27 Feb 2016
Dear Fellow
Investor,
Driving all
Assets Worldwide.
Below is the
Brent Crude weekly futures price chart as of Friday 26 February 2016.
Notice how
since September 2015 to January 2016 price has been marked down from USD 53 a
barrel to as low as 27.30. Since then price has accumulated over the last 7
weeks to 35.43.
This is in
the face of extreme fear, ultra-high volume, negative sentiment and an
onslaught of bad news.
Based on Dow
Theory, expect limited downside from present levels but a potential move to
47.50. There will be gut wrenching volatility so hold on to your stomach.
If a market
refuses to go down on bad news, expect an upside surprise.
This should
support stock and bond markets around the world as presently stock price
correlate positively with oil prices.
On Friday, I
attended a program by Sarjit Singh, a Singaporean who was an accountant with
PricewaterhouseCoopers for 16 years and the CFO for AIA for 5 years. The
program was about playing detective with financial statements and identifying
manipulation and fraud.
I was
surprised how much manipulation and trickery goes on in our publiclly listed
companies and how many executives running companies are no more than hungry
wolves in sheeps clothing.
Do take the
effort to learn how financial statements are manipulated so you can avoid
disasters for yourself, friends and family.
Sarjit is
also on the Singapore Gvt committee of the future economy and shared his
insights on Singapore going forward. He confirmed my view that the
collapse in the SGX was mostly due to the collapse in oil. The collapse was sentiment
driven rather than fundamentally driven as presently there are many blue chip
dividend payers trading at attractive valuations due to panic and fear selling
by the uninformed.
He said
Singapore is not in recession and the government is taking fiscal and interest rate
measures to ease policy and stabilize the real estate/ stock market.
Visitor
arrivals are also increasing.
The KLSE is
stuck in a holding pattern waiting for catalysts. Continue to invest in quality
companies with low debt, recurring income, increasing earnings and sustainable
cash flows.
If you have
time we are holding a small cap outlook by Nigel Foo, head of research for CIMB
and a company briefing by a director of Eden Sdn Bhd at the UEM convention centre
tomorrow, Sunday at starting at 9 30.
If interested
please call Darren at 017 333 4333.
Invest well
and grow your wealth
Bill
20 Feb 2016
Dear Fellow
Investor,
Which door
do you choose?
Most things
in our life have 2 doors. Which door do you choose? As an investor the
yellow door represents popular convention and the establishment view. In
the KLSE that would represent safe and predictable shares such as Tenaga, Sime
Darby, Telecom, YTL Power, Gas Malaysia, Maybank, Public Bank and most of the
big cap GLCs.
These shares
tend to follow the market trend. If you are an equity fund manager and
buy these shares, chances are if the KLSE goes up you will have positive
performance, collect your performance bonus and keep your job.
If the KLSE
underperforms, you shares will probably lose value and you might not get
a performance bonus. However; you will not lose your job because the
majority of your fellow fund managers will also not perform.
You will
also have a good story to tell your clients. Who can fault you for buying Tenaga
as everyone uses electricity or Gas Malaysia because almost everyone uses
natural gas to cook?
Personally,
I prefer the red door. This is the unconventional door where you do not
have to contend with the investment crowd. The shares you find behind the red
door have less research coverage, are not on the radar list of the big fund
managers and are not popular with the foreign funds. These shares are perceived
to be risky but stock market history has proven this to be misleading. They are
the most profitable.
Gervais
Williams, fund manager of the year in the UK for the last 2 years and overall
for the last 8 years has outperformed his peers and has been profitable even in
down years by choosing the red door.
He wrote 2
classic books on why small outperforms big meaning small caps have done better
than the conventional blue chips.
2016 will be
a challenging year and I recommend you select small/ mid cap shares. Stocks in
companies with lots of cash and little or no debt. Companies with guaranteed
contracts and leases and rents. Sellers of necessities with the ability to
raise prices.
How to enter
the red door:
Next week
Sunday, 28 February Nigel Foo, Head of Research for CIMB will give a
presentation on Small Cap KLSE shares. Below are the details: We also
have a corporate presentation by Mr Ting, director of Eden Bhd, a small cap
and a Volume Spread Analysis presentation by Martin Wong. (This is the
red door method of technical analysis used by George Soros and this is not
generally known as I luckily discovered it in a biography of him in a small
hidden footnote and how he made billions short selling the UK pound.)
Speaker:
1. Nigel Foo
(Cimb top small cap analyst) - Market Outlook 2016 and Beyond and Stock to
watch out for.
2. Martin
Wong (Creator of iVSAChart) -
3. Mr. Ting
(Eden Berhad, Director)
Date: Feb
28, 2016. SUNDAY
Time: 9.30
am - 5 pm
Fees: RM50 to cover lunch and refreshment.
Venue: UEM
Training hall, Jalan Templer, Petaling Jaya (off Federal Highway)
Below is a stricken
baby elephant hooked up to drip after vets rescue him in Indonesia
Its legs
covered in thick mud, this elephant struggled to get free when one of its front
legs got tangled up.
The baby was
totally stuck – but vets came to the rescue at the Balairaja wildlife sanctuary
in east central Sumatra where it lives.
1 good
strategy which will be presented Sunday with small cap shares can help you
profitably get through the tangle and mud traps in the KLSE.
Invest well
and grow your wealth
Bill
8
Feb 2016
Dear
Fellow Investor,
Do
you bet on the horse or the jockey? As a speculator in horse racing
should you focus on the horse or the jockey ? To put the odds in your
favour you need both. An excellent jockey as well as a quality horse.
Companies
are the same and the measure of management quality that I focus on is ROE or
steady increasing return on equity over at least 5 years. That shows
stability, focus on profits and the ability to overcome adversity.
Malaysia
has many world class business managers who have weathered the financial storms
over the years. You know who they are.
Malaysia
also has a strong business culture which encourages risk taking. Using
our IVSA sector analysis screens we can find those industries and businesses
which are growing- quality horses and those that are in decline – also ran
horses or donkeys.
Volatility
in world stock markets is at extremes last seen in August 2015. .
We
have focused on export stocks as well as some consumer stocks. We have avoided
GLCs, construction, property developers, gambling counters, oil companies,
REITS and large cap debt laden shares.
We
have also kept our small and mid-cap shares with rock solid balance sheets and
with steady sales and earnings. Our cash levels are also high. Once the
turn comes we will be well positioned to profit.
What
is holding markets back ? In a nutshell the oil price and China
uncertainty. The 1MBD problem is yesterday’s news.
I
am not worried about China. China has the financial resources to weather the
financial storms. They talk with their money as evidenced by the 1MBD
bailout and the recent offer to buy Shell Refining.
They
use their reserves to build infrastructure, buy productive assets and grow
their domestic economy. They build win business partnerships with
African/ Asian/ Middle Eastern countries rather than destroy them by war.
I
disagree with the talking heads on Bloomberg and CNBC who are universally
negative on China. The same is true for oil. Some establishment
analysts are calling for oil to collapse to USD 10 per barrel or lower.
Below
is a contrary view by Dr Kent Moors a geologist and oil analyst: He feels
that much of the oil price collapse is caused by manipulation by the US media
and the US government who control the US futures markets via the Federal
Reserve and Treasury department with their unlimited funds to naked short
futures contracts.
Do
have a happy and prosperous Monkey New Year,
Bill
A
winning combo !
The $600
Million Signal that the Oil Crunch is Over
by DR. KENT
MOORS | published FEBRUARY 5TH, 2016
Pundits just
missed a $600 million signal that oil’s downward slide is over.
You see, oil
“sages” everywhere are now calling for $40-$50 a barrel oil by mid-year. As
proof, they call on vague rumors of a Saudi-Russia deal to cut oil production,
costly shale oil producers collapsing, or the energy debt crisis.
But they’re
overlooking one crucial thing – the main signal that oil prices are turning
around.
You see, the
largest move of its kind ever just took place in oil markets… $600 million
worth in one day.
Pundits may
have missed it, but that doesn’t mean you have to. It’s a clear sign that oil
prices are turning around…
And that
it’s time for you to get back in the game…
Oil Prices
Are Artificially Deflated – For Now
While
volatility in oil prices continues, a consensus is rising that the current
slide is nearing its end. Daniel Yergin yesterday was the latest “sage” to say
he expected crude in the range of $40-$50 a barrel by mid-year.
Of course,
that still puts the price at less than half of where it stood in the summer of
2014, just before the collapse set in.
My algorithm
to determine the “discount” on oil caused by distorting artificial manipulation
puts it at $12 a barrel at close yesterday for WTI (the benchmark for oil
futures contracts traded in New York).
With WTI
closing yesterday at $31.72 a barrel, that effectively puts the actual market
price at a shade below $44. That’s hardly $70 or $80, but it will allow us to
make some nice gains when buying returns in earnest to a distinctly oversold
sector.
And return
it will.
Because a
singular event happened this week, an event that indicates the end of declining
oil prices more than any other…
This $600
Million Signal Shows That Oil Is Going Up
Despite what
the pundits will tell you, this is not about a Russian-Saudi agreement to cut
production, a wave of domestic company collapses in the above-cost shale
operating sector in the U.S., or the expected next phase of a constriction in
high risk energy debt.
While all of
these are factors that are likely to be weighing in shortly, the main signal
came earlier this week from something else entirely.
This is an
indicator I have been watching for a while. And it shows how negatively trades
that have little to do with the underlying dynamics of oil have influenced
crude prices.
On Tuesday,
the sale of a huge position in the VelocityShares 3x Inverse Crude Oil ETN
(NYSEArca:DWTI) hit, amounting to more than 1.8 million shares with a total
value of over $600 million. Given the delay in transmission, these orders were
actually filed on Monday.
WTI then
spiked 8% on Wednesday.
An ETN, or
exchange-traded note, operates much the same way as an exchange-traded fund
(ETF). Both will track an index or equivalent. DWTI, for example, is pegged to
the S&P GSCI Crude Oil Index ER and provides a three-time inverse return.
That means that if oil goes down, the ETN will go up three times as much.
However,
there is one crucial difference…
This Was the
Largest ETN Move Ever in One Day
While an ETF
provides a return based on the underlying performance of the stocks in an
index, an ETN is actually an unsecured, unsubordinated debt security meant to
combine the performance of a bond with that of an index.
An inverse
over-weighted ETN like DWTI will be highly volatile when the underlying
investment instrument fluctuates widely in price.
Remember,
DWTI will return a reverse that is roughly three times the movement in oil. If
oil prices are declining, DWTI will make a holder some nice cash quick.
On the other
hand, when oil is advancing, the losses can quickly add up.
DWTI doubled
in value rapidly last month as the price of oil declined. But it has been
declining in value over the past several days as crude oil has advanced. It is
still up over 20% for 2016 as a whole.
Following
this rise in oil, and fall in DWTI – remember, three times as large – an
unknown number of heavy players bailed out this week in one of the largest
coordinated withdrawals from an ETN ever recorded in a single day, valued at
$600 million.
Whatever
else is happening, these players have clearly concluded the decline in oil is
over.
Now, a move
of this size has significant ripple effects…
Less Than
Half of This Bearish ETN is Left
Using data
provided on the VelocityShares’ website, the overall market cap of DWTI
declined from over $1 billion to less than $420 million on Tuesday and less
than $325 million on Wednesday as a result of the large liquidation.
Given that
DWTI’s market cap averaged about $200 million when the oil pricing curve was
less volatile, this provides stark evidence that the anticipation of a downward
movement in prices is a recent phenomenon.
But that’s
not all. The $600 million redemption that hit on Tuesday also had another
effect…
Positive
Effects for the Price of Oil Are Spreading
Credit
Suisse, a Swiss financial services company, is the issuer of record for DWTI.
They also issue a “sister” ETN, the VelocityShares 3x Long Crude Oil
ETN(NYSEArca:UWTI), which moves in the same direction as oil, three times as
fast.
As our
mystery oil players were redeeming $600 million worth of shares in DWTI, Credit
Suisse was forced to buy back any short positions it was carrying – rapidly.
That, in
turn, emphasized the decline in DWTI’s market cap, providing additional fuel
for a further rise in crude prices. This led to some rather pronounced spikes
in trading volume of crude oil futures contracts.
The most
intriguing element of this story, however, illustrates just how much pressure
artificial moves to keep oil down can exert. On Wednesday, crude prices rose by
8%, completely ignoring what would normally have been news pushing prices down.
You see, the
Energy Information Administration (EIA) on Wednesday reported that weekly oil
supplies had increased by a hefty 7.8 million barrels. A surge in oil
inventories of that size normally pushes oil prices down significantly.
Instead,
exactly the opposite took place.
That shows
just how undersold the oil market has been, and the force behind oil’s upward
pressure now that some of these artificial moves to keep oil down are lifting.
