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Topics - Bevan

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Shares / Water as an investment...
« on: January 27, 2019, 03:02:54 pm »
I watched The Big Short on Netflix yesterday and enjoyed it immensely. Apart from some minor technicalities, I reckon they did a pretty good job of capturing the 2007/2008 mania and ensuing trades etc. Technicalities like if you have a short swap (ISDA) position with Bear Stearns, and then close out your exposure with UBS because you think Bear is going bankrupt, you've actually doubled your risk i.e. Bear won't pay you if they go bust whilst UBS will still expect payment.

Anyway, in the final credits it mentions Dr. Burry now only invests in one commodity... water. Having been in contact with him he explained his strategy some more to me. He's actually buying up water-rich farmland and planting water-intensive crops such as almonds etc. Reason being that water is rapidly disappearing across the globe, thanks to climate change, and these crops are going to be very rare in future. Many farmers I've spoken with are now saying that the past year has been the worst in terms of our drought. Yes, we've had rain, but thanks to the general temperature increases, the soil is too hot and baked to germinate crops. Plus, any rain just runs off the hard land now, and evaporates too quickly as well. Climate change is real folks and we're on the cusp of the hockey stick. Agriculture is going to get hit hard and I reckon we will soon stop exporting our water in the form of fruits and other crops pretty soon. This will affect everything and the taps will run dry in the next few years if something isn't done soon. Israel is far ahead in this game - they price water accurately, they recycle 90% of their black water for agriculture, they desalinate and they don't waste a single drop in the form of leaks. Plus most homes also all recycle their grey water for domestic, washing use, or for home-grown crops.

With that in mind, other than water-rich land, what investments do you see as being vital in the water sector?

Edit: Water is not actually disappearing. It can't be destroyed. Like energy, it simply transfers form on its ultimate journey from cloud, to river, to sea and back again. But it is being distributed in different ways now. Climatologists refer to this as 'drought and deluge'.

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Off topic / streaming financial news
« on: January 12, 2019, 01:38:13 pm »
Hi to all the more tech-minded amongst you... Like many, I've ditched DSTV for Netflix and the wider net. However, I can't seem to find a really decent streaming news and financial site. Of course I understand most outlets are trying to build their brands and offerings via their own apps etc. However, surely there must be a decent news and financials aggregator out there for free. Anyone have any advice in this area? 1st prize would of course be a news aggregator covering US, UK, international and SA news and markets, but I reckon that is a tall order.

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Shares / Buyer: Mind the Gap - Don't Buy the Dip
« on: November 20, 2018, 08:28:05 pm »
With markets in sell-off mode, you can expect a slew of news articles coming out about how one should always buy and hold in stock markets long-term. Well, that may have been true for the past 50 years but we are facing a very different future now.

The baby-boomer generation (born after WW2) threw away the austerity of their parents and were responsible for fuelling the mass consumerism we have today. The money men of Wall Street convinced them not to save for retirement but rather to give their money to the bankers and brokers and they would grow it in the markets. Of course this worked quite well while the baby boomers and their children have all been earning salaries. The massive bull run in stock markets we've seen since 1950, apart from a few minor corrections along the way, has been fuelled by boomers and everyone else seeking ever higher risk returns. The music has hardly stopped playing, until now....

Because those baby boomers are now all retiring en-masse. They are not earning like they used to and they are not buying the dips like they used to. Their children and grandchildren are mostly mortgaged and indebted (house, student loans etc.) up to their eyeballs with expensive property and toys. With markets in sell-off mode, we can expect greater and greater runs to the safety of cash and boring instruments such as government bonds. We should not expect markets to recover quickly again as there simply isn't the volume of readily investable cash lying around any more. The retirees need it now.

The 2008 GFC saw a massive deleveraging of wealth from consumers to businesses and HNW's who were able to turn the easy money into easy profits, in housing and stocks. This has created an even greater wealth disparity and inequality across the world. The average man in the street in New York, London, Sydney and Maputo feels poorer than ever before, and that's without hardly any inflation at all.

Pension and tracker funds have propped up markets for the longest time now. Of course we can expect these to continue but in an uncertain world with rising interest rates and inflation, and with low growth (even in the US) the best we can expect is stagflation. I've said this before here but Japan was once the world's no. 2 economy before stagflation hit them in the 90's. They're only kinda recovering now.

Yes, of course markets will recover. But I suspect we're in the early stages of a slow grind downwards. As I said here before, this feels like October 2007 again, where there was a slow but steady decline, before the final crash came in 2008. Depending on how macro events play out here, I expect a similar situation this time, only at twice the speed now. So we should know if we're into proper crash mode by Christmas / early Jan, or if this is just a prelude.

Either way, I reckon the fundamentals of the stock market are changing for good now. Too many people chasing returns. The mathematics of Capitalism doesn't work like that i.e. it asymmetrically rewards the top 20% with great wealth, whilst the bottom 80% must get less than average returns.

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Off topic / Seeking advice on weekly report
« on: November 09, 2018, 09:41:42 pm »
I'm thinking of starting a weekly report, the idea being there are two ways to improve the material quality of your life.... 1) Increase Revenues, and 2) Reduce Costs. Called the "Thrive Report", it will have advice on practical ways to reduce costs, mostly in terms of food, water and energy savings. Stuff that even city folk in apartments can do.

But I'm looking for your advice on what you'd want to see in the "Increase Revenues" section. As an ex professional trader I can give some insights into trading discipline, market timing, trend and momentum analysis. I can also run a model portfolio of stocks, commodities, currencies etc. for anyone interested to follow. I can give research insights into key commodities and the top 40 stocks. As an impact investor, entrepreneur and project / corporate finance guy I can also advise on raising investments, financial modelling, key issues for entrepreneurs, product and business development etc.

The report will be weekly and cost less than a grand per year, the idea being it needs to be packed with money making and money saving tips. The problem is that there are so many "gurus" around and I don't really want to be just another talking head. Hence I'm soliciting views on what you think would be most useful for you to know, bearing in mind that no-one has a crystal ball or time machine. Of course I'll give everyone who contributes something useful here a free subscription for a few weeks.

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The Investor Challenge / Crypto
« on: July 02, 2018, 07:25:45 pm »
I'm only trading ZAR and crypto in the Investor Challenge. I came in a little late which was probably a good thing but let's see how things go... I figure I could either end up winning with massive returns, or completely blowing out at -50% or something similar.

I would be interested in people's comments on crypto in the meantime. We have some crypto millionaires in Hogsback who don't have to ever work or save for the rest of their lives. They are in the late 20's - it's sickening!  :)  Do you think that BTC or other cryptos have a future, either as a store of value or as a currency? Personally I'm interested in a seed-backed crypto and would welcome any thoughts on this i.e. where farmers become the miners and earn crypto in exchange for their crop, paid in advance. In many places around the world this is being termed Community Supported Agriculture, and is helping break down massive centralised farms, logistics chains and major retailers selling chemically-preserved and outdated crap in plastic containers.

BTC is only now making a 50% correction and could possibly be building a support base here. Insto's are coming up with new financial instruments to support their HNW clientele, as they structure long/short plays in this new asset class. Could we be seeing some legitimacy entering this space? I don't believe that any of the major cryptos at the moment will emerge as a great store of value, or transactional tool in the next 5-10 years. However, there probably will emerge a killer app that will leverage the blockchain and provide some utilitarian value. Any ideas as to what that could be? I'm all ears....

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Shares / Just like 2008....
« on: June 26, 2018, 04:32:58 pm »
I remember being pitched to at my trading desk in London in early 2007 by a young, freshly-minted MBA. I was heading up commodities but had drawn the short straw and had to look after the grad interns. He was adamant the bank should be selling Credit Default Swaps (CDS) against these triple-AAA rated mortgage packages. Easy passive income, no risk... I wasn't so sure but knew I was getting older. I was only 34 but he was 20-something and he had the buzzwords. I knew that selling derivatives into a low volatility market was asking for trouble. We didn't do it and several months later those who did were staring at huge losses as the credit crunch swallowed them whole.

Since then I've managed to slow down and enjoy life in Hogsback, living according to Aristotle's mantra that "Happiness belongs to the self-sufficient". Of course I trade every now and again and the below chart should scare the pants off anyone.... It was inevitable that we would get here of course, such is the nature of momentum. And it may not even be that bad, but it sure is not going to be a rosy 2018 for equities. The vol we're seeing now is just the start of it. Basically, a monthly chart on the Dow is showing short-term momentum having broken below medium term momentum. This is like the wind blowing against the current, causing choppy sideways conditions. Of course this has happened before, in July 2011 and Feb 2015, but those occasions weren't too bad.

Something inside feels different this time. Never before in the course of human history has so much passive money been thrown blindly into the market, expecting outsized returns. In 2011 and 2015 the Fed was in the throes of QE, now it is easing, and rates are starting to shoot up. The trusty 2-10 year US Treasury spread is almost negative again, a sure sign of recession to come. The US is firing on full employment but no-one is any richer, and US citizens are about to start feeling a lot poorer, as the dopamine effects of zero interest wear off.

I'm not predicting a crash, just a lot of sideways bouncing around for now. The crash will come when the US can't refinance its $21-trn debt, even at 5% interest. And at 5% guaranteed interest, what investor is going to want to be in uncertain equity markets moving sideways? The markets sense this already, and are jumpy. Because when the short, medium and long term money all start pulling out the market together, it will be mayhem.


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Shares / Commodities
« on: October 19, 2016, 02:15:19 pm »
Last year December I told colleagues that commodity prices were going to rally in 2016. This was when everyone was still really, really bearish. Around March / April people started believing it and mining stocks have a really great run. I'm astounded by the price gains in iron ore however, because that is a dead commodity if ever there were one. Coal prices have also surprised me. With every man and his dog loathing coal, and renewables making great inroads into power generation, one would have thought Ol King Coal was finally dead. And yet China and India are buying the stuff like there's no tomorrow. This last week has seen coal prices move from the mid-60's to around the mid-90's i.e. USD/ton. You will probably see the stock market wake up to this fact in the next day or so. Expect counters such as Glencore and South32 to do quite well in this regard.

But, being the contrarian I am, I am now quite worried. The coal market is easy to squeeze and manipulate. Certain Swiss based trading companies spring to mind. With Hillary most likely to be stepping into the power seat, I can't imagine that US coal demand is going to go back up. That really leaves Europe, India and China as the major buyers, with China the big swing factor. Next year China gets their High Voltage power network properly up and running. This means that their Hydro Power (of which they have loads) can now easily be transported to the big demand centres on the coast and the SE, where the coal plants are. So, with oil prices remaining rational at around $50 and gas and LNG prices also still quite bearish, I can't see coal being supported at these insane prices for too much longer. Having watched this market for over 18 years now, I think this is the final "Hurrah" for the coal industry. In 5 years time it may only be Eskom buying coal from the Guptas. Enjoy the price rally while it lasts....

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Shares / Black Boxes
« on: May 10, 2016, 12:17:43 pm »
It is estimated that around 95% of the volume traded on the NYSE is now done through algorithmic trading / black boxes. See https://en.wikipedia.org/wiki/Algorithmic_trading

Traders are now just essentially order routing humanoids (e.g. from client to PC) with the bots essentially making all of the crucial millisecond execution decisions. (I'm always amazed at how people perceive traders to be the Hollywood alpha male types when in reality they are really more the IT geek beta male type). Anyway, I wonder how this relates to volumes on the JSE? Does anyone have any firm numbers for how much volume is coming from bots and how much from actual human executed trades? Of course I realise that most trades are still almost 100% human originated i.e. client or prop originated, be it pension fund, prop trader or individual stock clients. I just wonder how much of actual execution has shifted to the bots on the JSE, and associated trading platforms?

Also interesting to note how Chain has now developed an OS for the block-chain and that the major US banks are looking at how they can use this for private block-chain networks. Don't think cash is dead just yet but unless SA pulls up our socks our banks might soon be left behind....
http://www.bloomberg.com/news/articles/2016-05-02/inside-the-secret-meeting-where-wall-street-tested-digital-cash

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Shares / Next Week's Bloodbath
« on: September 11, 2015, 12:35:23 pm »
If this chart doesn't scare the living crap out of you then.... ok, keep calm and put your money into the market as normal.  :TU: 

The reason is that momentum trend is negative (red line on bottom graph is in negative territory) whilst short term momentum (blue line) is above red line (which means it must turn down again). When this happens it will be in line with momentum trend and we will see the big concurrent moves. At the moment, momentum trend is negative and short term momentum is positive i.e. crosscurrent. This is why we're seeing choppy market conditions, like the chop on the water when the wind blows the opposite direction to the swell. It just so happens that this imminent concurrent move will co-incide with the Fed's decision to raise / not raise interest rates next week. The market is so confused right now that it doesn't know what to do i.e. it goes sideways in a choppy way. So what happens when fear and confusion reign in the market...? People sell to preserve cash. And that creates more negative sentiment which feeds on itself in a vicious downwards spiral, especially when the algo traders and bots get involved.

Expect the market to sell off big time into next week's Fed announcement in a classic "sell the rumour, buy the fact" trade. Markets will recover after the Fed announcement no matter what the result but how much will have been lost before then? Going to be a very interesting week.... Of course I could be completely wrong about all this...   ;D

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Shares / Hindsight saw it coming
« on: October 03, 2014, 09:12:31 am »
Isn't hindsight great? This weekly chart of IG Index's SA Top 40 clearly shows the breakdown in momentum around end July. This coincided with a wobble on Wall Street. But Wall Street was growing sensibly, not like the SA Top 40 which was clearly on crack as the ZAR weakened. I'm not sure if the weak Rand means that JSE prices must rise to compensate or if there are simply too many Rand hedge stocks that drive this action. Anyway, the SA Top 40 was clearly ready for a correction and when Wall Street wobbled again end September then the JSE bear jumped out the window. Note now that the SA Top 40 has hit the bottom bollinger and the 50 day moving average. So it's probably safe to get back in but keep it light.

The problem however is that we are still in a bull trend as evidenced by the medium term momentum line (red line) being positive still, although it is rushing to the zero line quite rapidly. If this bullish bounce doesn't last from here and we go south again (in a few weeks time) then I suspect it would be quite wise to head for the exits i.e. if medium term momentum turns south that would mean that the long term cash (pension funds etc.) are pulling out together with the short term momentum flows.

So this is a very crucial time in the market. This brief correction is a bit of a fake-out and will suck in the dumb money which usually represents the final stage of a long term bull run i.e. everyone piles in thinking the crash is over and all is well again. Then the hurricane hits. So while it's probably OK to bounce around sideways trading the markets for a few weeks now, we need to watch that medium term momentum line. When short and long term investors act together i.e. short and medium term momentum goes concurrent then you need to sit up and take action.


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Shares / USD:ZAR and EUR:USD
« on: October 02, 2014, 07:13:55 pm »
Looks like EUR:USD forming a bottom and potential upside breakout of this medium term strong Dollar. US stocks should start recovering as USD weakens and ZAR should also strengthen a little from here. However, gold likely to fall or at best stay flat, unless news out about rate increases.

I'm calling around 11.10 for next week USD:ZAR (currently 11.22) and both US and SA equities to consolidate and bounce around sideways here for a bit. Following that, if equities go south from there we can all pack up shop because that could be a nightmare ride into the end of the year. I think the Dow should find a floor at 16650 (currently around 16770).

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Shares / Commodities
« on: February 04, 2014, 07:36:23 am »
Thermal coal prices are getting hit as possible recessions hit in emerging markets. EM countries are buyers of the marginal tonne and demand is weak, even in China who has plenty of its own thermal coal. India is not buying SA coal anymore because their Rupee is so weak. Prices yesterday rallied a little on the news that RBCT is shut due to a massive power failure but if this is fixed by Wednesday it should not affect loadings too much and prices will weaken again.

Copper has also been a great marker to watch since start of 2014 as it has predicted this sell off very well. Reasons for copper's decline include the fact that most US banks and traders are under pressure to release physical stocks onto the spot market. This has had the effect of lowering LME warehouse tonnes but increasing supply for consumers.

Iron ore prices are also weak as China is cutting back on severe over-capacity in their steel making sector. This also means that nickel and chrome prices are weak as these are feedstocks for stainless steel, ferrochrome etc.

Crude oil prices triggered a downside sell signal yesterday and we should see most crude grades moving down from here, especially as US factory orders have come in weaker and the economy might not be as strong as some have suggested.

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Shares / USD:ZAR Updates
« on: January 09, 2014, 08:27:40 am »
I thought it might be worth having a thread for USD:ZAR updates for those investing in shares as Rand hedges. The general mood seems to be that the Rand could weaken further but is a little overcooked at the moment. This is borne out as it approaches the top bollinger in the chart below.

Short term momentum is also a little overbought (i.e. Rand oversold) for now although the trend and long term momentum support this direction. I suspect we will see 10.80 forming a ceiling (support) level for the Rand and if markets pick up from here then some short term Rand strengthening is in order. Extrapolation of the lower bollinger suggests we could see 10.30 to 10.40 forming a floor level in a few weeks time as momentum inevitably moves back down. However this will be counter to trend and downward moves will be choppy and hard to profit from.

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