The prediction for the returns of different asset classes in the next couple of years.

Sorry for the absence from this blog for a long while. Was very occupied with many things, including investing. It was also because I have been using Wechat moment posts to broadcast my view on global macro in China as the fund that I am advising has mostly Chinese clientele. Time constraints means I was not to translate those views to English and post here. Below is a prediction piece that I wrote on February 21, 2016 about the returns of different asset classes in the next couple of years. As it is more important, I put the Chinese and English versions here in public view. Let’s see if I can be as accurate as I have been in the past 15 years. Here is the message:

On Thursday, February 18, 2016, I saw some pattern of market on the verge of another leg down. But as it was just after three days of a big relief rally, I was not sure if we can have another leg down so quickly given that it seems that although US markets have reached the full extent of allowed bounce, the other markets may not. I posted on Wechat moments about my suspicion of another leg down but I need more evidence. Friday’s market movement convinced me that this is the case. So I post on my Wechat moments that all friends should be very careful. When I check on Saturday, I find that all global markets have stayed around the technical support points. So it is possible that the downward adjustment next week is just a small one, and we could even have a bounce up, continuing the rally. This is important as my kind reminder may make some friend worried for nothing, I look through all the markets and asset classes carefully. I realize that most of the markets, not just the US markets, have bounced to close or at the full extent. So next week, we can have some bigger leg down, including Chinese A shares, and the leg down can start from Asian trading hours, which is different from the last two trading sessions when we have the leg down after US markets open.

Much more important than this short term movement is that all asset classes in all global markets are at a crucial point from a long term point of view. If markets keep jumping like what we had in the last year, most likely all markets will experience a big bear market. Whether we will also have economic recession is not a sure thing yet, but the volatility of markets can feed back into economy. At the same time, governments are not paying enough attention (US Fed even keep talking about rate hikes), or are occupied by other issues (European immigration issue and the crazy austerity straightjacket). This serious tightening of financial condition can lead to a global economic recession, which will in turn make the bear market even more severe. Although the momentum is not completely irreversible at this point, this possibility is bigger and bigger, flashing red light already. This economic recession may not be as scary as 2008, but will still be quite scary. After all, global markets have not experienced real bear markets, and global economy has not experience global recession for eight years. Note that a large part of the severity of the 2008 crisis is due to the monumental tightening of financial conditions after Lehman Brothers crash.

If we continue on this torturing path in global markets, SP500 will drop from the current 1915 level to at least 1600, Nasdaq from 4160 to 3000, Hong Kong Hang Seng from 19300 to 11000, Japan Nikkei from 15900 to 11000, German Dax from 9400 to 7500. At the same time, Japanese Yen will increase from 113 to 60, and Euro from 1.10 to 1.80, per USD. Yen, Euro, Hang Seng may need a few years to reach the price target. The rest will likely be realized in the next year.

So it would be foolish for investors to bet on bounce up or bull markets. They should put all money into cash or longest term developed government bonds. Gold may be a good bet in the next few months or a year, and should increase from 1200 to 1400 an ounce. I am not sure about its longer term future yet.

Markets are an evolving process. So I can be wrong in the end. But without preemptive, huge scale government actions soon, and just reacting after the risks already become fruition, or even creating uncertainty and tightening financial condition like the crazy US Fed (especially Fischer), I think it is a likelihood the above risks will explore in our face. Even government take huge actions now, it may only be effective in the short term, and is only ineffective in the long term, at least from market point of view. I still have some unsure hope for the effectiveness of government actions for the economy but even that is wearing thin. What if we will never get back to prior trend growth rate we experience in the last six decades? Also, the governments are barking on the wrong tree unless they focus on increasing final demand instead of focusing on productivity, reform, infrastructure, competitiveness, and other sounds good but useless or even harmful things.

接下来一两年的预测

好久没有再在这个网址发我的评论了，因为过去这段时间我一直在使用微信通过微信朋友圈发中文的宏观投资评论。因为时间忙，所以就没有把中文的评论翻译成英文放到这里。2/21/2015写了一个关于接下来一两年宏观投资的预测，觉得比较重要，所以把它放在这里，这次看看我是否跟过去一样准确。

周六一看，周五各个市场到收盘都守住了关键点， 所以有可能下周的调整只是一个比较小的向下调整， 甚至上涨都不是不可能。因为事关重大，怕我一番好意，反而让有些朋友白白受惊，又把全球各类资产都仔细看了一遍，觉得很多市场其实已经反弹到位， 不只是美股已经反弹到位， 所以下周还是有可能会大一点向下调整，包括A股， 而且这个调整很有可能在亚洲交易时间就已经开始， 而不是像过去两个交易日，在美国开盘以后开始。

更重要的全球各类资产长期来说都已经到了一个很关键的点，如果市场再这样折腾下去，很可能各大类市场都会有很大的熊市。是否经济衰退还不知道，但是市场的震荡很可能反馈到经济， 而政府并没有给与足够的重视，或者忙于处理其他问题， 从而导致一个全球的经济萧条。虽然还没有最后形成不可逆转的趋势， 这个可能性越来越大了。 这个经济萧条可能不会像2008年这么可怕，但是也会足够可怕， 毕竟全球市场已经几乎八年都没有真正的熊市。

如果再这样继续折腾下去，标普会从现在的1915至少跌到1600，纳斯达克可能从现在的4160跌倒3000，恒生可能从现在的19300跌倒11000，日经可能从15900跌到11000，德国dax可能从9400跌倒7500， 日元从113涨到60，欧元从110涨到180。 日元，欧元，恒生可能需要长一点，几年，的时间达到，但是其他有可能接下来一年就会实现。 

所以投资者可能根本不要去搏反弹或者牛市， 而是全部放现金或者买长期国债。 黄金在接下来几个月甚至一年应该还是可以持有， 应该可以从1200涨到1400，长期也不知道会不会又继续下跌。

市场是一个不断演化的机制，所以最终我也可能出很大的错误。但是如果没有预防性的，大规模的政府对应行动和措施，而是等风险出现以后再采取行动， 甚至像美联储那样的故意造成不确定性和紧缩金融状态，个人觉得以上的风险是大概率，甚至政府即使现在大力救助，短期有用，也无法长期有用。

可能有很大错误，完全一番好意，如果觉得一派胡言，多多包涵，忘了就是。