Friday, December 6, 2013

Just to say Hi.....see you all next year

Wow! it's has been almost more than one month I did not write or update anything on my blog. Looks like this will be my new normal until we see some serious market corrections.

As 2013 is coming to a close, it's may be a good idea to consolidate my thoughts and plan for 2014.

There are so much talks about bubbles. A bubble here and a bubble there. Just recently, the one piece suit that Bruce Lee wore in the Game of death sold for USD 100, 595(HKD 780,000). Go figure!

Are we in a bubble or are we in an over-valued market? Many argue that the market rarely crash when a cover magazine acknowledging a problem. If they are worried about bubbles, then most likely there are no serious bubbles. No worries, just keep climbing. Just walls of worries.

This is my lima sen worth of analysis.

This is a chart of KLCI index from 2000 till recent 2013. 

Prior to 2007/2008 collapse, there were 2 halves of the market rallies. Right after 2001 recession,  KLCI took 5 years to gain 60%. The second part, however, it only took the market to gain in 72% in just 2.5 years. That parabolic rise I would say has the characteristics of a bubble.

After the market recovered from a free fall from a cliff of 50% in sub-prime crisis, it took the market slightly more than 2 years to gain roughly about 100% before the PIIGS financial crisis triggered a severe correction. We went into a 20% correction which I thought the bear market was here. Alas, I was wrong. From late 2011 till now, the market went on to gain another 40%. There is no parabolic rise but the feeling is certainly eerie. People thought every dip is a buying opportunity which can be seen in a more and more narrow triangle. The volume however is thinning.......just not sure when it will run out of gas.

I have "Acrophobia", my legs are shaking standing at this elevated level. From here on, even the market don't go into a bear market, we are certainly in high risk of getting a very severe correction. 

May layman visual of what all the central bankers around the world did on QE looks like this.

It is certainly fun to swim in such a nice huge inflatable pool. We take comfort in artificial liquidity that makes us feel so safe and happy but a little nervous. Some are more aware of a possibility a rupture but to many it's just a "WTF" syndrome.  Nobody ever died when it rupture. Don't be a party spoiler, relax and have fun.

But. "Chotto matte kudasai"

Look at this. 

Corporate leverage is trending higher each year since we came out from 2007/2008 crisis and now is even higher than 2008.

Look at how NYSE margin debt. We are now higher than pre-dot com bubble burst and almost there to catch up with 2007 peak.

It is fun to leverage on ever rising market but when the market reversal comes. What is the impact of the de-leveraging? We don't need a brain with IQ 180 to find out the answer.  

I can go on and bombard you daily with a lot of anti-thesis but decided to keep quiet because thought what is the point of throwing cautions in the middle of a party? 

Speaking of parties especially getting close to Christmas and New Year. Don't drink and drive. When you don't drink and drive, lighten up the right foot. 

Just a remembrance of a favorite cool guy in Fast and Furious of mine died a few days ago. Brian - RIP.

And a remembrance of this cool guy too. May God bless your soul Nelson.

 "I hate race discrimination most intensely and in all its manifestations. I have fought it all during my life; I fight it now, and will do so until the end of my days."