Couple of weeks ago, I wrote that I bought gold at around 1310 and silver at around 19.50. Today, gold is 1395, silver at 23.70.
I check my charts once a week. I used to check them more frequently, like every night. But stock trading has taken a toll on my health through late nights. What's 15% return per year for me when real estate is giving me an IRR of 40 - 100% on a leveraged basis?
But I still need to hone my skill for both because stocks are a lot more liquid than properties. I know a few truly gifted friends who are able to achieve 30 - 50% per annum of returns for stocks. For these people, there is no need to invest in properties, and waste time travelling to far flung places like London, New York, LA, Florida, or invest in more risky and less transparent properties in Malaysia. If I can achieve even 30% per annum of returns with as much effort as I do for properties, then I'll allocate more money to stocks and bonds!
For properties, many things are not time sensitive. I can spend 30 minutes a day research, reading the news, 30 minutes negotiating with the seller and 30 minutes taking care of administrative matters like making sure the rentals have been credited into my account and my day is done. For stocks, sometimes you have to spend an hour or two a day just poring through annual reports, checking charts etc.
After running through a few charts, there were several interesting observations:
1. Gold & Silver have a 70% chance of turning up.
2. EURSGD and USDSGD are turning up. I can understand why USD will strengthen, due to the tapering. But the ECB has just declared that interest rates will remain low for the next few years so it is indeed a surprise. GBPSGD has also strengthened.
3. USDJPY is falling still, indicating that the Nikkei rally is over for now.
4. AUDUSD is in a sideways trend, indicating that the mining sector and China is still trying to find a base. It has not turned.
5. European stocks seem to have made a strong recovery and I prefer them over US stocks now. Price to book of Eurostoxx 50 is around 1.3 vs median of 1.8 and high of 2.7. Low was 1.0 in Sep 2011. US stocks are at median levels. I believe in rotation of money out of assets that have outperformed and whose valuations have over stretched, into lagging assets. It happens everywhere.
6. Emerging Market and Asia x Japan indices have entered into bear territories! I am lightening up on Asian stocks further in view of this but I do not think the downside will be as much as in 2007 - 2008 as valuations is already 1 standard deviation below median. The same bearish charts applies to Latin American stocks and ASEAN stocks too. If you have profits, you should try to lock into them now.
7. This tapering in the US will cause the 10 year US Treasury to rise above 3% and eventually kill off bonds. It will cause increased volatility of stocks so there is a lot of buying and selling opportunities along the way.
8. I am still of the view that we will experience a global recession by 2015 / 2016. We've had one every 5 to 8 years; The Global Financial Crisis in 2008 - 2009, The Bursting of Internet Bubble / SARS in 2001 - 2003, Asian Financial Crisis in 1997 - 1998. Meanwhile, stocks should flourish as the Great Rotation pulls money out of bonds into the asset class.
