The smart money is buying quality banks

26 November 2016

Dear Fellow Investor

Last week, I reviewed the CRB index which is a basket of all the major world commodities. 

Let’s take a closer look.

The 50 week moving average (the blue line) supported  last week’s
higher prices.  Price reversed off the support.

 

This could signal of higher inflation on the horizon. Commodity markets are designed for hedgers. Users are the buyers while producers are the sellers so  for the last 4 years sellers have been in control but there has been a shift as commodity prices have stabilized and are gradually moving up. The supply and demand balance is shifting.  

Demand for base metals is surging. These include copper, zinc, nickel, tin, aluminium, iron ore etc. 

Commercial traders as I mentioned last week control commodity markets as they deal in the physical product. They are the smart money.  They are beginning to load the boat.  Do not ignore them. 

The smart money is buying quality banks:

A bell weather of the Singapore exchange is OCBC Bank. We hold this for most of our managed PGWA accounts.

Notice the washout 0n 8 November designed to strip weak holders of their positions. As of Friday OCBC has risen strongly. On the IVSA chart notice the numerous green arrows and no red arrows. This shows demand is returning. Professionals are buying.

Quality banks all over the world are now back in favour because Trump intends to loosen  capital requirements, cut thousands of useless business regulations and raise interest rates. 

This is spilling over to free market economies such as Hong Kong and Singapore. DBS and UOB have also risen smartly.  

Singapore banks are trading at price to book levels not seen since the 1998 financial crises due to the onslaught of negative news, and fear mongering by the financial media.

As value investors, what are you waiting for ?

In Malaysia/ Singapore there are value opportunities. Look for companies that get their revenues in USD, can raise their prices with inflation and can leverage on the Trump boom. 

Make sure their financials are solid. 

How do we benefit ?

We buy value when the news is bad.

What buy a ticket on the Trump train. What helps us is that Trump is a businessman and not a politician. His agenda is to create wealth and reward hard work and innovation.   Many of his team are also  businessmen and someone commented his economic team is an investment banker’s dream. 

Invest well and grow your wealth,

Bill

The face of a prosperous value investor- calm, no worry, a full stomach and sleep at night