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