Higher rates are an indication of economic recovery

12 March 2017

Dear Fellow Investor,

The base metal index, traded on the Toronto Exchange which includes copper, lead, aluminium, zinc etc has fallen 12.5 % in the last month. It seems to be on target to test support a 11.25.

Daily chart of the base metal index traded on the Toronto Exchange.

For this reason we sold all  our Press Metal Sdn Bhd position on a break of chart support Wednesday @ 2.60.   Also China has slowed down their base metal purchases and copper commercial traders are increasing their short positions. 

Press Metal is a play on aluminium as they are the third most efficient aluminium producer in the world and enjoy high profit margins as  well as favourable demand trends. Infrastructure development in China/ US/ Europe are strong tailwinds for higher base metal prices so let the market shakeout before we buy Press Metal again.   

In last weeks letter I detailed our 2017 performance. It included the SGD currency gain, Singapore share gain as well as the KLSE share gain.

Most of our clients have portfolios in Singapore, Hong Kong and Malaysian shares . Our EPF accounts only hold Malaysian shares and the performance for Malaysia for 2017 averaged 9.3 % while the Sing/ HK and Malaysia portfolio averaged 13.6 %.

Obviously, I can not promise short term performance because no one  except God knows the future. The odds for the immediate future is 50/ 50 but then we have to pay costs  it is generally a negative sum game unless you understand the dynamics of price and volume

As a value investor, I am more confident in long term performance of quality companies which we hold.  If they have a history of sustainable earnings growth with competent managers it is likely they will continue to perform.  

If we buy them at least the odds are in our favor and our costs are minimal.  Our dividends allow us to compound our returns .

Sorry for the confusion.  

On the 16^th of March interest rates in the US are expected to rise.  The world waits but I am not worried. Higher rates are an indication of economic recovery.  This will benefit our investments.

Crude Oil continues to drop due to over supply issues but longer term demand will catch up especially in Asia, India and China. We hold Gas Malaysia for our managed accounts and that has performed well and does not seem to correlate with crude oil prices.   

I recently sold the XLE in our Singapore PGWA accounts. This is an ETF traded on the NYSE that holds a basket of quality oil companies. We made  small profits and earned some dividends .    

If crude oil gets slammed  another 10-20  % we will buy again.

Invest Well and Grow Your Wealth
Bill