Who will win the US election?

29 May 2016

Dear Fellow Investor,

Many of you have asked me who will win the US election?  Watch the Mexico Peso and Predictit.com to get a real time view. Predictit.com is a real money site where gamblers bet on events including elections.  They are like horse race bookmakers and set the odds every day.   

Weakening of the Mexican Peso correlates to Trump’s popularity among Americans voters who want to close the door on Mexican illegal immigrants. If the Mexican Peso were strengthening, Hillary/ Sanders would be gaining as they would welcome more Mexicans, migrants, illegals  to the US ( more voters for her and her party) Trump has a different view and Predictit proves the point.

The above chart is from Gary Dorsch who produces Global Money Trends. His views are realistic and profitable for his subscribers. The cost of his service is very reasonable and I recommend it. Google Global Money Trends for information.    It is suitable for commodity, currency and stock market players. It gives the big picture.   

May has been a gloomy month for most world stock markets including Malaysia and Singapore.  Fear and uncertainty are the dominant emotions.  Developed markets in Europe and the US have suffered with the fear of higher interest rates being imposed by the US Federal Reserve.

In my opinion the US monetary authorities with their political masters in coordination with other central banks will do all in their power to prevent a world stock market collapse so a small rise in interest rates won’t matter.  A panic or collapse could undermine the power of the politicians who control the world and possibly even cause social unrest. Expect corrections not major drops. 

There is a hint of social unrest  in European countries with the migrant crises and the possibility that the UK could leave the EU.  A neo Nazi was almost elected president in Austria last week by the public who are fed up with the establishment self serving politicians, rising unemployment, influx of refugees, and shortage of housing . He lost to an anti establishment socialist by less than a few thousand votes.  

Politicians with the central banks can turn the negative mood. These banks include the Bank of China, ECB, and Japan Central Bank.  They have the tools and the will to do all it takes to prevent stock market collapse and economic disaster.   

Tools include unlimited money printing to buy government bonds  to raise debt to GDP, QE as is being practiced by the EU and negative interest rates. World growth since 1970 is based on credit growth  and there is nothing to stop the politicians from  more money printing and more credit growth.

If Donald Trump wins he might fuel a stock market/ property boom like Ronald Regan. Trump is the master of credit growth. He built his multi billion property business with credit. He will rebuild America’s crumbling infrastructure with credit.  Hillary  might do the same if  elected but now as well as Trump as Trump is a businessman not a crooked politician. 

I do not believe Trump would impose trade restriction on China/ Asia/ Europe/ and Mexico. He will not bar Muslims from traveling to America.  

He says these things to get elected but once elected, he will forget  and  it will be business as usual. He is a hard  nosed businessman  and does not want a world depression by shutting down world trade. I think the Hillary and Bernie Sanders understand that credit growth is the solution just like Obama.

Obama has  ordered banks to give housing loans to buy a house  with a 3 % down payment guaranteed by the FHA, the federal housing  agency. It is even possible to borrow the 3 % for the down payment. Could this be another housing bubble ? 

The KLSE is suffering under a cloud of uncertainty as witnessed by low trading volumes and foreign fund outflows but could see a turn in world stock markets if fiscal and monetary stimulus is employed in China, US and Europe.

Companies that we hold should benefit as they are solid.

To remove the market uncertainty for our clients , Phillip is offering an investment conference on 18 June with several distinguished speakers. It is FOC to clients.  Please clink on the link or copy and paste to your brouser below for details and registration

https://www.fame.com.my/seminar2016.aspx

Invest well and grow your wealth

Bill

My latest trip to Taiwan

21 May 2016

 

Dear Fellow Investor,

Dolly and I just returned from a great holiday to Taiwan. We went with Reliance Travel and with Reliance all you have to do is show up at the airport. They do all the rest.  The weather was cool with slight rain, the food was tasty with much variety, the hotels were comfortable, the internet fast and the service impeccable. The Taiwanese are very friendly and welcoming people.  Costs were very reasonable and not much more than Malaysian prices.

 
 



Our group posing in front of the Grand Hotel in Taipei . The Grand Hotel has photos inside of distinguished guests such as Elizabeth Tailor, Charles Bronson, Margret Thatcher and even the first PM of Malaysia. It was built by Chang Kai Shek the first president of Taiwan.

 

 

In the quiet trading of the last 10 days nothing much has happened. Every night I checked our portfolios and there was minimal movement.  We did however collect some dividends so net were a positive result. It feels good to make money while taking a holiday. A quality dividend share allows this.

 

A good friend who is a fund manager asked me for advice in selecting shares and I will share with you what I told him.

Follow Mr Tong’s share column in the Sunday Edge. Tong is the owner of the Edge Media Group, and business savvy.   

His 2 year performance is 19 % outperforming the KLSE by over 24 %.  I am not asking you to jump in with the shares he recommends as his following may be chasing the same shares.   What you need to do is read between the lines and get into Mr Tong’s head. Try to understand his strategy and thought process and use this as a model to find your own shares. In this way you are not joining the crowd.

 

As an example, Tong recently recommended Supermax in his column. It was after Supermax and the other rubber glove companies had massive corrections.

 

I do not like Supermax as the CEO is an opposition supporter.  Using Tong’s recommendation my team researched the other glove companies and found Kossan to be a better opportunity with stronger financials so I bought Kossan for all our clients.

 

Tong’s focus is on value investing and buying shares off the radar screen of the big funds. He likes dividends. Liquidity can be an issue so you must be patient.  He is also a Warren Buffet fan and applies Buffet principles to his recommendations. He buys when there is blood in the streets so I suppose most readers of his column are too afraid to buy.

 

My favourite book on Warren Buffet is How does Buffet Do It by James Pardoe. It is only 148 pages and is sold in most bookshops. It is short and to the point. I am sure Mr Tong would recommend it.

 

Expect our markets to be quiet next week as we wait for the US Fed to make an interest rate decision in their upcoming June meeting.  Our shares should weather the storm no matter what the authorities do.

 

Invest well and grow your wealth,

Bill.

 

  

Alishan national forest in the mountains of Chiayi County in Taiwan with majestic Cedar trees planted in 1927. The elevation of the Alishan national forest is 2200 meters and you reach it by taking a narrow gauge railway to the edge of the cedar tree forest.  The air is fresh, cooling, and has a unique smell.   The tall trees as straight as bamboo trees and reach into the clouds.  These trees remind me of solid high quality businesses that continue to grow and give prosperity to their shareholders. They are able to weather the storms, disasters, predators and still remain standing

Cold water on the interest rate rising scenario

8 May 2016

 

Dear Fellow Investor,

 

Friday night’s headline US employment numbers  poured cold water on the  interest rate rising   scenario contrary to the Bloomberg blue chip consensus of investment houses led by the vampire squids Goldman Sachs and JP Morgan.

 

In the Last 3  weeks all Asian markets have  been under pressure due to fears of US interest rate rises as the last time in December 2015 when the Federal Reserve raised interest rates  ¼ point world stock markets went into free fall losing over 2.7 trillion USD in capital value.

 

Shock Headline on CNBC

The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labour force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.

Before the release of the numbers the Dow overnight futures were down more than 150 points as the continued gloom and negative sentiment caused fear selling.  After the release gold jumped USD 23, the Dow/ NASDAQ went into positive territory and the 10 year US treasury made new highs.

Based on the CME Fed funds futures contract there is now less than a 6 % chance there will be a rate rise on 23 June, the next FOMC meeting.

Our positions should do well in the next few weeks. We stood our ground and did not get caught up in the panic and fear mongering by the Vampire Squids, US Federal reserve propaganda and media hype.

After all we buy only high quality value shares with growing earnings, growing dividends and honest managements.  No need to worry. Using common sense as an example, why would potential rising rates in the US effect our investment in PBA, the Penang water authority whose only product is water, a recession proof commodity?

On Wednesday 11 May, Dolly and I will be off to Taiwan for a 1 week holiday with Reliance Travel and I hope to give you a positive report next Saturday or Sunday.   

Should you have any account queries please call Linda/ Nora or Idza @ 03 2783 0300.  For dealing you may call Steve/ Ashley/ Jeffrey or Richard who are Phillip fund managers @ 03 2166 8099.  You may email them @ pcm-dealing@poems.com.my I will also check my emails in the evening after we return to the hotel if you need assistance.  You may email me @wermineb@gmail.com

I was told Taiwan has very advanced internet, hand phone, Whatsapp coverage?

Below is something I intuitively knew but never had the scientific facts to prove the point. It has to do with stress and why observing trees will lower stress. 

 

 Being around trees makes you less stressed – study
   

People relax behind a Japanese blooming cherry tree at the horticultural exhibition '

 

Trees helps people become less stressed - and the effect increases the more trees are visible.

A new study by researchers at University of Illinois has confirmed the long-held understanding that natural scenery can be a useful tool in helping reduce psychological stress.

 

 

http://www.telegraph.co.uk/science/2016/05/06/being-around-trees-makes-you-less-stressed--study/

Invest well and grow your wealth,

 

Bill
 

For previous letters which are in a much better format you may visit my Eagle Investors blog asianequity.blogspot.com Linda will post this letter on Sunday
 

 

 

Smart money buys in times of extreme fear and panic.

30 April 2016

 

Dear Fellow Investor,

 

I hope all of you are enjoying your 3 day break this labor day holiday.

 

I am enjoying a bite of the Apple.

 

On Thursday, Carl Ichan sold his entire 6.3 USD billion stake in Apple and caused a panic sell down in Apple shares.  Financial headlines trumpeted the negatives of Apple such as slowdown in China, failure of Apple watch, lack of innovation, a one trick pony, declining revenue etc.

 

Carl Ichan is not an investor he is a corporate raider.  He buys up companies using high leverage and debt and strips their assets.  He has destroyed many companies, destroyed many lives  and profited  handsomely.

 

He was never happy with Tim Cook CEO of Apple. Cook is sitting on a huge cash hoard of USD 250 billion.     

Ichan had his greedy eyes on Apple’s cash hoard and tried to persuade Cook to spend and diversify into other companies but Cook refused.  Ichan tried every way to force the issue but failed and in disgust Ichan has walked away selling his stake with a sour grapes message. Cook won the battle.

 

Ichan’s media friends in the Wall St Journal/ New York Times/ Bloomberg and CNBC magnified the emotion and panic selling in Apple.

 

Let’s look at the facts. Apple has net cash of over USD 30 a share. Back the cash out and the PE is 7.  By tech company standards this is cheap. Google is over 20 PE.

 

They just raised their dividend by 10 % and will buy back over 30 billion of their shares. This will increase their earnings.  Apple will soon launch their Phone 7 and are focusing on their Apple pay venture which may rival Pay Pal. 

 

All good companies suffer bad quarters and in my opinion this will pass.  The Apple phone, I Pad  are still highly sought after and Apple is still on the cutting edge of innovation. They are also diversifying into their services division

 

Daily chart of Apple showing one month of price action. Notice the last 3 bars on the right edge of the chart. These are volume spread analysis patterns of bag holding, hidden potential selling on wide range price bars and ultra high volume. They are evidence of smart money buying. Smart money buys in times of extreme fear and panic.

 

This is a rare opportunity.

 

I personally bought a small position 100 shares  @ 97.09 in the panic and look for a target of at least 120 as well as a handsome dividend.  

 

We can buy Apple shares for those who have a Phillip PGWA account. Please contact me if you wish to do so. 

For those who hold Inari, Inari should recover with Apple as Inari is a supplier of Apple components and will grow with Apple . 

 

Inari will also benefit as they are diversifying into the China hand phone space with their recent acquisition of PCL a Taiwanese computer component company.   

 

Invest well and grow your wealth,

 

Bill