Trading Thoughts: Get That Monkey Off My Back
Another year and another Chinese Lunar New Year approaches, an event to be celebrated by at least 1.4 billion people in the world, including ethnic Chinese, as they prepare to enter a new Zodiac year which starts with a bout of ritualistic spring cleaning and there is none so important as this, I would reckon, for the mind.
The mood is an erratic one which is punctuated by a dismal Presidential inauguration in the US, and I find myself driving a tad faster these days, just to dodge that errant driver who may come my way like that chap who ran his Merc against traffic in Singapore, and who was probably under duress from some stress, possibly financial in nature, killing innocent victims in the process, accidentally giving Mercedes-Benz free advertisement as a superior vehicle.
It was perhaps eerie that it happened less than a week after we wrote Eat, Pray, Love—Stressed Out Singaporeans and The Singaporean Economy, talking about the mental stress levels in Singapore and stressed related illnesses, although I did not stop to think too hard or too much into it, it has now come back to revisit me that the year of the Fire Monkey has been one where our imagined fears have come to live.
No. It is not because I think Trump is a loonie or a clown or that Brexit will be a big mistake, for it could well be that these events that have happened will be the best things for humanity, years down the road.
Looking back on the year of the Fire Monkey, it has been hard taming that “monkey mind” when trading, for it has been a trading year indeed. The monkey mind being the flighty one, prone to hysterics and markets have been hysterical as we look back on the twists and turns of 2016.
According to Chinese geomancy reports, “Fire years” tend to drive stock markets and tend to be rally years, fueling the market rallies which was exactly how those black swan events of Brexit and Trumpism managed to shrug off their negative connotations to spark optimistic rallies against all expectations with Donald Trump’s win taking all but 1 day to turn losses into profits, for all risky assets in stocks and junk bonds.
Chinese geomancy, which is a delicate balance of Earth, Water, Fire, Metal and Wood elements, also says 2017 will be the last “fire” year we will have till 2022 and it is likely that the “yin” fire, as opposed to “yang” fire, will out run itself by mid year which is not so hard to believe because every day we will have more hope lost on Trump and 1 less supporter of Brexit (as they die off*), as it is estimated that over 120,000 Brexit voters have died since the referendum.
Still, that is not to say that these changes have been routed will end in tears or that we could be laughing through the pain as we sit through political upheaval.
Political upheaval should be more palatably known as change and change is scary, especially when Donald Trump projects Bane in his inauguration speech, one by the oldest ever inaugurated president of the United States.
How We Should Tackle The Year of Chicken Little
We enter the year of the Fire Rooster more polarised in mindsets than I can remember, pitting George Soros against Warren Buffet who have differing opinions of Trump’s win.
With billionaires divided, we have to admit that we cannot predict how the masses or the market would react in the uncertain days ahead as we hear from someone who attended Ben Bernanke’s recent speech in Singapore last week, that the guru himself admitted that he had little to offer in the form of what to expect. Just last week in Davos, we have Bridgewater saying don’t know, Blackstone saying brace for change, in other words, don’t know, and Roubini saying Trump’s policy mix doesn’t make sense.
Get That Monkey Off Your Back
Confused and uncertain, a seasoned trader friend of mine gave me possibly one of the best pieces of advice I can get as we bid farewell to the year of the Monkey. She told me ,“You should get that monkey off my back”, in part a homage to the late George Michael who left us last Christmas day, as we concurred Monkey is the better song.
Profound words interpreted, getting the monkey off my back would entail putting to past the world as it was pre-2016 and all to expect for risk-on, risk-off, QE-infinity etc. It is a new world world as put by Blackstone’s CEO Schwarzman, “If you don’t like change, this will be an uncomfortable period”.
We would need to be trading more than ever, as 2016 has proved—that we do not stick to our guns for the long term because US 10Y yields can make historic low and break 2-year highs within 3-4 months and the S&P 500 can enter bear and bull market in the same year. The circumspective approach to tweak that portfolio each month instead of each quarter, would have paid off handsomely.
It would not be too hard because we all know, by now, how Trump would react, it is just that we do not know what he would be reacting to which is the difficulty—to anticipate developments in a world of “controlled” media and fake news or permissible fake news, with government blessings.
For yes, Indonesia is considering curbing negative research by banks and goodness knows what the Turks are reading nowadays that Erdogan has been bestowed ruling power till 2029. And of course, we all know that it is pretty useless to “march against Trump” because one could be jailed up to 10 years with over 200 arrests so far.
Fake news, post truths, controlled media, alternative facts? Do we still need the army of analysts and strategists with those daily or weekly commentaries written for the sake of writing for the sake of professions and careers, along with their families and mortgages?
Getting that monkey off my back would entail, particularly, embracing the possible in the impossible such as, the possibility of a stock market pull back along with a bond market sell off or the possibility of a weaker US dollar because America first makes it America last for the rest of the world, the possibility that China will not be a basket case but come to represent globalisation, the possibility that inflation trajectory may stop at its tracks.
When we have Bank of America calling for an Icarus trade in 2017, “Global stock markets will surge by another 10pc in a parabolic ‘melt-up’ this quarter, akin to the final stage of the dotcom boom. This will be followed by a mirror ‘melt-down’ later in 2017 as the US Federal Reserves squeezes global liquidity, and rising bond yields puncture the Trump reflation trade.” and “HSBC’s latest global outlook is even darker. Indeed, it is astonishing. The bank expects yields on 10-year US Treasuries to push a little higher to 2.5pc before crashing back to historic lows of 1.35pc by the end of the year, taking global yields with them.”
We might as well let fortune tellers take over market research and indeed, the geomancer says, “2017 Yin Fire is still positive for the economy and the optimism continue to bring confidence to buy particularly in spring and summer time, when the candle flame gains seasonal support and drives up the illusory optimism, However, as the yin fire is illusory candle flame, it will be extinguished by autumn and winter. So there will be serious setback towards August and October and this will bring long term bearish market as there is no more fire years before the Tiger year 2022.”
The fortune teller concurs! As we wait for Chicken Little to arrive!