Expect a follow thru KLSE rally

25 August 2018

Dear Fellow Investor,

On Friday night Malaysia time , EWM the Malaysian county fund ETF traded on the NYSE had a solid 1.4 %bein rally. EWM has an exposure to quality blue chip Malaysian shares including Maybank, Public Bank, and Genting Malaysia. Expect a follow thru KLSE rally on Monday .   

 

This positive move in the EWM shows renewed confidence in Malaysia by foreigners and US based investors. I believe in the price chart more than the opinions and fake news of market commentators.

Price on the EWM closed above the 200 day moving average which is the line in the sand between the bulls and the bears. The 200 day moving average is a fact and not an opinion..

 

For long term consistent returns consider shares with predictable recurring revenues, expanding market opportunities, financial resilience, easy to understand business, and a competitive moat. The shares we choose for you fit these criteria. We have survived corrections, slowdowns, election and currency turmoil, Donald Trump rhetoric, trade fears, geopolitical uncertainty by following this simple formula. By the way this formula is not from me but from Warren Buffet.  

If you wish to follow the EWM and US shares you may access Stockcharts.com. It is FOC and offers bar as well as candle charts. You can overlay volume, technical indicators and moving averages.

Invest well and grow your wealth

Bill

Critters of the week – the bull and the donkey

This cartoon refers to the US 2008 mid term elections, to be held on 6 November. The opposition party the Democrats whose mascot is the donkey favour socialism, big government, open borders, and massive entitlement spending while the Donald Trump’s Republican’s favour free markets, border controls and capitalism.  

 

The US Dollar continues to strengthen.

18 August 2018

Dear Fellow Investor,

The background:

The US Dollar continues to strengthen.

The US Dollar is strengthening because  US interest rate rises reflect a real inflation adjusted return. Couple this with  a booming US economy, quantitative tightening, and Trump’s tax cuts with massive cutting of business destroying government regulations. 

In contrast, much of the slower growing developed world including Japan and socialist leaning Europe  pay negative interest rates or rates less than inflation so by default investors go to where their money is treated better which is the USD.

Our performance for the last 2 years has been positive because we focus on companies with revenues in Sing Dollar, USD, Euro and Yen. This includes Inari, Kossan Rubber, Uchi and  Nidec  

Nidec headquartered in Kyoto is the world’s largest maker of micro electric motors and 90 % of their revenues are in USD.  

Kossan, a high quality Malaysian  rubber gloves maker earns most of their revenue in USD

Malaysia has been a port in the world stock market storm because it offers many fine export related businesses and runs export surpluses with China as well as many other countries.

Under Dr M,  Malaysia is building a strong foundation for future growth.  Let’s pray to God to give him the strength to complete his agenda.

On the trade war front, a China delegation will meet the US trade officials at the end of August to sort out their differences on tariffs. For Trump there is nothing more important than the stock market so he will bend over backward to accommodate China.

This will boost  markets world wide.

Mid term elections in the US are in less than 75 days and Trump is losing support from the farmers because of the China soybean tariffs.

This is another incentive for Trump to make a deal to get more votes from the farmers.  

Turkey is another issue but our shares have minimal/ zero exposure to Turkey. Unlike the US and European banks, Malaysian and Singapore banks have minimal to zero exposure.

From Motley Fool:

“Many emerging markets, especially those here in South East Asia, are in much better financial shape than in 1997 and 2008. What’s more, Indonesia is not Turkey. Nor are the Philippines, Thailand, Malaysia or Taiwan.”

Invest well and grow you wealth,
Bill

Today’s critter is :

Southern right whale dolphins are the only dolphins without dorsal fins in the Southern Hemisphere. They are smaller than northern right whale dolphins -- and have more white on their heads and sides. They have slim, graceful bodies which are black on the upper side and white underneath. Their flippers are mainly white and are small and curved. Their flukes are small with a notch in the middle and concave trailing edges.  The range and total population have not been estimated or closely studied.  

 

 

How bull markets work

11 August 2018

Dear Fellow Investor,

There are plenty of worries which dominate the news flow.

Trade tensions, sanctions, currency wars, rising inflation, stagnant wage growth, stock market volatility, massive increase in deficits and political uncertainty are some. Yield curve flattening and asset bubbles are part of the mix. These issues dominate the business news and create fear and uncertainty among the uninformed.

That’s how bull markets work. They climb the wall of fear.

Less spoken about are positives such as US company earnings this quarter are likely to be higher by 20 % compared to the same quarter last year. Companies are buying back more of their shares. Credit in the US is easily available.  Foreign funds are beginning to return to Malaysia and Asia as they buy value at cheaper levels.

We need to look past the noise and focus on value investments.

For those who have been with me through the up and down cycles since 2006, you know what I mean.  We survived and prospered. We continue to prosper.   One of our Singapore holdings Riverstone just reported their second quarter earnings last Tuesday. From Motley Fool research :

 

Here are some important financial numbers for Riverstone for 2018’s second quarter:

• Revenue was up slightly by 0.5% year-on-year to RM 214.24 million.
• Gross profit jumped by 10.6% to RM 48.28 million.
• Profit attributable to shareholders soared 23.9% to RM 33.55 million. Diluted earnings per share for the reporting quarter was 4.53 sen, up by 24.1% from a year ago.
• Operating cash flow declined by 29.9% from RM 37.57 million in the second quarter of 2017 to RM 26.33 million in the reporting quarter. With capital expenditure declining by 30.8% from RM 34.99 million to RM 24.17 million, Riverstone’s free cash flow fell by 17.9% from RM 2.63 million to RM 2.16 million.
• As of 30 June 2018, Riverstone had RM 92.52 million in cash and equivalents, and RM 22.0 million in total debt, giving rise to a net cash position of RM 70.52 million. The balance sheet had weakened compared to a year ago, when there was RM 113.35 million in cash and equivalents, and RM 28.0 million in debt.
• An interim dividend of RM 0.013 per share was declared, unchanged from a year ago.

Riverstone is a specialty rubber gloves company with plants in Rawang and Taiping though listed in Singapore. We visited them a few years ago and found them to be very conservative and prudently managed. We like them because it is a simple business and earn revenues in USD. The CEO Mr Wong Teek Soon spent a few hours of his valuable time explaining to us the challenges and opportunities in the rubber gloves business and this understanding gave us the conviction to invest in this sector.

If you as investors take the time to do on the ground research and understand what you are investing in you will be armed with the knowledge to overcome and prosper even though there is an onslaught of negative news flow.

Invest well and grow your wealth,

Bill

Critter of the week is the hooded merganser small diving duck very common in North America. Both sexes have crests that they can raise or lower, and the breeding plumage of yhr male is handsomely patterned and colored.

An emotional frenzy of doom and gloom stoked up among the financial media.

4 August 2018

Dear Fellow Investor,

In the last 2 weeks, some of you  have sent me messages and shared research from leading brokerages including JP Morgan.  The news flow has been alarming and negative. I can understand your concerns. Some famous gurus are forecasting economic collapse. There has been an emotional  frenzy of doom and gloom stoked up among the financial media.

Some of the negative news includes the hysterical trade war rhetoric,  Middle East conflict, crude oil disruption, Facebook, Twitter share price collapse, rising interest rates world wide , Brexit no deal fears, rise of rabid socialist  candidates for the upcoming mid term elections in the US,  etc.   

Lets look at the facts: In the US unemployment is at 40 year lows. GDP as last reported is increasing and last reported at 4.1 %, higher than  previous US administrations including Obama.

Trump’s tax cuts have fuelled business growth world wide while quality stocks are performing well. Interest rates throughout the world are at historical lows though gradually rising.  

This is not the background of a recession- not yet.

The catalyst for the negative news flow has been the escalating trade war.

Why there will not be a trade war:

Below is commentary by Bill Bonner, a brilliant  anti establishment economist and owner of Money Week, a UK financial magazine.   

Fake Wars

The Deep State welcomes war. But, especially in the case of a trade war with China, it must be a phony war.

And here is a good test. We’ll see how well, or badly, we have connected the dots.

According to the picture we see, the Deep State – the more or less permanent, but fluid and schismatic, group of insiders that controls U.S. public policies – uses war to gain public support for policies that actually serve only one purpose… to shift power, wealth, and status from the public to itself.

That’s why the trade war has to be fake.

Real wars threaten the Deep State’s survival. The wars in the Middle East (now also in Africa), for example, help justify trillions of dollars of wealth transfers to the military/industrial/surveillance complex.

But the U.S. has nothing really at stake in these fights; no matter what happens, it will not be invaded, bombed, or humiliated.

Likewise, the wars at home – against poor people and drug users – go on for decades. And no one is better off – except the Deep State industries engaged in the wars themselves (welfare agencies, prisons, police, drug pushers, etc.).

The Donald’s new trade war is a delight, too; already, the sidewalks are slick with greasy swamp water; lobbyists line up around the block to ask for special favors and dispensations. The insiders gain power and money by controlling crony trade deals.

But neither the president nor his crackpot advisors may realize the danger. And here is where it gets interesting: They mustn’t allow this war to get out of hand.

A real trade war with China would be disastrous – for the Deep State itself. That’s why we predict it won’t happen. The 25% tariffs will more than likely never be fully implemented.

Mr. Trump will follow a pattern that is already familiar. He will talk tough. He will stir things up. He will announce victory. And he will quietly back down.

Or else he will not survive as president to the end of his term.

If this scenario plays out expect a recovery in Asian markets.

We must continue with our conservative value based equity strategy to weather the storm.

Invest well and grow your wealth
Bill

Critters of the week are the elephant and the donkey symbols of the 2 political parties in America, the republicans, party of free markets and low taxes and the democrats, party of high taxes, massive regulations, big government and open borders.