Day by day, reality becomes more apparent to the market.

Larry Fink: This is 'biggest crisis' in the world

http://www.cnbc.com/2016/04/14/blackrocks-fink-expects-stocks-higher-by-year-end.html

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Recently, more people are saying it's going to be a huge crisis. Where were they when we have been saying for yearsssss that the central banks are making big mistakes?

Larry Fink, like many others, thought that money policies are supposed to be temporary, and 7-8 years is not temporary. They thought that the drug can be removed without consequences.
Well, we also warned that easy money policies will not be temporary, because once central banks remove the drugs, there will be panic. And that is why central banks are afraid to stop the policies.

Crazy actions by the central banks. Policies destined to fail the minute they started them in 2008. Big windfalls and big losses in the financial markets to come.

Portfolio Update #5

Mid-to-Long-term portfolio (In USD unless otherwise stated):
(changes to positions highlighted in bold since the last update)

-Long physical gold from $950
-Long physical silver from $14
-Long paper silver from $15
-Short US 30-year bond futures from $150 (COVERED)
-Long sugar from 16.50 cents (CLOSED)
-Long north korean gold coins 
-Long chinese yuan against sgd from SGD:RMB of 1:5
-Long RSX at $13.18
-Long GDX at $18.95
-Long SLV from $14.30
-Long RMB vs SGD at 5:1
-Long ruble vs USD at about 65:1 (or ruble vs SGD at about 45:1)
-Long GLD from $107.57
-Long SJB at $27.48
-Long North Korean silver coins at SG $60
-Long GDXJ at $19.88

Still Looking to:
-Long South Korean airlines (A play on North Korea opening up/collapsing)
-Long RJA (Agriculture has taken a beating in recent years, and given my long-term bullish view on agriculture, this could be a good chance to accumulate some. Well, let's wait till later in the year).

Portfolio Update #4

Mid-to-Long-term portfolio (In USD unless otherwise stated):

-Long physical gold from $950
-Long physical silver from $14
-Long paper silver from $15
-Short US 30-year bond futures from $150
-Long sugar from 16.50 cents
-Long north korean gold coins 
-Long chinese yuan against sgd from SGD:RMB of 1:5
-Long RSX at $13.18
-Long GDX at $18.95
-Long SLV at $15.25
-Long RMB vs SGD at 5:1
-Long ruble vs USD at about 65:1 (or ruble vs SGD at about 45:1)
-Long GLD at $111.20 
-Long SJB at $27.48
-Long North Korean silver coins at SG $60

Still Looking to:
-Long South Korean airlines (A play on North Korea opening up/collapsing)
-Long RJA (Agriculture has taken a beating in recent years, and given my long-term bullish view on agriculture, this could be a good chance to accumulate some. Well, let's wait till later in the year).

North Korean Silver coins

In line with the idea that North Korea will not be around for much longer, I went to the Singapore Coin Fair again with my Gf this year. It was supposed to start at 10.30pm last Friday. We arrived at 10am and registered ourselves. We found that the exhibition was already open at 9am for paid visitors. Those who pay $100 can enter the exhibition hall at 9am for each of the 3-day event. My hope of getting some silver coins dimmed.

Thankfully, we did not have to wait until 10.30am, because they allowed us in earlier. The North Korean booth was very crowded. It was more crowded than last year. Having no chance to squeeze in with the crowd, I took a photo of it from behind:

We watched as these people pass the coins around to each other and examine them. The lady in black and the guy with the black sling bag said that it costs SGD 60 per coin. That was a 100% mark-up on normal silver coins. I said that it is a little pricey, but the guy replied that the Chinese Pandas are even more expensive at $90. I didn't think that pandas are so expensive. I later confirmed with my friend that pandas can be bought for just a little over $30.

We waited for the crowd to disperse. There were a handful of silver coins left, and I got myself 5 of them:

I did not see any gold coins (well, I didn't look carefully). They've probably been snapped up earlier. There were still tons of copper coins though. Those were selling at $3 per coin (1 oz). I calculated that each 1 oz copper coin should probably cost just about $0.20-$0.30 on the market. $3 was a huge mark-up! Too huge for me.

I am pretty satisfied with my collection of 3 North Korean gold coins and 5 silver coins so far. I may return again next year for more. But who knows what the price will be by then. I expect gold prices to hit bottom sometime in the next 1 year or so. Coupled with the fact that demand for North Korean coins seem to be hot, I expect this North Korean company to mark up the prices of their coins even more next year.

Reason for drop in oil price

About 2 months ago, I did some research on global oil supply. I cannot remember if I've posted something about this. But in any case, I found that it was mainly the increased supply from the US that has caused the increase in the global supply of oil. Many people were going along with the media and blaming OPEC or Saudis for the oil glut. This is yet another classic case that one should always do his/her homework instead of simply relying on the media or hearsay.

Yesterday, Bloomberg came out with an article that confirmed what I've said back then:

http://www.bloomberg.com/news/articles/2015-03-30/these-charts-show-clearly-why-oil-prices-crashed

"The geopolitics of oil are complicated, but last year's oil crash isn't. There's one reason above all others for the drop in prices: The U.S. oil boom. Last year was the biggest spike in U.S. oil production since at least 1900, according to a new analysis by the Energy Department. 
U.S. production jumped by 1.2 million barrels per day in 2014, to 8.7 million barrels per day."

Russia aggression put in perspective

I've seen a lot of online comments about Russia's behaviour in Ukraine. I am not trying to defend the government's action. I'm trying to provide some other perspectives.

Here's a recent short discussion with a stranger on a Bloomberg article on Facebook. The article was on how the Russian central banker convinced Putin to allow the market to set the price for the rubles:

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Him: wonder if she can convince Putin to stop invade other countries

Me: US officials have been caught on tape saying they want to change the govt of ukraine. This probably took everyone by surprise, and that was probably the reason for russia's actions. I'm sure there're much more complications. But I just want to show that there're always another side to the story.

Him: Come on, Russia has been influencing Ukraine internal policies since Yanukovych took power. They are no saints on that either. They lose the political game, but that is not a reason for them to start a war.

Me: Nothing surprising about that. All big powers try to influence their neighbours. I am just showing you that there's more to the story than meets the eye, and from another perspective. We dont have complete info. So I am not siding with anyone but it seems that you already made up your mind against russia. Maybe they will start a war, and that will be bad. 

The russian govt are no saints. But what if they have tried to get rid of the govt of mexico. Will you support the US to start a war/invade mexico?

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That was the end of the discussion. Short and sweet!

Bank runs prior to the Fed

Courtesy of the Fed:

-The total losses borne by depositors in closed banks from 1865 through 1933 were at an annual rate of .21 percent of total deposits.
-Before the Great Depression, the general trend of these loss rates was downward.
-The loss rates were .19 percent in 1865-80, .12 percent in 1881-1900, .04 percent in 1901-20, and rose to a peak of .34 percent in 1921-33.
-Depositors’ losses on total deposits exceed .25 percent in 12 years: 1873, 1875-78, 1884, 1891, 1893 and 1930-33.
-The average loss rate in these 12 years is .78 percent of total deposits.

Not even a 1% loss in deposits prior to the creation of the Fed.

Back in 2008, people were howling that the end of the world is coming if we do not bail out those big banks.

Banks have been failing for as long as they have existed. It's not the end of the world if a bank fails. It is a healthy process. Prudent banks should be allowed to buy up the assets of the failed banks and gain market shares. Instead, what we've seen in 2008 was the bailout of failed banks and the punishment of prudent and sound banks. There were more than 7000 banks in the US prior to the crisis. It is no big deal to let a few of them fail.

People always tell me that more regulation is needed. But the banking industry is one of the most, if not the most, regulated industries. Piling on more regulations will just push the problems away to another area. The problems will resurface again, no doubt about that. The root problem was government guarantees and the back-door provided by the Fed. These had encouraged banks to take excessive risks. Trying to control this with more regulations is the classic case of "two wrongs don't make a right"! The best regulation is market regulation. If you mismanage your bank, you fail. Period. In the market, banks should be treated like any commercial enterprise. Greed has to be balanced with greed. Instead, they have special privileges. They do not have as much fear as other commercial entities.

Those bailed-out banks are bigger and more leveraged today. Collectively, they hold more than $2 trillion of US government debt. In the Fed's stress test of the banks, they did not consider a scenario whereby bond prices have a meaningful drop in prices. Is it any wonder that the banks passed the test?