Phisix 7,550: Awesome 2.41% Marking the Close DUMP!

Last weekend, I noted that there were signs of seeming discoordination from the usual end session pumps by the index managers. Likewise, there had been incipient signs of hype and dumps. My point was the destabilizing "in your face" rallies looks to have reached a climax. 

Today’s session was a masterful display of the reverse manipulation—a huge marking the close dump! 

Today’s session reinforces signs of more forthcoming violent bidirectional price activities.

64% of the PSEi’s 2.41% loss came at the last minute! 

These guys could have simply sold at the higher price during the regular time which could have save them some money. So why the dump? A sudden change of mind? To fix the PSEi lower? To setup for a pump tomorrow by buying these back at the opening bell? 

Yet such a huge dump would only happen because the biggest market cap had been sold off.

And that’s exactly what had happened. Except for the mines, all of the mainstream indices had been “dumped” at the close. Such only indicates of a coordinated selling of the biggest market cap across the sectors. And so it was.

And the above window shows how the marking the lose dump was accomplished through most of the top 15 biggest market caps. 

Such HUGE session end price changes! 

Let me emphasize, the above represents the transition or the price changes from the market intervention phase to the runoff period. 

The lower window shows of the day’s performance. 

So the gist of the end of the day performance had basically been shaped only at the closing bell. Example, 95% of ALI’s 2.63% loss was shaped by the last second 2.5% dump! So four hours and 45 minutes of trading were all considered useless because the only thing that mattered was the end session transition phase. 

The PSE should just chop daily trading sessions to just 16 minutes! 

Considering how these have been done so frequently (but mostly on the upside) it shows that these guys have essentially no respect for the markets. 

And if the markets don’t get their reverence, it reveals of the scale of price and foundational deformities which eventually would lead to its destabilizing unwind or violent adjustments 

Today’s 2.41% dump virtually erased most of the three day pump.  The PSEi is now up by only .3%. Curiously the headline index is back to 7,550. 

And to consider such degree and frequency of price fixing happens ONLY in the Philippines! 

Nevertheless as I noted last weekend 

And as product of regulators, whom seem to have been asleep at the wheel, the ultimate consequence of such egregious manipulation has been to blow market activities out of proportion or drive them further away from reality. 

At the end of the day, market forces will eventually rule: the obverse side of every mania (backed by manipulation) will be a bust.

 

Explaining Soros' Move: South Korea's Central Bank Panics, Chops Interest Rates to Record Lows

And speaking of Developed Economy's NIRP and a Global ZIRP, South Korea’s Bank of Korea (BoK) just panicked, it chopped interest rates to record low! Korea's Zirp now looking for a NIRP! 

http://www.bbc.com/news/business-36486454

you can see the interest rate chart here

http://www.tradingeconomics.com/south-korea/interest-rate

South Korea’s external trade have been taking a hit…

Exports have been trending down…

http://www.tradingeconomics.com/south-korea/exports

As with imports…

http://www.tradingeconomics.com/south-korea/imports

Since merchandise trade account for nearly 80% of GDP, a slowdown in external trade affects their GDP

http://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS/countries/1W-KR?display=graph

Also industrial production has also been down…

http://www.tradingeconomics.com/south-korea/industrial-production

so again the net result has been a slowdown in gdp…

http://www.tradingeconomics.com/south-korea/gdp-growth-annual

yet private sector loans continue to materially grow…

http://www.tradingeconomics.com/south-korea/loans-to-private-sector

And this only aggravates the balance sheet conditons of South Koreans households whom have already been heavily leveraged.

http://www.tradingeconomics.com/south-korea/households-debt-to-gdp

So why wouldn’t the BoK panic? With the economy trending down, given the huge debt level, just how will heavily leveraged households be able to meet their financial obligations?

Thus the BoK slashed rates in order to ease such debt burden (which represents a subsidy to borrowers) while at the same time allow borrowers easier access to credit (in the hope that balance sheets of banks have been impervious to the likelihood of increasing accounts of bad credit). Again HOPE is not a strategy.

As a side note, I do not share the view that such actions have been designed as to engage in acurrency war.

Aside, housing prices have begun to sink.

http://www.tradingeconomics.com/south-korea/housing-index

And this would reduce collateral values, as well as, diminish household option to use the housing channel to raise financing (by sales). If Koreans resort to further selling, then housing deflation will only accelerate. Additionally falling collateral values could mean that financiers may ask debtors to either increase collateral inputs or force a call on loans. This will also put pressure on housing prices.

You see, the BoK’s room to further kick the proverbial can down the road appears to be narrowing fast. So the increasing recourse to a desperation policy.

Well at least there still is a buoyant stock market, which is likely the remaining option for Koreans to eke some returns. Perhaps much of the latest borrowing have been funneled here.

http://stockcharts.com/h-sc/ui?s=$KOSPI

That’s of course, until such windows also shuts too

You see now why George Soros sees a global market crash and Asia equally a sell????

$10 Trillion of Negative Yielding Bonds, George Soros Bets Big on a Market Crash!

Negative yielding global bonds have reached $10 trillion says Fitch. This means that instead of borrowers paying lenders for the privileged to access someone else’s or the lender’s savings, negative yields means lenders are paying borrowers to borrow! Of course under the fractional reserve banking, lending is not a function of someone else's savings but from the central bank's digital press traditionally channeled through banks. 

Even more, any entity that owns a negative yielding instrument is guaranteed of losses. So the broadening of negative yields simply means that losses in the financial and economic system has been mounting! And all these for the sake of holding onto liquid instruments that ensures of the financing of spendthrift governments around the world. 

In short, negative yield is like a premium for the convenience yield. 

Think of what this will do to financial institutions, which are required to hold government debt as part of their Tier 1 Capital. 

And think of what this will do to pension funds. In order to match assets with liabilities these institutions are being forced out into the financial markets to gamble. And the yoke of the attendant risks from such speculative activities will be shouldered by depositors and pension beneficiaries…and eventually taxpayers and currency holders 

In Japan, because primary dealers are required to buy government bonds, Bank of Tokyo-Mitsubishi UFJ (BTMU) mulls to quit from such a role given the prospective losses. 

It has really been an upside down world that has been spawned by desperate central bankers. 

Negative Interest Rates (NIRP) have been designed to the shield the mountain of accumulated debt, particularly government debt, from imploding and setting off a crisis. 

And don’t forget given the globalization of financialization these negative yields brought about by NIRP have been transmitted to as partly carry trade or cross asset arbitrages. For instance, bond traders have sold negative instruments and have been piling into any bonds such as US treasuries with  positive yields. Some of these has been spilling over into emerging markets (which should include the Philippines) 

Well not everyone agrees that central bank magic have its desired effect. 

Investing savants like Stanley Druckenmiller and Carl Icahn have bet recently big on the prospects of a market crash. 

Today, international media also reported George Soros have taken a sizeable position on a market crash. 

From the Business Insider (bold mine) 

Legendary investor George Soros is back to making big bets. 

Soros has returned to trading after a long hiatus, according to Gregory Zuckerman over at The Wall Street Journal. 

He has recently directed a series of large bearish bets, selling stocks and betting on gold, the report said. 

Soros, who ranks second on the list of the most successful hedge fund managers of all time, has spoken publicly about his concerns for the global economy. 

He recently said that China's financial system right now "eerily resembles what happened during the financial crisis in the US in 2007-08." 

And in Davos earlier in the year, he said that the world is running into something it doesn't know how to handle, and that he was betting against Asian currencies and commodity-linked economies. 

China later warned Soros against going to 'war' on its currency 

Soros stepped back from day-to-day trading some time ago, and his return to investing marks a turnaround. 

Scott Bessent had been the top investor at Soros Fund Management, but he left last year tolaunch his own fund, Key Square Group In January, Soros Fund Management named Ted Burdick as its news chief investment officer

Well you may interpret as my appeal to authority. Regardless, such unprecedented monetary-NIRP policies will come with big unintended very nasty consequences.

And because the world is interconnected and interdependent, rallying Philippine assets have been a consequence of the Developed Nation's negative interest rate and ZIRP policies for the rest. Yes the BSP has a negative real rates policy. Soros or no Soros.

PLDT’s Blowoff Phase: Will This Time Be Different?

Another ferocious rally brought the PSEi to approach the 7,800 level in the early session today. However the profit taking weighed on the index, so gains had been pared down to just .16% at the close. 

Nevertheless, the continued momentum to pump the index in a vertical fashion! 

TEL was, in part, responsible for the shoring up of the index. That’s because another hysteric bidding episode sent TEL prices to the sky! The firm’s share price closed up by an astounding 4.9%! Since its milestone low at 1,624 in May 24, 2016, the largest Philippine Telco company have accrued a mindblowing 29.55% in just 11 trading days! 

TEL has been no stranger to major and minor boom-bust cycles, though.

So far, the magnified intensity and fantastic speed of TEL’s parabolic moves seems to parallel the firm’s share price activities during the 1998-1999 saga.

Yet the justification for these wild bidding sessions has been the joint acquisition by the duopoly, TEL and GLO of SMC’s “4G”. Albeit such deal officially transformed the duopoly into a monopoly. As explained before, technology and growth are not written on the stone. Many other factors as prices, income, monopoly and politics will play a big role in determining the success of the rollout.

And as further proof, even with 4G generating 500 million subscribers in China, price charts of the three main 4G telco providers, China Mobile, China Telecom and China Unicom have all been struggling. In fact, all three, -21.5%, -35.8% and -40%, appear to be in their respective bear markets based on their April 2015 highs.

This shows that there is NO magic in 4G!

As clearly expressed in media, technology equals G-R-O-W-T-H simply equates to reasoning from price changes (post hoc fallacy) which in reality represents nothing more than to rationalize gambling.

Understand that given the phenomenal record price breaking binge by many of the biggest market cap issues, a key reason why the Phisix remains below the April 2015 8,127.48 has been because of TEL’s divergence with the pack! (Add to this banking trio and the laggard ALI)

In terms of market cap weight, TEL ranked fifth last Friday, and as of this session’s huge closing, the firm has taken fourth place to nudge down SMPH to its previous spot. Tel’s market cap weight, as of today’s close, was at 6.6%. And last May, as bubble firms race to new highs, TEL carved out a 2007 LOW!

Stories are necessary to fuel action. So index managers have conspicuously been using the 4G deal to propel TEL. The goal is for TEL to compliment the others in order to break the April 2015 heights! Such ambitions have only resulted to a bigger and bigger push of share prices away from reality. Hence such detachment means of more imbalances being accumulated. Yes ALL actions have consequences. 

And as I have shown last night, the lesson from AC’s historical price actions has been that ALL vertical breakaway run have always succumbed to failure. There has been ZERO occasion where a vertical runup did not cause a big selloff or a crash. Or said differently, 100% of all vertical runups experienced breakdowns (but in different degrees)! 

Below I show TEL’s volatile history which essentially shares the same lesson with AC.

Nota Bene: In this presentation, all 30% and above parabolic runs I consider as major. Whereas all less the 30% are minor moves. 

It was just last January where TEL made a minor 22.42% bull charge in one month. Unfortunately, the bull charge was totally eviscerated also in about a month. Even the price base from which the bull charge was founded eventually was broken.  And the new 9 year low, last May, served as the springboard for today’s vertical ramp. 

As a side note, how memories can be so so so very short! 

Also note that there was a short parabolic bout when TEL set a new record in September 2014. Unfortunately Newton’s Third Law of motion—For every action, there is an equal and opposite reaction—became reality. So the mini boom eventually ended with essentially all the gains returned!

Yet this will serve as template to most of TEL’s historical performance

From October to June 2015, which I broke down into two charts: violent upswings eventually turned into violent downswings. Aside from Newton’s Law, the law of gravity seems to haunt TEL.

Now to the majors….

2007-2008.

Folks, TEL soared by 32.45% in 2007. Too bad not only TEL gave back all the gains, the denial minor 19.74% rally only exacerbated TEL’s crash (-35.12%)!

Asian Crisis and the Post Asian Crisis 

I learned that PLDT wasn’t instrumental in the crash of 1997. Although from 1998-2000 or post Asian Crisis, bulls instigated a series of breathtaking (4) major and some minor vertical rallies! 

And the ramifications had been the same. ALL of the rallies went kaput! 

Newton’s Law and the law of gravity ruled!

Remember the gigantic 179% rally in the PSEi in 1993? TEL was key to the Brobdingnagian gains by the PSEi. 

TEL soared by 145% in a single year! Tel had two vertical runs. The biggest climaxed at the close of 1993. Yet when the rally sputtered, TEL gave back almost ALL of the spectacular gains!

Remember the same template from past to present 

Here is more

1987-1989 

Same story in 1987 and 1989. Recall that these were the post balance of payment crisis and the post Marcos era were Philippine stocks were at the cheapest! 

Yet TEL succumbed to boom bust cycles! Violent upside (always at the climax) morphed into equally violent downsides. At the end of the day, almost every single point of gain had been wiped out in both episodes! 

Have you noticed--at what period--or when TEL preserved its acquired gains? The answer, that’s when TEL moved up or built up their gains INCREMENTALLY! 

So again we see the same lessons in AC applied to TEL. 

That’s unless of course, “This time is different”

Hope is not a good strategy