Monday, 11 January 2021



Just dropping some brief views for this year, which is already turning out like 2020 2.0. All the best.


1. The everything bubble is chugging along nicely. Asset values are elevated, in some parts to historic extremes. Make no mistake; we do not doubt for a second that it’s a bubble situation. And bubbles will pop.


2. There are many permutations or triggers that could spark the most painful multi-year bear market in decades. The most obvious ones will emanate from US equities.




3. Only 4 out of the S&P500 constituents hit 52-week highs in the last week of December 2020. Even for a broad constituent index, the S&P is primarily swayed by the largest moves of the largest caps, in this case the tech names.


$TSLA valuations stretched way beyond belief... Link


4. $TSLA is trading at more than 1,500 times P/E (as I was typing this, it went to 1,700 times). All historical precedence points to such counters heading for a painful collapse eventually. There is no ‘this time it’s different’; we have studied bubbles and historical analogues spanning 300 years. When hype gets ahead of fundamentals and is seen as a permanent trend, be careful.



Blank check companies with $38 billion in free cash looking for something to buy... Link


5. SPACs and trendy ETFs are other phenomena indicative of what is essentially a flood of liquidity. Too much of it, with no place left to flow to. A bubble is perpetuated with seemingly insatiable inflows and good vibes. There will be a point when there are no more buyers left in the market. 


In a secular bull market, everyone's a genius....


6. In an equities market shock scenario, we believe that BTC will be positively correlated, simply by virtue of it being a purely sentiment driven asset class. There is little underlying justification for its fluctuations other than hype. We think if stocks fall, cryptos will fall just as hard.


7. We believe gold will retain its safe haven status in times of volatility in equities, notwithstanding movements in the USD, or DXY. As an inflation hedge, and a hedge against fiat currency depreciation, we’d go old school and stick to gold. Certain commodities (like precious metals) may be comparable gainers in a crash scenario, but we note that some are rallying due their proxy status of the global growth (hype) recovery angle.


Stacking bills sky high (pre-hip hop, 1920s Weimar Republic)... Link


8. Printing money stokes inflation eventually. And eventually what will happen is that interest rates need to go up again. There’s no escaping this. If and when central banks run out of tools, the market may finally see that the emperor has no clothes. This is probably the one, almost inevitable thing that will put a stop to the everything bubble.


9. The above are the wet blanket scenarios. Every year someone will talk about this, including us. We keep talking about it as a reminder that this time, it’s no different. That’s the thing about parties: they stop eventually.


10. While there is an ever-present temptation to keep dancing until the party stops, we advocate caution. Our holdings are probably about 18% in equities and 72% in cash right now. The cash component provides us with leverage and nimbleness to make big, short term trades. We have already stashed away (not the robo) significant funds. Not for rainy days, but for the major flood.


11. Some holdings we keep mostly as an experiment to see the most optimal way to derive good cash flows. Low risk, dividend yielding names are what we’re after. We may also express positions in stocks that are undergoing splits and bonus issues; for momentum names that kept being pushed up by an enthusiastic pool of mostly speculative buyers, our carrying cost for such names is small to the point of insignificant. 


12. We have actually been mostly in cash, at last count over the past six months. These are meant for short term momentum moves, knife catching (our specialty), and sudden breakouts. This kind of trading requires discipline as they rarely occur. Hence the key is patience, and waiting to strike at the right moment. Overtrading and speculative chasing in dumb penny stocks is an ever-present threat; unfortunately we are not immune to this.


KLCI performance since the pandemic began....


13. For short term considerations, we personally like tech, solar, vaccine (logistics related only), and healthcare, which we consider to be close to fair value and/or undervalued in some cases.


14. What we do not like currently : construction (threats of further cutdowns and mega project cancellations as reality sets in) and oil and gas (still influenced by OPEC newsflows, middling fundamentals).


15. Like the fire brigade, we are always on standby for sudden market shocks. We believe we can trade well enough to make a lot of money, but then again so does everyone else. Nothing makes one feel like an investing genius more than a runaway bull market. 


16. Given the trend in retail trading activity over the past six to eight months, there should be many opportunities for major gains. But we suggest not to lose sight of the main goals : capital preservation, and wealth growth. Trade within your capabilities and within acceptable risks. 


17. Always follow parameters, set tight loss stops, and take profit when targets are met. And with some luck, perhaps this year won't be worse than the last one.


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