- Stops on the DOW shorts at 18,900, AUD/USD short at 79.50, Robusta coffee long at 1274.
- Shorting is a tough game and I need to be prepared if I am stopped out on the above. Another measure I may deploy to de-risk is more USD exposure should the USD weaken further. The USD should reassert itself as a safe haven currency down the track again. I am weighing up still about the timing and how best to implement this. For the time being already I have increased USD exposure to now a meaningful amount, however some may get at least temporarily stopped out if we go above 79.50 quickly in the short term.
- The energy sector I believe made a major low this January and if we see dips they can be used as opportunities to buy correlated stocks or equity markets. My optimism in the commodity space does not extend beyond energy, precious metals and softs as more demand sensitive commodities remain vulnerable to global economic demand shocks.
- I am negative on the U.S. equities markets which lack breadth and many basic fundamental measures point to overvaluation. In particular measures point to a major relative overvaluation compared to other global equities markets.
- Whilst I advocate being very defensive and cautious with the U.S. equities markets, a portfolio does not necessarily have to have a major overweight in cash burning a hole in your pocket. I hold more cash than one normally does but make the point there are depressed assets that can provide opportunities. For instance, investing in other stock markets, just to name a few suggestions Australia, Singapore, Russia, Vietnam, China, UK, Spain, Italy you are buying at a time where the 5-year performance has been disappointing, unlike with the U.S. major indices. Likewise investing in the energy, precious metals, agriculture sectors.