Why is the USD strengthening ?

16 June 2018

Dear Fellow Investor, 

To all our Muslim friends and clients we wish you a peaceful and happy Hari Raya holiday. 

Last week I reported on the strengthening US Dollar and how that will impact our investments . 

This week, the US Dollar continues to strengthen as money flows out of some of the developing markets including Argentina, Mexico, Indonesia, India and Philippines . 

Why is the USD strengthening ? 

Out of control deficits and spending in the US is the main reason so in order to attract funds to cover the deficits the US Federal Reserve has been raising interest rates. Rising interest rates attracts much needed funds. Fed rate hikes plus Quantitative Tightening is draining hundreds of billions out of emerging markets and those funds are going into the USD. Money always flows to where it gets the best return. 

Solid blue chip Singapore, Hong Kong, US and Malaysian companies with rising earnings, recurring revenue and reliable cash flow will continue to prosper and these companies are somewhat insulated from the currency volatility. The undervalued Ringgit has stabilized after the shock Malaysian election result while the Sing Dollar has actually gone up versus the USD. 

We will continue to focus on established value companies with low or no debt. This will allow us to ride out the Donald Trump induced trade war volatility and continue to collect our dividends. 

Invest well and grow your wealth 

Bill 

This week’s critter is a Maine Coon, the world’s largest cat. 

The Maine Coon is a native New Englander where he was a popular mouser, farm cat and, most likely, ship's cat! The good-natured Maine Coons are the largest domestic cats in the world. Despite their size, they are known as gentle giants because of their relaxed and easy-going personality.

My last visit to Singapore

11 June 2018

Dear Fellow Investor,

On the ground research

We just returned from a 3 day visit to Singapore. Our visit included a company visit to IFast, who provide platform services to the financial service industry. They maintain the Fund Supermarket service which offers a wide range of ETFs, unit trusts, research and a discount share brokerage.

Their numbers are impressive and show consistent revenue and earnings growth. I am not buying this for our managed accounts until we complete our due diligence. 

We also attended a Motley Fool briefing on the US Dollar outlook by David Kuo, CEO of Motley Fool.

This was important as the trend of the US Dollar will affect our investments, especially those who earn revenues in USD.

His view on the USD is bullish because:

Rising interest rates:

Only the US can raise rates compared to the UK, Japan, EU, Switzerland and Australia. These economies are all slowing and only the US economy is booming while  US unemployment is at a 30 year low so interest rates will rise to keep a lid on inflation

Reserve status of the USD:

 2/3rd of central bank reserves are in USD . As other countries accumulate trade surpluses they have no other way to go but the USD. Even China is forced to accumulate USD.

The dollar index chart ($USD)

 

$USD weekly chart

If the 94.89 resistance breaks expect a push to the old high at 103. The underlying fundamentals and dollar demand favor a price break to new highs. The trend seems unstoppable.

I asked David the risks to this scenario. He said about 10 % .

The Singapore economy seems to be picking up. We went to Orchard Road and there were crowds of shoppers. We went to the Kinokuniya book shop and there were long lines of buyers waiting to pay. The same was true for cloths buyers at Parksons. The Lucky complex on Orchid Road was filled with Filipinos buying gifts for family and sending funds back to their relatives.

Singaporians are generally happy with the Malaysian election results and tell me they hope the same thing happens in Singapore.

The government intends to raise the GST  and the people are not happy with the GST policy -  just like in Malaysia. There could be a change of government in Singapore because the self serving politicians jack up the GST. That is what a taxi man told me

Singapore investors are cautious so our policy of picking up quality value companies such as Hong Kong Land which is priced in USD and assets in HK/ Sing  dollars should pay off. David mentioned to me that in his recent visit to Hong Kong, they own prime central business district properties with rental reversion contracts. The tenants pay up the higher rents because there is a waiting list for new tenants.

The generous dividend helps.

Invest well and grow your wealth

Bill

Todays critter is a black-crowned night heron -- and it stands a bit over 0.60 meters/24 inches tall.  This is the male -- and it certainly appeared that he was checking the tree out as a possible nesting site.  It will be interesting to see if he's still there -- and with a mate -- when I go back 

 

Malaysia will turnaround

4 June 2018

Dear Fellow Investor,

Turnaround

 

 

In 2015 Christoph Miller, a prominent aviation turnaround  strategist took over MAS as CEO. Within a year he cut costs, reduced headcount by 6000 bodies, negotiated cheaper prices from suppliers and cut unprofitable routes. After years of losses in less than a year MAS began to make profits.  

With the right leader such as Dr M, Malaysia will turnaround.  It is already happening.

The vast majority of Malaysian citizens are supporting him.

So far in only a few days citizens have donated over 40 million ringgit to a fund which will be used to reduce the deficit .

You may participate by banking into Tabung Harapan Malaysia Maybank A/C 5660 1062 6452 . Amounts collected are posted on the MOF website and are administrated by our new finance minister Lim Guan Eng. Donations are tax deductible. Since the abolishment of GST we are sure we can dip into our pockets to help our country.

Lim Guan Eng turned around Penang. When he was elected chief minister of Penang in 2008, Penang had debts of 630 million. Now Penang is in surplus. One of his new policies when he took over Penang was open tenders and transparency for government contracts. Now he and Dr M are applying this transparency and open tender policy for all government contracts in Malaysia.  

The most profitable time to invest is when there is a turnaround. In the transition there is uncertainty and fear. You will be buying quality at a discount. That is what I am doing now for you who are my clients. Do expect some volatility but hold on as positive events unfold. 

Next Friday, I will be in Singapore for a company visit to IFast, an interesting company which is disrupting the brokerage  and asset management industry.  In fact Phillip Capital as well as other asset managers and banks  are customers. If it passes my criteria I will allocate to your PGWA accounts.

Invest well and grow your wealth

Bill

Commentary by Ed Steer who publishes a gold/ silver report and like me is an animal lover

Today's critter is the yellow-shafted northern flicker -- and I only had to walk out into my yard to take these photos.  I had just cut and watered the grass on Saturday -- and this fellow showed up on it a few hours later.  I could hardly believe my good fortune --    

 

 

Putting a tuxedo on a monkey does not change the fact it is a monkey.

28 May  2018

Dear Fellow Investor,

Despite the volatility last week our shares were not much affected. Over all our portfolio value increased.  Many of the GLCs and construction shares held by most funds and individuals were hit as foreign funds exited the market. We hold none of these shares.

On a positive note, the local institutions and retailers continue to absorb the foreign sellers. Last week over RM  1 billion was bought by retailers and 1.4 billion was bought by local institutions. This shows confidence in the new government by the locals.

Most of the bad news is coming out in the open as Dr M, the new sheriff in town  seeks out the truth and hunts down the crooks.

K9 Belgian shepherd catching a purse snatcher (not shown)

 

Healing takes time. Imagine if you fall into a drain and sprain your ankle. With proper care it should take  a few months to heal. If the body is strong, the healing will be faster. I know this from experience. While on holiday to Shanghai 3 years ago, I fell into a drain and twisted my ankle. The initial pain was intense but with acupuncture and soaking in a herbal solution, my ankle recovered. It took over 6 months to completely recover.  I think the Malaysian economy will recover faster because:  

The fundamentals of Malaysia are strong and with a free press, a parliament with more oversight and a more independent court, Malaysia will heal. Just give it time.   The PKR will demand it. We should see greater transparency and accountability. The truth and facts will come out.

 

Putting a tuxedo on a monkey does not change the fact it is a monkey. Now the facts are coming out and we will know the truth.

Cutting the GST on 1 June will immediately boost consumer spending and this will benefit our consumer shares. Mall traffic is picking up. Auto sales and travel related industries will be boosted. Finance shares will benefit as confidence builds. Even property might start to recover. Never underestimate the power of confidence.    

Invest well and grow your wealth,

Bill

Today’ critter is a Canada goose.  They are slow flyers but can travel 1000s of miles when they migrate.  

 

Let’s move on and focus on the future.

21 May  2018

Dear Fellow Investor,

As mentioned in last week’s election report my forecast for our equity holdings was positive and since DR M won the election the result was positive for our shares. They all went up.

That is the past so let’s move on and focus  on the future.

The Background

The background world wide is rising interest rates, rising synchronized world growth and rising inflation.

The chart represents the 20 year short US T Bond. It is in an uptrend as price is trading above the 50 day weekly moving average. It shows that interest rates are rising.

As interest rates in the US rise, the price of this fund rises. This ETF is significant as the 20 year T Bond is the benchmark for interest rates world wide.

TBF Pro Shares  Short 20 Year US T Bonds

In addition to rising interest rates, the world is experiencing synchronized growth and rising inflation.

This will benefit our banking stocks both in Malaysia, Singapore and Hong Kong.

It means net interest margins are rising as well as well as net interest income. These are the 2 metrics banking analysts follow.

I feel very positive for our shares and Malaysia moving forward. The sentiment because of the election results has dramatically shifted. Most Malaysians are smiling – even the taxi man.

I will be buying more banking and value shares for our clients and myself.

Invest well and grow your wealth

Bill

Today’s critter is a polar bear from the arctic. A few months ago we visited a museum in Lankawi in which there were a collection of live arctic animals brought in by Dr M for the benefit of the people. I remember a  polar bear about 12 feet tall. 

US Dollar continues to strengthen

16 June 2018

Dear Fellow Investor,

To all our Muslim friends and clients we wish you a peaceful and happy Hari Raya holiday.

Last week I reported on the strengthening US Dollar and how that will impact our investments .

This week, the US Dollar continues to strengthen as money flows out of some of the developing markets including Argentina, Mexico, Indonesia, India and Philippines .  

Why is the USD strengthening ?

Out of control deficits and spending in the US is the main reason so in order to attract funds to cover the deficits the US Federal Reserve has been raising interest rates. Rising interest rates  attracts much needed funds. Fed rate hikes plus Quantitative Tightening is draining hundreds of billions out of emerging markets and those funds are going into the USD. Money always flows to where it gets the best return.

Solid blue chip Singapore, Hong Kong, US and Malaysian companies with rising earnings, recurring revenue and reliable cash flow will continue to prosper and these companies are somewhat insulated from the currency volatility. The undervalued Ringgit has stabilized after the shock Malaysian election result while the Sing Dollar has actually gone up versus the USD.  

We will continue to focus on established value companies with low or no debt. This will allow us to ride out the Donald Trump induced trade war volatility and continue to collect our dividends.  

 Invest well and grow your wealth

Bill

This week’s critter is a Maine Coon, the world’s largest cat.

The Maine Coon is a native New 

Englander where he was a popular 

mouser, farm cat and, most likely, 

ship's cat! The good-natured  Maine Coons are the largest domestic cats in the world. Despite their size, they are known 

as gentle giants because of their relaxed 

and easy-going personality. 

 

14th General Election

12 May  2018

Dear Fellow Investor,

My election forecast was wrong however; our shares should not be effected much.

We hold no cement, construction, property development or  GLC companies   We chose HL Bank rather than  CIMB and Kim Loong Plantation rather than Sime Darby. With the weakening of the Ringitt, our tech stocks such as Uchi and Inari as well as rubber glove maker Kossan should benefit. With the abolishing of GST, our consumer stocks such as Heim/ Carlsberg/ and F & N should perform.

Our focus has always been on less popular, less liquid shares off the radar screen of the big funds. These go down less in a panic and recover faster when the dust settles.  

Daily chart of EWM traded on the NYSE.

EWM is an ETF with high quality blue chip Malaysian shares. While Malaysia sleeps, EWM trades in New York and after the shock election results EWM plunged over 7 ½ %.

After the panic selling, EWM recovered with a loss of about 3 %

Top Holdings of EWM

These are high quality blue chip shares.They are similar to the shares we hold for you with the difference being they are popular with the big funds and the investment crowd. 

With the peaceful transition from the BN to the PKR and the positive popular sentiment, our market should now trade based on fundamentals and correlation with other Asian markets. The election result removed a major uncertainty that has held us back. Markets hate uncertainty more than bad news.  

Invest well and grow your wealth,
Bill

Today's 'critter' is quite the dandy.  It's the Indian paradise flycatcher -- and the male of the species would be hard to mistake for anything else.  "Males have elongated central tail feathers, and a black and rufous plumage in some populations, while others have white plumage. Females are short-tailed with rufous wings and a black head. They feed on insects, which they capture in the air often below a densely canopied tree."  Click to enlarge.