Central bank intervention has kept stock market rallies going but the rallies are beginning to taper.

22 April 2017

Dear Fellow Investor,

Central bank intervention has kept stock market rallies going but the rallies are beginning to taper.

The euphoria that Trump tax reduction and fiscal spending policies, low interest rates, repeal of the expensive and inefficient Obama care medical program would boost the world economy and stock markets is meeting political reality.  Many in Trump’s own party are resisting cut backs in social entitlement spending.  

Most politicians will never vote to cut a free program or benefit as this is political suicide. That is the problem with Socialism. It is hard to reverse . The end result of Socialism is that the money runs out. Witness Venezuela:  Complete chaos, social unrest, lack of food and medicine and hyperinflation

Couple this with historical high PE valuations in the S & P, Dow, Russell and Nasdaq (S & P @ 24.45, Nasdaq @ 25.45 Dow @ 20.45 and Russell 2000 small cap @ 111 )  and we see professional money managers shifting to emerging markets in Asia/ Japan/ Europe/Singapore/ Malaysia/ HK where valuations are more reasonable.

Should this worry us ? 

Despite rising interest rates, geopolitical uncertainty, North Korea, the French election , BRIXIT, wars in most of the Middle East, oil price drops, I am not worried and neither should you. The below chart of money supply growth trumps all. The massive QE will find its way into financial assets world wide but we must be careful to select the right ones and ask ourselves, where is the money flowing to ?

What can we control ?

As an investor, I do not worry about what I can not control. Interest rates, currency rates, inflation rates, commodity prices, geopolitics, election results etc are beyond our control.

What we can control is our selection of promising companies based on measures of financial strength, valuations, growth in sales and earnings as well as honest management. My investments are made based on probabilities. If my analysis puts the odds in my favour, I go for it.  I am not always right but over time this method has produced steady returns.  When I am wrong, I exit and look for something else.

Dolly and I  just returned from 1 week in Taiwan. 

Their stock market and economy is booming. Especially semi conductor shares.  When riding the MRT, we saw  motivated traders on their smart phones   booking orders.

I found a promising  Taiwan semiconductor company for our PGWA accounts but I need to make a careful financial analysis before investing.

English is not a problem as most young people/ students speak English and are happy to practice their English with a foreigner. Taiwan is also super safe and clean - like Singapore. Taiwanese are also very polite and helpful.  Costs of food and accommodation are  reasonable.

We recently took profits on some of our Malaysian shares and I am looking for value opportunities such as companies overlooked by the crowd to allocate our capital.  Money supply growth in Malaysia, foreign fund buying  as well as the possible upcoming election should provide support.

Invest well and grow your wealth, Bill

Notice the keep off the grass sign at the Taipei Zoo. Punishments for breaking the law in Taiwan are very harsh