Happy Fire Rooster Year for My Chinese Investors

29 January 2017

Dear Fellow Investor,

Today is the second day of the Chinese rooster year and I wish all of you a peaceful, happy and fruitful year ahead.  As long as we align ourselves with the dominant trends which I will review these wishes may come true.

The Trump Trend

With President Trump’s  proposed trade policies of protectionism, high tariff’s and make America first policies  how that will affect  bonds, equities, currencies, commodities, and property ?  How will Asian markets including Malaysia, Thailand and Singapore be affected ?

Rising Interest Rate Trend and Rising Commodity Trend

My advice is to focus on 2 emerging trends such as rising commodity prices and rising interest rates. Within these trends, select shares that offer value  and a margin of safety.

Invest in well managed  income producing property that produce cash flow. Certain REITs and property developers should be OK especially those that can raise their rents. Focusing on commodity related equities will protect us against inflation and a resurgence of commodity prices.   This is already happening.

Weekly Jeffrey CRB commodity index consists of 19 commodities including petroleum, soft commodities, grains and metals.

The CRB reflects the health of the world economy. In January 2016, the index bottomed after a 5 year bear market and has been gradually trending higher. It is on the cusp of a breakout. Trump’s potential infrastructure boom will move this index to new highs- US demand for aluminium, lead, copper will increase.  China is already heavily buying physical commodities.

Many leading Australian mining companies have had huge gains in the last year. Some over 150 %.

Having some physical gold and silver  ( about 5 to 10 %) should be a good inflation hedge with this scenario. I read yesterday that Volkswagon is now using tiny silver wires embedded in their windscreens to defog and de ice. They used to use copper wires. Silver is more efficient and a better conductor than copper.  Other auto makers are adopting this technology.  This could lead to more  silver demand and higher silver prices.

The TLT 20 year treasury bond ETF has had a major collapse as interest rates are rising in the US, Europe and most of the world.

Combine rising commodities and rising inflation we need to invest with these 2 trends.

Examples of equities which could benefit include well managed plantation companies and  banks which are already moving up as higher interest rates increase their profits. OCBC bank, our major holding in our PGWA accounts has recovered. Some Malaysia banks are showing positive price action.   There are several ETFs traded on the NYSE which benefit from rising commodity prices and interest rates. 

If you want more information and suggested investments in these sectors, please contact me.  I can purchase for you in your PGWA account.

Invest well and grow your wealth,

Bill

Australia produces beautiful investment grade gold and silver coins available from the Perth Mint. It is worth taking a holiday there and buy some. The coins are a lasting physical memory. The Perth Mint is owned by the government so you can be assured that the coins are genuine.