Good Morning, the Peanut Butter Ninja Warrior has subdued to a cold, so yours truly has been up watching Peppa Pig (parties would be wise to read about Entertainment One (ETO) and feeding her warm milk on demand since 4am. She's now back to bed but my brain is active...
China sees no need for big stimulus for property, economy (Reuters)...I'm inclined to agree that China should consolidate their economy. China is slowly allowing the risks of their economy to be shown with defaults and some natural trends to appear. What China isn't doing is sitting on the sidelines and doing nothing! Its already evidenced they've pumped liquidity in, its evidenced they've increased their social housing agenda and brought forward stimuli planned for 2015/16 in terms of CAPEX and developmental loans.
They are assisting the banks supporting the Chinese Steel mills. SinoSteel (one could be excused for swapping an e for an a) have yet to rectify its loans issue. The cashflow, despite the support of specific orders going to certain customers of SinoSteel whom are the most distressed, is poor to say the least. This came in from Li awhile back, which he kindly sent to me again as it appears I did not acknowledge the severity; Steel Group (not related to Liu the authot). What people will note is the iron ore liquidation, ironically the mills in China have caused their own problems selling on ore/positions to reduce the balance sheet leverage (or attempting to at least). Ironic the Chinese mills with the assistance of their suppliers have shorted the entire market...who'd have thought it!?!?!?!? Does it remind people of Solar? or piping? Steel? Oops its still happening!
China is willing to wait publicly, whilst meddling / stimulating on a local more discreet level, a complete contradiction to the overall state of the economy. When reading and viewing the Chinese economy, its far from lost and the end of the Chinese economy is far from nigh. What is important is reading that in comparison to the bulls of China in the perspective of a consolidation and slower country growth would be wise. (Mentioned many times here.) Ironically when looking at China without rose tinted glasses it is a stronger buy. China's build and sell model has significant risk, UK developers have begun to expand into more diversified models, in boom eras the returns are very good, but with prices under pressure and the mortgage approvals (+speed) allegedly on the increase, the demand clearly isn't there with prices under pressure. Expect the Chinese to make key deals abroad to hedge their exposure to a down-turning Chinese market.
Long Only (LO) is riskier than people perceive...take for example Afren, there's potential but not without risks but there's little point sitting there and watching profit eroded without hedging the position. AFR (AFREN) has been a predictable trade, with profits banked as well as equity still held albeit 10% less in value since yesterday.
When trends change, at what point does one sell? Do you have to sell? Not at all but you can hedge going short on stocks you have equity in. For example, Wolf Minerals (WLFE) despite buying on lower prices, there were 4 positions short, 3 of which have been banked (more than the equity holding). There's risks to every portfolio but with the availability of hedging for the average man, why not hedge in dire markets? Assuming ones' mindset leans that way, its having your cake and eating it.
Had darts been thrown at stocks this week and taken short positions with little knowledge you'd have no doubt made. Sentiment betting/spread betting is money for old rope. Gold was the surprise of the day with little volatility, one could read into it that investors do not perceive the risks as so significant to run to its safety, or are already exposed there...the latter is more than likely.
We'll leave the rumours on GKP (Gulf Keystone) on the periphery now, risks to both short and long positions based on the gossip.
The final thought goes to the post regarding Tesco's kitchen sink,Tesco’s new chief has a short shelf-life to find answers. Thinking back its clear Dave Lewis's best plan is to kitchen sink all the dirt, rebalancing expectations and getting it in whilst the news is dire. Transparency and forecasting is key to the survival of Tesco as a goliath stock for funds. Expect some dire news from Tesco (assuming there is any)...post any investigation and the next trading update, Tesco's woes will hopefully be known.
Have a good weekend, Atb Fraser
Fraser- Hi- hope the little un is back to her rampant ways soon. I bet you would be watching Peppa Pig even if she wasn't up as you appear to be addicted to its narrative and so I assume your nearest and dearest have your PP Xmas presents all bought and wrapped now :-))
ReplyDeleteRe strategy in volatile mkts- as you know I take a v long view with most of my main portfolio. I don't hedge and don't deal much, so costs are v low and if I stick to the fundamentals and watch the news, I take profits by top slicing from time to time and occasionally sell completely when the rationale dictates. There is a good spread, I avoid the dross and so if the mkt drops say 5% in a week, I will take a hit and drop say 2.5%. It takes discipline to not sell or even buy at the wrong times, but mkts can turn quickly so I don't want to miss the rebound. My patience is long enough to wait for the mkt to wake up to mispriced stocks. If the mkt recovers 2.5% next week, I expect to make a bit more than this and my cash is above normal %s so I will probably add to some holdings next week selectively. Its nice that we all have different approaches, I have yet to find a truly efficient mkt after 32 years searching and its the inefficiencies that open up in a volatile mkt that I am always on the lookout for, as Im sure you are too.
Have a great weekend. Cheers. The Leggie