Saturday, January 31, 2015

[SGX Portfolio] January 2015 Update

Hi everybody,

To all those that have seen my previous monthly, you would notice that this month it has changed quite a bit. This is due to the new change in the SGX as well as a new method of caluclation that I will be using. With the change of calculation, my previous individual monthly updates are slightly wrong. I don't know if I like this presentation format the best, but it's a work-in-progress.

As mentioned previously, this will be my attempt at having a monthly update of my SGX portfolio. I have also updated that page to include the historical growth of my portfolio. I find it personally encouraging to know that at this point last year I had nothing, but now I have accumulated a fair bit. Hopefully other people may be inspired and also decided to embark on their financial journey.
"The journey of a million miles begins with a single step"
Anyway, here are the current stats of the portfolio as of end January 2015.


Total Cost    $11,291.20    
Unrealized Gains$422.42
Accumulated Dividends $253.46
Realized Gains$33.77

*Total Cost is initial purchase cost of the current portfolio
*Unrealized Gains represents the unrealized capital gains on securities still held in the portfolio
*Accumulated Dividends is the total of all dividends collected thus far

*Realized Gains will only take into account the final net capital gain or loss after including transaction costs to close a long position on a security. 

As of December 2014, I had 15 holdings in my portfolio. One month later, with the introduction of the reduced SGX board lot size, I have expanded my portfolio quite aggressively to 27 holdings now. Many of the purchases were because of previous pent up demand, but I held off because I did not have enough conviction to purchase 1000 shares. The smaller board lots makes it much easier to dip my toes in the water and fine tune my portfolio allocation weights.

I have divested my small stake in CDW holdings for a total return on 46%, excluding transaction costs.

I received $28.40 of dividends from OUE Commercial REIT. I have very happy with it's stable unit price. Even with no capital appreciation, I am happy to collect the rent twice a year.

Annual income from dividends is now expected to be about $757 for a full year, but of course I collected some and miss out others by not owning them the entire period. That brings the expected monthly income to $63.08 and daily income to be $2.07. Quite a few counters will be declaring dividends next month, 7 if my count isn't wrong.

Based on the dividends I am expected to collect, my portfolio dividend yield on cost is estimated to be about 6.7%. I have taken the lower bound estimate for most of my counters, so it is quite possible to have surprises to the upside.

I am very pleased that now I can pick up stocks and take small nibbles with only a small capital outlay. It is a lot easier to psychologically get into the market with the lower capital requirements. I might need to think of a new way to display my portfolio. As my holdings increase, the screen will not be long enough!

I am still very cautious about the local market. I am hoping for some broad market weakness soon to allow me entry to some good names at good prices. Therefore I am also trying to hold off purchases until there are some really tempting offers in the market. I have my eyes on quite a few counters.

Friday, January 30, 2015

Buying REITs with NAV Premium?



Above is the chart of Cambridge Industrial Trust. I went back to trawl through their press releases and I graphed the NAV from the day after the results are released until the next results are released. I did not take the date last reported because it is not useful. We will only know this updated information the date after the announcement, which is why I used that date.

Interestingly, just recently back in May 2014, this REIT was trading at 12.95% premium over it's NAV! Currently it is trading at NAV.

After reading the REIT Bible and many other resources, I believe that the price paid in relationship to the NAV is the most important metric for a REIT. Obviously P/NAV should not be used as a standalone metric. The world of fundamental analysis has given us countless of metrics to use, why limit yourself to just one?

However, P/NAV is my go-to metric when I look at REITs. Different segments of REITs have different "natural" premiums or discounts to their NAV. For all segments, the natural standard deviation is 5%. This means that that the P/NAV generally tends to range between -10% of the natural premium to +10% of it. In the case of Industrial REITs, the natural premium is actually 5% and we should expect to see P/NAV ranges from -5% to +15% typically.

Of course, individual REITs have their own unique characteristics and attributes, so within a segment it is normal to see certain REITs always commanding a higher premium than others. This can be caused by a variety of factors such as asset quality, management, sponsor, location, etc. Even the method of accounting and valuation is important, as discounts or conservative estimates have to be applied to the reported values.

Healthcare REITs have a natural premium of 20%. Looking at S-REIT System Investor's post regarding First REIT, you can see that his very nice graph of First REIT's premium over NAV seems to confirm that the typical range of a healthcare REIT should fall between 10% and 30%.


I believe what happened in the 1st half of 2013 was an anomaly. Many REITs went ballastic at that point of time. Parkway Life REIT (healthcare) went up to 81% premium over NAV, while Ascendas REIT (industrial) went up to 50% premium over NAV. Disasters waiting to happen. And that's what happened. 2 months later, Parkway Life REIT shed 20% while Ascendas REIT shed 40%.

My point is, unless you can justify strongly why a certain REIT deserves to command a premium over it's NAV, it is probably a safer bet to buy REITs below their NAV.

Anyway, as mentioned earlier, in the case of Industrial REITs, the natural premium is actually 5% and we should expect to see P/NAV ranges from -5% to +15% typically. This means that Cambridge Industrial REIT is actually at the lower end of it's typical range. Does this mean that it is a good time to buy it?

By that logic, Sabana REIT is extremely attractive (-12%) and AIMS AMP Capital REIT is e also attractive (-4.2%). However, P/NAV is not an exact science. Like I mentioned before, a variety of factors come into play that eventually gives each individual REIT a premium or discount to NAV.

Perhaps in these cases they are warranted. I personally feel that Industrial REITs are going to be facing a lot of issues that affect the simple supply and demand in their segment.

However, in other cases, I think the market is massively mispricing them. Lippo Malls (retail) is trading at a 17% discount to NAV while Saizen REIT is trading at 35% discount to NAV.

I have previously shown that the mispricing in Saizen REIT is insane, especially if you are a Japanese investor and have other Japanese residential REITs to compare Saizen REIT to. Since my post, yields of J-REITs have dropped another 60bps while Saizen REIT has actually not moved at all. If Saizen REIT was listed in Japan and reached roughly the average level of P/NAV and dividend yield of other residential J-REITs, it would appreciate 100% in value. Of course, with Japan engaging in the coordinated systematic suicide of their economic while also blowing up their currency in tandem, I admit that there are risks investing in Japan.

The other line of thought is to not look at residential J-REITs as a standalone niche segment in this asset class, but to look at them as part of the entire REIT landscape available to local investors. In that sense, it means that investors believe that only at a 7.1% yield is Saizen REIT an attractive buy, regardless of P/NAV. There is no fault in that logic either.

Personally, I am willing to take sit on these 2 counters that investors perceive to be on the risky end. I already have. I actually feel that their mispricing ironically makes them safer investments. Saizen REIT and Lippo Malls are the 2 biggest holdings in my portfolio.

Recap Of Last Night's Battle

As pointed out previously, the 100DMA (and the less obvious 150DMA) are the lines in the sand that will require a hero to save us all.


Of course it comes to NO surprise that it is yet again someone from the central banks that comes in and talk stocks up. I mean, who could have seen this coming?

Yellen said that there would be no rate hikes soon.

Interestingly, following yesterday's Silver Smackdown, CME is upping silver margins by 11%. The effect is that there is less money able to chase around Silver. I think it will actually help to reduce volatility.

The Baltic Dry Index is at massive multi year lows. Technology new normal? Or just lack of shipping demand.


Finally, onto my favourite chart regarding Oil:


All the dead cat bounces. Technically, NOTHING suggests a reversal. Lower highs, lower lows. Going in to catch these knives is clear and simple greed. Not that there's anything wrong with that. I do that all the time. Buying low is good. However, you must be prepared that we can still go lower. 

I read this article about oil which I find very interesting. It postulates that Oil either bounces back up to $88 or Oil stocks drop 40%. I'm not saying that it is right, but I'm saying that it is a pretty interesting argument.

I feel tonight will also be important, but only if bulls can bring the fight back to the 100DMA. I've hedged out my short positions and I'm back to where I was last week. I'm going to hang low and watch for a clean break either above the 100DMA or below the 150DMA. If it's clean, next week should see good follow through.

Personally, I think this is a great buying opportunity for people considering some precious metals. Unlike Oil, the space has been in a bear market for YEARS. We are seeing higher highs and high lows. The fundamental reasons to own it as a currency has probably never been better. The last time Gold and Silver were at these prices was back in 2010. I firmly believe that downside risks are very clear and the rewards to the upside makes the risk-reward ratio extremely attractive.

I would purchase more at this price, but my brain is telling me not to be greedy and preaches risk management through diversification. My asset allocation to physical precious metals is already a whopping 25% of my portfolio. That's not counting my stake in miners. My exposure to the precious metals trade is actually nosebleedingly high, especially for someone that is not in love with his investments. I'm not attracted to gold and silver as an asset class because it's shiny and pays me zero yield. I like it as an asset class because it's cheap, at least by my analysis. And by golly, I'm gonna sell it much higher sometime in the future.

I keep having to remind myself, buy low, sell high. It's honestly not an easy thing to do.

Silver SMACKDOWN




LOL, Silver was down 6.9% for the day just now!

Dang, now I'm back to breakeven, haha!

See, if this had happened to Oil, I'll be chionging in!

This is where we hold them, THIS IS WHERE WE FIGHT

SPY now be like...



Thanks to Marketchess for pointing this out. The 100DMA and 150DMA seems to be where the bulls and bears are now deeply engaged in bloody hand to hand fighting. I like his point how these are not an the typical periods for the moving averages. To me, this makes it more important because the herd traders aren't fighting this fight. It's the veterans fighting upfront to decide the fate of their armies.


A close up look at this last line of defense.

Bears wanna see a close below the 150DMA while the bulls want to push the bears out and over the 100DMA. Winner holds the title for at least another week before before a re-match can be called.

The market is wild, wild and crazy today. Silver is down 5.5%, Oil is trying to tag $42.xx.

Today is an interesting day.

PS. I'm punting short, ready to cut losses if bulls take back the 100DMA.

Thursday, January 29, 2015

Watch Out, Oil Train!!!

"What's that?"
"Oh, that's the Long Oil Train!"


Oil sagged lower last night during the US market session. Don't worry, it's all good because Oil at $43.XX is "unambiguously good" for the economy, right?

Right?

Unfortunately, I don't think that lower oil is good for the economy (in the US) and I also still don't think we're done with the drop in Oil.

Jesse from The Felder Report has my same sentiments about Oil. (and he holds the same view for the Short Bonds Trade)


I also don't think that this is what fear looks like. To me, it feels like there is way too many people plowing into the oil space now since "it is definitely a no-brainer" that Oil prices cannot stay this low. Give me a nice big blow-out to massacre the leveraged longs, or an extended slow grind lower over the next few months to shake out the weak hands, and then definitely I'll be in the arena joining in on the knife catching party.

Until then though, I would be very wary on the commodity itself and all related O&G counters and their support services sector.

From a newbie that started out by shorting the US indices on and off since 2013 until now, I think I have been hit by the train enough times to give my self-recognized expert opinion of, "hey man, train."

Gold Is Higher Yielding Than These "Safe" Assets?!

I've said it once, and I'll say it again:
Gundlach is a brilliant man. Not only does he look badass with that sexy goatee, he is a great manager and I think he is one of the few no-nonsense, no-bullshit people around in the industry. He doesn't give views to conform, he gives his views straight up, whether you like it or not. Perhaps that is why he has been such a fantastic manager. I don't agree with everything that he says (long USD trade), but when it comes to bonds, this man knows his shit and I give him the benefit of doubt.


Check out that baller!


Remember how one of the best points against Gold was that it has zero yield? Well, as Gundlach correctly points out, Gold (and all other precious metals for that matter) is higher yielding than quite a number of bonds from Japan and Germany, but the most notably the Swiss bonds.

Now with Swiss bonds are yielding negative returns up to 12 years out, I think that makes the argument that Gold is a zero yield asset a moot point. I rather remain status quo, than to slowly lose money!


If Jeff Gundlach is buying Gold, I feel a lot more comforted with my hoard.

Of course, what one person says doesn't mean anything in this market made up of millions of individuals. It is just comforting to know that someone else is in the same trade as you, ya know?

Personally, I feel bonds are insanely broken, especially the bonds in Europe. Seeing the difference in rates, I see it entirely possible for US rates to head lower. However, that is not a trade that I am willing to make. The risk-to-reward does not seem appropriate.

How does negative bond yields even work? Things don't make sense anymore. I suppose that is what happens when you have central banks around the world trying to control the markets. Something is bound to get broken. I would not go near negative rate bonds with a 5 foot pole. Cash is just fine for me, thanks.

Sorry guys, I also know that recently I've been posting a lot of gold and precious metals related articles and many of you just aren't into it. I don't make the news or the markets, I just write what are the most interesting things that I see. Just to let me reiterate my view, I think precious metals are basing out here and I think equities look very precarious to me.

Wednesday, January 28, 2015

Welcome Internet, I've Been Waiting


This is the Internet.

You can type what you want, I can type what I want. We might be free to express ourselves, but we are not free from the consequences from our words. Don't forget that.

This is my personal blog with my opinions. You don't like it? You don't have to read it. I don't write to impress you or for your approval. This isn't the court. There is no fair trial here and no one should expect to be offered one. If you feel so compelled to comment, you best choose your words carefully.

I let you come into my house and I can jolly well kick you out.

Say what you want, but don't disrespect. There's the rest of the fucking internet for you to type whatever gibberish that you feel that is so important that you need to vomit it out. Go exercise your freedoms there.

I don't need the patronage of the degenerates from the Internet cesspool. Thanks for the attention, but no thanks.

If you don't like my rules, get out.


Can Singaporeans run fast, or are they "entitled" to win the race?

 

This Straits Times article has been rattling a lot of people lately. Read the comments and see at all the hidden finance and economics professors come out of hiding and rally to the Keyboard Warrior Army. Five Stars and a Moon had a great follow-up regarding the article, I'll leave it to interested people to read it.

Personally, my weightless opinion on a subject that everyone has already taken the opposite stand?

He's absolutely right.

I have been fortunate enough to travel to many places in the world and I have to say, most normal people work hard for a living and they don't expect anything from their government. In fact, they buffer in that their government is going to screw them over from time to time.

Too high standards of living and tough competition locally? They all either upgrade themselves, or migrate. What else can they realistically do? They don't complain about their lives and blame it on everyone except themselves, that's for sure. They just do what has to be done, not what they prefer to do. Therein lies the entitlement problem.

Maybe I've chanced upon rare cases of such tenacity and fighting spirit, but I feel most of my brethren would just lie down and complain, rather than stand up and do something about their situation.

The world is changing, and the ones that stay the same, are the ones that get left behind.
The only way to stay ahead of the labour curve as an individual is to learn, progress and keep running faster than everyone else to keep the advantage you have. The Red Queen Theory.
If you are unfamiliar with the Red Queen theory, perhaps now is a good time to think about it.


If we aren't improving ourselves, then your worst fears of "FTs come steal our jobs" will become an all too true reality.

If you're so damn good and skilled at your job, what do you have to worry about cheaper FTs coming to undercut you? After all, you provide such superior quality, right? /sarc 

Let's simply this: If someone is better, faster, cheaper and doesn't godamn complain so much all the time, wouldn't they get your job?

You bet your sweet ass, they will.

Just some food for thought.

Okay la, nevermind. Since you're Singaporean and this race is held in Singapore, you automatically win. This debate. This job. Your next job. And everything else you want. What else you want? Everything also can la. You're Singaporean, right?

Don't worry. You're entitled to it, hor?

Tuesday, January 27, 2015

Take Out Your Tinfoil Hats!

I know a lot of people think I'm borderline mad some days, but the truth is, I probably am.

Just like AK, I was reading the news about Suisse International and their gold scam. Please be careful when buying precious metals! I think the main appeal of precious metals is the complete absence of counterparty risks. Why would you want to leave it with somebody else?

There are plenty of reasons to own some precious metals in your portfolio, but I'm not gonna preach it. Either you believe it, or you don't. Nothing I say is gonna convince you. And it shouldn't. Because you should still go out and do your own due diligence anyway. Welcome to the internet, folks.

Anyway, coincidentally I went to collect a whole bunch of RCM 10oz bars that I had ordered a while ago.


Beauties, aren't they? 

Unfortunately, I have some minor gripes about my purchase. One bar had a scratch that cut through the plastic, one bar had a black spot and one bar must have had lots of pressure applied on it because it's edges were all dented.

However, at the end of the day, bullion is bullion. I got pretty bullion, but all I'm doing is buying for the metal content, not if there's scratches on the sides or not. I guess the best way to view them are like $50 bills. They are nice if in mint condition, but in reality, unless horribly disfigured, they are all worth just as much.

Anyway, this is likely going to be my last purchase for a while. Money is getting tighter these days, especially when I go around buying barbaric relics.

What was I thinking? I must be crazy.

 

[SGX Portfolio] SOLD TO YOU SIR!


CDW is actually one of the oldest holdings that I have. Okay, my portfolio isn't even a year yet, but it was one of the first stocks that I bought back in May.
With P/E at 4.4 and a discount of 28% to it's NAV, I think it's hard to complain about this company even if it is doing badly.
Back then I ran a simple screen and came up with this write up about CDW: 
CDW Holdings (D38) (link to annual report) is an interesting story. It is a Japanese owned manufacturing company based in Hong Kong, with operations in China and listed in Singapore. Confusing much? A little, but it is clear that they understand where you should go to milk certain capabilities. HK for access to China, China for access to labour, Japan for access to skill and Singapore for access to capital. I think that they are brilliant! 

They are profitable as a business, but I don't feel too comfortable with their margins of 6.5%. However, when I looked around at competitors, their margins are even worse, with half the industry out! 2013 was the 1st year they clocked in negative cash flow in the past 5 years too. Cash holdings are similar to others in the industry, around 18%, but I like it that they have very little debt. 

Their dividend history is pretty solid too. I wouldn't expect a drop below 0.03c per share, meaning a dividend yield with a base of 2.3% can be expected on the worst case scenario. 
Well, now times have changed quite a bit. From the initial price of $0.131 that I paid for this stock, it has now run up quite a lot.

Based on their recent quarter results, NAV is 14.21 USD cents and earnings for 9 months were 1.10 USD cents. Today's USD/SGD spot rate is 1.344.

This means that P/E has gone up from 4.4 to 9.4, which is earnings multiple expansion of more than double than when I bought it! P/B has gone up from 0.78 to 1.03, erasing the 28% discount and moving into 3% premium.

Of course, an argument is that P/E of 9.4 and P/B of 1.03 is decent, especially for a small cap stock with a market cap of $80 mil odd. And to that, yes I agree, it is decent. However, the margin of safety for me regarding this stock has all evaporated. That is to say, no, I would not buy this stock at this price.

Don't get me wrong, their balance sheet is in an amazing position. Personally, I love how much cash they have on hand. I think more companies should have strong balance sheets like them.

However, I hate carrot-in-front-of-horse investing. I'm not gonna pay for future growth or earnings that have yet to come. I don't invest with illusions of this being the next Apple or Google. This company has gone from ridiculously cheap to fairly valued, and that is enough for me. Fair price for a fair investment.

This is keeping in line with my new philosophy that unrealized profits don't mean a thing unless you know when you lock it in.

I sold my 1 and only lot today at $0.185.

Capital gains = 54 / 131 = 41.22%
Yield = 6.26 / 131 = 4.78%
Total gains = 41.22% + 4.78% = 46%
*transaction costs will be updated later

I hope you like my 1 lot of CDW sir, because I sure like my profits.

Monday, January 26, 2015

Tuning Out the Noise and Focusing In


There is so much noise and chatter recently, I feel.

Since SGX reduced it's board lots from 1000 to 100 and I strongly support and use Standard Chartered as my broker, I think that looking locally has a lot of opportunities.

It's no secret, but many may not be aware or willing to accept it, but the European and US stock markets are very expensively valued from an objective viewpoint. From my personal perspective, it's batshit crazy. I'm not even going to name some ridiculous names. Anything over a PE of 100 should require a sanity test to own.

The STI is honestly not that expensive when compared to history. My only concern is contagion. Market sentiment spreads fast and hits many other markets. That means even though we are not expensive, a downturn in other big markets could drag us down with them. This is something that I believe is very realistically within the realms of possibility. When is the last time we've had a recession? Statistically, this eternal summer will not last forever.


However, not everything moves in the cycle together at the same time. It will eventually be somebody else's day to shine.

In terms of looking at this from a global macro perspective, I have long held that precious metals and Russia will be the next big things. We shall see.

I also believe that we will see oil and oil-related stocks see their bottom soon. However I do not think that we are there yet and I am still waiting for a final shakeout. If we have a massive spike down soon, you can be rest assured that I will be running in guns blazing, joining the knife catching party. I have't seen that big move yet, so I'm still waiting. It looks so no-brainer to jump into stocks like Keppel now, which is exactly why I don't think it is the right time. It feels almost too easy. But who knows, maybe this is it and we blast off from here and I really am a greedy idiot with no brains.

I am compiling my list of oil-related stocks now. They ended up mostly being marine and offshore related though. Based on an SGX article, I found that there are 52 mainboard counters in the Maritime & Offshore sector. However, I do note of other counters that seem to be related but are not classified with them, like Mun Siong Engineering and SHS Holdings. I don't really envision Oil bottoming out for at least another month or 2, which gives me enough time to scrutinize that list and filter out all the garbage. And trust me, there is a lot of garbage in this space. I'm not sure if these related industries will be a good play to capitalize on the bottoming of oil, but I suppose this is about as good of a place as any to start.

Slightly further in the future, I think property counters are going to be the hot stuff (downwards). This CIMB report lists a few of the large cap developers, but I think that many are missing. I think companies like Sim Lian, Fragrance and Aspial are property counters and should be considered along with the rest of the group too. The CIMB report screams buy, I think I shall wait. No blood on the streets. I want to see bloody, dirty, ugly, tooth-and-nail, urban, free-for-all fighting, and then I'll come in and mop up the suckers. Again, maybe I am expecting too much and trying to be too greedy, and we base out here, but I doubt so. Things gotta get a lot more dirty and choppy before the stage is set for upsides.

My last sector to watch is commodities. Tickers like Noble, Olam and Wilmar has not been doing well as the prices of commodities across the board has been hammered. Plus, I like businesses that deal with hard assets.

Of course on top of all of these specific sectors that I am looking at, if any specific tickers sudden fall out of favour, I will be watching and waiting. I don't know, but I have a really strong and strange attraction for ugly, crappy stocks. It's not easy buying crap that have a trendline heading towards zero, but there ain't no other way I know of to buy low and sell high if you don't buy low.

Any sectors that you guys are focusing on? Or any good strong companies in this sector that you wanna promote? Don't shy! I told you my thoughts, let's hear yours!

*The Motley Fool has done some heavy lifting and sifted out these 6 companies. They also went to find out the weakest ones too. Useful? I'm sure it's a good place to start.

Saturday, January 24, 2015

10.68% Risk-Free Fixed Deposit? THANKS POSB!


AWWW YEAHHHHHH!

Thank you Mr BULLYtheBEAR for the hot tip!!

For those that qualify for the $88 hongbao, your 12 month return will be 10.68% on $1,000!

1.88% from the fixed deposit
$88 from the bonus

Total of 10.68% or $106.80!

The full T&Cs is here. The reason underlined below is another reason why you should never only be banking with just ONE bank.


Thanks DBS/POSB, you're making me happy. FREE MONEHHHH!!

If it is so obvious, it is obviously wrong: Gold and Currency

Very inspired by 2 posts recently on ZH, one by Santiago Capital and another by Dollar Collapse, I've decided to delve into my own charts and pictures to show you some interesting things about gold.

Let's just assume for a moment that some crazy people (eg, me) actually think that Gold or Silver is a currency. LOL, what idiots right? It's just shiny stuff, you stupid magpies. But please, just humour me.

Let's assume that, yes, some people actually think of Gold as a currency. What happens when there is a currency crisis?

Well, let's take a walk around the world and look at some currencies shall we? Data is the 1 year price of gold in different currencies all pulled from Goldprice.org.

Of course, we start with the USD as that is the reference rate for most people:


Now let's move on to the majors, EUR, GBP, JPY:




Odd.... Hmmm, let's move on to some other important "hard" currencies, like the AUD, NZD, CAD, BRL, SEK and RUB:







Bloody strange ain't it? Now bonus charts, SGD and CHF:



Phew, wow that tour around the world was kind of interesting. Let me share with you my thoughts.

In almost all major currencies, Gold is massively outperforming the EUR, GBP, JPY, AUD, NZD, CAD, BRL, SEK and RUB. The only 3 currencies that Gold is NOT outperforming is the USD, CHF and SGD, so let's break it down.

The USD is holding its ground against Gold because it has massively gained against many other currencies for being the cleanest dirty shirt around. The USD is up almost 20% from it's low last year. I personally think that the USD is a horrible currency with really bad fundamentals as a country. I think this is one of the biggest MoMo trades that we currently have in the markets. However, it's not what I think, it's what the market thinks, and they think that everything is awesome.

The CHF is holding its ground because it has always been a safe-haven currency, similar to Gold as a safe-haven asset. With the Euro losing its value massively over the past months, the CHF has been getting stronger as a place for that money to hide out. The Swiss govern their money relatively well and although many lament and blast them for removing the peg, I believe that the peg removal will help them run a much better and responsible currency, which will benefit them in the long run.

The SGD is also a very strong currency (totally biased). The SGD has been on a long-term appreciation trend in the long run against most currencies in the world. Why shouldn't it? It has a actual, real economy that takes all the painful ways to ensure its economic growth. It runs a balanced budget with debt completely under control. It has huge reserves and it is a prosperous country with massive intangible wealth coming from it's infrastructure and organization. The SGD might be suffering from fall-out effects of other currencies, but this is just a temporary move given the delusional fascination to hold USD despite it being nothing more than air.

However, at the end of the day, I do honestly and sincerely believe that Gold is the ultimate form of money and it is the premier currency of choice.

--------------------------------------------------------------------------------------------------------------------------

Many of you are excellent stock investors. Ask yourself, what makes a stock valuable?
The quality and amount of assets on their balance sheet. (assets - debts are positive)
The ability to generate and produce PROFITS in the future. (revenue - expenses are positive)
Now port this over to countries and their currency. *BOOM* Mind blown.

It is almost unimaginable to think of the pieces of paper and the numbers in our bank account as something that isn't money. Currency and Money is honestly a HUGE subject to tackle that 99% of people will never bother to understand about. I urge you, reader, to explore the POSSIBILITY and EFFECTS of a currency crisis.

Even with a low probability event, if the effects are massive, it would be prudent to do some scenario planning for it. That is why we all have medical insurance, right? However, I do not think that this is a low probability event anymore. I'm not saying to back up the truck and stack-on. I'm saying that to have SOME precious metals in your portfolio is not an absolutely stupid and ridiculous notion, like many would have you believe.

Anyone "worried about SCB as a custodian for their stocks" is now just holding blatant double standards if they cannot see the irony now when it comes to counterparty risks.


Call me crazy, I don't care. I don't believe that the world and the financial markets were created and made such that every Tom, Dick and Harry, along with their mother, father, grandmother, second cousin, third niece and pet dog can play the markets and become rich on something obvious.

If it is so obvious, it is obviously wrong.

If it is not obvious, then well maybe that is where money can be made.

You Say I'm Crazy



"For better or for worse
I can't believe you let me down
But the proof's in the way it hurts"

"For months on end I've had my doubts
Denying ever tear
I wish this would be over now"

"You say I'm crazy
'Cause you don't think I know what you've done"

It's all about the multiple expansion. (source: Yardeni Research)



What's better than simple multiple expansion?
Multiple expansion and falling earnings. Oh baby, don't tease me. (source: ZH, Soc Gen)


Translation: Danger, Cliff Ahead

Friday, January 23, 2015

I'm All Out of Bonds (sort of)


Last week I posted about why I am cautious of bonds.

- massive rally in 2014 (losses usually come after spectacular returns)
- extreme bullish sentiment
- extreme moves in price and speed of it
- historical comparisons show limited more upside

Which such extreme gains in the past 3 weeks, rocketing the TLT up almost 7%, even a small reversal like what we are seeing now is highly probable. Wow, so I managed to exit at "the top"? I am no market wizard or guru, this is just statistics.


Since my blog post last week, I did take action to liquidate my bond holdings, which are mainly in the form of unit trusts (how archaic, right?).


You would think with a mix of bonds like that, along with them all being unit trusts, gains would be muted and low, right?

Well, I don't know if it is a good or bad thing, but my overall bond portfolio that I liquidated netted me 5.44% returns. I entered in most of my position in 2013 and early 2014. I think it's not too shabby considering the whole world thought that bonds would be the worst asset class of 2014.

I am now almost all out of bonds, leaving only 2 holdings left - Emerging Market bonds and short-duration bonds. EM Bonds are still attractive to me since they are not in the crazyland that developed markets are in. Short duration bonds are just fixed deposits to me, with some downside risks.

I am now holding a very macro defensive portfolio, though I am holding a lot more cash than I would like. Incidentally, I have also recently increased my exposure to precious metals and Russia. Commodities are looking very attractive now as well. I would love to be invested with a larger portion of my portfolio, but the risks and the available rewards for other asset classes are just not enticing to me.

Don't get me wrong, that is not to say that bonds can't go higher (or stocks for that matter). They surely can. In the market, anything is possible. However, is it probable? From my perspective, no, I don't think so. Weighing the probability and expected returns of the upside against the downside, I have found it prudent to quit while I am ahead.

Thursday, January 22, 2015

The Central Banks That Cried Wolf

First there was the US,


Then there was Japan,


And now we have Europe,


Does this remind you of a story?


Unfortunately, I don't think that the world central banks can just print money until everything is okay.

This will not end well.

To quote George W. Bush,


'Fool me once, shame on ... shame on you.
Fool me... I can't get fooled again!

This MRT Auntie power pack, she don't play play one!

I wanted to blog about this a few days ago when it happened, but I was preoccupied and forgot about it until recently. This post by AK about the role of government and financial literacy got me thinking about it again.

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After work on Tuesday, I squeezed onto the MRT during peak hour. That day was a bit special, because instead of going home straight, I was going to town to meet some friends for dinner. Social life is important too, mustn't work all day and all night and forget about friends!

Usually I just stand around in the MRT, daydreaming and planning the rest of my evening and maybe even my weekends. However, since I knew what I was going to do the rest of the evening, my brain was not in a heavy thinking mode, so it was very active and observant about what was going on.

Within the carriage, 70% were playing their phones, 20% were sleeping and 10% were daydreaming like me. Very normal, right?

I see a lot of guys playing Clash of Clans. I see a lot of ladies playing puzzle games. A lot of people were messaging or scrolling through social media like Facebook or Instagram. Just normal stuff.

Then I noticed the auntie standing beside me.

What was that?

Is that a candlestick chart?

With moving averages and studies?!

It was!

This auntie that was standing beside me was using the UTRADE mobile platform by UOB to check up on stocks!

I know this is a super bad invasion of privacy, but she was very engrossed in her analysis so she did not notice my prying eyes. Plus, it isn't any personal info, I never saw her holdings. Still, I shouldn't have continued looking at what she was doing, but I was just so curious! It's not just me, the guy on the other side of her was also staring. We were both staring at her phone. Lucky smartphones these days all have super big screens, if not I won't know what I am looking at!

After she finished analysing the chart of her stock (it was M1, by the way), she shocked me by going to her watchlist with a decent list of stocks! There weren't the anyhow lup sup kind of penny stocks, she had a list of very decent and respectable stocks!

The next shocking thing? She had multiple watchlists of different kinds of stocks of each watchlist! This auntie is even more organized and systematic than me, noooo!

Once she was done peeking at a few other counters, she then logged out and went to the SGX website. She was looking to see how the index did, as well as the StockFacts info provided on SGX! Savvy!

I wanted to continue watching this auntie to see what she would continue doing, but I was already at my stop.

Bemused, I stumbled out of the MRT.

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I know that almost all my friends are not interested in investing or even basic financial literacy, except for a rare few. Even then, they are mostly interested in only trading and quick profits, rather than a more holistic view of financial planning as the bigger picture.

I believe that not being financially literate is a massive disadvantage in the world today. Everyone should have basic financial literacy.
When should we have government intervention?  
When we cannot reasonably rely on everyone to act responsibly on a matter that has tremendous importance in everyone's lives, especially if irresponsible behaviour would result in the burden being shifted from such individuals to the rest of society. - AK
Since it is not possible for everyone to act responsibly, is it really such a bad thing that the government plays the role of nanny state and force us to save a basic amount for our own retirement? I think a government that really cares about the welfare of their aging citizens and the possible strain of society should. The mistakes or ignorance of one person should not drag down others.

This is a modern day Catch-22. If you save enough money, you won't complain about CPF. You know it is a safety net and that you should be saving for your retirement anyway. If you don't save enough money, you will complain about CPF. And that is reinforcement that you should be forced to save money through CPF, since you cannot be relied on to save enough on your own in the first place.

Call me a (insert your favourite political party) dog, I don't care. I can validate my stand. Can you validate yours?

16 Tips from Walter Schloss

Who is Walter Schloss?

Walter was a student of Ben Graham and was an amazing value investor. Below is something that he wrote back in 1994, but I think it is still pretty applicable in today.

Walter was an amazing deep value investor, which is no wonder why he talks about price and book value a lot. Basically, he milked the buy low, sell high strategy to riches by simply figuring out a system to identify stocks that are valued low to buy.

With US stocks just off all-time highs after one of the longest bull runs in history, perhaps thinking of adopting a deep value strategy might help cushion any blows from a downturn.


Personally, I like rule #3 and #11 the best, they highlight his strong preference of deep value investing, which focuses on return OF capital, not return ON capital.

If you identify an investment with almost no more downside risk anymore, what's the worse that could happen?

Wednesday, January 21, 2015

Standard Chartered Equities Trading: Why I Might Lose Everything And I Don't Mind

While prudent and realistic, I think this article on Dollars and Sense is borderline fear mongering.

Is Standard Chartered (SCB) really a shitty bank that will just close down and then *POOF* all your investments with them disappear?

It is possible, but the odds are slim.

Based on Global Finance World's Safest Banks list in 2014, SCB is one of the world's safest commercial banks in 2014.

It is the 35th safest commercial bank worldwide, and the 2nd safest commercial bank in the UK.

Why isn't it on the overall list of banks, and only on the commercial bank list? Well, the overall list of banks include government banks, many from Europe and China.

Even if you have $9,000 to slosh around in the stock market PER trade to minimize the commission charges, brokerages still charge 0.28% compared to SCB's 0.20%. For people who trade over $9,000 per trade, maybe only then can you consider if it is worth it to pay an extra 0.08% to have your holdings held safely with the CDP.

Who doesn't want to sleep well at night? However, as much as I would love to sleep comfortably at night knowing that my stocks are safely kept in my CDP account, the price that I will have to pay for that protection is much too steep.

My entire portfolio is just shy over $9,000 with 23 holdings. I eventually plan to slowly expand my holdings to hold around 100 counters, all in small amounts. It would be IMPOSSIBLE to cheaply build my own diversified portfolio with a broker that charges a stupid $25 fee. Honestly? Seriously? It's a joke.

- Expensive brokerage fees are bad enough.
- The high fees encourage larger positions which might be too aggressive.
- Chunky positions and high fees are huge barriers to rebalancing and taking profit.

For people with large $10k trading positions, you have your pick to which brokerage you would like to patronize. However, for the normal retail investor, I feel that the small risk I am taking with SCB catastrophically blowing up is worth the hundreds of dollars I will be saving in commissions.

The way I see it, if the world is under a global economic meltdown and SCB succumbs to it, the stocks we own are not going to be worth much anyway. Hur hur.

Tuesday, January 20, 2015

How will the Future You thank you?


Personally, I think this is one of the best advertising campaigns to get people to think about financial planning and their future. Good job NTUC Income, I am sure you got yourself many customers with this campaign!

What sparked me to revive this relatively old campaign that was launched last year is actually a post by Uncle CW8888 about retiring in debt.

Go around and have a serious and practical real-world conversation with friends and ask them, "What are their goals in life?". I am pretty sure "financial freedom" or "financial independence" is bound to pop up, along with retiring early and travelling around the world. We are all special and unique snowflakes right? Hur hur.

I will leave the philosophical musings of how people are the same, yet think that they are different, to the sociologists, psychologists and philosophers. I will just focus on the "financial independence" portion.

I actually wrote a whole huge long page decrying so many "wants" that people mislabel as "needs". But then I realized that my issue isn't about specific things, like owning a condo, a car or burning money going on expensive vacations to use wifi in the hotel room. Overseas wifi more shiok and atas, right? No no, my beef is the inability of most people to differentiate "wants" from "needs".

Do you need a condo? Do you need a car? Do you need a vacation? No.

Would you like a condo? Would you like a car? Would you like a vacation? Yes.

When people confuse "wants" and "needs", they start spending tons of money on these pseudo-needs. They get deep into debt to finance all these "wants" because they are confused and "thought they needed it". It doesn't help that financing all these wants are so easily available. They end up working all their lives to pay off things that they didn't need which they bought with money that they didn't have. Hindsight is 20/20 and many people regret their bad choices.

I was reading somewhere about an old lady complaining about her daughter's education. She spent a few hundred thousand dollars sending her daughter to an overseas university, jeopardizing her retirement and forcing her to work many extra years... and for what? The daughter didn't even appreciate it, she EXPECTED it. To the daughter, it is the minimum that a parent should do for their children, to give them a good education. Screw that. I really pity the naive old lady for being so selfless, kind and loving. Her only mistake she made was confusing what is a "want" and a "need", and for that she will pay dearly with countless years of her elderly life working.

I do not want to make a mistake like that in my life that will cost me years of my freedom to work off.


"Financial independence" isn't being rich and flashy, having a big house, big car and a big lifestyle. You don't need to have tons of money and spend tons of money to be happy.

"Financial independence" is just about having enough to cover your needs, and maybe your wants.

To me, "financial independence" would be to own and live in a fully-paid off home and to have a predictable stream of income to meet my needs (medical, food, transport). And as a sweet bonus, my less predictable investments can surprise me with extra perks from time to time. Then perhaps a nice holiday would be in the cards.

I think happiness comes from managing expectations and reality. I feel that far too many people my age (the main demographic I interact with) are always so deeply affected when reality sets in because they have such high expectations for everything. For their jobs, their relationships, their achievements, their whole life.

My argument is simple: If you live a simple life with simple expectations and make realistic plans to achieve that, you would probably be very satisfied with your life.

When you are older, will the Future You thank you for the choices you made in your life from this point onwards?

Monday, January 19, 2015

The Death of an ETF

Back in Aug 2014, I wrote a piece called, "STI ETF Showdown: The SPDR is going to kill off Nikko AM".
"Let's be very honest here. The only reason why investors have been flocking to Nikko AM is due to the simple fact that the capital requirements to invest with them is a lot lower. Setting aside $300 odd every now and then to invest in the stock market is a lot easier than the $3000 plus that the SPDR requires. Not anymore come 19 January, it will now be a fair playing field.
Hands down, the clear winner is the SPDR STI ETF."
And now let us see the volumes of both ETFs today when they are now playing on the same playing field:


DAMN, that's a huge difference.

The bid-ask spread for the Nikko AM is 3 cents, while for the SPDR it is just 1 cent!

The traded value of the SPDR ETF was a whooping $708,000, while the traded value of the Nikko AM ETF was only a mere $26,500. That is 26.5 times more!

Trouble in paradise, Nikko AM?

Recap from Aug 2014:

ETFs can die because of low liquidity and low AUM, making them inefficient investing tools and expensive ones as well.

Nikko AM might be able to stem this off with their RSP feeding funds into the ETF, but I would rationalize that only an ignorant retail investor buying the ETF off the exchange directly would pick Nikko AM over SPDR.

I don't know about you, but I like to pick winners and "Hands down, the clear winner is the SPDR STI ETF".

It is simple game theory. If 2 shops selling the exact same product opened up right beside each other, and one shop is bigger, with shorter queues and lower operating costs, what is going to happen? It is going to kill off the smaller one.

Now let's sit back and watch the free market in action.

Wa, Liquidity in the SGX!

Wa, I think this reduction in the board lots is really giving SGX a lot more liquidity than what I usually see last time! It feels so unusual to me, ahaha!

I went shopping today and picked up these counters at my target prices in less than an hour (from my list yesterday):

CSE Global
Global Logistic
Golden Agri
SATS
Second Chance
World Precision

They are all just nibbles which might lead to bigger things, but I think the entry prices are pretty attractive already. However, now that I have some skin in the game, I will be watching theses tickers a lot more carefully!

I see a lot of chionging into the big names like Keppel and Sembcorp. I also see all the REITs going green. I think REITs these days are being over-touted to uncles and aunties as the replacement for second property investments.

I personally believe that REITs are better than second property investments in terms of total returns, but they are both different and I can see how things might end up very badly for the retail herd unfamiliar with the massive volatility of stocks. Most people that are not familiar with how volatile things can get will not have the stones to hold through a massive drop.

Anyway, it doesn't really bother me. Most REITs look fair or over-valued to me now, so I'm being very selective about them. If other investors cannot take the heat when it's finally going to be uncomfortably hot, then it will be people like me that will so kindly appear to offer to help them unload their "nonsense property investment" at deep discount prices.

Buy low, sell high! Buy high, sell higher also can, but do you really think you're good enough? I know I'm not, I am but a tiny grain of sand on this massive beach. I'm a price taker, not a market mover, haha.

Sunday, January 18, 2015

IT'S TIME



I opened up the newspaper today and this is what I saw!


So, it is finally happening, zomgawd, are you excited or what?!

After having a relaxing weekend meeting up with friends and chilling out, I have decided to spend this evening at home to have some quiet time to think about what I will be doing with the new change to the lots sizes.

Firstly, I need to identify good stocks that below to 2 groups. I am looking for Oil related stocks and Property stocks. I am going to have them in a specific grouping, all nicely sorted out with all the bad apples removed, so that when it is time to strike, I have my research and homework all done.

I will be looking at the Oil related stocks first, because I believe that they will bottom out first and soon. I will also be looking at Property stocks for the later half of the year as well. Sentiment in these 2 areas are very negative and getting worse each day. I don't think there is any need for me to rush in guns blazing for these stocks yet. I feel there is plenty of time to get in later and there are still too many people rushing in. Even the 52 week low in some of the nice big blue chips (you know which ones I'm talking about) don't entice me.

So, while I slowly do my research on these stocks, I will be avoiding them for now. However, with the new SGX smaller board lots, I will instead look to finally take nibbles in many companies that look very attractive to me.

Stocks that are looking interesting to me now are:

ABR
*CSE Global
F&N
*Frencken
*Global Logistic
*Golden Agri
Hong Leong Finance
Jardine C&C
K1 Ventures
Neratel
*New Toyo
PNE Industries
*SATS
Second Chance
SIA Engineering
Sin Heng Mech
*Sing Inv & Fin
SPH
*Super Group
Tai Sin Electric
Teckwah
TTJ
UMS
*World Precision
Zagro

*most delicious picks IMO

Gonna keep a look out at these stocks and consider picking them up if the price looks right! In the meantime, I'm going to transfer a small sum to my SCB account, just so I'll have some spare cash to take advantage of any opportunities! I'm expecting more blood and more discounts, so I'm still going to be very selective of my picks though. O&G counters look so good right now, ehehe.

What are you guys looking at!