Major sign of world recession

6 July  2019

Dear Fellow Investor,

On 4 July, Thursday, I visited my stock market analyst who I have been working with for over 20 years. He is correct in his views most of the time and has helped  keep us above the water during periods of volatility,  political and market uncertainty, and economic slowdown.

His best call was a warning he gave me a few months before the sub-prime collapse in 2008 and subsequent recession.

He advised to become defensive and hold only the strongest blue chips, some gold  and sell any speculative shares.

His advice was early but thanks to heeding it we survived the worst of the disaster and moved in the next 2 years to equity highs both in Malaysia and Singapore.

He is currently advising that many of the pieces of  a world recession are coming together . Recession he said is a process and not an event. All world markets will be effected.

A major sign of world recession is in the below chart from CNBC. It shows a yield curve inversion between to 10 year US Treasury Bond and the 3 year bond. Even more impactful is the inversion between the 30 year bond and the 3 year bond. Should the US enter recession the all world markets  will be effected. 

It means there is a cash squeeze and investors are willing to pay more for cash now than paying for cash in the future. In Malaysia every recession since the 1970s has been preceded by a yield inversion. So far the yield curve in Malaysia has not inverted but we need to remain vigilant.

Another negative factor is that on 3 July 2019 according to Bloomberg only 77 stocks in the major  world markets were making new highs.  This shows narrowing breadth  as insiders are booking profits while retailers continue to chase.

His advice was that we have a 2 month window to sell any speculative holdings.

He reviewed our portfolios and advised specifically what to sell/ what to hold  and most importantly he advised to sell before the crowd sells.

Gold a few days ago made a 5 year high. This is also a negative sign which shows lack of confidence in governments, central bankers and world leaders.

Will these officials allow more deflation, inflation or stagflation ?   I do not know but we must be diversified  to protect ourselves. That means reits, property,  high income dividend shares in Singapore, Hong Kong and Malaysia. and some gold.

Invest well and grow your wealth

Bill

Critters of the week are some Russian orca whales recently freed due to a world outcry. The Russians were keeping them in a whale jail to  sell to marine parks.