Saturday, February 28, 2015

Am I in a Bearish Echo Bubble?

"Gold: I'm long and adding"

The man behind the quote is none other than Steen Jakobsen, the Chief Economist and CIO of Saxo Bank. Usually I don't trust economists, but Steen is a really upfront and smart guy. On top of that, he has been pretty clairvoyant in his views and forecasts. He is also very honest about his previous forecasts, which I find most people are not.

I read a piece that he wrote today and I find it quite compelling. However, what kind of took me about is his mirroring of my sentiments that I explicitly came out to say earlier. Other than my view of Russia being very cheap (I do know that it is very well within possibility that I am in very early), his views of a weaker USD, weak US stocks and higher Gold are the same as mine.

Now, I feel really scared that I am in an echo bubble. Are the overlap of all the news I read and people that I follow confirming a certain herd view that we all have?

My single strongest conviction is the absolute retardedness of the US stock market. I like looking at historical comparisons, so for me looking at past valuations at peaks and comparing it to recent times is how I arrived to my conclusion. Steen came to his point from another angle, which is from the earnings and GDP relationship, which is very strong btw.




His view is that the USD will peak this quarter and that is probably the end of it. I am in very very strong agreement of this as well.


Using MACD as my lagging indicator, you can see how far it has gone over the zero line, while it looks like a crossover is imminent. A crossover is a confirmation signal meaning that the trend has already changed. The exact turning point will be before the crossover point.

With Stochastics as my leading indicator, you can also see that this period of overextension is actually very long and unnatural. The last time such an extreme happened was in 2009, but in the oversold territory. However, levels of oversold were not as extreme as these levels of overbought.

I am expecting a massive USD reversal anytime soon.

I think my position as a gold bug has also been well documented for a long time. Surprisingly, with the USD performing so well since the 3Q of last year, gold has managed to hold its price relatively well. I think that is a good sign. If and when the USD reverses, the gains will be swift and fast.

Anyway, don't get me wrong, I'm not advocating people to take up these trades based on the views that Steen and I share. These have been horrible bleeding trades for the past few months and the only thing saving me from selling my backside is segregating my "fun" money from my my actual long-term investments and practising risk management.

If and when these narratives and trades start working out, I would think that they are going to pay out quite handsomely for quite a while.

Friday, February 27, 2015

$2 FAST FOOD FISH FIGHT

Have you seen these advertisements lately?



I always had the impression that the BK Fish'N Crisp was quite expensive until my father told me that he bought a burger for only $2. I was skeptical whether he really knew which burger he was talking about until I saw this ad that confirmed it. In response, McD's dropped their price too.

Personally, I find the BK Fish'N Crisp a bit more... breading-y and crunchy as opposed to the more flimsy, but meaty Mac's Filet-O-Fish. Other than the fish fillet itself, the Mac's burger has a very airy and squishy bun which I quite like. However, 9/10 times the person that made my Filet-O-Fish was not able to put the cheese in the middle of the burger. It's not a major complaint, but it irritates me that the fillings of my burger are lop-sided. I like have to an even spread of bun, fish, cheese and sauce with every bite. OCD? Probably.

But to be fair, I haven't had either of these burgers in a while. Maybe I will do a taste test soon since it would only cost me $4.

It's tough, but the aunties and uncles selling homemade $2 burgers can't beat these guys. Usually they don't even have cheese in their burgers, and the sauce is ketchup or chili. The next time I go for reservist I will report on the status of the mess burgers at my camp.

I wonder if anyone will call BK and McD smelly Foreign Trash companies owned by foreigners that come to Asia to hire cheap local unskilled labour and steal away the ricebowl of other Singaporeans?

MINIMUM PRICE FOR ALL BURGERS!!! /sarc

Either way, between this clash of fast food titans, do you know who the real winners are? It's the consumers, like you and me.

It's a free market and I'm lovin it having it my way.

The Few Things I'm Looking At Today

The thing that I like about personal finance and the financial markets is that there is perpetually something out there that you have yet to learn.

For me, it is about Dividend ReInvestment Plans (DRIPs) or scrip dividend schemes. That is basically shares issued to you in lieu of cash dividends.

Now, what are the pros and cons of them? I've known about them before, but until Croesus Retail Trust recently announced that unitholders will now need to choose how they want to receive their dividends, I never actually have to know more about this and happily lived in ignorance.

After reading drips (oh, the pun) and drabs of information all over the web from pieces like this one and this one, I found this piece regarding dividend reinvesting the most useful for me.

Pros (compared to selectively reinvesting yourself):
- Automates your compounding (removes psychological fear to buy)
- DRIP issued units might be given at a discount
- Lower brokerage charges

Cons:
- Security to reinvest in is fixed and might be overvalued
- No control over reinvestment time
- No change in brokerage costs if you reinvest dividends at the same time as new purchases
- More straightforward, less confusing
- Creates psychological attachment
- Creation of odd lots

Weighing the pros and cons, I think I have decided that for Croesus Retail Trust, I will be choosing to receive my dividends in cold hard cash. The discount that CRT is offering to issued units is a decent 2.5% off the previous 10 day VWAP.

However, in the case of Global Investments, the discount is a whopping 10% off the 3 day VWAP. 10% is substantial to me! I need to explore if SCB can do this and what will be the effect of all the odd lots. All their lines are busy, so I'll call them later and post what I find out.

I just saw Noble go under $1. Weak quarter and lower declared dividend. I still think that it's a sinking ship for now. I'm glad that I got out when I did, and that I also managed to turn a small profit!

Hong Leong Finance reduced their dividend payout from the expected 8c to 6c, bringing their total annual DPU to 10c instead of 12c. I hope this freaks out some shareholders. I'm looking for it to retest lows before I get interested in it.

WTI Crude puked about 4% last night. We're now at the $48 handle. We are currently $5 away from the recent lows. That is not very far away at all. Smash through the recent lows and head into the $30s, we'll be seeing carnage and despair, and that is when I'll be coming in gunzablazin'!

USD soared overnight, yet precious metals remained totally unchanged in USD terms. You know what that means right?

Anyway, this was a fairly interesting February. Will be doing updates for all my monthly posts over the weekend!

Thursday, February 26, 2015

Stock Up 50% in 4 Months. Sell?

The counter that I am talking about is Valuetronics, which I bought in October when there was a spike down in the stock price.

Back then, I was scratching my head at the plunge in share price. The share price was below net asset value and their balance sheet is something to be envious about. Almost all their debt is payables (good debt imo) and they have a very high cash balance. They have a strong dividend payout history and offer quite high yields as well. The stock cratered 50% in just 3 months. Wise men say only fools rush in, and I was a sucker to this stock crash.

With recent sells of CDW and Hock Lian Seng netting in returns of 46% and 41% respectively, looking at my 50% unrealized capital gains on Valuetronics is making me think if I should walk away with the profits in hand.

Before I make such a decision, I have to go back and look under the hood to compare the stock at the time when I bought it, and today if I want to sell it.

What I found is that fundamentally, nothing much has changed. Balance sheet gained assets which pushed down the debt ratio, but also the cash ratio. Payables only form 82% of debt now when it used to be 96% of debt. Kinda of feel like the plus and minus balances off.

Looking at P/NAV, the stock is no longer trading at high levels of safety since it is now over NAV by 22%. It was trading 12% under NAV when I bought it. Seems to sound like I might want to walk away with my profits now, right?

However, (if my math is right) EV/EBITDA has only inched up a tiny 8% even though share price is up 50%. I'm not trying to be greedy, but I believe that such a company that is currently valued at 6 EV/EBITDA ought to have higher valuation multiples.

This really is a case of fear of missing out. I do believe that this stock has a very high potential considering the decent price that I entered. I think it is unlikely that stock prices fall too deep beyond my entry point. I am now risking my unrealized profits for the possibility of even higher profits, which I think is quite likely and worth the risk that I'm taking.


Even if nothing fruitful happens in its stock price, sitting on this stock pays out 6-12% in dividend yield historically. It's hard to complain given the current position I'm in!

The question is not if this stock will be profitable, the question is how profitable will it be?

Technical Analysis Example: Gold

While my view of the US stock market is ridiculous overvaluation, the other views that I have are:
  1. Cheap precious metals
  2. Cheap Russian equities
  3. Expensive USD
I suppose a trade that capitalizes on both of these is buying Gold in USD, which is basically long Gold and short USD.

All my bias aside, I believe that we might be looking at a short-term bottom is Gold playing out now or very soon. (That would signal the same for Silver as well, given the high correlation of both the precious metals)

Using a combination of 2 leading indicators and 1 lagging indicator, below shows the chart of Gold that outlines how I use technical analysis. I have mentioned before that using some simple technical analysis is what helps me decide entry and exit points.


Once I see my leading indicators screaming oversold, I turn my attention to my lagging indicator and start looking for a crossover.

Leading indicators can remain oversold for long periods of time so when they start giving a signal, you might be entering too early. Lagging indicators only signal a change in trend once it has already happened, which means that you will always be late to catching the turning point.

However, I think using these indicators together can help identify and confirm future possible turning points. It is definitely not a perfect science, but I would wager that it is better than nothing.

I use other technical methods too, but I decided to clean up my chart to just show the simple example of how using leading and lagging indicators can be useful.

I really want to stress that I don't believe that you have to only follow Fundamental Analysis or Technical Analysis. They are not mutually exclusive school of thoughts. Why not use both if you can? No one is going to stop you.

To be very transparent, even though it looks like an attractive price, I already have very very rich allocation to precious metals, so I am resisting taking up additional positions. I've got to practise risk management and not bet the whole house, especially since I am trying to save up cash so that I can buy a house!

Wednesday, February 25, 2015

Genting Singapore, Drop and Roll!

I don't know about you, but the SEA Aquarium is actually one of my most favourite places in Singapore. Truth be told, I've only been there once, but it was awesome. There's something about having a huge fish tank full of fish that is just so tranquil and relaxing. I suppose it is an experience opposite of music and sound. When staring at the fish tank, all you feel is peace and quiet.

(Credit: Ria Miranda via Google Images)

But the awesomesauce aquarium aside, Genting has one fugly chart.


As many of you know, I LOVE fugly charts. However, I think investing in these kind of counters require more than just an ugly chart to go in. No guts no glory, no brains same story. You need to know what you're dealing with. The biggest risk is that it ends up being a value trap.

The recent drop down is due to the horrible performance of the latest quarter, showing a 30% drop in net profit when compared to the same period last year. That feels like quite a steep drop, but comparing full year figures, net profit only dropped 10% actually. However, earnings are dropping and that is not a typically fundamentally good sign.

In terms of balance sheet, Genting is actually pretty nice. Debt/Equity ratio is a low 16.3%. Cash as % of NAV is a pretty decent 37.8%. Overall cash flow and operating cash flow is positive, with good management of their financing activities in my opinion.

As fugly as their charts are, their valuations hasn't hit the levels I would like. P/NAV is 1.6, P/E is 23 and EV/EBITDA is 9 if I did my math correct. To me, these are definitely not bargain levels yet.

If I'm not wrong, we will know if there is a 3rd IR in 2017. From my understanding, a third IR means that the same pie just gets split between the participants which is bad. If there isn't demand for a third IR, it means that this industry is estimated likely not to be too stellar in the near future, which is bad too, but less so than the former I suppose. Either way, it seems like a damned if you do, damned if you don't sort of situation that investors are going to see.

On top of this headwind, Genting has been doing their buyback but it doesn't seem to be holding the floor up very well. What is there to prop up this stock?

Personally, I like the fear trade that this counter could bring, and I expect it to continue heading south until earnings start to stabilize. If earnings start to stabilize and valuations are much lower, I would definitely consider this company then. Now, at this price with these fundamentals? No.

The Stock Market =/= Economy (Part 2)

Again, I needed to remind myself today that the stock market is not the economy.


Unlike Chairwoman Yellen, I think that the future is bleak.


If you've never seen someone doing live impromptu bulls***, you definitely have to watch Yellen's testimony. I cringe hearing her roundabout answers.

In Nov, I presented my slew of bearish indicators. I've been stressing US market overvaluation over and over and over again.

I think it's safe to say that I am an outright bear now. Of course, it is entirely possible for these levels of valuations to persist or even increase. No one said that the market was rational. A whole lot of patient people that I read and follow are cautioning against these extreme valuations. If I am not wrong, at current prices, the only other time in history that valuations were this rich was during the dotcom bubble.

Oh boy, did that end well, right? It painful watching this car crash in slow motion.

You know the rain dance? This is my bear dance.


Unfortunately for older people with more aggressive allocations, a massive bear market is one of the best things that can happen for young investors brave enough to seize the scary opportunity.

Anyway, I am just a small fish in this big ocean. I'm just a price taker, not a market mover.

Tuesday, February 24, 2015

Local Gold Companies?

Yesterday I only had a half day at work, so I thought I'd write up about these 2 Gold companies that are listed on the SGX.

I think a lot of people hear about LionGold (LG) and get a bit anxious and uncomfortable. That's normal, since they crashed along with the other penny stocks, Asiaons and Blumont. Don't worry, I'm not asking you to invest in it.

I never knew that there was another gold mining company listed on the SGX. Have you even heard of CNMC Gold Mines (CNMC)? Well, once I had stumbled upon it last week, I carefully peered into their financials and I was quite surprised with what I found.


Compared to LG, CNMC has a market cap about 10 times larger! CNMC is actually a profitable gold mine and their costs are much lower compared to LG. LG is not even making money at this point. In fact, it's bleeding fairly quickly. CNMC on the other hand is raking in heavy profits even with gold at this price.

Looking at their balance sheets, CNMC has a lot of cash on hand, most of its debt is in the form of payables and it has an extremely low amount of debt for a mining company. While CNMC checks all the right boxes, LG checks all the wrong ones.

LG does not pay dividends and has issued rights twice as its last 2 corporate actions. CNMC pays out a nominal sum of dividends, but that is a good plus in my books.

Valuation wise, LG is priced as if it will be liquidated and even then no one wants to take the risks of being able to salvage anything from the wreckage. CNMC is valued at a very high P/NAV ratio, which I feel is not very useful in this circumstance. However, based on EV/EBITDA, they are priced pretty attractively.

My personal thoughts are that gold mining companies are not your traditional sort of companies. They do not follow the local index at all, instead they track the price of gold. Considering that gold seems very low to me, I feel that the downside risks of investing in gold miners is capped. This means that any gold mining company that makes reasonable profits under these current poor environment should be able to thrive when the price of gold goes up.

Along that line of thought, I would not touch LionGold. It's company that doesn't make any money. Why would anyone invest in that is beyond me. CNMC on the other hand seems like a rare gem that I found. I am definitely keeping this guy on my watchlist.

Any thoughts on CNMC? I can't believe I never knew about it before.

Monday, February 23, 2015

[SGX Portfolio] Thank You Mr. Hock Lian Seng!

Check out dem recent price moves in Hock Lian Seng!


What's going on here? Hmm, I'm not sure, so this is just me thinking outloud.

Based on the SGX release of their Jul - Sep 2014 quarters results, we can pull out a bit of things.

Net Asset Value is 27.4c. Current Market Value is 38c. This is a premium of 38% of their book value. Market Cap of HLS is based on the total number of shares being 509,978,991 shares, which gives its a Market Cap of about SGD$193.8 million.

They have a very strong cash balance, which is $115.7M. This represents approximately 87% of their net asset value and 28% of their total assets.

Debt / Equity ratio is 232% which I don't particularly find attractive. So let's see what sort of debt they have. Most of their debt is in the form of payables (good debt) and progress billings (good debt?) which is the norm in their industry I suppose. So these actually make up the bulk of their debt.

I think their balance sheet looks pretty good actually.

Business wise, it's good to see that they are still getting business from LTA. Also read about an activist hedge fund entering into HLS hoping to shake them up to give better shareholder returns. I guess this news is quite neutral with a positive tilt.

Checking on valuations, simple P/E ratio based of their 1.4c for the past 9 months and extrapolating spits out a pretty high 20.4 P/E value.

Seems pretty high, so I'll be checking on the EV/EBITDA metric.

Enterprise Value of HLS would be stripping away all the cash, and adding all the debt to Market Cap.

EV = $193.8M (MC) - $115.7M (Cash) + $306.5M (Debt) = $384.6M

EBITDA (9 months) = $8,830,000 + $1,043,000 = $9,873,000
EBITDA (12 months) = EBITDA(9 months) / 9 * 12 = $13,164,000

EV/EBITDA = 29.2

Of course a possible reason for the elevated values can be due to a dry up in recent earnings. Full year earnings of 2011, 2012 and 2013 were 6.1c, 4.9c and 4.7c respectively. That is an average of 5.2c. Just extrapolating the 9 months EPS, we get 1.87c which is almost 3 times lower than the average previously seen.

This means to me that the EV/EBITDA ratio would actually be around 10 right now if it was a normal operating year. So will the stock be worth a lot more in the future once earnings pick up back to "normal" levels? Well, even in 2011 and 2012 and 2013 share price sat quite firmly under the 30c level. This means that the current valuations now are much much more rich and optimistic than it was just a few years ago.

Fundamentally, I think that this counter is a good one. However, based on valuations I feel that this pop in the stock is either a "new normal" for the stock, or just a euphoric moment. Either way, it seems like that just leaves me with downside if the market decides these valuations are not worth it.

I bought HLS last year in August at 27c. Since then, dividend yield has compressed from 6.9% to 5.1% today because of the run up in price.

I am selling HLS for a nice cool 41% capital gains. If I lock in these capital gains now, it is roughly worth 5-8 years of sitting and collecting dividends, depending if you take the starting or ending yield. I think that is pretty attractive to me.

I have to admit, it is never easy to sell. I had to write a whole post just to assure myself that I have some logic in my thinking when I sold CDW for a 46% gross total gain last month. I guess this is me doing that again.

Sunday, February 22, 2015

Personal Dilemma on Properties

While surfing around the internet for news, I stumbled upon this article on CNA. In the article, it was stated that smaller shoebox units get typically higher yields of around 3%, while other types of private homes had yields between 2-3%.

When I read that, I thought, gosh, owning an investment is huge investment to make, with lots of capital outlay and capital risk, not to mention all the extra work, for a paltry 3%! My previous research corroborates that investing in real estate through REITs securities has a better total return than physical residential real estate. Not to mention customizable capital outlay, diversification benefits and massive liquidity. Is the higher returns due to the more volatile nature of largely non-residential real estate, leverage, professional management and other factors? To that end, the reason for the outperformance of REITs over residential real estate is unknown, but the fact is that it does outperform.

For those that have been following me for a while, I think I've made it pretty clear that I am looking to leave the nest and make a home of my own, a small home in particular. This is because I believe that housing is an expense, therefore I should choose to live in a place large enough that I am comfortable in, but not excessive that I am forking out money for needless space.

On my part, I have actually extensively looked and searched the entire Singapore for the perfect locations. I have found a few properties that are excellent choices, even if money was no option and I could have a mansion on Sentosa, I would probably rather stay in these places. Unfortunately, unlike securities where the market is liquid, big and open for all to see, the real estate market is not. Which is why I will not be sharing the hot tips of locations that I have found until I got a place for myself. It's all subject to preference anyway!

One thing that I am lacking is the lack of knowledge regarding property transactions. I did say many moons ago in November that I will be researching on DIY property transactions (part I and part II here), but I really have done it yet! My friend was asking me if I was interested in taking the real estate course and exam with her. Perhaps because I haven't seen the property market heading south, I don't see the real urgency yet. People aren't running around with fire on their heads. No rush now, at least, not from what I can see. I do have friends that have taken or are planning to take the real estate courses and exams, so I will be asking them for their material so that I can come up with proper steps. I don't think I need to past the exam to be able to DIY. I am not planning to be a freelance agent either. I'm sure once the sky is falling, a post like that with the steps for DIY should be useful to all.

Anyway, 2 things got me thinking about property now. One is all the CNY visiting. I've gone to people's houses where the house is small. Personally, I could live in such a place happily alone as a single. My parents got claustrophobic. Second was talking to a VP of a bank. Anyway, he was telling me that I should consider a larger space, but for more practical reasons than just finances.

Now, that got me thinking. I've met a handful of people that tell me I should live in a space as big enough that I feel comfortable in. Since it wouldn't be too big, it shouldn't cost as much, and I would be able to finance it on my own and I can start living out my adult life as an independent person.

The second group of people are telling me that I should think further out in my life. What if I get married? What if I get kids? I think that is a good possibility, but I don't want to be stuck with a big empty house and pay for it myself. In that scenario, I would have to find tenants, and poof, there goes my privacy.

Currently, I am only thinking of 2 possibilities. What got me to consider a larger house is that while doing my research, I have found out that between a 1BR and 2BR, there is quite a big potential for savings on the PSF. However, between the 2BR and 3BR, I see only a very slight difference which is not worth mentioning. I have also learnt that the yield on a single bedroom compared to an entire unit is much higher and can push up to 6% gross. (Gross Property Income*12 / Cost difference between 2BR and 1BR)

Minimal Impact: I get a 1BR. I have minimal capital outlay and monthly payments. Since my finances will not be stretched, I can happily enjoy quite a decent lifestyle. If my lifestyle changes in the future (marriage), I would likely have to sell this place for a larger place in the future.

Flexibility: I get a 2BR. I have higher capital outlay and monthly payments. My spare bedroom will have to be rented out to help me cover the cost of my mortgage. Privacy will be compromised, but the incoming rent will help lessen the mortgage burden so it would actually be less than the 1BR. However, there is a risk of vacancy, which can be mitigated by undercutting prices during hard times, since the locations I am looking at are very prime. The biggest plus to this is the flexibility that such a home should be able to accommodate the next stage of my life.

After reviewing all my available information, I think that I am less resistant now to a 2BR unit. It is not as crazy of an idea that I thought previously. Why aren't their any websites or resources that consider this above debate at all? Or maybe I just haven't found them.

Of course, all this is just fantasy unless I hit the Toto grand prize. If I do I will have a housewarming, HAHA!

Transportation Talks: COE and Public Transport

What made me think of this topic was stumbling upon an article about how Jakarta has the worst traffic in the world. This led me to read up on the Castrol Stop-Start Index, from which I produced this table:


Within the Asian countries, we have the 2nd lowest Stop-Starts per car per year, coming in only behind Kuala Lumpur. We are better than all the other cities!

Now, I don't know about you, but when I travel to all these places, the advice I always get is, "Don't underestimate the traffic of XXX". Which is actually a very wise advice for any Singaporean travelling Asia. In other words, "Don't expect smooth traffic like in Singapore".

Nowadays I keep hearing people calling out for the government to remove the COE. I don't know if this is a good idea. Personally, I think cars in Singapore should now and forever in the future be seen as a luxury item. Like owning a house on Sentosa. Very cool, but not practical for the most of us (considering the costs).

I just read an NUS paper. In Singapore, the cost of living has been shooting up mainly due to PRIVATE transportation costs and not PUBLIC transportation cost. The middle class feels that cars are necessary, and since cars have been increasing in price, so has their costs of living as it starts eating up a larger and larger portion of their income. Should 70% of households be running around and driving cars? You decide.



I have also come across this article while researching this topic. I was kind of shocked to learn that Singapore has one of the largest car ownership percentages across cities. That makes our performance on the Start-Stop Index a bit more impressive, but also shows that there is a large room for Singapore to play around with to improve our transportation system. Do we push the limits and add more cars? Do we dump more cars and ramp up public transport?

Ironically, since cars are so ridiculously expensive, this makes it a clear status symbol. This is EXTREMELY counter-intuitive, but it is very clearly proven and demonstrated in the Singapore market. The more expensive and branded European brands have seem their market share increase as the cost of car ownership in Singapore increase, not the opposite. People don't compensate for expensive COE's by buying cheaper cars. People bid for expensive COE's just so they can buy expensive cars. I'm too lazy to format the source data for you guys, but go see the LTA statistics. It is very obvious. When it comes to face, Asians just love burning money to have a really big face. Fancy weddings and expensive cars, need I say more?

I have stayed in America and have noted how every single person has a car (cities like NYC and Seattle are the exception). Many have multiple cars. I have stayed in cities in Europe where the main mode of public transportation was bicycles. Yes, I too laughed at that stupid idea. Turns out, it's not stupid at all. It is CHEAP, practical and smooth with ZERO traffic jams. Not to mention it was pretty fun and kept me very fit.

Ever since I travelled to huge metro cities like New York City, Paris and London (not bad eh), and I have seen the way that everyone uses the metro there, it always make me think of this particular quote:


I hope that Singapore will one day have a public transportation system that is a cross between New York City (practical) and Tokyo (dense) and that people living in Singapore don't view cars as basic necessities.

I wish that in the future, the time taken by public transport to get to most places will be both faster and cheaper than private transportation.

My biggest wish is for Singapore to have a 24/7 public transportation network. Even a skeleton crew to operate the MRTs once an hour during the midnight shift would be a huge improvement to making this city a city that never sleeps.

How Important are Valutions? VERY (Part 2)

So yesterday I said that valuations are super important. Look what I read today from ZH.



So apparently during the last crisis, LBO at multiples of 8-10X were considered very aggressive. Now half the market is trading over 11. Problem?

Problem.

I actually wrote about these elevated valuations back on 10 Jan 2015.

I don't want to be a crazy fearmonger, but I urge anyone that has equity holdings in the US to strongly look at their holdings and do an evaluation of them now. Are they valuations pretty stretched and well above their own long term average? Industry average? Market average? Please consider leaving the table with all your handsome profits! Extrapolating current trends out into the future is a very dangerous thing to do, because the market moves in cycles.

Saturday, February 21, 2015

How Important are Valutions? VERY

Just to reaffirm my stance, I believe that any underlying investment can be a good or bad one, and the determining factor of success or failure is the price that we pay for the said investment.

If we buy it at good valuations, odds of success if greater. If we buy it at high valuations, odds of success is lower.

Regardless of how good any investment is, I don't believe we should sign a blank cheque for ownership of it.

I was just reading this article by John Hussman from Hussman Funds and it again reminded me just why valuations are so damn important.


It doesn't matter what sort of valuation model or method you use, they ALL pretty much will tell you the same thing. Buying cheaper is better. Buying more expensive is bad.

The model that Hussman uses now estimates the subsequent total 10 year annualised total returns of the S&P500 to be 1.4%.

That's right. If you're investing for the long run, you're better off over the next 10 years with a 10-year bond. The US10Y is yielding 2.13% now.

Let that sink in for a moment.

An array of valuation models are saying that the US stock market is so absofuckinglutely ridiculously priced that over the next 10 years, bonds will outperform stocks by 70bps a year.

Let that sink in for another moment.

1.4% means that rolling fixed deposits year after year would probably beat the stock market.

Which is more scary at this point right now, the Fear of Missing Out (FOMO) or the Fear of Holding the Bag (FOHB)?

While I don't know how much more extreme valuations will run, I can confirm plus chop money back guarantee 2 year warranty that this one way route to the moon doesn't last forever. It's gonna be ugly.

Singapore's Very Own P2P Lending

For a while now I've known that places like the US and UK has been having quite a strong and vibrant P2P lending scene.

Essential, it's about making private loans and earning an interest on it. Needless to say, this is very risky.

Singapore has it's own version and it is called MoolahSense.

They are currently running a campaign to raise money for a media and design school planning to expand its operations. And no, I did not get paid at all to talk about them. I just think that this is a very cool idea. Even MAS thinks so. They are taking comments from the public so that they can come up with a proper policy stance for this.

With this campaign, creditors can look to gain up to 12% of interest with a 1 year loan, or lower if there is a high demand. A high demand means that creditors think that the risk of loss is low and thus are willing to accept a lower interest rate. This is a win for the debtor, since they will eventually pay a lower cost for debt.

I don't want to talk too much about the specific campaign because I can't remember all the terms and agreements that I agreed to when I signed, but I'm sure there is something against sharing non-public information.

However, I just want to share some of my findings that might be useful. Based on Reuters, these are the yield spread based on credit rating, but for Industrials. (industrials are more cyclical than service, right?)


I also have the default rate of the different credit ratings of S&P over the years of 1981 to 2011. Realistically, I think that companies would fall within the red box range. Slightly riskier than investment-grade, which is why they cannot get cheaper cost of debt, but not a basket case scenario either.


Finally, the last piece of the puzzle is the credit rating assigned that local companies would have.

If you can add A + B + C together, all separate information, I think some people might get what I am trying to hint. Of course, you have to do some brain work yourself.

Personally, given the large yield spread over the implied level of default risk, I think that the current campaign being run on MoolahSense looks very attractive. Of course, don't put all your eggs in one basket. I have not decided yet if I want to take part in this, but I must admit that it does look like a pretty decent opportunity.

Would you lend a company money for a year to get back 12% return? Eager to hear what others might think about this!

All dead, Betrayed by 1 of their own


All I heard was, blah blah blah, it's not what it looks like.

I guess my respect for Varoufakis was unfounded.

Friday, February 20, 2015

SingFirst... er, no thanks

Maybe you think it is outright treason and I am a traitor to my people. Maybe I am a screwed up citizen, or my definition of a citizen is wrong. But I care enough that I am spending time to write down my thoughts.

I think this SingFirst socialist welfare state is crap. That is my opinion. You can have your own opinion and write it on your very own blog, thank you.

I think my position on capitalism is very firm. I'm all for welfare to help those that cannot help themselves because of the luck of the draw, but I don't think that moving towards socialism is the correct direction we should be heading to.

Ever since I've seen some videos Milton Friedman giving lectures and answering questions, I have a deep respect for this man. Let Milton Friedman school yo ass:


 "Of course none of us are greedy. It's only the other fella that is greedy!"

"In the only cases in which the masses have escaped from grinding poverty are where they had capitalism and largely free trade"
"So the record of history is absolutely crystal-clear: There is no alternative way so far discovered of improving the lot of ordinary people that can hold a candle to the productive activities that are unleashed by free enterprise markets"
Virtue does sound nice to have in our economic system, but as rightly pointed out, the world does not run based on virtue and good thoughts. Perhaps our design of social systems have not yet advanced enough to be able to harvest virtue as well as capitalism, which harvests and re-directs self-interest to improve the aggregate.

I am actually mid-way reading "Why Not Capitalism", which is the rebuttal of the famous pro-socialist book "Why Not Socialism". I am only 37% through the book (based on my Kindle), but I can already see Cohen's very flawed argument regarding equality and justice. Spoiler: Capitalism wins.

I do not think inequality is a problem at all. I think raising the absolute household income of the bottom deciles is much more important. I am more concerned about having a HUGE ASS PIE that even if the poor only gets a small and unequal portion of it, this unequal portion is still bigger than the equal portions of a tiny pie.

Whether increased government spending will reduce inequality is a big debate by itself. No doubt less inequality would make for a more stable society with less friction, but hey, who should dictate who has more and who has less? The government? Or people themselves through the free markets? Remove regulations, have good and fair laws to prevent abuse (is profiteering abuse?) and let the skilled and hardworking clearly mark their distinction over less talented or lazy peers. Is that unfair? Or is taking from the hardworking and giving to the lazy unfair?

I think too many people has read Thomas Picketty's (Le Grand Hypocrite) book.

 
There is always going to be a degree of inequality. Deal with it. Or else, that's blatant double standards. "It's inequality if I don't have enough. It's okay if I have more."

Perhaps the only good part I see is that they are not so crazy as to spend all the surplus and leave a portion as a safety buffer.

Is having free education to university really necessary? If you want people to save money on education, then perhaps parents should stop sending their kids overseas for higher education. It costs a bomb to send people overseas to study, but yet Singaporeans still leave in troves. Let's not even talk about extra tuition classes that every student seems to be forking over hundreds of dollars a month to their tuition teacher. I don't want to make this point look too stupid on their part.

I think some perspective is needed here. Paying $6.50 - $19.50 a month is not a fucking big deal, especially if you have a handphone costing $1000. But yeah, priorities, amirite? I think heavily heavily subsidized education is good enough. Even letting people pay just 1% forces them to be stakeholders and not to abuse the system. How about having textbooks owned by the government and managed by the school that get passed down from the outgoing class to the incoming class instead? That sounds a hell lot more effective to me.

Child allowances? Well, there already is the parenthood tax relief, but I guess this is a bit more of a direct approach to it. Every month the government gives each child a basic stipend of $300 a month. I don't think this is too bad. Tell me that it is given to the parents for the first 6 years, then transferred to the kid's name in the form of a bank account and I'm game. Not only does it prevent abuse from parents who don't care about their kids, it also cultivates saving and personal finance from a young age.

Child care subsidies with a single broad stroke isn't fair. Actually, it's unfair. I think that the current framework now is quite comprehensive and with the different subsidies given depending on working and non-working parents and the level of care required. Child care centres can be private and for-profit, and this single sweeping subsidy creates an big open space for unfair pricing. 

Transport subsidies for seniors seem all right, but for everyone across the board? Oh come on, our public transportation system is great for the price we pay. In London, the cheapest ride is only travelling within Zone 2 costs £1.80, or SGD $3.77. Realistically, people that live in Zone 2 or further (cheaper housing) that travel to Zone 1 to get in and out of work pay MINIMUM £2.90 (or SGD $6.08) PER TRIP. "Oh, but people in London make so much more money". Singapore's median monthly income is $3,770 per month, while London is £2329 or SGD $4,881, which is 29% higher than us. Does it look like their public transport cost is 29% higher than ours? Of course, this is by no means a fair or scientific way for me to make my point that our public transportation fees are not balls breakingly expensive. An NUS report also shows that transportation costs is going up due to PRIVATE transport, not PUBLIC transport. I have never met a foreigner that has complained about Singapore's public transport or the cost of it.

What's with all these unsocialist socialist policies? Shouldn't a stipend to seniors be means-tested instead of freely distributed to all? Like because all old people are poor? Of course not. It's to be fair (to all old people), but not really THAT fair (to the younger tax-paying population)? I can understand why children should have an allowance, to ease the cost of bringing them up. But free money just for being old? What's that all about? Means-test, and I won't say anything. By golly, make it even bloody simple to past the test, but don't just piss away OUR money like that.

I don't see what's the problem with our healthcare system. We have one of the cheapest healthcare systems in the world, especially relative to quality. Yes, we have the 2nd most efficient healthcare system in the world. I think that forcing a personal stake and contribution (via CPF and Medishield) is a very good way to ensure that there isn't abuse of the system. Perhaps a better approach is to have healthcare subsidies based on the level of healthcare insurance they choose. Medishield members can get a proportionately bigger support, while those who choose to opt for the highest tier private shield plans can get the least. I am skeptical of just how much of the "private" healthcare spending is really from being burdened with "expensive" health insurance premiums, but I'll let it go.

Phase out GST? What? GST is a CONSUMPTION tax. Should the guy spending thousands of dollars buying caviar, premium dog food for his 6 purebreeds, magical oasis bottled water and quintuple ply toilet paper pay for extra taxes that we all benefit from? YES. This one, really cannot give chance. Yes, lower income households save 7% of their consumption. But higher income households now contribute much less total tax income for their excessive consumption! This is the exact opposite of their later plan of higher taxes for the wealthy. This. Is. Stupid.

Unemployment insurance should not be mandatory. It should be highly encouraged, but it should not be mandatory. Unemployment insurance for some people has costs that outweigh the benefits. Screw it man. How about free universal critical illness, early critical illness, cancer and personal accident for ALL!!!! HOORAY!!!!! Wait, how about home insurance, travel insurance, car insurance? (no seriously, it's a very stupid idea)

Taxes on the wealthy and corporates. Hell no. This argument again? I feel like rolling on the floor now. I'm not sure if they are really serious or if this whole thing is a joke. Sure, tax the ultra rich based on income, but not net worth. Unless you want all those millionaires to just move over to Hong Kong and blow their cash all over HK Island instead of here. Same goes to corporate tax. Corporations already dislike the expensive costs of operations in Singapore and the poor work attitude of the locals. Give them another reason to drive them to our friendly and welcoming competitor cities! So drive away wealthy individuals and corporations that are in Singapore to spend money and employ people? Check! (FYI, in case my sarcasm loses you, our tax rate should be as high as possible, but lower than the next best realistic option. Which is exactly why HK has their tax rate at 16.5% to undercut our 17%.)

Estate duty will just give rise to the explosions of trusts and life insurance. Unfortunately, the rich are the people who can afford to escape estate duty, while the poor do not. Just like the removal of GST, this policy ends up taxing the wrong people that they want to help. I suppose they can try. I doubt it would work.

I don't understand about the Good Class Bungalows and the Payroll Tax, so I shan't comment.

When it comes to the Investment part, I don't see anything wrong with spending more for Social Investments. However, I don't think that a hard and fast number should just be given like that. Investing involves generating returns. Getting bang for your buck. Spending money is not investing, and spending money is easy. Anyone can do that. If there are real and proper proposals about how to spend the money and what sort of benefits can be expected from them, I am sure it can be done. I'm not in the camp of, "Build it, and they will come". Investments can made when we can expect good returns for what we put in. It is, our money, after all.

All in all, I don't questions the intentions of SingFirst. I'm sure they are a bunch of nice folks that want the best for Singaporeans. But I don't agree with them that this is the way that it should be done. Their vision of a fair society doesn't seem to include the other people in our society. That doesn't seem very fair to me.

Call me a smelly sinkie pappy dog or whatever, but I believe that Singapore as a country should be more outward looking than inward looking. We have no natural capital, all we have is people. Don't be mistaken to think that all we have are Singaporeans. We have many other people who are also here, contributing their human capital and would also love to see Singapore progress and succeed. Is it so hard to see that their win is also our win and we all win together, even though they might just be in Singapore temporarily (or longer if they convert to citizens)?

In this highly globalized world, a few clicks of a mouse, a phone call to a cab to bring you to the airport and a few hours later you can be standing in a totally different country. To succeed as a country, we need to win. Win who? We need to win other countries (and specifically, cities eg. Hong Kong, Shanghai, Kuala Lumpur). How do we win? Unfortunately, I believe we win by attracting the smartest and brightest of the world and entice, seduce, trick, steal and kidnap them here and milk them (in a mutually beneficially way) to contribute to OUR collective society. We need to stop being so black & white and stop seeing the people that live here as either Singaporeans or Others. I think we should create a warm, friendly and welcoming environment that appeals to all intellectuals from the world, and with them they will bring vast amounts of human and financial capital, from which we all (both Singaporeans and foreign residents) can benefit together.

Driving out foreigners and making a Singapore for Singaporeans is just the new modern day equivalent of the backward Malaysia for Malays, bumiputra policy. 

In the past, does having people of a different race come into a country mean that you can treat them as inferior residents? No? How about today then. Today, does having people of a different nationality come into a country mean that you can treat them as inferior residents? They live here, they work here, they have a stake here, they contribute to our society whether we like it or not. Why can't we instead harvest their efforts and goodwill to improve our society and view them as a teamate, rather than incite xenophobia and chase them away after they do their deed, like a one-night stand you just use and toss away.

We need to create a society and environment where the best of the world WANT to come to Singapore, not immediately cross it out of their minds even as a remote possibility.

To end, let me just throw up an old photo:



Anyway, this whole post is all just my opinion on this touchy subject, of course.

Before you comment, read the house rules. I know my rants on economics and politics can attract interesting people. My blog is not a forum or your personal arena to vent your frustration about your life, but I'm happy to hear thoughts and opinions on this as long as everything is civil.

Thursday, February 19, 2015

Checking out the 3 Local Pawnbrokers

Here on the SGX, there are 3 pawnbrokers. ValueMax (VM), MaxiCash (MC) and MoneyMax (MM).

I guess out of my huge list of stocks, these 3 fall into a very specific and distinct group which I can use to compare with each other, so I thought I'd start on these 3 stocks first. Should I eliminate any of these from my watchlist? Should I eliminate all of them? We shall find out together!

OSK/DMG did a research on them mid last year, but I think I'll be looking at their most recent financial statements and try to make a comparison from there.

I'm using all their 3Q statements since MoneyMax has not released their full year results. I doubt there is much difference. The main adjustment I did was to proportionately change the EBITDA from their 9 month figures to an estimated 12 month figure.

*Mislabel: "Gross Revenue" should be "Profit Before Taxes". Figures are correct.

ValueMax is the only pawnbroker of the 3 that is listed on the Mainboard, while the other 2 are on the Catalist.

Although VMhas the smallest number of outlets, based on market cap it is as big as both MC and MM combined together. However, looking at EBITA, VM is pulling in almost double of what both of them combined bring in. Is VM undervalued, or are the other 2 stocks overvalued?

Profitability-wise, although VM has the lowest GP%, it has the highest NP%. This is probably due to the higher amount of revenue that it goes through, since a lot of the costs are fixed regardless of transaction volume. If MC and MM can push up their volumes, it would seem that they would have a big improvement to their bottom line. However, is that possible? Both of them have almost double the outlets of VM.

Financially, VM again is the best looking. It is the most well capitalized as well, has the highest amount of payables as debt and also has the lowest debt/equity ratio by far. Between MC and MM, MM looks better, but marginally. They both look horrible to me. How did these 2 get past my screening of Debt/Equity > 2? That's why I have to look at each stock's financials.

Dividend-wise, why am I not surprised to see VM as the top performer again? Keep in mind that both MC and MM have a cash hoard about 2-3 times smaller than VM.

Valuation-wise, isn't it strange to see that the biggest company, with the highest net income margins, with the strongest balance sheet and highest dividend yield being the most poorly valued? It seems that pawnbroker investors do not like quality but love trash. Based on both EV/EBITDA and P/NAV metrics, VM is the cheapest by a large margin! MM, while looking expensive, is a lot cheaper than MC which just looks ridiculous.

Business-wise, it seems that MM is moving into the right direction by launching an online platform. I don't think this changes anything much. If this online model works (which I doubt it's effectiveness as a channel), it is very very easy for the other 2 pawnbrokers to jump on the bandwagon. Cute, but effective? We shall see.

Oh, but of course Maxi-Cash has the nicest marketing. C'mon, it's Michelle Chia! MC endorsing MC? Also very cute right.


Anyway, I am glad I did this exercise. I would not invest any money to Maxi-Cash or MoneyMax. Even if MM's price dropped by 50%, I'm not sure if I would like it over ValueMax. ValueMax looks the best to me fundamentally, and based on valuations, I like even more. I do not have any positions in any of these stocks, but I honestly wouldn't mind to own ValueMax now at this price. Maxi-Cash and MoneyMax are banished from the watchlist, at least for many more moons to come.

Precious Metals for you?


I guess one of the things that people know about me is that I really like precious metals. I have to admit, valuations aside, there are some good fundamental reasons to own gold and silver.


While the reasons above are mostly for Gold, much of the same can be said of Silver as well.

People might debate which is the better investment now, gold or silver, but I think both investors will tell you that either way, you should have some precious metals in your portfolio.

In a world where modern developed countries are having close to zero real yield or even negative yield, the BIGGEST argument against precious metals in voided. Simply, there is no longer any opportunity cost holding precious metals as it would a 5 year Swiss bond which yields NEGATIVE 0.4%.

One of the biggest problems that I see now are that central banks around the world are losing control. Below is a list from ZH of the 19 countries that have changed their central banking policy easings recently. In chronological order starting Jan 1st 2015:
  1. Uzbekistan
  2. Romania
  3. Switzerland
  4. India
  5. Egypt
  6. Peru
  7. Turkey
  8. Canada
  9. ECB
  10. Pakistan
  11. Singapore
  12. Albania
  13. Russia
  14. Australia
  15. China
  16. Denmark
  17. Sweden
  18. Indonesia
  19. Botswana
If that doesn't make you uneasy, I don't know what will.

Maybe we can look at Singapore as an example of something we are more familiar with.

 (Credits: Sober Look)

Singapore has been burning through our foreign reserves to defend our currency. Why is it that our currency has been appreciating against our neighbours? They just have been dropping faster than us, so relatively we look stronger. Burning through so much reserves in just 6 months is probably the reason why the MAS had to change their policy. To maintain such a gradient to increase against the USD over time would force them to take larger action. I think if the USD doesn't let up within the year, the MAS will further ease their policy, and this would shock quite a lot of people. What choice do they have?

Many other countries are not like us and fortunate enough to have a strong central bank with deep reserves. So if we are feeling a pinch, the rest are probably feeling a punch.

Basically, central banks around the world seem to be losing control of the markets.

The question of How and Why is less important than What and When. What will happen when central banks lose control? I reckon all hell would break loose in the financial markets. The only safe havens that would be left standing are real assets. Like property or precious metals.

Anyway, I don't want to sound like a "fringe" conspiracy theory kind of guy, but I really don't see how all of this is sustainable. The way that I like to see Gold and Silver is that they are just hard currency that looks pretty undervalued now. Think about it. When you go to the money changer and change money, you get charged a spread, maybe between 1-3%. When you buy precious metals and later want to sell them, it's the same thing. I really don't see the harm of having some precious metals in your portfolio as insurance. On top of that, if you think they are valued cheaply, then perhaps buy them now to sell them at a profit later.

Precious metals has been getting slammed over the past few weeks. Gold has dropped about $100. I do think that now is a particularly fair and attractive time to take up positions if you don't have any already. I am up to the hilt with precious metals and exposure in their derivatives so I am quite fine. I'm sitting in some unrealized losses, but that's all right.  

Things like the GOFO, gold demand from China and India, gold supply for mines, global interest rates.... all these things are much more complex and secondary. You don't need to know and understand all of those things to if you are buying precious metals as a portfolio insurance.

All you have to know is that you now own a very shiny and expensive piece of rare earth metal, that you can bring to any country in the world in your pocket, and you can sell it for pretty much spot value. If that doesn't help you sleep at night knowing you have physical money with you instead of digital bits and bytes in a computer system, nothing will.

[Book Review] Our Iceberg is Melting by John Kotter


A while ago I did a book review of a booked titled "The Nature of Risk" by David X. Martin. This book follows a very similar style of story telling, weaving in important concepts into a simple story.

Essentially this book tackles how to effectively implement changes. I imagine that it would be filed under management and motivation, but I think that the concepts can really be applied to all fields.

The concepts is not directly applicable to investing. However, the concepts are applicable to our systems and processes that we use when investing. Are we set in our old ways of thinking? Have we come met a new and better way of doing it? How do we incorporate this change and transit from where we are to where we want to be?
  1. Create an urgent need to be addressed
  2. Have a team take charge of the change
  3. Know your destination and how you will get there
  4. Explain the change and get people invested
  5. Empower other people to help
  6. Have mini-goals along the way to keep morale up
  7. Push through until the end and don't lose momentum
  8. Make sure the change you just made sticks
This book took me less than 2 hours to read and digest. The font is large and there are very occasional comics and illustrations to make the book less dull.

Although it seems short, since this is a story about talking penguins, the author has specifically crafted a story meant to focus on the key steps to effectively implementing change and the reasons behind the steps. All other non-essential information has been stripped away. I admit, it does feel a bit sterile with some humour attempted along the way, but I think this book does what it is supposed to do very well: illustrate how change can be successfully implemented.

I wouldn't say that this is a must-read. The whole process and all the steps are in fact very intuitive. However, it is nice to have a specific order and task to finish the process, which this book gives very clearly.

If you are struggling with leadership and motivating other people, I think this is a very good book. However, I imagine that most leaders actually already intuitively do most of these steps. I would love to have the brief steps with me when I am planning a change. Even though I might think I know what I am doing most of the time, it doesn't hurt to have a checklist, does it?

Wednesday, February 18, 2015

Freedom of Speech? You must be joking

Contrary to popular belief, I think that the guys behind New Nation are hilarious. Their satire is spot-on time and time after again. Maybe it's just because I'm a sarcastic guy, but I really enjoy their brand of humour. The way that they point out and illustrate double standards in a funny way is top grade. I salute them.

Their most recent article on the TRS news is a masterpiece.



The last line, absolute winner!

I've never really enjoyed reading TRS, but there is one place I never venture to. If you're looking for the bottom of the barrel, you should head over to TRE. Word of caution: your IQ will drop once you start reading their articles and it plunges towards 0 once you start reading the comments.

Anyway I am glad that they are bringing up the Sedition Act again. If they don't bring it up ever so often, I think most people forget, get confused and start thinking that there is freedom of speech in Singapore and start vomiting out nonsense. There isn't. You can't just go around saying whatever you want. And I don't think people should. You can think I'm one stupid and ugly mother f***er, that's fine. Keep it to yourself or in private. But if you say it to my face, don't think you can walk away with no consequences and hide behind the excuse of "FREEDOM OF SPEECH" or "FREEDOM OF EXPRESSION". I will express myself all over you. Everyone should be held accountable for their own actions and understand the consequences of those actions.

Danger, Danger, High Voltage! Foolish or brave? Foolishly brave?


Here is a ridiculous video to represent the ridiculous situation we are in now.

This post is from ZH, which has a very interesting Citigroup report:






Why anyone would put their money in the US markets is completely beyond me anymore. I am definitely outright bearish at the US (and even Europe) stock markets right now. But I do understand that the stock market can be irrational for a very long time.

Without even knowing anything and just looking at their valuation, you would imagine that earnings are being forecasted to fly through the roof. Are they?


I have very strong convictions that this is it, we're way over and have long past the point of re-re-re-acceleration of the economy in this run. Unemployment based out, demand and sales are weakening, profit margins are going to drop from their record highs. It's not something secret, people do know this, which is why forward earnings have peaked out and will be heading lower. And of course, it is correct.

However, value and price are 2 different things. The stock market "should" reflect the status and health of the real economy. Perhaps people are still looking at the markets too up close to realize what is going out.

If earnings have peaked and will be heading lower, stocks "should" follow. Really, this isn't like some magical fancy model with complex calculations. The only reason why "this time is different" is due to the ridiculous central bank intervention. If you think your stock prices in those countries are driven by fundamentals, let me cough politely in protest.

"eh, earnings coming down leh. what should i do?"

"issit? orh, better buy more then"

"buy? not sell?!"

"central banks all buying, we buy also la! later they can buy from us ahaha"

???

This is a massive game of chicken. Buying high and selling higher is not a horrible strategy. In fact, it is clearly the same concept of buying low and selling higher, except that we shift valuations across the board a few multiples higher. This makes it slightly more risky, but it is not to say that it is a flawed strategy. I suppose the problem that I see here is that it will not be going higher, so how do you buy now to sell higher? Do people even have a sell strategy? I think now is an excellent time to say, "hey okay, made a lot of money and things don't like they can ever be as rosy as this, time to get out!".

Food for thought: David Tepper reduced his US equity exposure by 40%. I like David Tepper because he's a self made man and he has balls of steel. As a distressed specialist, him selling off 40% of his US exposure tells me that one of the world's richest and smartest person thinks that things are getting lofty here. I highly doubt his exposure in the US will be increasing anytime soon. He's either going to sell as it goes up, or starting selling down if this ship tanks. Basically, he's already made his move. Now he's watching the rest of the market participants to see what they do.

Tuesday, February 17, 2015

Grexit: The End of Austerity


This movie started screening on 11.2.2015 and it is still ongoing. Have you watched it yet? It is very interesting.

Varoufakis is a pretty admirable, I'd admit.

Nigel Farage has already set up the backdrop of this story. This video is well worth the watch.


Honestly, this doesn't look like it'd end well. This reminds me of a video...


What do you think?

I think Greece wins. You should never play against a man who has nothing to lose. Europe will fold.

Making A Less Than Noble Exit

Special thanks goes out to Felix for highlighting the report released by Iceberg Research

It was very easy to verify their actually pretty obvious findings.


2013 Annual report lists Yancoal's recorded value at US$677,608,000. They only own 13% of the company.

Bloomberg lists Yancoal's ENTIRE market cap at AUD$99,420,000.

Problem?

Big problem.

Is it a nonsense report? Maybe. Could the stock crash a lot lower from it's current value? Maybe. I don't want to find out.

This is not something that I took into account when I purchased the stock, so I am running away from this with my tail between my legs.

On the bright side, I made 3.9% gross from this investment of 3 weeks. After deducting fees, I should still be up about 3%. Not too bad as a "trade", I suppose!

Kicking the Addiction, Going Cold Turkey

Today while I was showering, I came to a sudden realization.

Earlier this evening I was out having a drink with a friend, talking about his new job and adjusting to the adult working life. He asked what did I do in free time and if I'm bored with my life, now that he doesn't see me that often.

Honestly, I never really thought about it in such a concise manner.

I am busy meeting and hanging with friends and having a social life.

The constant low buzz of investing and personal finance is perpetually in the background.

I have a HUGE stack of books to read, not to mention all the e-books in my e-reader.

I need to deal with the lower metabolic rate of a sedentary working adult. I am determined to spend the best years of my life as a sexy beast.

I have a long list of movies (and less importantly, TV shows) that I want to watch.

I want to pick up the basics and be conversational in a new language.

I want to enroll myself in some class and courses, but I've been lazy to find people to sign up with me.

So add all of these on top of all my other less significant hobbies that I indulge in (I have a very weirdly board range of interests) and we get a very busy GMGH.

What is holding me back from doing all these things that I want to do with my life?

My addiction.

I've decided that I'm going to quit one of my longest and most time-consuming addictions.


Good bye League of Legends. You've been tempting me with at least 30 minutes of gaming every day, with some days being hours on end. This is the final straw. I've got so many things that I want to do with my life that also bring me happiness and joy, but also brings me places. You, however, are just a drag and a really big waste of my time. 

With LoL out of my life, I honestly think that tomorrow is going to be the start of a brand new era of me. 17th Feb 2015, where do we go from here?

The sky is the limit.