What to do…

Yeah, I’m selling a lot of my equities right now. The markets was amazing last year, we all know that. I was very skeptical in the beginning months, thinking that it was too early for recovery. But I went along for the ride, and I am glad that I did. Now I’m beginning to worry again, primarily because of the extreme recovery made, is it really sustainable? I’m thinking that it probably isn’t, so I have begun to sell holdings, starting with the ones in emerging markets. Brazil, Russia, India and China was truly amazing last year, but a lot of it (at least in the case of B and R) was fueled by increasing commodity prices, something that China in large part have been the driving force behind by buying and stockpiling a lot of resources. Now there’s rumors that China has enough and will stop buying, immediately leading to lower prices.

In the end my idea is to reduce my equities to about 25% of what I was holding yesterday. I will buy some gold, but I’m not a real gold bug, it’s more of a hedge.

So, what will I do with the money? I will switch it over the long term forex trading. I’ve been running RoboMiner for 6 months now, and made about 80% over that time (really depends how you calculate since I’ve been adding funds now and then, but MyFXBook has gotten it to 80% gain and 50% absolute gain). That is amazing I think. But I think that EA could have done better still with some changes (the Pro version adds a few things like ability to trade all currencies and the shift-function). So I’ve been working on my own grid trader again, that actually is getting quite nice I think. I’m about to start demo trading it seriously at different brokers right now, but in a month I hope I’m confident enough to put it live on a rather big account. I’m really pleased with the backtest performance, which in the case of a long term grid trader is quite precise.

I will start the live test on my existing Alpari UK account and look into opening others. I’m thinking about starting a $10000 account at Forex.com/UK (but perhaps in euros, since I already have a USD account, again to hedge a bit) to get the Pro spreads and five decimal pricing. I’m also looking at FXCM UK.  I really would like at least 1:200 and favorable swaps. Well see. It is fun to code EAs again at least

There’s a excellent article by Tyler Durden at ZeroHedge about the current state of the American economy. It covers basically all the relevant statistics that is used by economists to predict the future. It doesn’t look good, at all.

Read up: http://seekingalpha.com/article/151427-the-end-of-the-end-much-needed-perspective-on-recession-is-over-debate

So what does this mean? Well, I’m suspecting both the American markets and the USD should be hit by this in several stages over the years to come. Sure, last time (this fall) the USD strengthened as the crisis worsened. I’m predicting the opposite now as the majority of investors is starting to doubt the greenbacks long term value. I don’t think USD denominated equities and bonds will be seen as the safe haven it have often been in the past.

Since today is Memorial Day I’m laying low, even in the open markets. Last week continued the decline after the move upwards in the beginning of the week (when it hit my stop-loss limits) and I stayed out for most part of the rest of the week after that. The OMX was closed half of Wednesday and whole of Thursday.

The USD weakened against all other currencies last week hitting a low of 7.44 USD/SEK. It will be very interesting to see if this trend continues, since it is remarkable that the both the S&P 500 and the USD declined simultaneously.  Gold is rising at about the same rate as the USD decline.

PA Resources went up again Friday, and really proving to be my #1 moneymaker. I liked the 11% interest in the convertible from start and now, when it’s up 60% since January, I love it. Hopefully it will continue trend upwards with the increasing oil price and then make a jump when the results from GITA is released, sometime this summer/autumn. A rumor going around is that it is a candidate for being bought out by some larger entity in the Oil industry. If this happens we are probably looking at a tremendous payday.

As for my ventures into the FOREX trade it didn’t start great last Thursday with a hit of -6.6%. I think it was a fluke, but I admit that it was really bad timing… But I am still intrigued with the possibilities of automated trading, and I really enjoy tinkering with the robots and their settings.

The only EA I run live is MegaDroid for the moment. I am testing FAP Turbo and Robominer in a demo account also, and considering starting the GridBot in demo also. I probably will start FAP Turbo live tomorrow night (don’t trade FOREX around holidays). You can follow my (or my EAs that is) trades at: http://tylerdurden.mt4stats.com

So, last week was negative (positive for us who where short…) on basically all exchanges over the world, with the American markets in the lead. The US financial sector is severely overbought, and I was anticipating a correction to take place. The downturn last week was only a fraction of the needed adjustment thou, and I am expecting the financial sector to lead the way downwards this week as well. I am therefore keeping my SKF and SDS positions and will probably take up some FAZ sometime over the week also.

In the Swedish market I now almost solemnly hold XACT Bear ( a 1.5X inverse ETF based on the OMXS30), lets hope the OMX follows the general trend down…

The USD has strengthened a little against the SEK, according to my predictions, and I think it will keep this trend (as long as the markets fall investors will inadvertently buy more dollars).

Tyler Durden has written an interesting piece on the future valuation of the greenback over the weekend. It is sufficient to say that this dollar squeeze has been a reality for quite some years, and It will be in effect again when the markets stabilize after the next low (I don’t believe that the low in march was the end of the crisis, there will be no V-shaped recovery, but more likely a W-shaped).

http://seekingalpha.com/article/138085-dollar-euro-short-squeeze-race

Personally I’ve gotten more interested in the FOREX market over the weekend after a friend gave me a link to some very interesting automated trading possibilities. After spending several hours reading about the market and trade in general and trading platforms and technical aspects in specific I am very excited about these possibilities. Expect me to start writing about these investment opportunities as soon as I’ve taken some of the first steps. Just to clarify I don’t think that the FOREX market is the holy grail to investments, I see it as a way to further diversify a portfolio, and probably will allocate no more that 5% of my portfolio to this market.

Read up on the basics of the FOREX market at: http://www.babypips.com/school/

Okay, I know that I’ve made posts before about the imminent crash, but this blogpost is just so excellent in showing how the banks made the Q1 “profits”.

http://seekingalpha.com/article/136769-a-summary-of-q1-bank-earnings-world-you-just-got-hustled

Again, if I were an american taxpayer I would be enraged at the current government. Luckily I’m not. But the ramifications will of course be severe wherever you live, since the greenback is basically every nations second currency (and many even the first).

So, what am I doing now? In short, I’m starting to sell equites on all markets. I have some ETF:s left in emerging markets (FXI, EWZ and EWM), but I think even those will have to go this week, and a long position in OMXS30 that I will reduce. I’ve also today taken up short positions in the S&P500 and EuroStoxx 50. Since before I’m short the USD and EUR and long gold, silver, platinum and palladium, that will not change.

So how about gold? I think it will be considered the “safe heaven” it historically often have been when there’s storms abruin.  So I’m staying long in gold. Some bloggers agree with me: http://seekingalpha.com/article/136849-how-will-gold-perform-in-the-coming-equity-crash

Silver then? Not so sure anymore. One of the arguments for a bullish outlook on silver is gone if there is another wave of crisis and that’s the increase in industrial use. But for now I am staying long in silver too, just not as much as gold.

Platinum and palladium is even more dependant on the industrial use buyers, so I will keep them on a short leach for now. Signs of declining prices and I’m gone.

Oil then? I think we will se a stagnant oil price now around $55 for Brent. The summer usually means higher oil price, but not this one I think.  Despite this I will keep my convertibles in PA Resources (on the OMX), because I think they will announce news about the finds in GITA soon (Noreco has given some estimates in their Q1 report). But I might short the Oil just in case, we’ll see.