Month: December 2016

Here are six charts that defined price action and investors’ psychology in 2016.

1. The U.S. dollar added to his gains from last year. This has helped small caps to outperform. It would be interesting to see of any of the large-cap multinationals starts complaining about the Dollar’s impact on their margins.

2. Emerging markets continue to underperform. The strong dollar is the main reason.

3. The spike in interest rates has been a boon for financials.

4. The biotech sector has been naughty in 2016. Most momentum stocks tend to give back 50% to 80% of their upside move after they break down. IBB is down about 33% from its all-time highs. Biotech has always been a sector of stocks with relatively low correlation among them.

5. Both, value and momentum can work.

6. The best performers after a deep market correction are usually the stocks that were hit the worst during that correction.

7. Bonus graph

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We  often take an Uber when we go out at night. I always like to talk to drivers. The other day, my driver was a recent immigrant from China. As most drivers, he likes the flexibility that Uber offers, but it is a part-time job for him. He is looking to branch out in a different business.

What do you want to do, I asked him.

Him: “Real estate. This is what we did in China. In fact, I just bought four 2-bedroom units in Pacific Beach and I am renting them out for $2,500 a month each. We are considering trying out short-term renting via AirBnb to double our income”

Pacific Beach is not Detroit. The median price of a 2-bedroom unit is $750,000.

I know it’s not easy to transfer so much money from China into the U.S., so I asked him about it.

Him: “China doesn’t let you transfer more than $50k per year per person. We sent our money first to Hong Kong and from there an Investment Bank helped us to transfer it to the U.S. for a 10% fee. We are still happy with the deal. I want my kids to grow up in a free country. China is still a communist country, where freedom of speech is not really allowed. The government controls everything.”