday at $2.20 and more today at $2.15.
ReplyDelete'Everyone' was looking to buy a gap-down open - therefore unlikely we were to get one. Now there's rampant distrust of today's bounce - which probably means it has further to run.
ReplyDeleteMy bet (through Sunday evening) had been on a breakout in emerging markets. The bet was predicated on out-performance in the sector dating back to last October - and driven in part by continuing momentum. A -10% selloff puts a serious dent in short-term momentum - enough to make me think twice.
I think it's appropriate to zoom out to October 2016. Global markets rallied hard after US elections, with an average return in 2017 of +21%. They gave back -9% in 2018. They have now rallied ~12% in 2019. I'm currently about even with the benchmark. Were I to sit out the remainder of the year, the portfolio will have returned an average of 7% compounded annually for three years. Few investors have a problem with 7%/year - I'm actually not sure why it doesn't quite cut it with me. I'm beginning to rethink risk/reward.
The recent pullback in GDX might be over, judging by its 6-month chart. Just picked up some today at $20.83
ReplyDeleteIn reverse chronological order:
ReplyDeleteWill open RYWVX (Rydex 2x Emerging Markets) @ the 730 am window using 12.5% of the investment portfolio, which translates into a 25% allocation to emerging markets.
On Fri, May 17, 2019 at 4:44 AM wrote:
Shanghai -2.5%/ Hang Seng -1.2%.
Reopening positions in ASHR/ FXI/ BABA/ EEM near Monday's lows - in a few cases below my exit points on Monday.
I think the retest will take the form of undercutting Monday's lows, followed by a recovery.
On Thu, May 16, 2019 at 4:27 PM wrote:
Scaling in after hours.
(a) IQ (iQIYI) on the -5.75% reaction to earnings.
(b) EWZ (Brazil) near the closing low.
Sometimes nailing in the first stake sharpens the senses.
Adding VEMAX (Vanguard Emerging Markets) at the close.
DeleteSold GDX today at a small loss relative to where I opened it a couple of days ago. It is not rallying as it would have if the market became concerned with inflation because of the tarrifs.
ReplyDeleteInstead, bought more NMM today at $0.91, reloading the batch that I sold at $0.97 a couple of weeks ago.
ReplyDeleteThe bear case is easy to make.
ReplyDeleteLet's take a look at the bull case.
(a) The market feels washed out. Monday's panic lows in global indexes felt like the real deal.
(b) Two consecutive weeks of large equity (mutual funds + ETFs) outflows.
(c) High put/call ratios - whether intraday, single-day, or 5-day moving averages.
(d) Sentiment indexes have all made nice U-turns over the past two weeks.
I think the stalemate in trade talks has done a great job of rebuilding the Wall Of Worry, which is exactly what was needed to extend the spectacular rally off the December 24 lows.
I plan to end the day flat.
ReplyDeleteGiven my recent performance, this probably means emerging markets will continue to rally all week!
However, I'm happy with being up around +4.75% year-to-date in the current risk-off environment. That leaves me trailing my benchmark by -7.8% for 2019...but having ended 2018 +7.64% ahead of benchmark - so what!
Brutal day for me today, as my largest sectors oil and shippers were butchered today...
ReplyDelete"Price is what you pay, value is what you get." Warren Buffett
ReplyDeleteI didn't buy anything yesterday, but couldn't resist today and sold a bunch of September $27 puts on XOP for $1.90. If executed, I'll buy XOP close to December lows, which happen to be its all-time lows...
Catch up post.
ReplyDeleteWe spent the week in Vegas. Arrived back home yesterday.
I opted to scale back in on Tuesday (FXI/ ASHR/ IQ/ CGC/ VEMAX) - just in time to ride the downdraft on Wednesday! I added to positions at Wednesday's close, and again on Thursday.
Things are looking much better today!
Trimming and/or closing positions in CGC (Canopy)/ IQ (iQIYI)/ FXI (China 'H' Shares).
ReplyDeleteClosed all positions end of day for ~+1% gain over four days. There's too much unexpected overnight risk right now - my trading timelines will be shorter.
DeleteI think the Hong Kong protests offer an attractive replay in emerging markets.
ReplyDeleteScaling back into FXI (China 'H' Shares), ASHR (China 'A' Shares), IQ (iQIYI), HUYA, USO (crude) and CGC (Canopy). VEMAX at the close.
Yesterday's buyers (including me) being tested. That's normal, and I think that's all it is.
ReplyDeleteOver the past ninety minutes:
(a) Added to existing positions in IQ (iQIYI), CGC (Canopy) and ASHR (China 'A' Shares).
(b) Reopened positions in HUYA and USO (crude).
Selling all positions here and/or end of day.
ReplyDeleteI like the selloffs in Hong Kong and Shanghai last night, which may well be the last pullbacks we'll see prior to the meeting between the two Presidents.
ReplyDeleteReopened a position in FXI (China 'H' Shares) below 42 in the premarket session.
Added positions in ASHR (China 'A' Shares), BABA (Alibaba), IQ (iQIYI), HUYA, and CGC (Canopy) throughout the day.
I'm buying today's flush. My plan to is go long the world stock market (with a focus on large caps) at the close via FWWFX.
There is an amazing discrepancy between the recovery in the Baltic Dry Index and in USO from the recent lows and the fact that dry bulk shipping stocks and XOP are still near all-time lows. The traders are, apparently, pricing in an imminent recession that will tank the oil price and the shipping rates. If it doesn't materialize soon, then the shipping stocks will likely double and XOP will likely be up 50%.
ReplyDeleteThe VIX has plummeted -7%, and has pierced its lower Bollinger Band. This is generally a high-probability sell signal.
ReplyDeletehttps://finance.yahoo.com/quote/%5EVIX?p=%5EVIX
Of course, it's only a short-term sell signal and if you're a buy-and-hold investor then by all means continue to hold.
All positions off at the close.
The dry bulk shipping rates keep shooting up, and the shipping stocks are finally starting to respond. NMCI and NMM hit a few sell limit orders for the share lots that I aquired while they wobbling around at the bottom. Placed sell limit orders on the more volatile NMCI all the way up to 3.20, at 10c increments.
ReplyDeleteThe emerging markets sector has now pulled back for three consecutive trading sessions and I'm able to reopen positions at discounts (to July 2 exits) ranging from -2.5% to -7.5%.
ReplyDeletePositions in ASHR (China 'A' Shares), FXI (China 'H' Shares), BABA (Alibaba), and IQ (iQYIY) reopened here. Will reopen VEMAX (Vanguard Emerging Markets) at the close.
Opening a new position in QD (Qudian).
Powell delivered - the market reaction to his comments has not. With most of my positions up +1% since Monday's entries, I'm going to bet on another pullback before we see the SPX close above 3000.
ReplyDeleteFXI (China 'H' Shares), ASHR (China 'A' Shares), IQ (iQIYI) and BABA (Alibaba) off here, and VEMAX (Vanguard Emerging Markets) off at the close.
For what it's worth, the decision to sell is also partly based on a seasonal pattern - the last week of June->mid-July is generally bullish, then turns bearish from Mid-July through August.
QD (Qudian) was closed yesterday ~8.89.
DeleteIn reverse chronological order:
ReplyDeleteOn Thu, Jul 18, 2019 at 7:32 AM wrote:
Some of the Chinese stocks have pulled back to the point where I'm willing to begin scaling back in. IQ (iQIYI), HUYA, QD (Qudian).
On Thu, Jul 18, 2019 at 7:01 AM wrote:
There were two gaps up in the SPX on its way to 3000. The first gap (2980-2889) has now been filled. A second gap (2940-2950) awaits - but no guarantee it fills either this week (or ever, for that matter).
Now:
I think the first gap fill is enough to power this market back above SPX 3000.
Opening a position in VASGX (a Vanguard fund split 50/30/20 total US/total international/total bond market) at the close. I'm betting on a multiyear breakout in global markets, which will benefit both stocks and bonds.
new post
ReplyDelete