Views of Dr Chan of Share Investment Research in Singapore

24 November 2018

Dear Fellow Investor,

I will share some views of Dr Chan of Share Investment Research in Singapore on 19 November 2018.

“Expect heightened volatility leading to Trump-Xi meeting next week.

“China just launched its inaugural China International Import Expo in Shanghai where Xi underscored the event as evidence to China’s desire to further open up its markets to foreign goods and services.

During a visit to Singapore China’s Vice President Wang Qishan also shared similar rhetoric, stating that China is ready for US talk on an acceptable trade solution.

Over the last few months China’s response to the US confrontation was to shore up its domestic economy. The intention is to engage in infrastructure development, reduce import tariffs and raise domestic consumption.

With a population of 1.3 billion citizens, China will in time be the largest consumer market in the world. China businesses are tapping into the growth of their middle class.  As Asian businesses have a better understanding of Chinese culture and society they have a better chance in penetrating China’s promising markets.

Currently, China has the highest foreign reserves in the world after decades of amassing foreign assets, China with these financial reserves will withstand the US trade confrontation.”

As Dr Chan said there will be  short term volatility but longer term markets should stabilize.

This will benefit our shareholdings which offer stable dividends, recurring revenue, low debt, reasonable valuations  and the ability to leverage on the China consumption story.

Should there  be a positive resolution between Trump and Xi next week expect a Christmas rally in world markets.  If not there could still be a rally as all the trade war  bad news appears to be priced in.

Invest well and grow your wealth
Bill

Today’ critter is the impressive Langkawi eagle guarding the port.  Over the Christmas holidays we will take  a holiday to Langkawi and visit the eagle sanctuary as well as other attractions.

Canary in the coal mine

17 November 2018

Dear Fellow Investor,

Canary in the coal mine

General Electric was once the world’s most valuable company. It is now struggling to survive. The company’s leverage is extremely high  The company’s bonds have taken a hit and some of their bonds have been downgraded to junk status.

Weekly price chart of GE.

The problem is debt which was used to make disastrous acquisitions and fund over generous company pension plans, and high salaries and bonuses to executives.

This is why I am very wary of companies who take on high debt to expand.

This is why in the current environment of tightening liquidity and trade uncertainty,  my focus is on value rather than growth.

I want streams of recurring revenue, low or no debt and prudent conservative management.  The companies we hold meet this criteria and will survive the volatility.

Growth is a bet on the future while value is based on the present.  Witness the present collapse in the FANG stocks in the US.(Facebook, Amazon, Netflix and Google)  These are all great companies but their valuations are at extremes  It is not how great is a company but the valuation and the prudence of the management  that is important.

One good piece of news was reported on Bloomberg: Chairman Powell commented in the latest minutes of the Federal Reserve that the  housing market is slowing down in the US and he may pause his rate tightening policy. Also President Trump is meeting  Chairman Xi at the end of November in Argentina  to discuss trade. Should there be relief on these 2 fronts expect an end of year rally in world stock markets.

Invest well and grow your wealth
Bill

Critter today is a thirsty lion from South Africa.

Lions kill more than 95 per cent of their prey at night, and spend the majority of the day resting. Although they drink readily when water is available, they are also capable of consuming sufficient moisture from their prey and plants - making them perfectly adapted to their arid landscape. Yet despite this, lion numbers are decreasing significantly. 

Drain the Swap

10 November 2018

Dear Fellow Investor,

One major uncertainty has been removed that has effected markets worldwide. The US mid term elections are over and Trump’s pro growth low tax low regulation economic agenda will continue.  The Dems were unable to flip the senate  so it is impossible for them to impose their socialist anti business agenda.

In a vote of confidence in Trump’s pro business policies ,  Warren Buffet bought over USD 1 billion of (BERK.B) Berkshire company stock. We hold this stock for some of our PGWA accounts.

Many other company executives worldwide are heavily buying back their shares in the current world market correction.

On the local front there are a few positive signs amidst the cloud of doom.

Japan has extended a multi billion line of credit at just 0.62 interest rate. This will allow Malaysia to retire borrowing carrying an up to 10 % interest rate made by the previous government.

It shows Japan has confidence in a Malaysia recovery.

Anecdotal feedback from some of my business clients is positive for recovery. One client told me if BN had won he was planning to move his business to Vietnam.  Now he will stay.

Dr M is draining the swamp. Every day the news reports authorities catching another swamp creature

A metaphor for what is happening in Malaysia is a farmer planting wheat in a barren field.  With proper maintenance and rain, the wheat will grow and in time there will be a bountiful harvest.  At first the progress is slow but in time green shoots will emerge.

Our value/ dividend investment strategy saved us in  the 2007/ 2008 world market collapse when our share portfolios  dropped over 28 %. Those who held on continued to collect dividends and our equity went on to new highs.

The situation in 2007/ 2008  was much worse: unemployment rising, recession, housing market collapse and fears of a possible depression. None of this is true now.

Invest well and grow your wealth

Bill

Critters of the week are the swamp creatures

Emotional cycle dominating world markets.

3 November 2018

Dear Fellow Investor,

Last week I touched on the present emotional cycle dominating world markets. Fear is dominating but there is evidence of stabilization. Lets look at the news flow in the US which drives world markets and some local fears:

Fear                                    Reality

Trade war	Trump is now talking with China
Interest rates moving up	Interest rates still low from a historical perspective
Liquidity squeeze	Fiat money allows central banks to create liquidity out of thin air
Mid term elections polls suggest Trump will lose	Majority off polls suggested Trump would lose in 2016. Don’t believe polls
Bombing of Jewish temple in NY	Nothing to do with earnings of companies
Recession fears	Recession unlikely with low unemployment, low interest rates and rising GDP
Bubble Nasdaq FANG stocks	Not all stocks in a bubble
Brixit no deal	UK economy booming despite  Brixit fears,
Shooting war with Russia/ China	Unlikely, the whole world would suffer
Growth slowing world wide	Value stocks coming back into play
Middle East turmoil	Not much impact on solid value stocks
Singapore under a cloud of doom	Singapore property beginning to recover, visitor arrivals up
Budget uncertainty	Malaysian budget announced Friday appears to be balanced and will address many of the issues in a positive way. Market reacted positively.
Credit downgrade in Malaysia	S & P/ Fitch reaffirmed Malaysia A- credit rating
Collapse of RM	RM has remained stable despite all the fears

 

FEAR = False Expectation Appearing Real

Markets move in emotional cycles which go to extremes like a pendulum. They return to the mean and then overshoot. Rarely do they stay at the mean.

If you have carefully researched your investments and have conviction in your choices you will survive the storm. If they pay dividends so much the better. This storm will pass.

Invest well and grow your wealth.

Bill

For the next little while I'll be feature some award-winning photos that Patrik Ekdahl sent. The first is a pair of rare Quinling golden snub-nosedmonkeys. They are restricted to the Qinling Mountains in China. Among the most striking primates in the world, these monkeys are in danger of disappearing. Their numbers have steadily declined over the decades and there are now fewer than 4,000 individuals left. 



Photo Credit: Marsel van Oosten.