Friday, October 29, 2020: Day 2 - The 30 Day Bali Silent Retreat Challenge Review
A night, I won't forget for a while. Around midnight I woke up. I tried 1-4-2 breathing to fall asleep again, but it did not make me sleep. And many thoughts were running in my brain.
3 to 36 months prognosis for the stock market
It is an almost full moon night, and due to that, a lot of people cannot sleep. Do you know this problem? I do so because I am one of them. Two nights ago, I woke up at midnight. These thoughts about the major factors, that will influence the international stock markets did not let me sleep:
1. US presidential election 2020
3. Vaccine availability
4. Second lockdown in Germany
1. The upcoming US presidential election 2020
It is only 4 days to go until the presidential election in the US. This creates a lot of insecurity in the market. Even if it is already pretty clear how it turns out. That should give already certainty. But it doesn't, due to the fact, that Biden will not win because people vote for him. They will vote against Trump. Because they are sick of this cowboy. So, the new president is not known very well. And due to that, they don't know what to expect from him. Especially economically, for which the majority of US Americans consider Trump more competent.
He actually started cold war 2. But not against the Russians, they do not play a major role in the world economy anymore. These days it is a trading war against China. Let's look back in history. Remember the first cold war between the capitalistic west and the communistic Russian Federation. This period provided us with a long politically stable situation. This was a long peaceful period. And during that time, the world economy wonder took place. Due to a strong competitive situation, both sides played out to their fullest. This created tremendous worldwide economic and technological growth. Just think about
- the first dog in space,
- the first satellite Sputnik,
- or the first cosmonaut,
- the first moon landing,
- and so on.
So, If cold war 2 goes on, a similar politically stable situation will be created. And this competitive situation between China and the western world will create faster technological development and economic growth. Because Trump loves to fight, he is considered the better choice for this scenario.
What will happen with Biden?
We don't know. That's why we see the volatility. And it will go on for a while until the new president Biden has shown what he stands for. I expect, as soon as he earned the trust of the people, markets will calm down. Further, I expect that he will do so within his first 100 days after his nomination Volatility will decrease, and a long recovery phase will follow. Looking over the industries in the US, energy, and transportation, especially aerospace are down 50% from their last year's highs. That means recovery to the old level will be a 100% growth. And I expect that to happen within the next 18 months.
That's why I am invested in a US Energy ETF with about 1/3 of my assets. I have no doubt, that the Yankees will resume burning energy as they did before. As soon as the lockdowns are released, the majority will fall back into old behavior. Even if the energy mix, will shift slightly from oil to alternative energies. But they are also represented in the energy ETF. And with the growth of renewable energies, those will be weighted higher in the ETF as well. Actually, the drop of this ETF is currently bigger than the drop we can observe for Crude oil. That's why I prefer the ETF instead of an oil ETC.
At the end of this year, the United Kingdom will turn into the separated Kingdom! At least in terms of being divorced from the European Union. Currently, they are negotiating the trading conditions for the future, after the execution of the Brexit. And as long as this is not finished, we will also see volatile markets. Especially in the UK and Europe.
Playing the volatility game
Based on that, my best strategy at the moment is, to observe the bandwidth of the volatility. To play the volatility game, I place a pair of a buy-order, sightly above the lower edge of the bandwidth. And place a sell-order for the same amount of shares, just a little below the upper one. So, with each swing within that volatility band, you make about 80% of the volatility bandwidth.
If the index moves between 100 and 110 points, you gain about 8 points. Which equals 8% of the invested amount, each time the pair orders got executed. As soon as the first order got executed, you double the number of shares for the second one. Let's say, the order at the lower edge got executed and bought 100 shares. Now, by doubling the order at the upper edge to 200 shares, you switch directly from a long to a short position, as soon as the stock price gets near to the upper edge.
Of cause, you can only do so, if your broker and depot allow going short on the chosen asset. The same is required if you are not invested yet. You just want to put your initial sell order at the upper edge. After this sell order went short on 100 shares you set up a buy order at the lower edge. But this one should be for twice the amount of shares, 200 shares. That will cause a switch from short to long positions, as soon the stock price moves near to the lower edge.
This is pretty uncritical, apart from that you might have to be patient. Because even if it will fall dramatically below that level, markets always recover! You can be pretty sure, to get your value back, at some later time. The only challenge is, not to sell with a loss, due to a lack of mental strength.
Latest by mid of December 2020, I would stop switching from long to short at the upper edge, to avoid a short position for the FTSE UK. Because by then, the conditions of Brexit will be clear and then the volatility will be lower. And the market will start to recover towards old levels from 2019 and above. Due to both scenarios, the lower edge might not be touched for a long time.
You do not want to get stuck in a short position, while the market is booming. This is not a very pleasant volatility game, because, that boom might take several years. And a short position is basically selling borrowed stocks. The one, who lent those stocks to you, wants to have some interest in it ... and his dividend as well. And guess, who's gonna pay the dividend? YOU! So, it is best practice to make sure, not going short on a stock, that pays a high dividend short before the dividend got to be paid. ETFs of indices like
- Euro stocks, which represent the European market, or
- FTSE for the British market,
are good candidates to play this volatility game.
Personally, I rather like to invest in technological indices, like TecDAX. Because technological indices have higher volatility and growth. If you would make 5% on the DAX volatility, you could make 8 to 10 % on the TecDAX, for each pair of executed orders.
Actually, gold is a good counterpart for this strategy. Because, if the global markets go up, gold goes down. And the other way around. If you observe that gold and the global markets move in the same direction for a week or two, one may expect a trend change, and I keep reinvesting, to avoid an unpleasant surprise.
Growth expectations for the UK
Currently, FTSE UK is down about 30% below its all-time high in 2019. So, how much does it need to go up, to reach its old level? 43%! Because 1/0.7 = 1.43!
And I expect that it will reach that within less than 2 years. I even expect to exceed that by 30% within 3 years. How much gain will that be? 85%! Because 1.43 * 1.3 = 1.85!
Not a bad expectation for a period of 3 years.
Why am I so optimistic about the development in the UK after Brexit?
Well, the UK will come in a situation similar to Switzerland. Not having to ask the European Union how to do this or that. This flexibility can be used, adapt faster to new market conditions than the slow-moving European Union. Where everything needs to be discussed and approved between all member countries. And after that, the implementation in the individual countries can start. Which can take years.
Observing that, the UK can already analyze the European compromise and find a way, to do better. They may implement it in one step, as the Swiss do it for ages. Without a time-consuming process, they will benefit from the slowness of the EU. The UK will become more independent from the EU regulations, similar to Switzerland. Apart from, the UK is more traditional and conservative. So I expect the UK not to play as smart as the Swiss. But still, due to their bigger market volume, their power and influence on the market will be much bigger than the influence of the Swiss dwarf.
Every day we may expect the announcement of the release and availability of a vaccine. But, I have a hard time understanding, how long it takes to get approval for the candidates. Why do governments stick to old regulations? These laws make the process for this approval long and expensive. And at the same time, they watch thousands of people dying. While they are trying methods, which created the problem to solve it!
Albert Einstein already expressed it so nicely:
"It is a sign of madness,
to try solving a problem,
with the methods that created it."
What do I want to say with this?
The state that claims to get hit the worst is the US. Now they try increasing hygienic standards to fight the virus. But, they are one of the countries in the world, that already have one of the highest hygienic standards. Here in Asia, the hygienic standards are much lower. But in most of the Asian countries, it is not really a problem.
You wonder why?
- High hygienic standards weaken your immune system.
- Low hygienic standards train it!
Now the reaction is, to increase the hygienic standards. But this caused the lack of a natural defense mechanism. So, over a longer period of time, it will increase the likelihood to catch a virus or a bacterial infection. And not only the currently best-known one!
But, coming back to the availability of a vaccine. As soon as this is announced, the market will react, and it will know only one direction. The only way is up! I expect a slow recovery in the western world about 20 to 30 % above the old all-time highs from 2019 within 2 years. But a much faster growth in Asia. Here, I expect the majority of the Asian markets to double within 1 year.
Why will Asia do so much better?
Because they are so optimistic! It is a pleasure to see how much construction work is going on presently here in Bali. The reaction to lockdown in Bali for most businesses was like this. Let's renovate and increase capacity while we have none or little customers. Just, to be prepared well for the future.
Instead of that, what I get to hear and see in the west, they already worry, that the ramp-up will not be a smooth one. Sorry to say that, but I think the west is completely brainfucked! And due to that, they will not benefit from the crisis as much as Asia, for which I expect a blooming future. Asia keeps going slow if the business is booming. And they keep going continuously, even if the business is running slow.
Now, coming back to the long approval process. Why cant the governments change the regulations for it to make faster progress? There are a lot of vaccine candidates available already, and they do very little field testing with them.
How about making a really big field test?
Why cant the vaccine candidates made be available to everyone who is willing to participate in a field test? "Oh my goodness, we cannot produce that much vaccine!" But, that is not required. If there are more participants, that vaccine available, all of the additional participants get a placebo. This is anyway the method of how medicine gets tested. If someone doesn't know, if the injection was a real vaccine or placebo, people think, that they are immune now. And thanks to the placebo effect, over 30% of the people who got the placebo will be immune. Even a higher percentage of those who got a real vaccine will be immune anyway. And after 1-2 months, we will see, which of the real vaccines created the best immunity. Then we can give vaccines to everybody who still fears an infection.
4. Second lockdown in Germany
This has not a big global impact, but it touches me personally, being a German. Du to increasing infections, restaurants, pubs, and bars have to close during November. This shall lead to a decrease in the number of contacts between people. Our Kanzler Ms. Merkel rectifies the unpopular decision with a safe Christmas and the perspective to celebrate it with relatives.
I wished Merkel could initiate a field test of vaccines, as described above. She does not want to be nominated as a candidate for the next election anymore. Due to that, no one can blame her to do so just for doing so as her election propaganda. Other than Trump, from whom I expected to announce the availability of a vaccine before the election. But he surprised me, by showing how well he mastered his infection. So he showed us an example, that the virus is not that dangerous.
How likely is it that the president of the US gets infected?
And especially during the late phase before the election. In which any kind of publicity is beneficial to win the election. To be honest, I think this was a complete theater and a lie. The likelihood that he got infected is so small because his bodyguards probably disinfected anything and anyone he possibly could get in contact with. So, either the theory, that higher hygienical standards do not protect you from getting the virus is true. Or, the suspicion, that this was a complete inclination to get eyeballs for his renomination campaign. Now, it is your choice, what you believe in!
Email Marketing Tool
Another issue that ran through my head, was a problem with my hosting provider. I downloaded my emails the evening before. Due to that, I realized the break down of my scheduled email autoresponder for the Abundance and Gratitude Challenges. And I already sent an email to the plugin provider, to ask for support. This was a plugin for my WordPress web page. I created a sequence of emails with it, to serve people who want to create a meditation habit. And/or want to become abundant. And I have automated that on my web-page in a way, that it runs and entertains the participants automatically.
It worked quite well since I set it up in February, a little more than half a year ago. But now, just two days into my offline time, it stopped working! Why now? What shall I do? Remain offline as intended, and ignore it. That's what I tried, and I realized, it was another reason why I couldn't sleep! I asked myself: "Is it better to stick to a self-induced limitation? And to disappoint the participants of the challenges? They are awaiting every day an email with the task and meditation of today. Or would it be better to
- break the rule,
- and fix the problem,
- then go back to bed,
- and find the sleep, I kept missing out on?"
So, I started thinking about, how to solve the problem.
At 3 a. m. I was ready to get up to fix the problem. So I went to the history-house, where could get an internet connection via my mobile phone. First of all, I checked for an email from the plug-in provider. And there it was. Recommending me to resend the email as a newsletter. Which was not very helpful. In a newsletter, I only was able to apologize for the failure. But this did not solve the root cause of the problem. Nevertheless, I wrote a newsletter and published it. But even those emails did not go out. That sucks!
I went to bed at 4 a.m. But soon, I got woken up about one and a half-hour later from the gong for the morning meditation. I participated in it and the subsequent yoga class, but I was pretty tired. Then heading to breakfast, it was so delicious, and I was so greedy, that I completely overeat.
Subsequently, it was Indonesian learning time. I took a walk along the forest path. During the walk, I was listening to the week 4 lesson of the mental strength training for about one hour. Then I felt so sick, due to my full stomach. I laid down in my bed to recover. Today, I did not want a coffee before laying down. Because I felt, that I needed a longer rest, due to the busy night with little sleep. Further, I expected, that it may cause a detonation if I would put anything else into my already overfilled stomach!
After I slept for about 2 hours and skipped lunch. Then I was heading to the history-building. There is was possible to get an internet connection using the phone's hotspot. I wanted to get the problem with the autoresponder fixed. I did some research and was able to start the crone job manually. That fired the mail sequence. But only half of the newsletters got sent out, as I found out later.
Balinese Culture Talk
I skipped the afternoon yoga but joined the meditation. Followed by a little snack for dinner. And then Sang Tu, the co-founder of the resort, shared a very interesting Questions and Answers session. He talked about Balinese Culture, Hinduism, and Traditions. I asked him: "What is the meaning for the Balinese of the daily giving ritual? And which role gratitude plays in it?"
It turned out in a long story about the giving and gratitude ritual. I learned about the triangle of fire, water, and air. Which stands for creation, operation, and destruction. Du to my big surprise, fire stands for creation. The way I saw the fire before, it was basically destroying things and turning almost everything into dust and ashes. But he explained that fire causes a transformation process. And that for example, the fire of a volcano and the volcanic ashes create very good soil for agriculture. Even if I still have not understood, why water stands for operation and air for destruction ... I expect to find an explanation for that soon.
Then he explained the square and the 8 directions, like the rose of a compass. And finally, he talked about the 5 elements.
At 9 p.m. we finished the Q&A session, and it was time to go to bed and enjoy my self-healing meditation, during which I fell asleep.