Daily Times

Markets are whistling past the graveyard

Pandemonium is a difficult word to fathom.  Systematic risk is getting serious now and global investors are very nervous and baffled. Systematic risk, also known as “market risk” or “un-diversifiable risk”, is the uncertainty inherent to the entire market or entire market segment. Also referred to as volatility, systematic risk consists of the day-to-day fluctuations in a stock’s price. … Systematic risk can be mitigated only by being hedged. History might be repeating itself after 86 years and US economy might be heading for deflationary recession in the coming quarters.

I have seen financial history very closely with my sinful eyes when two global banking giants [Lehman Brothers and Bear Stearns] collapsed while I was studying for my MBA in USA at University of Chicago Booth [2007-2009]. In the last 10 after the collapse of Lehman Brothers on Sept 15, 2008, market is meandering around two non-economic variables in the macro equation; Confidence and fear. Wherever, economic confidence is strong and solid, economies are booming and GDP is growing at a faster pace. Both the governments and tech savvy labour force are leverage from productivity especially ASEAN and CHINA. However, there are many economies where fear has gone into the landscape and among people, economies have demonstrated abysmally low economic progression and sub-par growth rate in countries like Italy, Japan, UK, Australia and many countries in Europe. Macro stability drives the economic confidence in the economy.

Strategic market insight: opportunities with high price.

Markets have gone down by 20% meaning $9Trillion wiped off the equity markets. Boots on the ground market intelligence reports are suggesting if markets go down by 50% next year, $23 – $25 trillion is expected to be flying off in the air like a bubble from the equity and bond markets.  Tough call.

Sovereign currency risk——new headache for the market.

Sovereign currency risk is the new systematic risk coming back into the financial markets. Every currency has got 3 variables embedded in its value; structural, cyclical and political.

Fair market value of the currency encompasses these 3 variables and provides direction to its future outlook. In 2019, few currencies [ Dollar, Euro and Pound Sterling] will go through some structured depreciation and might ride a wave of extreme uncertainty. Currency noise can quickly pass deep into the equity and bond market. Many sophisticated investors are caught off guard in the equity and bond market since they don’t really hedge themselves against currency risk. Sovereign currency risk is becoming a new challenge for many policy makers in the advance economies.

Markets have gone down by 20% meaning $9 Trillion wiped off the equity markets. Boots on the ground market intelligence reports are suggesting if markets go down by 50% next year, $23 – $25 trillion is expected to be flying off in the air like a bubble from the equity and bond markets

president Trump, fed and dollar: on a collision course. disharmoney

We have witnessed nice discourse in front of camera [ Nancy Polosi, President Trump and Chuck Schumer]. Policy maker’s fights are bad for the market and people in general. Economic policy confusion can create havoc for savvy investor’s investment. Trump’s back ground is real estate and people in the RE industry don’t like higher interest rates. J Powell likes stronger dollar and higher discount rate to curb price inflation. Trump’s is really crestfallen with Powell -FED Chair lately over higher interest rates and chaos in the equity and bond market. Since Jan 2017 after taking office, President Trump has looked to the stock market as a benchmark for his presidency. Trump is now pondering to dismissing Treasury Secretary Mnuchin. There are plenty of people inside the White House who are not fans of Mnuchin who are happy to throw him under the bus. He is protected by the fact that Trump liked him and he’s been a loyalist. Political bickering will keep US dollar to be toasted further in 2019. On the US economic predicament; one of my Nobel Laureate Professors Milton Friedman from University of Chicago, Booth predicted 30 years ago in his book: MONEY MISCHIEF.

Gold, yellow metal shines again in 2019

Gold is trading at $1250/oz right now——–market intelligence reports are suggesting that gold will go up by 12-20% in 2019, we have calculated few scenarios. Premise: Base amount $1250/oz, Dated: Dec 24-18

PERCENTAGE RISE                                           PRICE HITS

12% increase                                      $1400 / ounce

16% increase [Average]                                $1450 / ounce

20% increase                                      $1500 / ounce

The markets are in a mood and heading for pandemonium. Its difficult to fathom the trajectory in the equity market. There could be a panic selling globally. Markets will move from Quantitative Tightening to Quantitative Easing——If another crisis happens, the Fed will cut rates back to zero. But it won’t be enough. Then they’ll have to abandon QT and go back to QE4. Other central banks will follow the Fed’s lead.

The market sees this coming, but the Fed does not. As usual, the Fed will be the last to know. Behind the curve most of the time. Investors should prepare now for the inevitable crack-up.  There are 3 asset classes to start with to preserve your wealth. First cash, then real estate and then gold.

Most of the global investors are going long on tangible assets. We can expect lot of noise in the markets, uneasy times, opportunities and volatility in the coming months. In 2019, I can foresee CUT i.e. Chaos, uncertainty and turmoil hitting the market soon. Tempestuous times ahead of us and could be worse than 1933s. The signs are ominous. Sagacious and sophisticated investors must prepare themselves for 2019.

Shan Saeed is a Chief Economist at IQI Global, a leading property and investment company operating and advising clients in Kuala Lumpur, Singapore, Hong Kong, London, Melbourne, Makati, Toronto and Dubai [www.iqiglobal.com]. He has 18 years of solid financial market experience in the areas of private banking, risk /compliance management, commodity investments, global economy, brand and business strategy. He is based in Kuala Lumpur, Malaysia

Published in Daily Times, January 1^st 2019