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Archive for July, 2015

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Posted On 27  Jul  2015  

Gold – a tarnished metal

Here is a link to a pdf file of this post. Click here July 27, 2015 Gold is not a safe asset. Gold is the last asset one should buy when the world economy is getting into deep trouble and the first asset one should sell when it is on the mend. Over a normal economic cycle the time period for which one should be long of Gold is quite short, perhaps 1/8th of the time of the full cycle. The rest of the time, 6/8th of the economic cycle time period, holding on to Gold is likely to not pay dividends. Gold is an interesting financial instrument to trade. But to trade Gold profitably is no easy task. One needs an understanding of the dynamics of the economy as well as the particular factors that impact the price development of Gold.   Gold is not a currency. Gold is

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Posted On 12  Jul  2015  

What if?

How predictable are market responses to emerging risks? Are we prepared for catastrophic events? Here are our initial thoughts: Link The original document:   The Art of Systematic Investing and Trading 12/07/2015 How predictable are market responses to risks? There is no doubt that markets are complex. The recent sell off in the Chinese market and uncharacteristic and potentially harmful response of the market regulator appears to have arrested the slide.  Short sellers have been caught off guard, while many long investors in small cap stocks have been locked out of being able to sell because trading has been suspended. Perhaps the authorities will succeed in forcing prices higher and only then resuming trading. In the meantime people who have borrowed money to buy the shares will have to pay interest. We will find that manipulating markets through policy decisions may be just as dangerous as allowing relatively weak and

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Posted On 09  Jul  2015  

Athens – the Greek tragedy and now the start of a slow recovery

A few weeks ago we wrote that the Greek drama will unfold with a European solution. We still believe that this is the best outcome for Greece. Here is our take on recent development and possible outcomes: Link  

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Posted On 03  Jul  2015  

China shares, volatility, margin trading and prospects

The SSE Composite Index rose from a level of around 2,000 to over 5,000 recently and has corrected by more than 1300 points over the last three weeks. In our previous notes many months ago we recommended that one should be long of China. So what has gone wrong and what is the likely scenario? The SSE Composit Index was launched in 1991 at a base value of 100. Today it’s value is 3684 (03/07/2015) having reached 5023 on June 5th, 2015. The sell-off is attributed to the unwinding of leveraged positions by retail investors. The retail investors are responsible for >80% of the daily trading volume of Chinese equities.  The Chinese market regulator (China Security Regulatory Commission) and brokers determine the workings of the markets by increasing or decreasing reserve requirements and increasing or decreasing margin requirements. This active oversight (control) forces participants to adjust their market exposures and