Friday, 20 March 2020
Adelaide, Australia
By Bernd Struben

  • Markets
  • Stabilise your frame of mind
  • Keep an eye out for this…

 ‘There is nothing wrong with taking profits and raising cash levels when faced with a potentially explosive situation.’

Murray Dawes, from 31 January Port Phillip Insider

It’s getting silly in the markets.

No, not the financial markets. Silly doesn’t come close to describing the ongoing wild price swings there. We’ll get back to that in a tick.

But it’s been two weeks now since the run on tissues, TP and soap saw supermarket shelves stripped bare. And still every new delivery is snatched from the shelves in minutes. One pack limits or no.

My wife returned from work yesterday (as a teacher she’s yet to join the remote work army) triumphantly wielding a newly purchased box of tissues and a double roll of paper towels. No TP. She wasn’t fast enough, apparently.

At some stage you have to imagine people’s cabinets will be bursting with stockpiled rolls. And the panic buying will come to a stop. You just have to hope your own supplies last until then. Or that you can time your trip to the store with perfect precision.

Moving on to the far more interesting and tumultuous financial markets…

It looks like the Reserve Bank of Australia (RBA) may have managed to stoke some bargain hunting after all. At time of writing the ASX 200 is up 2.43%. Though even with that welcome bump, it’s still down 31.60% over the past 30 days.

Yesterday afternoon the RBA cut interest rates to a rock bottom 0.25%. The first out-of-cycle interest rate decision since 1997. ‘Extraordinary times call for extraordinary measures,’ says Treasurer Josh Frydenberg.

Further stoking the market, the RBA is launching its own quantitative easing (QE) program for the first time in history. This includes the purchase of Australian government bonds. Banks and small business will also be offered cheap loans to help them stay afloat over the coming months.

RBA governor Philip Lowe, channelling former ECB head Mario Draghi, promised the RBA would do ‘whatever is necessary’ to help Aussies through the viral economic shocks ahead.

Not to be outdone, the European Central Bank (ECB) announced a €750 billion (AU$1.47 trillion) pandemic bond buying program as well.

That is certainly helping stem the losses.

But if the mass lockdowns we’re seeing in Europe and now the US are any indication of what’s in store, it’s likely far from the last lifeline we’ll get from the central banks and global governments.

And that spells more crazy swings ahead for markets already experiencing record volatility.

Further announcements on more QE, cash handouts, tax relief, etc. will tend to give markets another boost…like we’re seeing today.

But, as we’ve witnessed over the past month, these sugar hits (even the trillion-plus dollar ones) don’t have much staying power in the age of COVID-19.

Every day brings more alarming news on the virus front. Just imagine investors’ reaction if (when?) news breaks that the coronavirus has re-emerged across China.

Already this week has been the most volatile on record for the Aussie share market. As a reminder, here are the moves for the ASX 200 this week:

  • Monday: Down 9.7%. The biggest one-day loss in its 20-year history.
  • Tuesday: Up 5.8%. The biggest single day gain ever.
  • Wednesday: Down 6.4%.
  • Thursday: Down 3.4%.
  • Friday: Up 2.4% (as at 3:40pm AEDT).

It’s little wonder many investors are on the edge of panic.

And we know our readers feel the same building angst. With that in mind, Port Phillip Publishing is offering a free four-day online trading workshop.

It’s called the ‘Metronomic Trading Workshop’, commencing this Saturday, 21 March.

Over four days the seminar walks you through a system — 20 years in the making — specifically designed to trade highly volatile stocks. Which today is most all of them.

If you’ve been following along the past few days you’ll know about this already. Hopefully you’ve already registered with your email address so you can attend.

If not, you can do so now by clicking here. Again, this is being offered free to all our paid subscribers.

More, after the markets…

Markets

Overnight, the Dow Jones Industrial Average closed up 188.27 points, or 0.95%.

The S&P 500 closed up 11.29 points, or 0.47%.

The Euro Stoxx 50 Index closed up 68.26 points, or 2.86%. Meanwhile, the FTSE 100 gained 1.40%, and Germany’s DAX closed up 168.72 points, or 2.00%.

In Asian markets Japan’s Nikkei 225 is down 173.72 points, or 1.04%. China’s CSI 300 is up 0.59%.

The S&P/ASX 200 is up 116.26 points, or 2.43%.

West Texas Intermediate crude oil is US$25.78. Brent crude is US$28.69 per barrel. That’s an 8.2% bump in WTI since this time yesterday. Apparently driven by Donald Trump’s plan to buy 30 million barrels to top up the US Strategic Petroleum Reserve. Oh, and Trump mentioned he may have to insert himself into the Saudi–Russian oil dispute.

We’ll see. But I wouldn’t count on significantly higher oil prices until the world begins to come out of lockdown.

Turning to gold, the yellow metal is trading for US$1,472.24 (AU$2,544.05) per troy ounce. Silver is US$12.17 (AU$21.03 ) per troy ounce. That puts gold down 4.4% overnight. We’ll have more for you on why gold is sliding…and what our experts expect in the coming months…next week.

One bitcoin is worth US$6,209.01, an overnight gain of 14.7%.

The Aussie dollar is worth 57.87 US cents. If that sounds low, you probably weren’t tracking the currency markets yesterday.

Showing the massive, viral induced volatility isn’t limited to stocks, bonds and cryptos, the Aussie dollar fell to 55.10 US cents yesterday before recovering. That’s its lowest level since 2002. And not far from its record low of 47 US cents.

Stabilise your frame of mind

Yesterday I promised you I’d share a few details on Murray’s trading system. One based on thousands of data points in price action. Not someone’s ‘gut feeling’.

The best way to learn the ins and outs of his system is to tune into this Saturday’s ‘Metronomic Trading Workshop’.

But a promise is a promise.

So here’s one of those details. Nothing technical, I’ll leave that for Murray and Simon Munton to explain over the four-day online workshop.

But as a risk management tool, Murray splits up the investment into three sections.

Here’s how he explains that first section of investment:

The first thing that needs to be managed is our emotional state. None of us make good decisions when we are emotionally charged. Holding on to a position that goes in and out of the money is incredibly draining.

We waste time watching price action because we feel great when it goes up and terrible when it goes down.

When you have been tossed around by that cycle a few times you usually end up dumping the position at a loss just to end the pain. Even if it hasn’t hit your stop loss.

I eradicate that cycle by selling a third of the position as quickly as possible and adjusting the stop loss on the remaining stock to a point where we will breakeven on the whole trade.

At that point we have created a payoff similar to a free call option. We will either breakeven or make money.

The first profit target isn’t about money. It’s about managing our state of mind.

For the rest of Murray’s trading strategies…and the system he developed over 20 years of trading…be sure to sign up for the ‘Metronomic Trading Workshop’.

Keep an eye out for this…

This morning editorial director Greg Canavan sat down with Murray — yes, in the same room! — to dig deeper into the mechanics of Murray’s trading system.

Namely, Greg wanted to find out more about Murray’s unique approach to risk management ‘in this crazy, crazy environment’.

As Murray wrote here previously, ‘Risk management is so much more than meets the eye. When you do it well you lower the volatility of your P+L [profits and losses] over time which stabilises your frame of mind.

We’ll send you a copy of their videotaped discussion around 7pm (AEDT) this evening.

Keep an eye on your inbox.

That’s all for today.

Stay safe and healthy.

Cheers,
Bernd