Local and Singaporean Market Under Pressure

21 May 2022

 

Dear Fellow Investor,

 

Our Singapore and Malaysian shares have been holding up while those in the US markets have been under pressure.

 

“Do I sell our under performers now or hold on?”

 

There’s a simple way to answer that question. First, check if the company makes money. If it’s profitable, there’s a chance the stock might recover. If it’s not, you should consider selling.

 

Three examples are Apple, Microsoft and Amazon.  These companies all make money. They have an investment moat and are of the highest quality. It was reported by Barrons that the Swiss National Bank bought 8.2 million shares of Apple on the recent correction as well as large positions in Microsoft, Disney, Amazon, GE, Tesla and other beaten down blue chip shares in world markets.

 

The fund manager reported that in the current market turmoil and currency volatility there are not many alternatives to high quality blue chip shares. If they pay dividends that is so much the better. With interest rates and inflation rising holding cash and bonds is a sure way to lose money.

 

Although the Federal Reserve and most central banks have been raising interest rates, the real interest rates, that is inflation minus the federal funds rate still offer negative returns with the potential of large capital losses in bonds should rates continue to rise.  For example if inflation is 8.5 % and the federal funds rate is 3 % the guaranteed loss is 5 %

 

High quality businesses such as Apple and Microsoft offer dividends, high profit margins, cash flow and have the potential for growth and recovery.

 

The fund manager has also been adding to his physical gold holdings to protect the purchasing power of his shareholders’ funds.

 

The Swiss are known for their conservatism and skill in preserving wealth. This is the space we want to be in for now.

 

I have been looking at some high quality China shares that have been beaten down. PEs are at decade lows which means downside risks are limited. Some pay handsome dividends and offer recovery potential. Interest rates have been falling   which provide a tailwind and the Shanghai lockdown is transitory in my opinion. 

 

Take care

 

Bill

 

Biden has shut down oil pipelines in the US which has contributed to inflation. higher interest rates and the possibility of recession. He has also been attacking free speech via social media to silence his critics. His failed policies have caused him to have the lowest approval rating of any recent president. Now mothers are having trouble getting baby formula because  of government meddling and increased regulations by the Biden administration.  Should the Republicans take back power in November 2022, expect a major turnaround. They will open the oil pipelines and allow drilling for oil again which could drop oil prices by 40 % and solve the inflation problem.