Investing allows us to make money by compounding

25 February 2017

Dear Fellow Investor,

Is the Singapore property market collapsing ? Have the buyers gone on strike ?  The photo below shows a crowd of eager buyers on 18/ 19 Feb 2017 waiting to take up units at SGD 1350/ sq foot.

                                            

Overwhelming crowd at Grandeur Park preview

By Lin Zhiqin / The Edge Property | February 22, 2017 9:55 AM MYT


10,000 people attended the preview event of Grandeur Park Residences over the weekend of Feb 18 to 19.

The 99-year leasehold condo, by CEL Development, the property development arm of listed construction group Chip Eng Seng Corp, is located next to the Tanah Merah MRT station at the corner of New Upper Changi Road and Bedok South Avenue 3.

"We expected a good response, but it's overwhelming,” said Chng Chee Beow, CEL Development’s executive director. He reckons the response is owing to the price quantum and pent-up demand as there were no new launches in the area for the past three years.



This same story is happening in Hong Kong, Vietnam, Thailand and other Asian countries. Malaysia ?



I just read the latest Singapore Edge and their analysts are recommending property shares including Capital Land. The Malaysian edge is also recommending property shares.



Yesterday morning, I attended a briefing by UOB Kay Hian . Speakers included Julia Goh, a UOB economist, and she was recommending property developers and  construction  stocks in Malaysia. Reasons  included the possibility of an early general election in which liquidity will flow into the economy and into stocks.



In the KLSE the strongest sectors include construction, property and technology but they are trading near their highs. Should we jump in now. Yes and no.



If you have a very disciplined method to find smart money buying and you have an exit plan the answer is yes. Why not for a quick trade?



If you simply buy because your friends are buying that is a recipe  for disaster and heavy losses. Most of the crowd of perhaps 500 today who attended the briefing  will do just that. They will buy because the Star/ their remeiser/ their friends/ the grab car driver  recommended to buy.  



On the other hand, if you listened to Martin  and Darren who were promoting the IVSA charting service you would have the odds in your favour as their program selects shares with the odds in your favour and it tells you exactly the price to buy or sell. 



Those traders who have  faith in IVSA and stepped  up and paid the fee today have a trading edge and the chance to earn handsome profits.  



If you are an investor and take a longer time horizon we have to look off the radar screen and away from the broker hype. We need to carefully access the financials, management,  valuation,  history of earnings and cash flow. 



Investing allows us to make money by compounding. This is my method and I use the weekly charts with IVSA to confirm a low risk entry.   I have been buying these sorts of shares for my clients. 



Evidence suggests we are close to the bottom of the property cycle at least in Singapore and Hong Kong. In Malaysia loan and deposit growth is picking up and that is a positive sign.



Invest well and grow your wealth,
Bill

“Green Turtles in the Rays” by French photographer Greg Lecoeur, one of the winners in the “Portrait” category of the Underwater Photographer of the Year 2017 contest. Lecoeur commented “During a diving trip to Tenerife, I came across these green turtles. It was early morning and the sunbeams pierced the surface. After a little while, the turtles were circling around us and it was a great opportunity to photograph them.”  

Investment Strategy

18 Feb 17

Dear Fellow Investor,

Warren Buffet has sold his entire position in Walmart which is traded on the NYSE.

Weekly chart of Walmart

Buffet, the world’s greatest investor, is never afraid of making a difficult decision and when he acts he acts decisively. 

At  USD 72.5 per share in August 2016, Walmart showed evidence of smart money selling.  

We see up thrusts, no demand bars and no follow through on declining volume.  This is evidence that investors like Buffet are selling.

Why did he sell ? Very simple: retail is declining. Consumers are changing and Walmart is not adapting quickly enough to meet customer needs.   

Have you ever visited a Walmart ?  Some are bigger than  a football field. It is an all day affair to shop in Walmart.  You have to contend with large crowds, long checkout lines, and full parking lots.  Think of all the wasted time.

Wouldn’t it be more efficient and convenient  to shop on line ? This trend is emerging in Malaysia as well as the rest of the world.  Even Tesco will deliver  your groceries to your home if you order on line.   I order almost all my books on line and do not have to waste my time in a bookshop.  

How does Buffet choose an investment ?

Buffet’s method is to forecast the yield on an asset over its lifetime.  If he finds it difficult to forecast  he will most likely  by pass the investment.

He has taken long term positions in Amazon because he feels Amazon has a profitable future ahead as Amazon is disrupting  retail businesses such as Walmart.

As investors we need to have a view of what our companies will look like say 10 to 20 years in the future.  Are they able to handle the competition? Will they innovate ? Will they leverage on robotics and artificial intelligence  ?  Do they have pricing power ? Can they cope with substitution ? Is management nimble and flexible to adapt to change ?   

I am currently looking at Singapore banks. Book values are at 15 year lows averaging 1 to 1.2 . Net interest margins will increase should interest rates rise and they are.  NIM means what price does the bank pay for deposits and what are their loan rates. 

Leverage ratios of Singapore banks are low and average less than 10 while most US and European banks are over 30.    Singapore property is stabilizing and this is helping the banks. The same goes for the oil markets.  They also pay generous dividends.

Next Saturday, we will hold a market outlook from 9 AM to 5 PM at   The Club @ Bukit Utama, PJ.  Martin will give examples of profitable IVSA trades and the UOB head of research will present a market outlook. If interested please visitwww.ivsachart.com  for registration and event details.

Invest well and grow your wealth
Bill

This brave little girl has tamed a horse. The horse is like the market. The girl is the investor.  Can we tame the market to build our wealth ? The girl has. She has adapted and shows her love. She may enjoy a pleasant ride. 

Benefits of Trump and Abe agreed to start new trade and investment talk

11 February 2017

Dear Fellow Investor,

Over riding  fears in Asian markets since President Trump took power are the fear of trade wars, protectionism, war with China over islands in the Spratleys etc.

These are overblown and magnified by the fear mongering press.  Markets are wakening up to this.

On Friday it was announced that Trump and Abe agreed to start new trade and investment talks.  The Nikkei vaulted 471 points after the announcement. Trump is also planning a visit to Japan to meet Abe.

This could indirectly benefit Japanese operated companies in Malaysia/ Singapore.

The Shanghai index has been rising after the president’s daughter Ivanka was a guest at the Chinese embassy in Washington  as Bejing is aware of the need to build close contacts with his family and advisers.

Trump affirmed the one China policy which reversed his previous statements/actions on Taiwan.   

Trump being a businessman realized there was no profit in antagonizing China and Japan.

Unlike the Obama administration, Trump has no interest in other countries domestic affairs. He is only interested in building business.

Quality banks world wide are rising due to the anticipated roll back of the punishing  Dodd Frank regulations. This will free up capital for lending. I read in the Porter Stansbury report that  over 400 billion USD will be freed up.

This will also benefit financial and property development  stocks world wide.

It will also benefit infrastructure development, job creation and commodities. Bond rates are rising which signal inflation.   

Gold and silver are moving up which signal inflation.  

The Ringgit has stabilized as well as the KLSE. Foreign funds are slowly coming back.

Momentum is returning but be careful and focus on value.  

Value/ Momentum/ Quality/ Growth from Tim Price, The Price Report from Money Week in London.

Tim Price, one of the top fund managers in the world focuses on off the radar screen small/ mid cap low PE shares that offer value at a discounted price. In his book, Investing through the Looking Glass   he relates how he follows Warren Buffet methods in his search for opportunity.  

He takes the time to visit companies that are too small for large funds.  He wrote about a small, low profile Japanese electronics company in the Honshu mountains. He and his analyst team were welcomed with banners, dancers  and a banquet. The CEO said no investment house visited them in the last 6 years.  They were too small.

There is nothing stopping you from doing this method in Malaysia.  We do it.

Tim went against the consensus of the large fund managers. He invested and earned handsome returns over a 3 year period.

His fund trades all markets but is now focused on Japan, Vietnam and other Asian equities.    He has cut exposure in developed markets including Europe and the US as he says values in many cases are at an extreme.

Invest well and grow your wealth
Bill

Sharing the nut.  The squirrel and the birds both benefit. If the squirrel and the birds understand this concept I am sure Donald Trump also understands. 

Reasons for optimism

4 Feb 2017

Dear Fellow Investor,

There are reasons for optimism.  Growth is returning to Singapore, Japan, Asia  and the US.

Inflation is slowly rising. Commodity prices are recovering from a 5 year bear market.  Selected banking shares in Singapore/ Malaysia are recovering.  

The banking index traded on the NYSE  has gone up over 17 % since Trump won the election ($KBX) Banks lead the economy as they lend money to businesses which create growth, opportunity and wealth. They profit by helping others to get rich. 

This is a worldwide phenomena except for Europe as Europe is ruled by the socialist, anti business,  central planners. They punish wealth and reward laziness.

Trump is now in the process of dismantling the Dodd-Frank regulations which were put in place by Obama to massively regulate and restrain US banks- (over 8000 pages of regulations)  and restrict their business activities. Trump wants to reduce the 8000 pages of regulations to 80 pages.

These regulations have made it difficult for small businesses, like Mr Wu’s restaurant below to  create wealth and jobs.

Manhattan culinary staple China Fun shutters, blaming government over-regulation

For 25 years, China Fun was renowned for its peerless soup dumplings and piquant General Tso’s chicken.

What left a bad taste in the mouths of its owners and loyal patrons was the restaurant’s sudden Jan. 3 closing, blamed by management on suffocating government demands.

“The climate for small businesses like ours in New York have become such that it’s difficult to justify taking risks and running — nevermind starting — a legitimate mom-and-pop business,” read a letter posted by the owners in the restaurant’s front door.

“The state and municipal governments, with their punishing rules and regulations, seems to believe that we should be their cash machine to pay for all that ails us in society.

http://www.nydailynews.com/new-york/carnegie-deli-employees-demand-jobs-back-protest-article-1.2937912

The Second Ave. restaurant became a beloved local mainstay, with customers bemoaning its unexpected disappearance. The Daily News hailed the soup dumplings as the best on the Upper East Side in 2015.

Mr Wu above is an example of tens of thousands of small business in the US who were forced to close their doors due to over regulation, high taxes and the socialist anti business  policies of Obama/ Hillary and their ilk.

The 12 % rise in the S & P since the US election shows that people are anticipating good things to come .  A new sheriff is in town. Trump is a man of business who takes solid action without much talk.

Weekly chart of EWS, an ETF traded on the NYSE that has a basket of the highest quality blue chip Singapore shares. Notice the head and shoulder bottom and emerging  positive bullish trend. Singapore is not sinking into the sea as the pessimists have been saying.

Even though Singapore is 9532 miles from New York, the Trump bull has emerged. Banks are leading the charge.

When will the Trump bull come to Malaysia ?   Its already here if you are a careful stock picker and focus on value companies with low debt, increasing earnings and cash flow, with honest share holder focused management.

There are certain technology, export and commodity related companies which qualify.  This requires company visits and understanding of the business.  There are opportunities in Malaysia but you need to do your homework. If you do not have the time to research these opportunities, give me a call or email me and I will help you.

Invest well and grow your wealth,
Bill 012 685 1207

I visit the Negara Zoo regularly to relax. It is a good place to generate investment ideas . Just sitting in the shade on a bench with your lunch and a cold drink, enjoying the peaceful quiet surroundings, the exotic animals and magnificent  greenery  will put you into a relaxed, stress free state. Make sure you turn off your hand phone. Bring a good investment book.  

There is a new sheriff in town.

Happy Fire Rooster Year for My Chinese Investors

29 January 2017

Dear Fellow Investor,

Today is the second day of the Chinese rooster year and I wish all of you a peaceful, happy and fruitful year ahead.  As long as we align ourselves with the dominant trends which I will review these wishes may come true.

The Trump Trend

With President Trump’s  proposed trade policies of protectionism, high tariff’s and make America first policies  how that will affect  bonds, equities, currencies, commodities, and property ?  How will Asian markets including Malaysia, Thailand and Singapore be affected ?

Rising Interest Rate Trend and Rising Commodity Trend

My advice is to focus on 2 emerging trends such as rising commodity prices and rising interest rates. Within these trends, select shares that offer value  and a margin of safety.

Invest in well managed  income producing property that produce cash flow. Certain REITs and property developers should be OK especially those that can raise their rents. Focusing on commodity related equities will protect us against inflation and a resurgence of commodity prices.   This is already happening.

Weekly Jeffrey CRB commodity index consists of 19 commodities including petroleum, soft commodities, grains and metals.

The CRB reflects the health of the world economy. In January 2016, the index bottomed after a 5 year bear market and has been gradually trending higher. It is on the cusp of a breakout. Trump’s potential infrastructure boom will move this index to new highs- US demand for aluminium, lead, copper will increase.  China is already heavily buying physical commodities.

Many leading Australian mining companies have had huge gains in the last year. Some over 150 %.

Having some physical gold and silver  ( about 5 to 10 %) should be a good inflation hedge with this scenario. I read yesterday that Volkswagon is now using tiny silver wires embedded in their windscreens to defog and de ice. They used to use copper wires. Silver is more efficient and a better conductor than copper.  Other auto makers are adopting this technology.  This could lead to more  silver demand and higher silver prices.

The TLT 20 year treasury bond ETF has had a major collapse as interest rates are rising in the US, Europe and most of the world.

Combine rising commodities and rising inflation we need to invest with these 2 trends.

Examples of equities which could benefit include well managed plantation companies and  banks which are already moving up as higher interest rates increase their profits. OCBC bank, our major holding in our PGWA accounts has recovered. Some Malaysia banks are showing positive price action.   There are several ETFs traded on the NYSE which benefit from rising commodity prices and interest rates. 

If you want more information and suggested investments in these sectors, please contact me.  I can purchase for you in your PGWA account.

Invest well and grow your wealth,

Bill

Australia produces beautiful investment grade gold and silver coins available from the Perth Mint. It is worth taking a holiday there and buy some. The coins are a lasting physical memory. The Perth Mint is owned by the government so you can be assured that the coins are genuine.

Reason to be optimistic

21 January 2017

Dear Fellow Investor,

First I would like to thank all of you who wished me a speedy recovery from my sinus operation. I was discharged yesterday and I am now at home in front of my computer.

The operation went smoothly and has completely cleared my nose and sinus. 

I would highly recommend Dr Narizan to any of you who have an ENT issue. Consult with her at Ampang Putri Hospital. She is a legend in her field according to her students at GH (General Hospital)

One good thing about this experience lying in a hospital bed was it gave me quiet time to read and reflect about the stock market, the economy and our prospects moving forward.

While waiting for the surgery, I read an e book, the Exponentialist by Nick O’Conner who details about emerging disruptive technology and how being familiar with these unstoppable trends can put you on the right side of  markets.

That is why our investment in SATS, PGWA accounts as well as Inari in our KLSE accounts have performed. SATS is an airline caterer who has about an 80 % market share in Changi Airport. A few years ago they had over 10,000 workers but via robotics and automation they have reduced their headcount to less than 4000.

They are able to produce more at lower cost and higher profit. They are net cash and show continual earnings growth. They pay a solid dividend and reinvest in automation. 

Inari in Penang provides radio frequency chips to Apple and rides on the fortunes of Apple. Apple just made a new high on Friday as Apple constantly innovates and disrupts.  

Some of the other disruptive trends include data mining, machine learning, solar energy to disrupt fossil fuels, AI (artificial intelligence) and biotechnology.

He gave an example of a hedge fund in London which is one of the best performing hedge funds in the world.  

The fund is  automated and makes decisions based on fundamental and technical criteria. By using AI and machine learning,  performance  gets better over time. On the staff are physicists, computer, and statistics experts as well as a famous PHD human fund manager to oversee the operation.

There is reason to be optimistic.

  

Are you worried about 2017 ? Look at the newspapers predictions and you will see  misery such as  trade wars, real wars with China  Russia and North Korea. The Eurozone will implode prompting a financial and political crises. Inflation will surge. Overpriced markets will crash. It’s all awful.

Unless  you ignore the newspapers and look at the stock market price action there is nothing particularly awful happening or expected to happen. Since the beginning of November 2016 now most markets are up including the SGX and KLSE . The Dow is up 12 % since Trump won the election.

What if Donald Trump follows through on his business friendly policies, lowers taxes and cuts regulations? This could drive growth for the rest of the world. This could bring higher wages and higher profits for corporations. Suppose he makes peace with Russia and sanctions are lifted. This would revitalize Europe which would benefit Asian markets.

Marc Mobius in a recent Bloomberg interview  said:

“Fundamentals of emerging market equities remain attractive and valuations are attractive when compared to developed markets. Opportunities will emerge.”

Alan Tong who writes a value investing column in the Edge wrote:

“I foresee higher  inflation worldwide under the Trump policies. Interest rates will rise . Commodities will rise. 

We must find companies whose earnings growth will outpace the discount rate rise. The company must have sustainable earnings growth, a solid balance sheet and honest management. “  These are the criteria for shares we invest in for our clients.

Invest well and grow your wealth,

Bill

Could this be an opportunity hiding under the carpet ? Profit opportunity in a stock is usually lies hidden from the crowd. When the opportunity is recommended in the public media it may not be an opportunity any more.  

Invest well and grow your wealth

14 Jan 2017

Dear Fellow Investor.

In 1989, the Berlin Wall fell. The Berlin Wall was torn down due to political changes in Europe; Soviet President Mikhail Gorbachev lost his control by 1990, and the Soviet Union fell apart.  The East Germans could now  travel West and be free


East and West Germany were then united and it was the beginning of business renaissance.
Prosperity and growth returned .  Germany is now a world class exporter and manufacturer.

25th anniversary  of the fall of the Berlin Wall

On Tuesday 8 November 2016, Donald Trump was elected to be the next US
president.  


Trump’s election  could be a the start of a business renaissance just like the fall of the Berlin Wall was the catalyst for the German business renaissance. East Germany was decaying and dying because of socialism, central planning and government intrusion into the private lives of the citizens.


The US and Europe have been going down the same road to socialism, entitlements, welfare, mass immigration, citizen control  and central planning. Obama and Hilary Clinton   were the standard bearers of this anti- business socialist path.


The voters have seen through their failed policies and have voted for change. The change is free markets, lower taxes, and elimination of business killing regulations.


Stock markets worldwide have reacted positively.  Stocks in Singapore and Malaysia have been picking up. Hong Kong has stabilized. Japan is now in a bull market.


It will not be a straight line up trend.  Expect volatility but in my opinion the trend has turned.  The US markets are beginning to top out as the euphoria abates.


Locally, Bank Negara has introduced measures to stabilize the ringgit. Foreign funds are slowly coming back. The panic has subsided. Volume has picked up.


There will be headwinds. Some include possible higher interest rates, inflation, currency pressures, trade wars and commodity price recovery.

ming

We have been adding into our positions with selected export and commodity related shares which can benefit from these headwinds.  We are now about 80 % invested.

On a side note: I use the IVSA share filtering platform which identifies signs of strength and signs of weakness for shares.  For the last 2 ½ years there are have been more signs of weakness and very few signs of strength but lately we are seeing a reversal in the signals. More green buy signals are appearing.

Invest well and grow your wealth,

Bill

A Baby Koala Clings To His Mother While She Undergoes Surgery.   Lizzy the koala was taken to a wildlife hospital in an Australian zoo, with her son holding on to her side. Poor Lizzy had been hit by a car. Her little boy, Phantom, only 6-months-old, was luckily unharmed and screamed when they tried to remove him from his mother, so they just let him be.