Oct 23, 2014

It's a Bird, It's a Plane, No! It's SuperFed!



Evil Xeo with his evil doves, trying to destroy Wall Street by hoarding lots of USD...
No. SuperFed is not some health supplement that will eradicate Ebola and save the world.

It's actually stands for "Super Federal Reserve System of America" or more commonly known as the US central bank.

The Villain known as Xeo Lye, was rubbing his hand in glee as the global stock market crashed, taking down all the billions of dollars every day. There were panic on the streets as the men on the streets were shouting, "The stock market is crashing! Ebola is going to kill us!"

Just when the villainous Xeo Lye thinks that his plan watching the global stock market burn and crash with a highly possible 20% market correction, SuperFed flew in and smack our evil villain with his super powers.
SuperFed saves the day!
SuperFed first used his icy breath of "USD is too high" to try to convince global investors that SuperFed will print more money in order to bring the USD down, so as not to jeopardize the economic recovery.

When that failed, SuperFed summoned his sidekick "Hawkeye" Bullard.

"Hawkeye" Bullard used to be a double agent working for Xeo Lye, by suggesting that SuperFed should raise interest rates earlier so as to prevent a possible asset bubble from forming. However, being a double agent, he decided to defect to SuperFed and renaming his superhero nickname to "DoveEye" Bullard. He managed to assure the panicky investors by telling the world that SuperFed should continue the QE program and not terminate the program in October, giving hope that SuperFed will continue to print money and delay the raise in US interest rates.

With SuperFed and DoveEye putting a bottom to the market correction, Evil Xeo Lye has no choice but to retreat from cash and reallocate his devious investments to US and European Equities.

Here is the comparison between the old asset allocation and the new asset allocation.

Asset Allocation before 20th Oct 2014



Asset Allocation after 20th Oct 2014


Further Correction still Possible

Although the US central bank has swooped in and saved the stock market again, just like what had happened in the past 5 years, there is still much uncertainty in the global markets with Europe potentially lapsing back into another recession and China's property market starting to deflate. I am switching half of my cash holdings and moving them into mainly US equities. I am going to leave around 30% of the allocation still in cash and I will put more of the cash to work later in Nov once the coast looks clear. Meanwhile, let's pray that the stock market hesitate for a few days while we try to catch the very sharp rebound in the global stock markets. I have allocated the majority of the allocation to US and Europe as I am still fearful of the overheated property markets over at China and South East Asia, which can potentially be lethal to the Asian stock markets. Europe is still way behind at the economic cycle curve, still finding the legs to the road to recovery and we will expect more economic stimulants which will support the stock market. Over at the US side, the improving consumption and jobs market data will continue to support the market and the SuperFed seems to be reluctant to rock the boat for now. The US stock market should be clear for now, until SuperFed decides to switch sides and turn over to the dark side during 2015 and started to become more Hawkish rather than Dovish.

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