Crisis averted?

Tuesday, 15 August 2017
Melbourne, Australia
By Bernd Struben

You’ve probably heard of the game of chicken. Though hopefully you’ve never played it. I always picture James Dean when I hear the term. He played bad boy Jim Stark in the 1955 film, Rebel Without a Cause.

In a classic game of chicken, two drivers barrel towards each other at high speed. The first one to swerve is labelled a chicken. Their car may also end up damaged if they spin out of control.

The winner is lauded a hero. They take whatever prize money is on the table. Sometimes that can include their opponent’s car. Of course, if neither driver yields, both are likely to meet a fiery end.

In the game of nuclear chicken playing out between Donald Trump and Kim Jong-un, Kim may not have swerved yet. But he’s at least eased his foot off the accelerator.

From The Australian:

North Korea pulled back its threat to attack a US territory, after days of trading increasingly bellicose rhetoric with President Donald Trump, and hours after China took its toughest steps against Pyongyang to support UN sanctions.

North Korean state media said Tuesday that Kim Jong-un had made his decision not to fire on Guam after visiting a military command post and examining a military plan presented to him by his senior officers. But it warned that he could change his mind “if the Yankees persist in their extremely dangerous reckless actions.”

I can only imagine that the ‘military plan’ Kim’s senior officers presented him was less than inspiring. Perhaps it was a sketch of Kim on a bicycle riding pell-mell towards Donald straddling a speeding locomotive.

Make no mistake though. The US and North Korea remain on a collision course. How that plays out is anyone’s guess.

Last week I advised that you review your investment portfolio. Not to sell all your stocks and run for the hills. But to consider adding to your gold exposure if you don’t already have 5-10% of your investable wealth in the precious metal.

Adding a few of the best gold mining stocks could also really turbo charge your returns if tensions heat up any further. You can find those here.

For the moment, however, the markets remain largely unfazed. As does quant trading guru Jason McIntosh. More on that shortly…

Markets

Overnight, the Dow Jones Industrial Average gained 135.39 points, or 0.62%.

The S&P 500 gained 24.52 points, or 1.00%.

In Europe, the Euro Stoxx 50 index closed up 44.32 points, or 1.30%. Meanwhile, the FTSE 100 gained 0.60%, and Germany’s DAX index gained 1,26%.

In Asian markets, Japan’s Nikkei 225 index is up 254.64 points, or 1.3%. China’s CSI 300 is up 0.16%.

In Australia, the S&P/ASX 200 is up 28.80 points, or 0.50%.

On the commodities markets, West Texas Intermediate crude oil is US$47.61 per barrel. Brent crude is US$50.74 per barrel.

Gold is trading for US$1,278.31 (AU$1,626.34) per troy ounce. Silver is US$16.98 (AU$21.60) per troy ounce.

One bitcoin is worth US$4,413.95.

The Aussie dollar is worth 78.60 US cents.

VIX down, markets up

You’re likely familiar with the Volatility Index (VIX). You’ll often hear it referred to as the fear index. And it would seem investors have had their fill of fear.

The near constant threats of debt fuelled financial meltdowns, terrorist attacks, and looming trade wars — to name a few — have left many largely indifferent to the rhetoric flying between Pyongyang and Washington DC.

After briefly spiking to 16.04 last Thursday — still not particularly high by historic standards — the VIX fell 20.5% yesterday. And it continues to trend lower, as you can see in the graph below.



chart image

Source: MarketWatch
Click to enlarge

Following a pullback last week, almost every stock market index across the globe is trading in the black.

As at writing the ASX 200 is up 0.50%. And investors in Perth based mining contractor NRW Holdings Limited [ASX:NWH] certainly haven’t been scared out of the market. NWH is up 56.82% since the market opened.

Meanwhile Atrum Coal Limited [ASX:ATU] is up 35.00% today and social media tech company HearMeOut Limited [ASX:MO]  has gained 22.73%.

Are investors just being complacent and naïve to the building global risks?

Not according to Jason McIntosh, the brains behind the highly acclaimed Quant Trader.

Climbing a wall of worry

If you followed along with Port Phillip Insider last week, you’ll know I spilled my fair share of digital ink on the brewing nuclear crisis. But even as I sounded the alarm bells, Jason McIntosh calmly went about his business — delivering the latest trade alerts to his subscribers.

Which begs the questions, does Jason know something we don’t? And the answer is both no…and yes.

Jason certainly doesn’t have an inside line to the White House. Nor to Pyongyang. But he does have something called ‘System Q’. I won’t go into all the details, but in short System Q is a three-pronged indicator Jason uses to identify key turning points in stocks.

Two of these indicators involve keeping a close eye on the actions of fund managers and small businesses. The third is his own proprietary algorithm. And it’s that algorithm that takes the fear — and greed — out of his trading system.

Yesterday I asked Jason his thoughts on the hoopla surrounding the latest crisis. Here’s what he wrote back this morning.

Hi Bernd,

Could Kim Jong-un spark a crisis?

There’s only one answer. Your response must be “yes”.

So, should you worry?

No.

A couple of years back, the focus was on Greece. Last year it was China. Now it’s North Korea.

The point is there’s always something. I can’t remember a time when traders could sit back without a care in the world. It’s just not that sort of job. 

They say markets climb a wall of worry. And you know what. They do.

The Dow Jones hit rock bottom at 6,443 in 2009. That was over eight years ago. This month it hit 22,019 — that’s a gain of 242%.

And do you know the common theme during this time? 

The doomsayers.

Year in, year out, they’ve been saying a major collapse is looming. 

I remember the same thing happening during the 1990s. A prominent forecaster was predicting the Dow would crash to 100. That’s right, 100!

He had a persuasive case. A lot of people followed his service…and I was one of them.

Yes, the 90s had its share of panics. There were scary headlines and plenty of reasons to worry.

But the worst of the predictions never happened…they rarely do.

I learnt an important lesson during this period. It’s something I remind myself of whenever uncertainty strikes.

The lesson is this: don’t let fear stop you from moving forward.

Hunkering down may feel safe. But historically it’s a risky strategy…most of the time the world moves on without you. All the opportunities go to those that stay in the game.  

I’ve been a devotee of algorithmic trading for years. It’s the best way I know to sidestep uncertainty and trade consistently — no matter what the headlines say.

Take my trading system, Quant Trader, for instance. It doesn’t take notice of opinions (including my own). The system has no emotions, and no biases. All that matters is the share price data.  

It comes down to this: React to what is happening, not what might happen. 

‘Quant Trader’s strategy is easy to understand. You buy when the trend is rising, and sell when it falls. It’s all about following the trend, not the commentators.

A mistake many people make is selling out of fear. They pre-empt trouble and get out early. Often this proves unnecessary — and costly if shares keep rising.

‘Quant Trader manages this problem with a trailing stop. The algorithms calculate a unique exit point for every trade. This helps you stay in profitable trades longer.

No one can say where the markets will be in 12 months. But I know this. I’ll continue to buy strong stocks and sell weak ones. That’s the best way I know to climb the wall of worry.

I’ve been keenly following Quant Trader since its launch back in November 2014. To be honest I had my doubts about a ‘black box’ trading system. But those doubts were quickly dispelled.

Although not every trade the system flags is profitable (that would require divine intervention) it has beaten the market 43 times over the last two years. And neither Brexit, terror attacks, or the Aussie government hitting the half trillion dollar debt mark gave it pause.

If you’d rather be investing in the market than sitting on the sidelines, and you want to sleep well at night, check out Quant Trader today.

Bitcoin soars to new records

I wasn’t going to write to you about bitcoin or cryptos today. But you just can’t ignore it!

From Bloomberg:

Bitcoin soared past $4,000 for the first time on growing optimism faster transaction times will hasten the spread of the cryptocurrency.

The largest digital tender jumped to a peak of $4,298 Monday, a gain of nearly 20 percent since Friday, after a plan to quicken trade execution by moving some data off the main network was activated last week. The solution — termed SegWit2x — had been so contentious that a new version of the asset called Bitcoin Cash was spun off earlier this month in opposition…

“Up until now a lot of people didn’t really believe bitcoin could go any higher until the scaling issue is resolved,” said Arthur Hayes, Hong Kong-based founder of bitcoin exchange BitMEX. “With this actually being implemented on protocol, theoretically the amount of transactions that can be processed at a reasonable speed is going to be much higher, so a lot of people are very bullish about bitcoin now.”

At time of writing one bitcoin is fetching US$4,413.95. When I wrote to you last Thursday the same virtual coin was worth US$3,376.52. That’s a gain of 30.7% in four days.

Oh, and five years ago today you could have bought a bitcoin for US$11.74.

None of this comes as a surprise to Sam Volkering, editor of Revolutionary Tech Investor. He’s convinced that bitcoin has much further to run. Though he cautions it will be a choppy ride to the top.

But it’s far more than bitcoin Sam has his eye on.

Over at Revolutionary Tech Investor he’s constantly on the hunt for the next bitcoin. New cryptos are hitting the market almost every day. Sam calls most of them ‘crapcoins’…they’re almost certain to fail and take their investors down with them.

But a select few — a very select few — will have what it takes to make them viable in the rapidly evolving world of cryptocurrencies. And that could see their prices rocket from a few dollars to hundreds of dollars…or more.

To get in on what could be the next bitcoin on the ground floor — and to steer clear of the deluge of ‘crapcoins’ — check out what Sam has to say here.

That’s a wrap for today.

Cheers,
Bernd