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My confidence as a trader is lost
I have lost my knowledge, trading and psychological edge
Tim Vollans
January 23, 2024 • Estimated Reading Time: 5 minutes
🧠The Big Brain
China Steps Up To Save The Market
What happens next?
In case you missed it, Chinese officials are finally at the end of their rope. The propaganda machine went into overdrive, and stocks in HK/China have responded positively.
We’ve been on the lookout for this (Hang Seng & China - So Over).
Serious take - I think 🇨🇳đź‡đź‡° sentiment will flip on a dime pretty soon.
I know some think that this process will take months and you'll have time to get involved
I disagree on the last part.
Tinder trade, zero interest in long term hold.
— Tim™️ (@VolaTim)
6:43 AM • Jan 19, 2024
The question now is just how much juice there is to squeeze…
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⚡ The Spark
My confidence as a trader is lost
Asia Genesis died on that hill
One of the most brutal things about markets is how they’re programmed to seek out pain.
One big bet gone wrong (however right you may be) can tear you apart.
For Chua Soon Hock, founder and chief investment officer of Asia Genesis, it was this trade:
What was the trade?
“I am astounded by the incredible Nikkei-Hang Seng spread that priced Chinese versus Japanese stocks at the same value as in 1991, despite current economic realities.”
So, he bet that the spread would close, and then he bet some more, across a four month period of extensive pain.
Until he couldn’t take it any more.
The fund hit an 18.8% drawdown and he decided to call time.
Now, there’s nothing particularly notable about the poor performance. Funds often draw down (and recover) 20% in the course of a few months.
But this trade has him questioning his entire existence:
“I have reached the stage whereby my confidence as a trader is lost,”
“The recent tough trading – October, November, December 2023 followed by a disastrous January 2024 – has proven that my past experience is no longer valid and instead, is working against me,”
“I have lost my knowledge, trading and psychological edge.”
We’re not talking a Billy Hwang gunslinger here. This guy’s been in the markets for 40 odd years.
And just like that, his confidence evaporated. All that experience suddenly counts for nothing.
Nobody is immune to the unfathomable darkness & depths of the human mind.
An amazing cautionary tale.
Cut your losses. The price the market extracts can be far more significant than any $ number.
Your view doesn’t matter, the number on your screen does.
đź’ˇ The Lightbulb
Bank of Japan Riddles Continue
Thinking about thinking about raising rates
Reading between the lines of policymaker speeches, and interpreting subtle shifts in language is, sadly, part of an analysts job.
They’re like the intellectual, indoorsy versions of those weirdos that take metal detectors to the beach…
Most of the time, they turn up junk and crap. Loads of false positives.
Occasionally they find something interesting.
Today’s BoJ meeting, and more importantly the subsequent comments from Governor Ueda are causing a stir…
It’s not just what he said, it’s also what he didn’t say (emphasis added):
"Prospects of higher wages are gradually affecting sales prices, which is leading to a gradual increase in service prices,"
"If we get further evidence that a positive wage-inflation cycle will heighten, we will examine the feasibility of continuing with the various steps we are taking under our massive stimulus programme,"
The remarks contrasted with those made last month, when he said there was high uncertainty on whether a positive cycle of rising wages and inflation would fall into place.
The inference is clear. The BoJ is getting more confident that the positive cycle between wages and inflation is in place…
"Ueda's comments heightened my conviction the BOJ will end negative rates in April,"
"He suggested that the BOJ doesn't need to wait too long in scrutinising this year's wage outlook. Furthermore, he no longer talks about the danger of a premature exit,"
The April meeting is a popular choice among analysts & strategists.
It would be the end of an era.
The final central bank to close the door on the post GFC regime of ultra-low & negative interest rate policies…