My Crystal Ball

By | August 20, 2018

Turkish Lira under attack!

Turkey detained an American Pastor and that’s what annoyed the Trump administration which promptly applied sanctions to Turkey. Due to relatively high level of dollar denominated debt, Turkish Lira was having a panic selling earlier in the week. Together with ultra-high inflation, economic growth slow down and various political issues with Turkey, people placed a great deal of concerns onto this mini currency crisis.

Somehow I think it is not directed to Turkey, it is directed at China. For quite a while, China’s “coping mechanism” of trade friction with US was to promptly devalued its currency. It was successful and Trump administration hated that. However, given the potential impact against Chinese economy, it is hard to argue that a cheaper Chinese currency is an outcome of manipulation. It could be just a natural outcome from the lower confidence of economic growth from the market. At the same time, “America First” policy will probably resulted to a strong US GDP growth rate, and strong US economy overall, which is a support to a strong US Dollar. (You can’t have both, strong US Economy AND weak US Dollar).

I guess instead of protesting to China crying foul on its short term manipulation of RMB, Trump administration did the opposite. It is more like a Tai-Chi type of play: we will let your currency devalue even more and if you are not careful, it can be a lot worse. The Turkey Lisa mini crisis trigged exactly that: a mini crisis in emerging market currencies. As a result, China have to stop its own currency devaluation operation and come back to negotiation table: the re-start of US-China trade negotiation! (And also China has been lending money to Turkey to help stabilize its situation). This summer has been too quiet, and too much rains in New York.

End of the day, this will pass. It is just another tactic or near term event that you can enjoy with some popcorns (but not your hard-earned dollars)

Cryptocurrency Crash

Who would have thought?!?!

Cryptocurrencies have seen their value declined over 70% so far this year. That’s a good pace to deflate a bubble, but I thought it should have been faster. At the same time, S&P 500 has returned high single digits, my FIC core fund has returned little short of 30%. Anyway, just like what Ben Graham have said: the market is a voting machine in the short term, but a weighing machine in the long run. 

I really don’t want to waste any time talking about these turds (cryptocurrencies). My readers should not have any involvement with them anyway so I will stop here.

Has Chinese Equity Market bottomed?

This is a good topic to study. A few weeks ago, Shanghai Composite Index entered bear market. We wrote a post about it. (You can read it here). As of the past Friday, it stood at the level of 2,668.97, 2.84% lower than its level as of July 6, 2018 (2,747). It had a few ups and downs but the violent ups were always followed by slow and grinding declines – a typical characteristics of bear market. We are not chart analyst here at FIC, so the comments above is not the reason to determine if the stocks are bottomed there.

From the quick scan of a few stocks I am following in Chinese market, it is still not cheap enough. It is getting there though, and I am more excited every day for its declines – getting closer and closer to a true value range. Therefore I am arranging more liquidities now to getting ready to take advantage of the attractive pricing when Mr. Market there is showing signs of depressions and when the prices are attractive enough.

Until then, take your pop corn and watch the show. (Restarting trade talks will not help its equity market, by the way).

Nordstrom have a third of their sales from digital channel. 

Let that piece of information sink in a bit. This is something that “thumb-sucking” did me more damage than anything. A error of omission rather than commission probably will haunt me for a long period of time. Back then when they were around $42-45/share, I have taken a great deal of interest in it. Then take-private rumors pushed them to $50 dollars and then that effort failed, they came back down. I was closely watching them along the way. However for one reason or the other, I did not act when they were traded at low 40s! And now they are $59/share and they have transformed their business to almost – wait for it – to become a 1/3 Amazon + 2/3 high-end department store business. That’s pretty good. 

It won’t be all smooth sailing from here for sure. But they have done a great job transforming themselves and I should give kudos to the Nordstrom family.


6-Month corporate disclosure and reporting frequency?

I am totally for it. Skip the quarters please.


In summary, there are lots of “exciting events” in the market every day. But guess what, we haven’t been trading for quite a while and the results showed the benefit of staying put and ignore most of the noises. To every long term value investors out there, no matter how your models are built and what your assumptions are, treat it as your family business instead of a piece of paper to trade every day. 

Then you will be doing just fine if you are reasonably good.

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