EVERYWHERE I look, I see really bad news. Full-blown nuclear war, raging inflation, crashing markets, the Fed and other central banks raising rates, global recession, tumbling consumer confidence, China lockdown, energy crisis, food shortages, the dinosaurs are back and the stinky list continues.
One of our investment teams has been locked down in Shanghai for six weeks now. More people are freaking out and some are getting hostile. Global money managers are hunkering down and preparing for the absolute worst.
How could stocks, bonds, cryptos, and gold all “crash” simultaneously? There has been forced selling among leveraged hedge funds that contributed to the extreme volatility.
Even some of the bulls in our show business have thrown in the towel. It is common that most investors tend to be bullish after the market has gone up and bearish after the market has fallen.
Elsewhere, the US dollar has been strong across the currency market. I have always been consistent on my bullish position on the dollar and my record speaks for itself. I always embrace something that I may be wrong.
I always go out in search of evidence to prove myself wrong. I had re-issued a warning in early 2021 for ringgit investors on the risk of a higher dollar against the local unit. There was almost no good news about the greenback floating through the airwaves at that time.
Ringgit on downtrend
I was looking for USD/MYR to hit my medium-term target at 4.50 which is a three-year view and the pair was flirting close to 4.00 at that time.
Someone from an investment bank mocked my signal and he expected the “undervalued” ringgit to trade much higher than the “overvalued” dollar.
The insults continued from other “authorities” who have been wrong on the greenback’s outlook over the years.
I wish I could be right 100% of the time. However, I am a human. I was “wrong” that the overvalued dollar has become even more overvalued or stronger than my forecast if you care to look at the trend.
In the next decade USD/MYR could blow past the 6.75 level. Sorry for the bad joke and for adding more salt to the wound.
Moving on, I was warning of a pullback on the risk assets in the first quarter of 2022. In other words, I was ready for it.
Unfortunately, it is impossible to be perfect. Yeah, it is always easier to look back after the fact. The current correction has dropped and dragged more than what I had expected this time. So, where are we now?
The general expectation still remains intact. While a famous bear expects a total destruction, the bottoming process has already begun.
Boys and girls, my bottles of champagne are ready to pop but I am not celebrating yet.
We are still in a long-term bull market and I see new highs after this round of madness. What a bold statement which brings me to my forecast on USD/MYR made last year.
“Some people literally walk into fortune.” Despite the big drawdowns on some of my personal allocations, I have been accumulating risk assets at lower prices with veins popping out of my neck.
The latest market action all goes to show the importance of a longer term and rational mindset when investing in the markets. The algorithms are selling because they want to make a quick profit in seconds.
The hedge funds are selling because they have to. We are all driven by our base emotions but let me remind you that the market is always forward looking and is smarter than all of us.
There is no room in our show business for posturing and self-glorification. Backed by a long-term track record, we invest according to our long-term objectives.
The valuations have priced in the worst-case scenario in this long-term bull market where market corrections and panic events are common. The dinosaurs are back after 65 million years but this is not the end of the world. – May 16, 2022
YH Wong is Senior Partner (Asia) at Satori Consultancy (MUR) Ltd and has over two decades of experience in the financial services industry.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
