Buy Malaysia & Singapore!

30 July 2016

Dear Fellow Investor,

Buy Malaysia and Singapore !

Despite the onslaught of negative news and pessimism, there is value in these 2 markets.

 

The price to book ratio of the KLCI vs the MSCI shows the Malaysian stock market trading at a substantial discount to the MSCI world index.   There are quality dividend paying shares which continue to reward shareholders with steady dividends and deal in the necessities of life such as telecommunication, consumer products and power assets.  

Insurance companies and state funds such as EPF with multi billions to invest support these   companies to provide decent retirement returns for their   members. Foreign investment funds are also slowly accumulating.  Retailers are still on the side lines paralyzed  by fear and the daily dose of negative news.

The same is true in Singapore. As noted by True Wealth publishing:  

·         The cyclically adjusted price-earnings ratio (CAPE) says Singapore is one of the cheapest markets in the world 

·         The price-to-book ratio (P/B) is at a level that has historically been followed by huge market gains 

·         The market’s dividend yield is one of the highest it’s ever been 

And there is a trump card. (Not Donald Trump but Gary Dorsch of Global Money Trends) This is the flooding of the world of helicopter money.

 

“Malaysia’s surprise rate-cut on July 13th, made it the 54th central bank to ease policy since the beginning of last year. Will Carney make The Bank of England the 55th? As Reuters reports, interest rates have never been lower, monetary policy has never been looser. A total of 54 central banks around the world have eased policy since the beginning of 2015 to boost growth, ward off deflation, or both. Expectations are certainly biased towards The BoE cutting rates, as the views of the eight colleagues on the BOE’s rate-setting panel become more clear. Chief Economist Andy Haldane favors a “sledgehammer” approach to stabilizing the economy in the wake of Britain’s decision to quit the European Union. "This monetary response, should be delivered promptly and muscularly.”

 

This trend of world money printing is to keep the game going and avoid a world recession.  Much of this money will flow into income producing dividend shares, gold, silver and commodities.

Invest well and grow your wealth,

Bill

This red eagle is from the Port Weld Eagle Sanctuary near Taiping, Perak.  It is interesting to watch the eagles  swoop down like  bullets  from the sky to catch   fish.   They are truly great hunters.  I keep a marble statue of an eagle on my desk to motivate me to find investment opportunities just like the eagles.

 

Lion are the kings of the jungle and the stock market is a jungle

 

23 July 2016

 

Dear Fellow Investors,

 

Below is a chart of the KLSE overlaid with the current Malaysian

 

interest rate.

Have we entered into a period of declining interest rates after the recent ¼ point cut?  As growth in Malaysia and the world slows, Bank Negara has room to lower rates. This will support property developers, construction, Reits and consumer spending.

 

 

The macro picture shows virtually every central bank in the world is using every tool at their disposal to ease monetary policy.  The reasons are slowing growth and deflation.  Since the Breton Woods agreement in 1971 when the world went off the gold standard and replaced it with the credit standard credit growth has exploded and much of this easy money is flowing into equities and financial assets. The money is not going into the real economy and that is why we suffer from low growth and falling incomes.

 

At some point the credit creation Ponzi game will collapse, people will lose confidence in fiat currency and return to hard assets such as gold, commodities, farm land  and income producing property.  No one knows when and it will take a Black Swan event to trigger it. 

But not until November 2016. 

With the upcoming US election in November, expect markets to continue to rise as Obama pulls out all the monetary stops to get Hillary Clinton elected. Obama controls the Federal Reserve and treasury and will sacrifice the economy to retain power.  Janet Yellen, Obama’s stooge has even said she may adopt the failed negative interest rate policy to stimulate growth.

Japan and Europe have tried negative interest rates and they are both stuck in recession, no job growth, falling incomes, and rising poverty.

 

 

  

Permandu.gov.my
 
 
 
 
 

 

 

Malaysia, however; still enjoys positive growth with low inflation although it has marginally declined in the last 2 years. Sentiment is negative but there are high quality niche companies bucking the trend. 

To find them takes diligent on the ground research and careful study of their financials.

We use tested fundamental and volume spread analysis filters to find these companies and then when we find a promising company we schedule a visit to get an understanding of the business.   

 

 

 

This fierce and hungry tiger is ready to pounce on a prey. Tigers do not listen to news, watch CNBC, surf the internet or follow the crowd. That is why like the lion are the kings of the jungle and the stock market is a jungle.

Invest well and grow your wealth,

Bill
  

Central Bank Continue to Buy

17 July 2016

Dear Fellow Investor,

Last Wednesday, Bank Negara cut the key overnight policy rate by ¼ point to 3 %.

The immediate result was a rally in property stocks which quickly fizzled out. Selected Reits should benefit but the overall effect to the economy and stock market will be limited unless the Bank Negara officials plan more interest rate cuts.

Loan growth in Malaysia is still slow and net interest margins will be squeezed by the lower rates.  According to a prominent research analyst, do not expect a pick up in credit and property loans. Cash is still king. Those who have  FD savings will also suffer as their returns will be adjusted downward.  Less income means less spending.

On a more positive note: There are 5 words why all world markets should  continue to go up despite economic and political turmoil , low growth and low or negative interest rates in 40 % of the developed world ,  

The 5 words are: Central Banks continue to buy.This chart is from CitiBank research and the black line shows central bank liquidity is the highest since 2013.

Right now global central bank buying is the highest we’ve seen since 2013.

The catalyst has been  Brexit and that has changed downside risk to policy-induced upside.

Japan is talking about  Cold Fusion monetary policy. Cold fusion is perpetual motion to produce energy.  From a physics perspective this theory has been discredited but Japan central bankers are talking about it. They will issue bonds with a low or negative interest rate that have no expiry dates. They will be perpetual loans that will never have to be paid back.

The result is a perpetual money supply created out of thin air. The officials believe this should create growth and prosperity for all the Japanese.

Perhaps this is why the Japanese are loading up on physical gold. They believe in gold more than PM Abe and his bankers.

With the increased Central Bank liquidity continue to focus on quality Malaysian, Singapore and Hong Kong shares that pay dividends.  We need income to pay our expenses and a vehicle to protect against possible inflation. I like selected Reits because of above average income, stability and the backing of quality real estate. The pig story is a metaphor for real assets but do not overdo it as far as gold is concerned- perhaps 5 to 10 % of your wealth. Gold pays no dividends, there are storage/ security issues  and I do not for see a world collapse any time soon.      

Invest well and grow your wealth,
Bill

Jim Rogers presentation at KLCC

9 July 2016

Dear Fellow Investors,

On Wednesday 6 July I had the privilege of listening to Jim Rogers at a presentation at the KL Convention Centre. Jim is a famous investor and financial author who was once partner to George Soros.  He migrated in 2007 from the US  to Singapore and became a  permanent resident where he lives with his wife and children while managing his investments.  

 

His reasons for choosing Singapore reflects his views on world markets and the economic road moving forward.

Investing Legend Jim Rogers with yours truly . Notice his fearless stance.

 

Jim is a bull on Asia, China and commodities. His view is that China will rise and be the next big country as Europe, the UK, the US and most developed nations continue to decline. He was born in 1942 in a small farming town in rural Alabama, USA  where hard work, savings, education and investment  were the economic model for prosperity. This was the free market capitalist  business model that made America rich and great.

The free market business model has  changed. America and developed markets face bankruptcy. The new developed world model has now moved towards socialism and entitlement. These include increased welfare, government spending, increased regulation, higher taxes, debt and fiat money creation.  It has resulted in slowing world wide   growth, destructive  wars, a migrant crises and  financial market turmoil.  

The recent dramatic gold/ silver price rise is evidence of the beginning loss of confidence in  the socialist business model and the politicians who administer it.

Jim mentioned that savings rates in China are over 35 % of income while in the US are less than 2 %. This giant pool of savings is fuelling growth and prosperity. 

The Chinese he mentioned have regular Plenary sessions to guide the economy. The most recent one in 2013 focused on the capitalist  business model with the focus on building wealth via the market rather than on politicians creating wealth via government programs, printing money and giveaways.

Jim shared his portfolio: Long: Gold, silver, Malaysian plantation shares, China, HK and selected Asian shares, USD  Short:  S & P, Dow, UK and European markets

He feels that there will soon be a great crash and all markets will collapse. This includes, shares, speculative property, bonds, and fiat paper money. Only real assets such as gold, silver, grains, land will survive. Next comes a world wide depression.

The problem with this is that he has been saying this every year since 2008.  With his 300 Million USD fortune I suppose he can wait  out the drawdowns . I would rather be like George Soros who has an 8 billion USD +  fortune and simply plays the trends and takes what the market offers in real time.  That’s why Soros’s fortune continues to increase.

Here is some good news for our IVSA volume spread analysis group. A few years ago, I read the auto biography of Soros and it was mentioned Soros uses price and volume in his analysis.

I asked Jim about this and he confirmed it. This is from the horse’s mouth and not a third hand opinion. By the way if you gamble on horse racing and you want to know which horse will win go to the horse stable and talk to the horses.

Price and volume talk to you in their own language like the horse talking to the little girl. The price and volume language is the language of market money making- more powerful than any language on the planet.

Jim Rogers and George Soros sat side by side managing billions of funds while running the Quantum Hedge Fund.   

Expect world stock markets to stabilize next week. Helicopter Bernenk is going to Japan to advise PM Abe on money printing and QE. The Bernenk is the king of money printing. The UK is considering lowering interest rates due to Brixit turmoil while the US plans to keep interest rate policy on hold.  Low or no growth and market turmoil continues in Europe so expect easier money in the weeks ahead. This will benefit VSA stocks so enjoy the ride. At some point Jim will be right but not now.

Invest well and grow your wealth,

Bill

Meeting with Motley Fool Ceo on Facebook

Dear Fellow Investor,

 
Yesterday morning, I attended a Facebook live meeting with Motley Fool CEO David Koh and his team of Singapore analysts.

 

Topics included Singapore Reits and property, Brexit and its impact on Singapore, and  Singapore market valuations.

Valuations are currently about 12 PE which based on earnings is one of cheapest stock markets in the world. This is partly because of   the penny stock market crash last year that wiped out many investors who were burned so badly they are still staying on the side lines earning 1 % in their money market funds.

 

Smart money is buying. 

 

Singapore has a world class market and economy and the selling is more based on sentiment than fundamental valuations – just like the Brexit selling. Dividend yields offer the highest yields of any Asian market.  

The consensus views were that there are signs of demand picking up for quality Reits because of their attractive yields approaching 6 % while money market rates are about 1 %. If you think world growth will continue to slow institutions will continue to support Singapore Reits as a proxy to low worldwide bond yields.

Also tourist and business arrivals are picking up and institutional money managers want to re allocate assets from Europe to Asia as well as shift more of their operations to Singapore, Singapore being the financial hub of Asia. 

Singapore is also very attractive due to a business and tax friendly environment compared to Europe and developed markets.

This catalyst is Brexit which will now place a fog of economic uncertainty on Europe and the UK   for at least 2 years.  As Brexit is unfolding no one of the Motley Fool group had a view of the impact. Their view was to focus on what we can know: good companies, well managed, strong balance sheets, low debt and growing sales and earnings.  

I personally feel that capital flows will move towards Asia. Money always goes to where it is respected best.  

 

Growth in Asian countries is robust, taxes low and regulations that are business friendly.  Demographics also favour Asia as there are more young people than in Japan and developed markets.    They will contribute to growth.

 

There are some very attractive Malaysian/ Hong Kong and Singapore companies that fit our model and we have found a scientific way to identify and profit with them.

 

We have adjusted our trading plan to take into account the changing dynamics of markets. We have developed with our team of programmers’ proprietary software which identifies high quality fundamental shares with accurate buy and sell signals. 

In my years in markets I have never seen any software or method to equal this. It is based on volume spread analysis.   

We will begin to allocate client assets based on this model.  This will incur more of a trading approach.

 

For our Malay friends and clients we wish you a safe,  and happy Hari Raya

Bill