Coronavirus Market Panic

29 February 2020

Dear Fellow Investor,

Coronavirus Market Panic
February 28 (King World News) – Pierre Lassonde sent KWN the following communication about the Coronavirus market panic:  “Last week no one in the USA cared for a second and now they panic. Has the world changed that much? Of course not. Like SARS, Covid19 will burn itself out over the next 2/3 months. And the world will go back to normalcy. The knock on effects could be serious for thousands of small companies with fragile balance sheets. But it isn’t the end of the world my friend.”

Lessonde is chair of the World Gold Council and former CEO of Newmont Gold.

There has been a world wide panic instigated by the Covid19 virus media coverage   Much of the hysteria has been whipped up by the non stop media coverage. CNN and the BBC lead the coverage showing long lines of fearful citizens cleaning out supermarket shelves of toilet paper, canned soda and bottled water.

San Francisco joined the party by declaring   a city wide emergency when there was not even one reported case.

In my opinion much of the hysteria is politically motivated.  The Western media is biased towards Trump. They failed to get Hillary Clinton elected, implicate him in the Mueller investigation and they failed to get him removed from office via impeachment and they see this virus as a way to get rid of Trump and replace him with a socialist high tax anti- business open borders candidate such as Bernie Sanders or Elizabeth Warren.   

They are using the crises to bring down stock markets world wide, precipitate a recession  which could result in him losing the 2020 election.

There is some positive news from Asian news services who support business.  

The Singapore news service CNY yesterday reported that more patients are recovering than being infected both in Singapore and China.  This was not reported by CNN.  They also reported that  children have a very high recovery rate due to stronger immune systems.  Elderly  and  those with pre existing conditions are more at risk.  

Gold took a big drop last night – more than USD 50 per ounce- which is a good indication of panic subsiding.    The Nasdaq was down over 400 points but closed slightly up. Even the Dow was down over 1000 points but narrowed its losses going into the close.

The political uncertainty in Malaysia is holding the market back but it seems that next week should see some resolution. No matter who wins once the uncertainty is removed  foreign funds should come back .

There is value in our local markets and some beaten down blue chips, quality REITs  are paying handsome dividends more than EPF or bank rates.   I am not forecasting the bottom but we are close.

Invest well and grow your wealth,
Bill

Critter of the week is a silverback gorilla from the Mogo Zoo .Mogo Zoo was in the path of the bush fires near Sydney and the staff was ordered to evacuate . They courageously remained and saved the priceless collection of exotic animals. They did not get caught up in the panic as you must not in the stocks you hold.

Turnaround 2020

22 Feb 2020

Dear Fellow Investor,

Turnaround  2020

There is a powerful market strategy which has stood the test of time and has an investing edge.  It works in stock markets, commodities and currencies.  It identifies a relatively low risk entry for a high profit opportunity.

It is also simple and straightforward but does require discipline, analysis and effort to implement.

For shares, the first step is to identify the strongest sectors. In Malaysia and most world markets it is the technology sector. 

We identify shares that have strong uptrends over a 6 month to 1 year time frame.  We then wait for a substantial one month pullback before entering. Risk is below a weekly support . Position sizing is also important so as not to put all your eggs in one basket.

I would not recommend to buy shares making new highs as they are vulnerable to steep corrections. These are crowd favourites heavily promoted by the talking heads in the financial news.  These experts are in some cases  the sellers who are looking for fresh buyers to offload to.

Once these shares are identified it is important to do a thorough financial analysis of the company.   If the share passes the financial filter; that is a share with a solid balance sheet, reasonable valuations and reputable management  then I will check for insider buying which shows that these insiders  have confidence in their company.  Insider transactions must by law be reported to the exchange and are available  to the public. I use the Bloomberg work station to track the insiders.    Profits can be taken if there is a big run up and there is evidence of insider selling.   Insiders know the value of their company and being prudent business people will not overpay and will buy after a step correction  and take some profits when the share is overvalued.

That’s all there is to it.

I met Martin Wong last week who operates tradevsa.com to update me on his stock filters. He has come up with a powerful sector filter as well as a filter for shares to identify the pattern I described- (buy into a strong trend after a pullback )  This is real time. He also has developed a fundamental filter which ranks shares by financial strength.

If you are active in the markets, you should check it out. It can save you a lot of time and potentially  boost your profits.

I will be focusing on this method for the balance of  2020 to counter the negative market sentiment and extreme pessimism  of the overall market and economy.  It can find rays of light in the dark gloom.

Invest well and grow your wealth
Bill

Critter of the week is an Indonesian crocodile

Reward Offered To Anyone Who Can Remove The Tire From This Crocodiles Neck

This Indonesian crocodile has survived a Tsunami and earthquake 

but the tire remains and we pray that someone comes to his aid..

Reward By The Market For Following My Favourite Indicator

15 Feb 2020

Dear Fellow Investor,

Today Saturday we held our investors club meeting. I do appreciate those who supported the club by attending and sharing your views.  You will be rewarded by the market if you follow my favourite indicator.

It is the seminar indicator.  If we hold an investment seminar and attendance is low, we are close to a bottom. When attendance is full house, we are close to a high. Of my 20+ years of holding investment talks this consistently works.

Fund Manager Kevin Christopher shared Warren Buffet’s favourite market indicator. Market Cap vs GDP. The lower the ratio the better the value of the market. The US markets according to the World Bank is at 158.3 % and the KLSE is at 113 % as of the end of 2019.

This means Malaysia is undervalued compared to the US and it pays to focus on high quality undervalued KLSE shares.  Malaysia is near a 30 year low based on the market cap to GDP indicator.

Are Malaysian equities that bad? The consensus of our group who are mainly market professionals is that not all is doom and gloom- there are opportunities.

I did a brief analysis to answer the question are conditions in the world deflationary or inflationary. I showed the chart of the UST- the 20-year US T Bond- which is the benchmark of world interest rates. It is in a solid up trend as defined by the declining short term and long-term interest rates.  In days ahead it shows lower interest rates worldwide. This is deflationary. Governments keep lowering rates to stimulate demand but it has not worked.

The chart of the CRB confirms this. The CRB index represents a basket of declining commodity prices. This indicates lessening demand for world commodity prices and is deflationary.

The declining oil price confirms this. Coronavirus also has slowed demand for commodities.

We shared the chart by Google Trends of Coronavirus infection rates over the last 30 days showing that momentum rate of infection is moderating.  The same is true for death rates. It is not as bad as the media suggests.

Hopefully the virus will have passed by our next club meeting and we wish all of you good health.

Bill and team

Critter of the week is a lucky dog

Man Tried to Bury His Dog Alive Because He “Didn’t Want Her Anymore”

Pedro Dinis was walking his dog near Paris, France, when he came across an awful sight: A French Mastiff who was halfway buried alive in the dirt.

The poor dog was extremely dehydrated, and her eyes were caked with dust from the dirt. She had a leash on that was attached to a sack of gravel to prevent her from breaking free if she got out.

Luckily, Dinis got there just in time and worked quickly to free her from the dirt. Dinis’ dog even helped with the rescue by digging a hole in the dirt around the trapped pup.

Once she was free, Dinis gave her water and alerted police. Paris has strict anti-abuse laws regarding animals, so an investigation was underway immediately to find the cruel person who did this.

Eventually, police were able to track down her owner, who was then charged with animal cruelty and faces up to two years in prison.

Thankfully, the dog made a full recovery and was adopted by a loving family.

Investor Club Meeting

8 Feb 2020

Dear Fellow Investor,

Next Saturday from 10 to 12 am we are holding an investors club meeting at my office at Phillip Capital Mgt. Our analysts will be there to answer your questions on the shares we have been allocating to your portfolios or any other investment question you may have.   

Please let me know if you wish to attend.

I will give a brief macro outlook as to what is influencing our markets and what to expect moving forward.   

Today I attended a briefing by Phua Lee Kirk chief strategist of Phillip Capital Mgt.

The title of his talk was Virus may top out.

Phua showcased a chart from Google Trends gathered from data showing the media trend of news stories about the Corona virus over the last month. It shows media interest has dropped by over 50% from the panic highs. 

Google trends is a useful tool to measure economic trends which affect markets. It can help you to be on the right side of a trend and avoid buying a high when the crowd is chasing the market. It can also alert you when to buy before the crowd jumps in. It is free of charge and you can imput the variables you wish to measure.

The biggest problem of the Carona virus is the disruption of supply chains. This is affecting world market GDP.  What may alleviate the problem is that factories in Wuhan are due to reopen on 19 February. The CNY is over and people are going back to work.  Central banks around the world also have been lowering interest rates to support economies. Presidents Xi and Trump had a friendly  call 2 days ago.    At least for this problem they are finding common ground. The Corona virus problem does not benefit anyone. I, Google Trends and Mr Phua are optimistic that a solution will be found.

In the meantime we need to take advantage of beaten down quality shares.  We will share a few for you this Saturday.

Invest well and grow your wealth,

Bill

Critter of the week is the Democrat donkey. The donkey is the symbol of the opposition party in the US and Senator Romney who voted to remove Trump from office.  They failed.  It means Trump will most probably win the next election in November and that will be good for our investments.   Trump helped and supported Romney to win his election in Utah and then Romney turned around and stabbed Trump in the back. Benedict was a  traitor during the  revolution between the US and UK in 1776 when the US gained independence. Benedict was hanged for his traitorous actions.  

Selling Intensified Due to Coronavirus

1 Feb 2020

Dear Fellow Investor,

Instantaneous news flow has triggered panic reactions in most world markets as selling intensified due to the spread of the Corona virus.

Our diversified and conservative strategy has  protected us from the worst of the panic.   Our focus on quality dividend stocks/ Reits  gives us income during these volatile and uncertain times.  

Our large holding in Kossan has performed well and I reduced our positions to book some profits.  All it takes is some slightly positive news on the virus to trigger a reversal.  Valuations on Kossan are now over 50 times so we are  treading on thin ice however if more bad news hits at least we can participate in further upside.

I am presently looking at some beaten down blue chips trading at reasonable valuations to take advantage of the extreme pessimism and fear.

Selected technology shares such as Inari and Uchi which we hold also offer opportunity as they are not much affected by the panic. Both pay good dividends and are trading at reasonable valuations.

Our CIO Mr Ang mentioned to me that the Chinese government  is using their hard won experience with SARS and the H1N1 virus to mitigate the  impact of the Corona virus. They are building instant hospitals and  medical research centers are working 24/7 to find a vaccine for Corona.  President Xi does not need parliamentary  approval to take action or spend money. All he has to do is pick up the phone.

There are some positive economic things happening. Not all is doom and gloom.  There is a possibility of Bank Negara lowering rates again.  Infrastructure spending could resume and someone might come up with a vaccine for Corona.  This would boost the airline and hospitality sectors.

President Trump made a positive comment yesterday about what the US government is doing to solve the virus problem. He said it is a small problem.

Invest well and grow your wealth
Bill

Critters of the week are 2 virus free  rats used for virus research.