Market Insight 10/12/18

Remeber earlier this year?

_이미지_2018__10__11__오전_12_21

(SPY, 10/11/18)

 

There were two major falls during earlier this year and every experts were talking about the correction and possibility of entering into a recession. Oh well, after in just 6 months, SPY has broken into a new high.

How are the world going to have a financial crisis when everyone is looking for one? That is not a financial crisis nor recession, but a correction. Isn’t it?

The usuales of the usual process works in every sessions except financial crisis

  • Creating rooms 1
    Market sentiment is extremely bullish, making calls too expensive and puts undervalued.
  • Removing the bubble 1
    Market would punish leveraged/overextended/unconfident buyers.
  • Doing nothing 1
    Market realizes that the actions were overdone and stays within boxed area.
  • Creating rooms 2
    Market sentiment is extremely bearish, making puts too expensive and calls undervalued.
  • Removing the bubble. 2
    Market would punish leveraged/overextended/unconfident sellers.
  • Doing nothing 2
    Market realizes that the actions were overdone and stays within boxed area.
  • Heads back to ‘Creating rooms’
  • Through numerous cycles of overboughts and oversolds, market correctly adjusts its position.

Currently, the market sentiment has become extremely bearish. Not only the world is worried about the geopolitical issues but also slowing down of world economy. IMF has just issued a statmenet recently that the world economic growth rate is reduced except the US. Remember? in 2008 financial crisis, Lehmans was the trigger.

  • Investors should not be panicking.
  • Investors should not try to forsee the unforseen events.
  • Investors should not leverage beyond their control.
  • Investors should not think of the past crisis and put themselves into that miserable position. It has not happened ‘YET’.

If the investor is long.

  • Look over the portfolio
  • See if there were any overextention
  • Reduce leverages to minimize the risk
  • Be confident

If the investor is short

  • Do enjoy the volatility
  • Do not overextend

 

 

Market Insight 08/25/18

Remeber the post from 09/06/17?


Current affairs these days cannot get any uglier. Many investors already suffered flash drops in August.

As usual, many ‘experts’ and Wall Street ‘insiders’ creep through the wall of shame calling for bear markets, recession, stock market crash, and so on. Yet, the Dow Jones Index has now climbed up to the current level of 22,000. Investors have to understand that the long term market cycles are not affected by any of media, economic numbers, company fundamentals, and analysts’s predictions.

From 2012, Dow has chunked up more than 10,000. During this,  there were …

In 2012, North Korean Rocket Launch

In 2013, US Government Shut Down, Ukraine War

In 2014, Rise of ISIS, Russian Rumble Tumbles

In 2015, Paris Terrorist Attack, China Stock Flash Crash

In 2016, Brexit, US Debt Ceiling

In 2017, North Korean Missile Crisis

a

(Market Q, 09/06/2017)

However, still US market remained bullish.


Interesting isn’t it?

The market has already gone through notable geopolitical events

  • US – North Korea summit
  • Ongoing trade war with China
  • Reimposement of Iran sanction
  • Massive drop in cryphto market
  • Finalizing Brexit deal

However, the U.S. market kept on rising, reaching new high after new high. Why the U.S. market would keep rise? There would be hundred reasons and in contrast, hundred reason why the U.S. market could fall.

Keep it simple!

It is rising because people are buying.  “Their economy’s weak, their currency is weak, people are leaving the country”, National Economic Council Director Larry Kudlow said in a bloomberg Television interview on August 4th regarding China. Even, the US government is confident on the stock market.

Below is the 25 year chart of SPY

_2018__8__25__오전_4_42

Below is the logged 25 year chart of SPY

_2018__8__25__오전_4_43

Logged version is not as dramatic as the orginal chart, isn’t it?


Market is a collective result of all transactions from buyers and sellers who use their own rationale. Aboslutely, no one can possibly know the thoughts of the whole market. Thus, one can only view the net result of all buyers and sellers.

What matters most is risk control. Bull markets do no move up in straight lines. There are always pull backs or stalls at times.

Koreas and the U.S. Part 1

Win for the US and North Korea, Lose for South Korea, What for the investors?

 

Two weeks ago, there was a historic summit in Korean Peninsula. North Korean leader, Kim Jung Un, met with South Korean President, Moon Jae In. Somehow, the world has forgotten the strong tension between Trump and the ‘Rocketman’ few months ago before the Olympics in Pyeongchang. Peace is a sweet word and it is one of many Trump ‘accomplishments’ in addition to the revised FTA and Won – Dollar discussion with South Korean government although the details regarding currency was not released.

Trump administration signaled several decoupling with South Korea. South Korea was often regarded as one of the strongest allies of the US but nowadays South Korea was often accused of being ‘unfair’ and ‘free rider’. To support Trump’s argument, the sentiment in Korea is somewhat different from 50 years ago. South Korea does not consider the U.S. force, a necessity so there is no point for the US troops to stay in Korean Peninsula when their forces are ‘unwelcomed’ and ‘mistreated’. The new era of geopolitics has brought the idea that the U.S. does not necessarily need foot soldiers in South East Asia continent. Okinawa base could be enough for the US to put pressure to China.

Trump has been playing North Korean card to pressure both Iran and China. In hope for peace and prosperity, South Korean government foolishly limited itself with only one viable option. If the deal between North Korea and the U.S. does not go well, South Korea is left with no option. The tension between two would rise and South Korea, one day, would need to pick a side again. The U.S. has signaled of reducing their forces in South Korea multiple times before. Trump administration is not reluctant for such ‘behavior’.

On the other hand, ‘Rocketman’ has been successful for past few months. North Korea is constantly on the world news front page. South Korea is now filled with hopes for peace to the level where the talks of unification is slowly brought up in the news in South Korea too. ‘Rocketman’ could constantly ask for capital support, dollar most likely, from South Korea if the deal goes well. Trump pulling out of Iran deal has left ‘Rocketman’ with legitimacy in his pulling out from the deal with Trump in some future time too.

So what is left for the U.S.? This is a strong win for Trump. Now, Trump has a good reason to strike down North Korea if the deal has not met with the promise since the U.S. does not feel to be obligated in protecting South Korea like before. If the deal goes well, Republican party would gain additional support from neutral voters during midterm election. Today, Trump gave a strong warning to North Korea in an indirect way. If whatever promise has not been kept, the U.S. would not hesitate to leave the deal.

 

Enough of Politics. Should one invest in Korea or not?

 

The key factor here is the interest rate. Rising interest rate in the US would bring bearish market to the Korean market resulting significant increase in borrowing costs. Although Korean market currently is on an uptrend, unlike the U.S. market, only bio and semiconductor stocks are leading the market. In other words, the low interest rates for past years has caused investors to chase after higher yields, investing in the emerging market. The driving factor of the surge in South Korean market has nothing to do with South Korea. Ultimately, when interest rate goes up, dollar would be strengthen, the value of emerging market currency would fall, and emerging markets would fall. Unlike other times, investors would not seek for such gain on exchange because dollar would be strengthen over the time. Thus, there is no point in being long or short on the market because the value of won would keep fall compare to dollar.

Moreover, current South Korea is suffering from high unemployment rate and high corporate taxes. There is a huge outflow of human capitals into Japan already. South Korea is relying on hiring more public service personnels to help the unemployment. This is a significant sign of the downfall of one’s economy.

 

Investing is all about the risk and the reward. What is the point of investing when the risk is high but the reward is so little.

 

Overwatch League, the Glimpse of the Future. Part 1

One of the biggest gaming convention was held in Anaheim Convention Center from Nov 3rd to 4th- Blizzcon last year. Blizzcon is literal Blizzard Convention where their loyal players and fans around the world gather to celebrate and experience the showcase of Blizzard games during the convention. During Blizzcon Blizzard announced specific details of Overwatch League. On february 10th, first season of Overwatch League crowned its season champion London, defeating New York 3- 2 in a slugfest.

 

What is Overwatch.

Overwatch is a team-based multiplayer online first-person shooter game where total 12 players, with 2 teams of 6 players each, would fight against certain objectives. The game was both developed and published by Blizzard Entertainment. It was released in May 2016 for Windows, Playstation, and Xbox.

The Overwatch League (OWL) is a professional esports league for the video game, Overwatch. Blizzard annouced their plans for the league during Blizzcon 2016. Unlike other esports games, the organization of permanent teams in league placement is much like traditional physical sports in the U.S. (League of Legends followed this format in late 2017 with the announcement.) There are two divisions divided by oceans.

Pacific

Dallas Fuel

Los Angeles Gladiators

Los Angeles Valiant

San Francisco Shock

Seoul Dynasty

Shanghai Dragons

Atlantic

Boston Uprising

Houston Outlaws

London Spitfire

Flordia Mayhem

New York Excelsior

Philadelphia Fusion

 

The Birth of Esports

The esports is considered to be ‘a league of their own’, mainly because people who watch esports are the gamers themselves. Esports scene for the past 20 years has grown out of South Korea to the global level yet current esports scene is difficult for the non-gamers to watch and follow the game. With growing number of competitor games arising, esports can never succeed through such small amount of viewer pool.

Blizzard watched and studied the growth of esports scene. Luck played her part, because Starcraft 1, the mother game of esports, was developed and published by Blizzard. After successfully settling down in South Korea in 2001, it had grown to produce Ongamenet (Now OGN) and in 2004, MBC Game (Now MBC music). With the strong support from the public and even army (selected Korean male progamers could fulfill their mandatory military services in Air Force Ace by playing games) The strong public appreciation and support for the gaming scene knowing that Korean public especially males are strict on mandatory military services.

 

Disclosure: I/we have positions in ATVI, not an investment advice.

 

Market Insight 12/09/2017

Recently, the tech sector was hit with heavy correction. Flash drops occured to those stocks which were beating the market by huge percentage, sure enough many Wall Street experts claim that the Trump tax cuts was a trigger to the upcoming recession. However, for almost 10 days, tech sector has been facing massive sellings. The hottest sector of 2017 came as no exception. Most of semiconductor stocks fell below MA50. The Wall Street experts claim as more and more uncertainty grows out of the digital coins, such as bitcoin, semiconductor sector hits the top.

aa

(SMH, 12/07/2017)

No, the market does not work as simple as that.

bb

(IYF, 12/07/2017)

It is healthy sector rotation. Most financial stocks started to rise when SMH started to fall. Here is an easy comparison between IYF with SMH.

‘Market is a collective result of all transactions from buyers and sellers who use their own rationale. Aboslutely, no one can possibly know the thoughts of the whole market. Thus, one can only view the net result of all buyers and sellers.’

‘What matters most is risk control. Bull markets do no move up in straight lines. There are always pull backs or stalls at times.’

MARKET INSIGHT 09/06/17

Current affairs these days cannot get any uglier. Many investors already suffered flash drops in August.

As usual, many ‘experts’ and Wall Street ‘insiders’ creep through the wall of shame calling for bear markets, recession, stock market crash, and so on. Yet, the Dow Jones Index has now climbed up to the current level of 22,000. Investors have to understand that the long term market cycles are not affected by any of media, economic numbers, company fundamentals, and analysts’s predictions.

From 2012, Dow has chunked up more than 10,000. During this,  there were …

In 2012, North Korean Rocket Launch

In 2013, US Government Shut Down, Ukraine War

In 2014, Rise of ISIS, Russian Rumble Tumbles

In 2015, Paris Terrorist Attack, China Stock Flash Crash

In 2016, Brexit, US Debt Ceiling

In 2017, North Korean Missile Crisis

a

(Market Q, 09/06/2017)

However, still US market remained bullish.

Market is a collective result of all transactions from buyers and sellers who use their own rationale. Aboslutely, no one can possibly know the thoughts of the whole market. Thus, one can only view the net result of all buyers and sellers.

What matters most is risk control. Bull markets do no move up in straight lines. There are always pull backs or stalls at times.

 

Market Insight 07/12/17

For past two weeks, retails in Korean stock market enjoyed some roller coaster ride Many retails invested in NCsoft Corp., a South Korean online gamemaker, that relaesed the movile version of its mega-hit ‘Lineage’

ncsoft

NCsoft Corp., Chart Movement, about 400days

About 50% of the trading volume is saturated above US $300. This indicates that the investors came in for the short term trading, seeking gains from the anticipation or the actual release of ‘Lineage M’.

NCsoft suffered huge drop by about 11 percent around 2:30pm on June 20th, a day before launching. There was a market speculation that ‘Lineage M’ was going to be launched without tradable items and trading market. Moreover, its executive vice president was accused of engaging in insider trading which resulted massive short selling of the stock.

For those unfamiliar with gold (in this case, iden)-farming, it’s the practice of gathering money in online games, then selling it to players for cash in real world.

Much of the hype has now quitened. Retails are hanging onto the day to day app sales data. There are much to update in the game. However, it is questionable whether the retail money can endure the market for the time being.

Stock trading is simple. More buying power than selling power, then stock rises, and if more sellering power than buying power, then stock falls. However, this simplicity is built upon perpetual complexity. All investments invovle risk. The data is just one of many factors in trading. Rising sales and great guidance can contribute to the higher probability of the stock’s rising but do not ‘gurantee’ it. Past performance does not gurantee future results. The risks are maybe over-shadowed by the good factors of the company. Perhaps, one of many algorithms seeked better profit in shorting. Really who knows.

I hope many investors who are trading NCsoft recently understand the above. I read many complaint and impatience among retail investors trading NCsoft. Recent NCsoft trading is just a pure example of why one should never trade the stocks narrow-minded.

Currently, we do not hold any positions on NCsoft. We are not giving nor providing any positions nor opinions towards NCsoft. Invest at your own risk. 

Market Insight 5/18/2017

Yesterday, the recent trump controversies triggered the biggest loss for Dow since September. Investors deserted financials and techs that contributed to 1.78% drop for Dow Jones and 2.57% drop for Nasdaq each.

Chart

(Market Q, 05/18/2017)

Market sentiment has calmed down since President Trump fired his FBI chief. Many anaylsts and investors bring back the memories of early January 1973. The S&P did not recover for almost eight years.

Chart

(Market Q, 05/18/2017)

Most sentiments are still bullsih for the US market. However, Wall Street analysts predic that the bullish sentiment could hit the wall. When the market shows a slight sign, there could be a panic sell. Yesterday, many investors turned to the energy, utilities, and real estate.

Investor should approach the market with an extreme caution.

 

 

Market Insight 09/27/2016

Last night people around the globe watched the presidential debate in the U.S. As most presidential races have done, this year is no exception. Fed as expected did not raise interest rate and showed no sign for November but signalled that there is a high possibility for a rate hike in December (depending on the outcome of the election)

twitter

On March 1st, Donald Trump won Super Tuesday with a sweep. On May 3rd, Ted Cruz dropped out of the race. On July 18th, RNC went more fluently than one had expected it to do.

chart-3

(Market Q, 09/27/2016)

Above is the 1 year chart, market was not really reactive towards Trump candidacy as a Republican nominee.

 

Lifelong goal of Hillary Clinton’s healthcare started politically in 1993. Hillary Clinton is the future of Obamacare. Investors are very catious towards healthcare stocks when it comes to Hillary Clinton. From August, JNJ, the biggest healthcare stock, has been on a downtrend. For past few weeks, JNJ has been hitting 120 moving average.

chart-2

(Market Q, 09/27/2016)

The above chart of JNJ tells the whole story.

 

Is it just JNJ, a single healthcare stock, that has been dropping from August. The answer would be No. XLV, one of the biggest health care etfs has been on the same track.

chart-4

(Market Q, 09/27/2016)

The question might be asked why have they started to fall from August. It is because both Republican and Democratic conventions were finished at the end of July. Moreover, the actual head to head polls became more real. In other words, before convention, although it was clear that the presidential race was going to be Trump vs Hillary, polls were less thought provokative. People and polls become more real once the specifics are fixed.

 

Investors should approach healthcare stocks with an extreme caution.

Market Insight 09/02/2016

Recently, high growth stocks have been sold off hard by hedge funds. Selling power was significantly huge in recent weeks after the market hitting new high. Even stocks with good earning beats have been suffering from the sell-offs.

Why did the sell-off occur?
– Talks about raising interest rate
– Typical new high sell-off

Before BREXIT, U.S. market was not all negative towards raising interest rate. In other words, the market translated raising rates as a confirmation of recovering U.S economy. However, as Fed officials become more hawkish and raising rates becomes more real day after another, the market fears the uncertainty,
mostly because Fed was never right about the economy for the past years.

Market is simple. More buyers than sellers would increase stock prices. More sellers than buyers would drag stocks down. Dow Jones and Nasdaq have been hitting new highs. A new high is a good position for stockholders to lock in gains.

Chart-4

(Market Q, 09/02/2016)

Chart-2

(Market Q, 09/02/2016)

Chart-3

(Market Q, 09/02/2016)

 

Everyone is saying the same – If Fed raises rate then stocks would fall, then buy at the bottom. However, where is the bottom? Would U.S. market fall as much as what everyone expects it to? Would Fed even raise rate this year?