9 October 2016
Dear Fellow Investor,
“Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria. The best time to buy is maximum pessimism and the best time to sell is maximum optimism .
" Stock investor John Templeton (2012- 2008) "
Fund manager Ken Fisher repeated
Templeton’s quote on a Bloomberg interview Wednesday.
He reviewed the current uncertain pessimistic sentiment effecting most world markets such as volatile oil and gold prices, interest rate fears, high debt to GDP, low growth, possible collapse of Deutsch Bank in Germany, Brixit, media frenzy about the US election and so on.
He stated that the main stream media fuels the pessimistic, negative fires and scares the average investor who is content to leave his savings in a bank earning a tiny return. The below chart of money flow proves the point.
The above chart shows cash flows into US money market
funds since early 2015 out of Mutual Funds (Unit Trusts) are rising. It
is evidence of pessimism by retail investors.
Although the KLSE has been well supported at current levels many retail investors are pessimistic and have reduced their equity unit trust holdings. They will regret this decision. Selling fear is a wrong decision.
Bear markets/ recessions do not start on pessimism so in my opinion I take the opposite view. There could be a good rally in the last quarter of 2016.
No matter who wins the US election, both will spend and keep interest rates low. There is a strong seasonal tendency that after a Democrat wins the US presidential election the next year markets will go up. Democrats are big borrowers and spenders.
Clinton is a democrat but Trump is also more of a democrat than a Republican so if Trump wins that should also be market positive. Most of the big guns in the Republican Party have abandoned Trump to support Clinton. Even the Bush and Romney families are voting for Clinton. This is why if Trump wins he will act as an independent with no debts to special interests and the Republican Party establishment. He will borrow and spend.
This could be more bullish than should Clinton be elected.
Oil prices appear to have turned. The agreement between Saudi Arabia and Iran appears to have put a floor on the oil price at USD 50 per barrel. Russia may soon join the group. This is bullish for the Malaysian and Singapore economies as higher oil prices will filter through the economy.
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Although the KLSE has been well supported at current levels many retail investors are pessimistic and have reduced their equity unit trust holdings. They will regret this decision. Selling fear is a wrong decision.
Bear markets/ recessions do not start on pessimism so in my opinion I take the opposite view. There could be a good rally in the last quarter of 2016.
No matter who wins the US election, both will spend and keep interest rates low. There is a strong seasonal tendency that after a Democrat wins the US presidential election the next year markets will go up. Democrats are big borrowers and spenders.
Clinton is a democrat but Trump is also more of a democrat than a Republican so if Trump wins that should also be market positive. Most of the big guns in the Republican Party have abandoned Trump to support Clinton. Even the Bush and Romney families are voting for Clinton. This is why if Trump wins he will act as an independent with no debts to special interests and the Republican Party establishment. He will borrow and spend.
This could be more bullish than should Clinton be elected.
Oil prices appear to have turned. The agreement between Saudi Arabia and Iran appears to have put a floor on the oil price at USD 50 per barrel. Russia may soon join the group. This is bullish for the Malaysian and Singapore economies as higher oil prices will filter through the economy.
Since June 2015 crude
oil has been congesting with no direction. Notice the higher bottoms since
August 2016 and the absorption at the high. This in my opinion is selling
absorption. After a challenge of a new high short sellers will come in to drive
the price down. It looks like they are failing as commercial traders come in to
absorb the selling. To confirm this, notice the higher bottom in
mid-September. If price breaks out on high volume expect a run to USD 60.
If oil runs to USD 60:
We still need to be mindful of what companies to invest in as I have mentioned in my letters. Most of all avoid highly leveraged companies.
Invest well and grow your wealth,
Bill
If oil runs to USD 60:
We still need to be mindful of what companies to invest in as I have mentioned in my letters. Most of all avoid highly leveraged companies.
Invest well and grow your wealth,
Bill
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