FACING ECONOMIC
HEADWINDS
IN
2016
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Opportunities and Analysis with
Bloomberg
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GLOBAL AND PHILIPPINES
EQUITY
OUTLOOK
2016
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Recovery Rally or Recession?
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REVIEW/PREVIEW: LOOKING AHEAD IN EQUITY DEALS
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GLOBAL GLUT: $5T OUT OF EQUITIES FIRST 10 TRADING
DAYS OF THE YEAR / $2T WIPED OUT OF EM MKTS
UBS CEO : “NO ASSET CLASS IMMUNE TO VOLATILITY”
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{ VIX INDEX GPC <GO> }
CHINA SYNDROME
UBS CEO: “NO ASSET CLASS IMMUNE TO VOLATILITY”
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WHAT THE GURUS EXPECT ON CHINA
BULLS
• Credit Suisse CEO – Tidjane Thiam “you can only be a
Bull … the transformation is just extraordinary”
• Yang Zhao – Chief China Economist, Nomura- “China
is Fine”
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BEARS
use
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• George Soros“a larger
Crisis
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environment is similar to 2008 “
of• Nouriel
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is strictly
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Roubini –”risk
of financial Crisis
in China Rising”
WHY WE CAN’T IGNORE CHINA:
ALMOST 2X PHILS NEXT BIGGEST TRADING PARTNER
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WHAT THE GURUS EXPECT ON CHINA STOCKS
BULLS
• Abby J. All
Cohen,
GS thinks
stocks are the best
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place to be as economy more sustainable
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BEARS
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• Larry
expects
to decline
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another -10% before turning around
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Faber
expects
S&P to fallprohibited.
20-40% , thinks
of• Marc
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author
is
strictly
manufacturing is suffering
STRATEGISTS’ FORECASTS
+ 7.6%
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+ 18.2%
{TNI STRAT TABLE <GO>}
OUTLOOK FOR THE PHILIPPINES
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GDP
CPI
UNEMPLOY
COMPARING PHILIPPINES TO HER NEIGHBORS
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{ ECFC <GO>}
FOREIGN FLOWS BACK IN THE PHILIPPINES
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Phils
lndia
China
WHERE IS SMART $$ GOING? ETFS
Vanguard , the biggest U.S. mutual fund provider, attracted a
record
$236 B All
in ETF
net deposits
in 2015 as investors flocked
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to passive
investments.
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{ ETF <GO>}
Banks and Fed Tightening
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GOOD
ofEARNINGS
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ARENT
ALWAYS
ENOUGH:
E-COMMERCE DISCRETIONARY AND INTERNET MEDIA
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WHATS NEXT FOR TECH AS “FANG”
BASKET OF STOCKS?
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Source: cnbc.com
The 2 Best performing stocks of 2015, Netflix ( +134%) and Amazon
( +117%) were overextended
GLOBAL EVENTS TO WATCH
US Earnings – if Earnings disappoint, it will be 3 qtrs of
contraction, industrials will have strong headwinds from the
strong dollar.
30% of US companies have revenues from overseas
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{ EA <GO>}
GLOBAL EVENTS TO WATCH
Make in India Week - February
Elections
©2016 All
rights Philippines,
reserved.May
- Presidential
Elections- Presidential Election- US , November
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- New Monetary Authorities – Malaysia, Australia
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- Central
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India
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G20 Summit will be in China for first time Q3
{ TOP <GO>}
MAY’S ELECTION: SCENARIOS
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Presidential
in 2016
offer a boost
to economic growth, as
campaign spending generates economic activity nationwide. Recent
presidential and midterm elections, going back to 2004, have seen peaks in
economic expansion.
NOVEMBER’S ELECTION SCENARIOS
DEMOCRATS:
HEALTHCARE
ALTERNATIVE ENERGY
CONSUMER STAPLES
EDUCATION
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:
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DEFENSE
HOUSING
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ENERGY
FINANCIALS
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INDEPENDENT CANDIDATE:
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A 3rd Party Candidate Has NEVER WON
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GLOBAL TRENDS TO WATCH
RATE CHANGES in the developed Mkts – BOJ, EU, FED
Fed Speak – will be more defensive if growth slows, Unemployment is
much lower, but not translating to higher GDP
©2016 All rights reserved.
Increasing Regulations To Continue
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agencies aim to finishdistribution,
Dodd-Frank rules
- ETFs and dark pools are under SEC review
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- Talks to elevate sustainability reporting with requirements
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More “Unicorns” start ups valued over $1 Billion
TRADING
CASE
STUDY
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•
Finding Clients to Cross the Order
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Idea Generation from Economic and Security Tools
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Monitoring
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By Pamela Kustas
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Get the Order, Trade the Order
February 2016
COMMODITIES –
HISTORY
REPEATING
ITSELF
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An Over the Shoulder Production
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EXECUTIVE SUMMARY
Brief Overview of the Commodities Market
Oil:
Recent market price actions
©2016
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China as the ‘Main Plate at the Table’
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How to get Exposure to the Oil market
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Coal:
Does it have a futuredisplay or other
Metals:
Gold
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Ags:
Wheat as a Proxy for all crops
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24
SO FAR THIS YEAR!
CRR <go>
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Gold
Energy
- Can we go lower?
- Will the commodity industry suffer?
- What is the best trade to have on right now?
25
CRUDE OIL – HISTORIC MOVEMENTS
OILPHIST Index GP <go>
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20 dollars
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Downside
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• The physical market continues to be over supplied by +1Milo Barrels/day
of
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• China’s economy continues to slow down [Swing Demand]
1990
Iraqi Invasion
of Kuwait
1973
Oil Crisis
2008
Financial
Crisis
• OPEC and NON OPEC countries continue to over produce
• Inventory levels grow with a Super Contango on the horizon
• Strongest El Nino seen 1997
26
TOO MUCH SUPPLY
OPEC <go>
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Swing
Factor
- Russian [10,837 mbpd] and US [11,644 mbpd] production
- Iran production is the Swing Factor
- Increased capacity to service China and India
27
RUSSIA AND GEOPOLITICAL RISKS
WCRS <go>
RUB Curncy <go>
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Global Sanctions
- Russia allocated USD55 Billion on infrastructure to China
- Russian – Chinese USD400 Billion Nat. Gas deal already signed
- Russia selling in commodities in Rmb
28
CHINA – THE DEMAND STORY
CNH Curncy GP <go>
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Government
Intervention
- China continues to purchase ~ 45% of the global commodity supply
- Devaluation of the currency is expected to improve export viability
- Large scale industries such as Steel Manufacturing are heavily indebted
29
CRUDE EXPORTS TO CHINA
COSY <go>
Demand will Increase
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- Imports continue to rise
- Strategic Reserves are being solidified
- Long term demand will increase as it always has!
30
CRUDE PRICE ACTION AND OPTIONS
XLTP <go>
Call Skew
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- Option Trades account for 60% of the flat price volume
- Strike Risk and Liquidity Risks dominate price action
- Skew will indicate the short term view of directional movements
31
STRIKE RISK AND GAMMA TRADERS
XLTP <go>
Strike Risk
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- The higher the O.I. by strike the more volatile it will become
- Large O.I. will draw flat price movements towards them
- Changes in O.I. will signal changes in Sentiment
32
CURVE STRUCTURE
CLA Comdty CCRV <go>
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Contango pays
for storage
- Current Storage costs are around a USD1.00
- Storage can be floating or fixed
- Risk vs Reward
33
OIL ETF’S
ETF <go>
Better than loosing the
Roll each month of a Long ETF
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- Dramatic Spike in short exposure ETF’s
34
GASOLINE MARGINS
CMSP <go>
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The real value
In owning a Refinery
- Equity values follow the Underlying asset price action
- Macro demand could be a better indicator
35
GASOLINE - BRENT SPREADS
SEAG <go>
Multi year
Highs
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- Gasoline prices are well above average relative to Brent
- Car sales are up especially in the US
- Refiners are profiting from the additional margin
36
NOT QUITE AS BAD AS SOME EQUITIES
BTU US Equity GP <go>
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99.7%
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- Peabody was the largest coal company in the world 4 years ago
- The stock has fallen 99.7% from the high in 2008
- Market cap is now USD74 million
37
US COAL OUTPUT
COSY <go>
Still no complete
Replacement for coal
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- Coal remains the cheapest form of energy
- Clean Coal can be used but the costs will go up
- Solar and Alternative energy sources are uneconomical at these levels
38
LNG OUTPUT
COSY <go>
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LNG Pricing Currently
USD5 per MMBtu
- Massive Infrastructure spend
- No distribution network to fully leverage the port capacity
- Qatar remains the cheapest producer globally
39
GOLD COPPER RATIO V S&P500
GP <go>
Gold rally muted given
the global uncertainty
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- Is the HKeX – LME merger a sign of the things too come? Chinese PMI lower
- Warehousing inefficiencies brought to light.
40
AGRICULTURAL STOCKPILES
CPLY <go>
Considering Wheat for
Further analysis
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- Largest crop ever seen.
- Largest unsold stockpiles ever for time of the year.
- South America weather market causing volatility
41
WHEAT STOCKS
CPLY <go>
Well above average
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- Wheat stocks currently well above average
- Globally stronger/more resistant crop strains
- Too much bread not enough meat
42
WHEAT VOLATILITY
GV <go>
25 Delta options suggesting
Wide opinions in price action
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- Weather market
- Open Interest in options extremely large in grains
- Most players are fully integrated into the Supply Chain
43
CONCLUSION
Overall
Expect a year of even more volatility
©2016
All rights reserved.
Commodities are suggesting the worse is still to come
Any
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Geopolitical risks will lessen due to Governments understanding
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Dynamic shift towards Asian Pricing Power will continue
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44
DIFFERENTIATE
YOURSELF
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DIFFERENTIATE YOURSELF
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1.C
REATIVE
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3.ALERT
1. Be CREATIVE with Equity Index Movers
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{PCOMP Index MOV<go>}
1. Be CREATIVE with Most Active Securities
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1. Be CREATIVE with Money Flow Analysis
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Market
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1. Be CREATIVE with Money Flow Analysis
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2. Be INFORMED with News Sentiments
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2. Be INFORMED with News Sentiments
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2. Be INFORMED with News Sentiments
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2. Be INFORMED with Launchpad
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3. Be ALERT with Bloomberg Alert Catcher
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