25 Sept 2021
Dear Fellow Investor,
Stabilizing on relatively high volume after price correction
News flow was mixed . Reaction to the loan moratorium on banks was slightly negative as Maybank dropped to RM 8.10 but a 28 sen dividend was declared which under the share reinvestment scheme can be taken up at RM 7.80 per share. Public Bank which we hold for most accounts was slightly down. Not much impact to the negative news which in my opinion is positive. I do not look at news in and of itself but look at market reaction to news. In the case of the banks, bad news has been discounted.
Bank earnings are increasing as the economy gradually re opens. The parking lot and restaurants at my office show increasing customer traffic . Even the KLCC is coming back to life. Vaccinations are working. The government has loosened foreign labor restrictions and is giving visas to plantation and manufacturing workers. Quality businesses in these sectors now have recovery potential.
The Evergrande property developer uncertainty continues to overhang world markets but not much impact on Malaysian or Singapore companies or banks as the Edge reports minimal to no exposure to Evergrande. The Chinese authorities are taking decisive efforts to manage this problem. The finance ministry has banned bitcoin and crypto trading in China to prevent anonymous money transfers in or out of China and Hong Kong.
I know it is possible to get rich quick trading crypto but in my opinion the biggest risk is government regulation. When governments who flood markets with fiat money feel threatened by a private currency which is outside of government control they can shut it down.
According to Ray Dalio, the billionaire hedge fund manager Central Banks have the tools and can instantly flip a switch and close crypto down. Fiat currencies grow by an average of 15 % a year over time so by holding cash we lose 15 % a year in purchasing power. Politicians do not want to lose their money printing power which is a form of wealth confiscation. This is the attraction of bitcoin which has a fixed supply and can not be created out of thin air. Gold and silver are similar. No one in the last few thousand years has found a way to counterfeit gold and this is why gold is a good insurance policy against irresponsible money printing. Annual gold mine production world wide is less than 1.5 % which is lower than population growth. In shares to protect ourselves and survive we need at least 15 % Return on Equity + dividends.
Technology is the strongest KLSE sector closing at an all time high Friday. Money continues to move to this sector as businesses to survive must innovate and adapt. The pandemic has accelerated this trend.
Take care
Bill
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