I probably don't understand society but...

... we wake up on Monday after a massive earthquake has hit a major commodity producer like Chile and markets are going up?!

Me - I am largely indifferent but it says a lot about society doesn't it. My only open position at the moment is long the US dollar versus the Euro and some small long-term equity positions and that's about it.

This is a massive earthquake and there have been 90+ aftershocks to rock Chile all between 5.0 and 7 on the Richter scale. The swells off the coast of Hawaii are rising again and action in the Pacific on Friday was felt in Australia, New Zealand, Japan, Californaia (which you can short the shit out of till it sinks into the sea), Chile and Hawaii.

If you're interested in currencies, there is a good story on Bloomberg this morning predicting that pound sterling could drop by as much as 30% against the US dollar.

“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.”

You can trade Forex products here if you want to get in on the action.

With any luck the Poms also sinking into the sea along with California and we're saved from their painful whinging and Wayne Bridge acting all sanctimonious about his woman being groped by a team-mate.

Anyway time to sit back and watch Hawaii get washed away...

Contracts for Difference

CFD(Contracts for difference) trading is about ‘margin trading’, or buying not ownership of stock but ‘trading rights’ on the stock by putting down a fraction of the price (i.e.,10%) holding it for short term, hours, days or weeks, and selling it at a profit when the market rises.

Easy? Yes and no. The cautionary is that like all speculation with stocks and shares, only money that you ‘can afford to lose’ should be used. Having said that, with the right systems, good nerves and attention, it is very feasible to make a lot of money. A CFD being a ‘derivative’ of a stock holding is a separate entity from Forex which can also be traded in the same manner but has some regulatory differences.

“For example, A client wants to purchase £10,000 worth of HSBC shares, the margin requirement would be only £1,000. If HSBC share value increases to £10,500 a £500 profit on the deal would equate to just 5% return if you traded the shares outright; compared to a return of 50% on a CFD.” Interested? You should be.

Get started now with a free ‘demo’ account from agmtrader.com .

Tactical asset allocation

Over the last few weeks I have been thinking quite a lot about this concept of "tactical asset allocation" and specifically how it impacts me as a South African trader / investor...

So here's my issue - over the last decade it has been pretty much money for jam if you have been long SA equities. The dividends have been good, there has been capital appreciation and believe it or not, the rand has been overall a quality currency to hold these assets in.

Shock, gasp, horror - and here everybody was thinking that South Africa was heading down the drain at a rate of knots...

So it has been easy - you buy SATRIX or RAFI or you pretty much throw darts at the newspaper and provided you don't hit the Alt-X you've made a pretty decent return.

But as cliched as it may sound, the world is a very different place now...

Are you going to get away with just tracking an index over the next few years? Can you just buy SATRIX, RAFI, MSCI World etc?

I amo not that sure that you will.

Two reasons:

• Global economy is recovering - we're not in a global economic bull market - certain segments will heat up faster than others
• South Africa has (at least from an equity perspective) appeared to catch up with the rest of the world

Locally our exchange is dominated by big international heavy-weights whose markets are made in London primarily. If international investors want them to move - then they will move.

Pfizer seems to be a stock that a lot of asset managers are talking up and it will suit my example well. I want to buy Pfizer - I have two options - buy it off my own bat through an asset manager geared for the international markets or buy into a fund which is supposedly "tactical" and will look for more opportunities like this.

I don't like the fund idea so I need to fin a stockbroker who can get me into international markets and then work in my tight forex regulations. But that takes a mindshift from me - I can't just limit myself to the SA market anymore.

I need to be aware of a brewery in Zambia or a Russian oil firm or a Mexican tequila plant and that takes some doing....

Will need to think about this a bit but would welcome any thoughts on

A) Will tactical stock picks outperform index tracking?
B) How important is the international market to local investors?

Let me know.