Tag: analysis

Tasteless but necessary – Part 1

On By Chen Yu YanIn Environment, Fundamental Analysis, Futures, TradingLeave a comment

If there’s one thing in this world that is both tasteless and necessary, it would be water. Actually, scratch that, air would be equally important but that’s not my point. I’m focusing on water. The human population of the third planet in a solar system that is on the outer reaches of the milky way galaxy (as it is known by by the indigenous inhabitants of the planet) has grown to over 7 billion people last year. All 7 billion people needs to drink water to survive [citation needed]. I am going to split this research into a few parts due to the large amount of research papers, websites, and information in general that I have to go through.Now that’s out of the way, it’s time to ask the important question.

How much water do we have?

From studied so far, the volume of the world’s oceans is 1.332 billion cubic kilometers [1]. That’s a lot of water [citation needed]. I don’t think I need to exaggerate exactly how much that is. But I will. That amount of liquid is roughly half the water based lubricant you go through in one night when… well you get the idea. I don’t think a racist homophobic necrophilia incest joke is acceptable anywhere other than 4chan (and if you don’t know what 4chan is, go check it out. It’s a nice place [citation needed]).

In terms of freshwater (all in cubic kilometers), we have 24 million in ice caps, glaciers, and permafrost, 23 million in groundwater, and around 10.5 million in fresh water that is available to drink as is (if you don’t mind the occasional deadly bacteria or virus). 3.8 trillion cubic meters of water is withdrawn every year (excluding evaporation), which when converted into a similar metric as what we were using before would yield… 3800 cubic kilometers of freshwater. Oh well, that’s a lot less than I thought. You know what, we’re in the clear! But wait, that’s just the withdrawn from the reserves. A research done shows that the average American uses around 420 litres of water per day. So some simple maths yields around 50 trillion litres of water in a year. Which once again… isn’t that much. If it weren’t for the fact that only 1 percent of our freshwater is readily accessible due to stupid things like, being trapped in other less convenient forms, such as ice. 1% of 23 + 10.5 + 24, gives us around 570 thousand cubic kilometers. Suddenly, 3800 out of 570,000 seems like a lot (~0.66%). It would mean that if there wasn’t any replenishment via the water cycle, we would run out of water in 150 years.

When nature kicks you in the balls, it usually doesn’t end with just one kick. So of course things are going to get worse from here. Fresh water isn’t spread evenly in the world. Some areas are affected by droughts (South Africa is brought up a lot when we talk droughts) while others are constantly flooded (Atlantis is a good example). So we’re stuck with technically enough water for the world population right now, but just with really, really bad distribution. So we need to move water around. Except that it is a lot harder than it seems. Moving water by trucks is extremely inefficient. Moving it by any form of transport that we have is extremely inefficient. So we need to build some canals that funnels water into areas that needs water.

But geography puts the ‘anal’ in ‘canal’.

Water tends to flow in a downward direction [citation needed]. Unfortunately, mountains tends to go upwards. It’s kind of axiomatic that way so there’s not much that we can do about it. Water doesn’t seem to like it when you tell them to go upwards. This is actually good, otherwise there’d be no land. Distance is also a major factor. There is nothing that distance can’t break down. From relationships to water, distance tends to ruin things and is up there right after ‘time’. However, we all know that distance and time is related so in reality, that whole family is bullshit. I’ll end this here for now. There will be more coming soon, though a temporary lack of internet might delay it a bit.

 

Technical Analysis: Let’s get Irrational

On By Chen Yu YanIn Technical Analysis, TradingLeave a comment

Before we move on, you may wonder why I’m wondering why I’m continuing this at such an odd time. Or most likely, you didn’t think that but are now. Nevertheless, it is because I am very busy and apparently, it is too much to ask for me to do some decent research because there has been some issues accessing some sites for data that I wanted to pool. So now, you get a short version of what I intended to go through (and without charts because I want to satisfy my own rambling before all else).

Picking up from where we left off previously, price action dictates who makes and who loses money in the market. When you try to think about what drives the price action, you move into the realms of fundamental analysis. Technical analysis is all about the numbers.

The demand and supply of the market isn’t always rational. In fact, from my experiences, it rarely is. Human emotions kick in and affect traders who then buy and sell in a blinded frenzy. I dare say that this contributes greatly to the noise element in the market. In fact, it’s better when the market is irrational. A bunch of logical thinkers gathered together would provide as much progress as a philosophy session. My particular ‘style’ of technical analysis involves me deducing any information asymmetry within the market and act upon it before the market has time to digest everything. Err… fancy way of saying pick up on a movement before it has finished.

I’m gonna go into specifics into how I do it exactly but maybe brush up on Elliot Wave Theory if you’re not familiar with it because what I do is an extension to it. I’m keeping this one short because I suck and I have no time and life is bad and saof;jg  13409237u5 rilkdfmngsv 9i43oj4t klj……

 

 

Bold Calls: Jan 2016

On By Chen Yu YanIn Bitcoin, Equity, Fundamental Analysis, Futures, Policy, Technical Analysis, TradingLeave a comment

In private, I’ve made some bold calls. This affects my trading and I see it as a way for me to exercise my ability to predict long term movements based on an unique style of analysis. I won’t bore you with specifics as that isn’t the point of this entry.

In 2015, over a ramen lunch with close friends, I made a bold call to say that the US equity market will fall 30% from the peak, the Aussie will fall 40%, and China 50%. This was around June 2015. So far, China is looking to have almost hit my target as it is almost touching that magical 2600 mark. Honestly, being a massive Chinese hedge fund, the Australian markets is gonna tank a little as well. I guess we’ll see some results by mid year. The US markets are probably the most difficult to predict. I believe it will be heavily affected by who gets elected for presidency this year.

My new bold call for 2016 is Gold (gold vs US to be precise). I am fairly bullish on gold and I expect an initial target of $1200/oz followed by a rally to $1400/oz (it is currently $1100 as I am writing this). This is based on increasing volatility, the distrust in the growing Chinese/other emerging economies, a beautiful technical bottom plus reversal patterns emerging.

My second call would be for bitcoins. As mentioned in my very first post here, the block chain technology is worth a lot of money. The ability to decentralize the settlement system alone is enough to save enough money to make Scrooge McDuck drool. This along with the fact that we’re half way to mining everything out means that suddenly there is a supply squeeze that can raise the prices faster than twitch chat raising dongers (a very specific reference so kudos if you got this one). My personal target is $1000/coin but I believe we have to wait for around the end of the year for that to come about.

To sum up, bitcoin and gold will be the best performing currencies in 2016 (I’m counting gold as a currency because it pretty much is) and your phone is ringing because I’m calling it!

Technical Analysis: In the Beginning, there was Price!

On By Chen Yu YanIn Technical Analysis, Trading1 Comment

Most people who know me in a professional environment would know that I am very technical heavy with my analysis. Not that I have anything against fundamental analysis, it’s simply the fact that I don’t enjoy spending an entire day looking at the accounting figures and growth potential etc. Technical analysis to me is, as Kanye would put it, harder, better, faster, stronger. So if you want to read charts, and you can’t wait much longer, stick with technical analysis, else you can’t get stronger… and this is why I should never write anything while listening to Youtube mixes. Back on topic now!

I suppose since I am going to spend multiple posts diving into the intricacies of TA, I should really start at the… err… start…

TA, from a academic perspective, describes the type of analysis used by market participants who tries to generate abnormal returns using only past information. The ‘blasphemous’ theories implies a complete lack of market efficiency (and thereby pissed off thousands of academics, or so I would like to think) and is pretty much the modern equivalent of witchcraft and alchemy. Many attempt to disprove it via the inclusion of taxation, backtesting different strategies and showing fairly conclusively that they don’t work over the long term, by tossing coins and then spinning in a circle and throwing a dart, by diving into a pool and picking out a random marble hidden at the bottom of every tile (but behind every prime numbered tile, there is a golden one. Also, the latter two may or may not have happened. I can’t prove that they haven’t so……). However, some swear by it and one of the most famous trader of all time, Jesse Lauriston Livermore, the great bear of Wall St, made it big using TA. So why is that? How can something disproved make so much money for some while bankrupting others?

I guess I’ll describe the general logic behind why some believe that TA works before I go into the specifics. The first trader, even if by random chance would buy something because the price went up a little. Soon after, a different participant would look at it and think “Hey, I just saw this, and this is crazy, but I like this stock, so I’ll buy some maybe”. The price would go up further because of additional demand from other technical traders. Finally, the traders who missed the run then looks at the chart and thinks “Hmm… I missed it, I missed it so bad, I missed it so so bad”.

I’m sorry, I’ll turn off the music.

My favourite analogy for TA (I read it on a research paper but I forgot which one… if any of you know where this analogy came from, please refer it to me as I’d like to cite it) is if you throw 10,000 people into a small city and ask them to meet up. You don’t tell them when and where but some may assume that around noon in front of the town hall on a Saturday would be a nice time. In fact, I dare say that more than one would think that. So some people gather, and then the rest looks in awe at a sudden gathering reminiscent of flash dancing. So they group up too. Who knows, maybe they’ll even be starred in a viral Youtube video! Wouldn’t that be neat? Then the crowd attracts others and suddenly it’s massive. This is essentially what will happen in the market. It’s all about the stock price (no, I’m not listening to ‘It’s all about the Bass’) which makes sense as its arguable the most important element for stocks. We quote price before anything else (though the only other thing that comes to mind would be volume) and base a lot of calculations off of it regardless of using TA or FA.

So why does that skewer of demand and supply dictate what traders do? Well, that’s where cognitive dissonance kicks in. That’s where greed and fear kicks in. That’s where the next post in my technical analysis series kicks in.