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Where do we go from here?


786Trader

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 Trillions of dollars in stimulus around the world, interest rates at near zero, an uncoordinated global response to an imminent threat and continued capital flight are recipe indeed for indigestion, confusion and irrational behaviour, compound this with the whole planet under virtual house arrest and we have the joys of 2020. Volatility means profit, but it would appear this is only the end of the first act. Of course, I have failed to mention the peeing contest MBS and Vladimir Vladimirovich are continuing, whilst the global economy sinks, all to spite the good old US of A and prove who is top dog in Oil. The mindlessness is stupefying. However, it is no surprise. 

The question remains, will normal return? Where do we go from here? Does this mean another 10 years of austerity to pay for the limitless super cheap credit now on offer? Will things ever be the same again?

One thing is sure this is nowhere near being over. As time lines go, we have months more of this. China is tentatively returning to normal-ish lite in places, but can hardly be said to be being confident. That is after 3 months of China style, authoritarian, strict isolation. It would therefore be fair to suggest 3 months as an acceptable timeline to control the virus spread. Of course, it could return for a second time come the winter, if we don't do it right first time and that also has to be factored in.  Yes, equities are cheap right now, but where will they be in 3/4 weeks after the expected pandemic reaches peak numbers in the USA and UK? How many people will be left with a job after an economic shutdown of such magnitude and duration?  Social distancing is here to stay for the short term and could last for up to a year, so much as most of us dream about a fabulous holiday anywhere but home, that still remains a flight of fancy rather than a flight on an Airbus or 777. There is also the question of public order, (as patience and sanity are tested to new found limits), food supply and logistics. At its worse this virus could claim many lives unnecessarily. Sooner or later governments will have to make a Hobson's choice, public health vs the economy. A survival of the fittest choice, where we could either shut down all economies for upto a year and reset 01/01/2021 or plough on, do our best and trust to fate.  A survival of the fittest and smartest ethic may win the day, condemning the poor, the weak and the old to their fate so the global economy does not tank completely and sink on the rocks of Corvid 19. Not a happy choice. Perhaps I am over reacting, I am not a pessimist by choice, I am an optimist and believe this too shall pass, however the pragmatic realist looks at the situation and does not like the alternatives. 

So where is the profit? Those companies which have mountains of cash will be fine, big food retailers, Amazon (but even their warehouses are less than full as delivery times extend more into the future), Netflix, Instagram and youtube seem to be occupying alot of my son's time. Some online Casinos, communications and mobile companies including the old favourites like ATand T and BT in the UK as they will have strong cash revenues throughout. Organic farmers. Soft commodities.  Go long on Oil and gasoline (if you can afford the wait). The banks that survive this will be stronger for it. Bizarrely, the non government backed Bit coin may come out well.  Leisure, travel, events and sport have had it for 2020 (not to mention the gig economy and  the self employed) and the future doesn't look so rosy for gyms (wow I miss my gym, pool and sauna). All these will be pleasures for later on.  Also, many of us will not be enjoying as much as one would expect, the protracted family time many of us are experiencing. I love my wife and son dearly but 24/7 is proving to be a challenge in itself (and we have space!).

So where do we go from here? Nowhere, we are all under house arrest. The longer lockdown lasts the more lives are saved, but the more the global economy is damaged. Life or money? Or a fundamental change in our value system?

 

 

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Purely Markets I see lows of 2008 levels , once earnings reality starts to kick in over  the next few quarters, thats where the real opportunities will be , no rush to chase any lows yet, just keeping adding to the shorts, the profits will fund some great opportunities of the great companies that will make it through to better times.

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On 30/03/2020 at 17:43, Martino115 said:

Purely Markets I see lows of 2008 levels , once earnings reality starts to kick in over  the next few quarters, thats where the real opportunities will be , no rush to chase any lows yet, just keeping adding to the shorts, the profits will fund some great opportunities of the great companies that will make it through to better times.

Sound policy. It's a waiting game. I am prepared to sit on paper and real losses in oil and gasoline because I know the position is a good one. No pain no gain Bought  Brent at 27.25 and 30.01, gasoline at 5500 and 6000 (which is real cheap) Have gone long on GBP/EUR and am going long GBP/USD. Still shorting Wall Street as it may have rallied too soon and 19-20k range is a tempting option to return to buying the market. Will wait to buy big 5 shares for another few weeks, until the peak (infection and death rate) have been reached and we all think about a return to work (those who still have a job). Then ride the Bull up, scalping all the way. That's the plan with us, even though it is fraught with risk, though we are banking on Corvid 19 not ending the world, just changing it and making the most of the times of change which are full of opportunity. Good luck and stay well.

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6 minutes ago, 786Trader said:

Then ride the Bull up, scalping all the way

 

That's like taking a long train journey, but getting off at every stop along the way and hoping the next train you get on keeps going in the same direction.  Inefficient and full of unnecessary risk.

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True. Going for the big swings works and so does scalping for everyday gains. Big swings often take time and sometimes one has to be patient and wait and pay the vig for the wait. Taking profit where one finds it is no bad thing and to be encouraged and applauded surely? Especially if one is lucky enough to short, trade out and then reverse one's position and profit by each swing. I agree if one takes a position and is going long and has a clear target in mind there is little point trading in and out, but when there is obvious profit what's wrong with taking it? Traders seem to have different approaches to gain. If one were running a bot one could easily programme it to do exactly that.

 

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With the benefit of hindsight, buying on 26 December 2018 and adding on dips would have been hugely profitable until the turn this year.  At which point, selling and then adding on rallies would be profitable to this point and possibly beyond.  It seems to me that, if the payoff can be so huge, it's at least worth trying to catch major moves and ride them up rather than buying and selling and losing lots of money during sideways periods like I have done to enormous frustration and upset.

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