Could not get back to sleep after watching the Champions League finals. I guess it is all the adrenaline pumping in my veins after watching Barcelona outclass Manchester United. What a great result. Lay in bed for 1 hour and decided that it was really a waste of time trying to get back to sleep. Decided to start writing the post and maybe catch up on the sleep a little later.
This week, we had another weak showing for the markets even though we had a slight rebound towards the end. Is this the turning point for the markets? I do not think so. Volumes are still low and expect more volatility ahead.
We also saw the privatisation offer for Allgreen this week. At a hefty premium indeed. Analysts scurried around after the deal trying to find the next property play that may be taken private. So typical of them, trying to sell the story that more M&A in the property sector is in store. I do not disagree that more privatisation offers are on the way but it will not be constrained to the property sector. I actually find S chips attractive as M&A plays because of their lack of popularity and low valuations. If you used Bloomberg to filter the SGX listed companies, using p/e, p/b, cash to liabilities, ROE and debt to equity parameters, you will see a whole list of S chips companies. Why is that so? You really cannot blame market participants who are skeptical about S chip companies especially after the likes of China Aviation Oil, Ferrochina, China Milk, Fibrechem and the list goes on and on. S chips have really not done well for a long time and credibility has been flushed down the toilet.
What made things worse was the worrying news of Cosco's parent having audit issues and from what I know since meeting Cosco Singapore's management, I would not be surprised if this company has many more audit and credibility issues going forward. China Chaoda, the largest independent vegetable producer in China plunged more than 20% in a day last week because an article in "Next" magazine wrote about how the company has overstated its arable land on its books. There are also some bad press on the US listed chinese ADRs, how do you expect Chinese companies outside of China and Hong Kong to do well?
What I totally intend to do is to start investing some money into those S chips which I like and trust because investing when there is fear is somewhat of a speciality for me. Maybe I should set up a fund investing just in S chips. I believe if you have a medium to longer term view, you will be handsomely rewarded. Remember what Buffett always say, "be fearful when others are greedy, be greedy when others are fearful". Be rationale and look at those companies that have delivered according to whatever they have promised and have steered clear of negative press since their listing. Low profile companies which have high management ownership tends to be safer bets. Will write more if I find any interesting ones.
The property market is still booming. Considering the number of transactions listed on "The Edge Singapore", it really shows that the market is still booming and does not look like abating any time soon. Plenty of market watchers are speculating that there are more policy action to come in the near future. I do not deny this is a possibility but I still maintain my stance that the liquidity flood in the market is not allowing the property markets to cool down. Interest rate is the key to stopping this rampaging property market in its tracks and no matter what draconian measures are made, they will only be temporary in terms of slowing down the market. The government has to also consider the risks of over implementing policies and totally affecting the market and causing the market to crash rather than correct in its own cause. The destruction of wealth and the wealth effect is something which the government understands that will not help the economy in any way, that is why they would be more cautious with regards to policy action going forward.
Another point I would like to make this week is on Goldman's reversal on their call to sell commodities. Last month, they made the call to cut resource exposure and suddenly this week, they raised their target price for oil causing commodities to make a turnaround and move upwards. That is just down right disgusting. Personally, I just feel Goldman's move was their ploy to lower prices to accumulate before pushing for higher prices. Poor investors who placed their faith in them. What a shameless move.
This week, I would also like to pay a special tribute to my favourite CNBC anchor, Mark Haines who passed away suddenly last week. I really liked his frankness and his hard line approach to asking questions to questionable CEOs and analysts on screen. Good reporting is already rare this days, to lose a great anchor man like him means financial journalism has taken a big step back. Well rest in peace, Mark Haines.
Ok I have written what I wanted to write this week. Nothing special to talk about because the market volumes are low and this is definitely not a trading environment because sustained moves in the market is going to be hard to come by. If you are looking to trade the market be wary, if you want to buy and hold, please do so because this is a good time to accumulate.
Thats all for this week.
Have a good week ahead.
Best,
SVI
Saturday, May 28, 2011
Saturday, May 21, 2011
Tradewinds Corporation Berhad, the winds of change are blowing in the right way. Buy $1.10
Sell in May and Go Away......I am still right as the weakness continues. Told you guts so.
What a week of IPOs! We had the mega blockbuster IPO of Glencore, the much anticipated launch of LinkedIn and PRADA finally marketing their issue. After so many years of hiding in the dark, Glencore has finally decided to put themselves up for public scrutiny. The question is why? Some people are saying it could be the end of the commodity cycle and they newly crowned billionaires of Glencore decided to cash out. No matter, this is the commodity giant that is equivalent to the likes of Goldman in the investment banking industry. So keep this baby on your watchlist.
LinkedIn however is a very different proposition. The social network bubble continues with LinkedIn being the served up as the entre of the social network meal while investors eagerly await for the coming of Facebook. My sources tell me that Goldman Sachs have already started marketing the launch of Facebook's IPO to preferred clients. There is no doubt in my head that Facebook's IPO will fly and it will probably rival that of Google in terms of market cap eventually. But a word of caution. There is absolutely no fundamentals in these social network companies because they do not earn a cent. LinkedIn has been in the business for 9 years and the business has only broken even this year. Its IPO opened up with a 95% gain from its IPO price of $45. That is just ludicrous. This is somewhat reminiscent of the 2000 internet bubble. Sigh...stupidity always finds a way back into our hearts. Let me just emphasize...THIS TIME IS NOT DIFFERENT!
As my mum always told me, I have always been such an extreme person, its either my way or the highway. So if you are looking to invest in rubbish, please stop reading this blog. I will not be right all the time but at least you can be assured that the stocks I am picking have the best possible fundamentals I can find. If you want companies that trade at 100 times price to sales....I think its better that you read some research report from investment banks or maybe local brokerages. They are not going to go for boring businesses like Heng Long. Go check how many brokerages or research houses cover Heng Long. The answer is a very nice 0. Research houses will be able to come out with lame explanations on how the a company can be worth 50-100 times price earnings and how it is actually cheap in terms for forward earnings. Unless you have a crystal ball, there is no way anyone can be sure about how the company will grow at more than 30% per year over the next 2 years. That is one of the main reasons why I always take analyst reports with a pinch of salt.
So I promised a stock pick, I have just the one for you. This is a company which I have had experience with since a long time. My mum used them as a tour service provider many many moons back. The company is called Tradewinds Corporation Berhad.
Tradewinds Corporation Berhad (TCB) is a Malaysia-based company engaged in investment holding, provision of management services and commercial property investment. The Company, through its subsidiaries, is engaged in hotel ownership and management, property investment and development, sale of properties, manufacturing, trading, insurance broking, travel related services, providing integrated security services, leasing and hire purchase financing. It has 22 subsidiaries which gives you an idea on diversity of this company's operations. I just want to focus on the key businesses of the company.
Tradewinds Hotels and Resorts Sdn Bhd, a subsidiary of Tradewinds Corporation Berhad, is one of the largest hotel owners in the country with 10 hotels and resorts in its stable. The hotels in their stable include:
* Crowne Plaza Mutiara Kuala Lumpur
* Batang Ai Longhouse Resort, Managed by Hilton
* Hilton Kuching
* Hilton Petaling Jaya
* Hotel Istana Kuala Lumpur
* Meritus Pelangi Beach Resort & Spa, Langkawi
* The Danna Langkawi
* Mutiara Johor Bahru
* Mutiara Taman Negara, Pahang
* Mutiara Burau Bay Beach Resort, Langkawi (A resort owned by Langkawi Development Authority (LADA) and managed by Mutiara – TCB Hotel Management Sdn Bhd)
These are not small hotels, they are prominent and 5 star quality hotels which are worth a good chunk. The current net asset value of the company sits at $1.73 while the stock is trading at $1.10. Therefore the discount to its NAV is just too steep for a company that is trading at only 9 times p/e even though earnings were raised through some land sales. Operating results are going to be flattish and property rental income will fall in the short term through their refurbishment of Menara Tun Razak. Over the long term, the results will get stronger and be sustained due to the stable nature of their businesses especially in a strong economic backdrop.
Tradewinds Corporation Berhad is also involved in investment and development properties. Investment properties include two strategically located office buildings in the heart of Kuala Lumpur – Menara Tun Razak in the Central Business District and Kompleks Antarabangsa in the Golden Triangle.
Tradewinds’ involvement in insurance broking is amongst the largest in the country. Strategic assets protected by Tradewinds and its insurance affiliates involve numerous land and offshore oil and gas drilling platforms for both national and multinational oil companies.
Tradewinds Corporation Berhad announced that it has agreed to form a joint venture with Kelana Ventures Sdn Bhd and Oxbridge Height Sdn Bhd to develop approximately 704 acres of land located in Mukim Tebrau, Daerah Johor Bahru, Johor. This could turn out to be very promising as it is a huge project in their most promising city due to their proximity to us.
The company is also in the midst of restructuring itself to streamline their operations and to shed their dead weight businesses. This has started to show results because their quarter's earnings were their best for some time. Should this continue, the stock could easily trade back up to $2 dollars.
While writing about this stock, a favourite tune came up in my mind, an oldie buy goodie. "Wind of change" by the Scorpions. Going off to find that old CD of mine to enjoy the tune.
Till the next week. Have a great trading week ahead. Oh I got a feeling, it will not be a great week for the markets as the USD rebound is not over yet and you know what that all means don't you? Weakness.
Best,
SVI
What a week of IPOs! We had the mega blockbuster IPO of Glencore, the much anticipated launch of LinkedIn and PRADA finally marketing their issue. After so many years of hiding in the dark, Glencore has finally decided to put themselves up for public scrutiny. The question is why? Some people are saying it could be the end of the commodity cycle and they newly crowned billionaires of Glencore decided to cash out. No matter, this is the commodity giant that is equivalent to the likes of Goldman in the investment banking industry. So keep this baby on your watchlist.
LinkedIn however is a very different proposition. The social network bubble continues with LinkedIn being the served up as the entre of the social network meal while investors eagerly await for the coming of Facebook. My sources tell me that Goldman Sachs have already started marketing the launch of Facebook's IPO to preferred clients. There is no doubt in my head that Facebook's IPO will fly and it will probably rival that of Google in terms of market cap eventually. But a word of caution. There is absolutely no fundamentals in these social network companies because they do not earn a cent. LinkedIn has been in the business for 9 years and the business has only broken even this year. Its IPO opened up with a 95% gain from its IPO price of $45. That is just ludicrous. This is somewhat reminiscent of the 2000 internet bubble. Sigh...stupidity always finds a way back into our hearts. Let me just emphasize...THIS TIME IS NOT DIFFERENT!
As my mum always told me, I have always been such an extreme person, its either my way or the highway. So if you are looking to invest in rubbish, please stop reading this blog. I will not be right all the time but at least you can be assured that the stocks I am picking have the best possible fundamentals I can find. If you want companies that trade at 100 times price to sales....I think its better that you read some research report from investment banks or maybe local brokerages. They are not going to go for boring businesses like Heng Long. Go check how many brokerages or research houses cover Heng Long. The answer is a very nice 0. Research houses will be able to come out with lame explanations on how the a company can be worth 50-100 times price earnings and how it is actually cheap in terms for forward earnings. Unless you have a crystal ball, there is no way anyone can be sure about how the company will grow at more than 30% per year over the next 2 years. That is one of the main reasons why I always take analyst reports with a pinch of salt.
So I promised a stock pick, I have just the one for you. This is a company which I have had experience with since a long time. My mum used them as a tour service provider many many moons back. The company is called Tradewinds Corporation Berhad.
Tradewinds Corporation Berhad (TCB) is a Malaysia-based company engaged in investment holding, provision of management services and commercial property investment. The Company, through its subsidiaries, is engaged in hotel ownership and management, property investment and development, sale of properties, manufacturing, trading, insurance broking, travel related services, providing integrated security services, leasing and hire purchase financing. It has 22 subsidiaries which gives you an idea on diversity of this company's operations. I just want to focus on the key businesses of the company.
Tradewinds Hotels and Resorts Sdn Bhd, a subsidiary of Tradewinds Corporation Berhad, is one of the largest hotel owners in the country with 10 hotels and resorts in its stable. The hotels in their stable include:
* Crowne Plaza Mutiara Kuala Lumpur
* Batang Ai Longhouse Resort, Managed by Hilton
* Hilton Kuching
* Hilton Petaling Jaya
* Hotel Istana Kuala Lumpur
* Meritus Pelangi Beach Resort & Spa, Langkawi
* The Danna Langkawi
* Mutiara Johor Bahru
* Mutiara Taman Negara, Pahang
* Mutiara Burau Bay Beach Resort, Langkawi (A resort owned by Langkawi Development Authority (LADA) and managed by Mutiara – TCB Hotel Management Sdn Bhd)
These are not small hotels, they are prominent and 5 star quality hotels which are worth a good chunk. The current net asset value of the company sits at $1.73 while the stock is trading at $1.10. Therefore the discount to its NAV is just too steep for a company that is trading at only 9 times p/e even though earnings were raised through some land sales. Operating results are going to be flattish and property rental income will fall in the short term through their refurbishment of Menara Tun Razak. Over the long term, the results will get stronger and be sustained due to the stable nature of their businesses especially in a strong economic backdrop.
Tradewinds Corporation Berhad is also involved in investment and development properties. Investment properties include two strategically located office buildings in the heart of Kuala Lumpur – Menara Tun Razak in the Central Business District and Kompleks Antarabangsa in the Golden Triangle.
Tradewinds’ involvement in insurance broking is amongst the largest in the country. Strategic assets protected by Tradewinds and its insurance affiliates involve numerous land and offshore oil and gas drilling platforms for both national and multinational oil companies.
Tradewinds Corporation Berhad announced that it has agreed to form a joint venture with Kelana Ventures Sdn Bhd and Oxbridge Height Sdn Bhd to develop approximately 704 acres of land located in Mukim Tebrau, Daerah Johor Bahru, Johor. This could turn out to be very promising as it is a huge project in their most promising city due to their proximity to us.
The company is also in the midst of restructuring itself to streamline their operations and to shed their dead weight businesses. This has started to show results because their quarter's earnings were their best for some time. Should this continue, the stock could easily trade back up to $2 dollars.
While writing about this stock, a favourite tune came up in my mind, an oldie buy goodie. "Wind of change" by the Scorpions. Going off to find that old CD of mine to enjoy the tune.
Till the next week. Have a great trading week ahead. Oh I got a feeling, it will not be a great week for the markets as the USD rebound is not over yet and you know what that all means don't you? Weakness.
Best,
SVI
Tuesday, May 17, 2011
Buy into a correction, not sell into one. Start chasing beta for better performance in the next wave.
Markets are still falling and the negative news flow continues to come in. Greece, end of the commodities cycle, downgrades etc. Sigh, no wonder so many people are confused about what to do with their investments. In the past couple of days, I have seen a few larger investment houses recommending investors to cut their exposure to resources to underweight. These are the exact same proponents that asked investors to be aggressive in accumulating commodities. You know what makes it worse? The people who work for them, like yours truly, end up have to call for the same rhetoric as them even if I disagree. If I had a dollar for each time I reminded investors to look at the longer term, I will probably be staying in a good class bungalow in Cluny Road.
I had a client who asked me whether he should sell into this correction and it baffled me. The often used cliche of "Buy low, sell high" has really not registered into people's minds. Very easy to use and remember but virtually impossible to put to practice. Emotions are what makes investors weak and irrational. My response to him was a straight "No". What you want to do is to sell into a rally and buy in a correction. Mind you, this investors which I deal with are some of the smarter people in this country but they are no exceptions to falling victim to emotions.
Global markets have experienced close to 2 weeks of weakness in the market, making me look like the Sage of Singapore as I have been warning about weakness in May for the past couple of months. When is the buying point? I really do not have an exact point. All I know is, I am using the USD as my key gauge. The USD has rebounded off its lows of $1.22 against the SGD to $1.25. The dollar index which is an indicators of USD value against a basket of currencies have rebounded from 72 level to 76. Buying time? I believe it is very soon. What about the end of QE2? No worries, because Ben Bernanke is still at the helm and he is going to maintain the size the of the Fed balance sheet so the market will still be flushed with liquidity.
Profits are being booked by professional investors after a good run during this QE2 driven rally, that is why you are seeing so much weakness in commodities and equities. Do not be deceived and sell your positions. Just hang on, you will thank me later. I am sure.
In my previous post, I mentioned something on the debt ceiling in the US. I am choosing to ignoring it first because I have absolutely no interest in the political wranglings of corrupt politicians trying to use this issue as a bargaining chip. In my view, nothing is going to happen by July on this issue. So no worries.
Just buy aggressively in this weak market. I will start buying when the dollar index hits 76.5, that is when I go out and start buying. It is not far from that point. This is just a technical rebound on the USD from oversold territory, it will not be too long lived. So take this opportunity to buy into higher beta stocks to ride the next wave of upside.
One headline that caught my attention was poor IMF Chief Dominique Strauss Kahn getting accused by a chamber main for sexual assault and being sent to Riker's island in reprimand is just the funniest story over the past few days. It is just perposterous to think that a man of his stature would do such a thing. He has been one of the more outspoken experts on the financial crisis in 2008 and has been particularly critical on the US. He is not exactly the most complying and submissive IMF chief the US would have liked. Throw in the fact that he is seen as a possible front runner for the French presidential elections, it is not surprising that he is being taken out the picture.
Remember Eliot Spitzer the disgraced US Attorney General who was known to be a hardliner on bankers? What happened? He was also caught for soliciting prostitutes. Considering how prostitutions and high end social escorts are part and parcel of Wall Street, it is just hypocritical that Eliot Spitzer was taken out of the picture for doing so. It was because he was coming down so hard on his investigations on investment banks and high flying bankers prior to the blow up of the subprime crisis. Conspiracy theory...what do you think? Just something interesting to think about.
Am I going to write about any stocks today? I guess not but I am currently looking at the a very interesting company which should be posted over the next week or so. You must understand that researching on companies is a tough job and it is even tougher to find companies to have conviction on. Why I am posting today is because I foresee a busy schedule for the 2nd half of the year and it will be tough to catch up with the postings. Need to make at least 52 postings this year which looks like I am far behind schedule. It is a discipline I am trying to keep to. Wish me luck.
Have a great rest of the holiday.
Best,
SVI
I had a client who asked me whether he should sell into this correction and it baffled me. The often used cliche of "Buy low, sell high" has really not registered into people's minds. Very easy to use and remember but virtually impossible to put to practice. Emotions are what makes investors weak and irrational. My response to him was a straight "No". What you want to do is to sell into a rally and buy in a correction. Mind you, this investors which I deal with are some of the smarter people in this country but they are no exceptions to falling victim to emotions.
Global markets have experienced close to 2 weeks of weakness in the market, making me look like the Sage of Singapore as I have been warning about weakness in May for the past couple of months. When is the buying point? I really do not have an exact point. All I know is, I am using the USD as my key gauge. The USD has rebounded off its lows of $1.22 against the SGD to $1.25. The dollar index which is an indicators of USD value against a basket of currencies have rebounded from 72 level to 76. Buying time? I believe it is very soon. What about the end of QE2? No worries, because Ben Bernanke is still at the helm and he is going to maintain the size the of the Fed balance sheet so the market will still be flushed with liquidity.
Profits are being booked by professional investors after a good run during this QE2 driven rally, that is why you are seeing so much weakness in commodities and equities. Do not be deceived and sell your positions. Just hang on, you will thank me later. I am sure.
In my previous post, I mentioned something on the debt ceiling in the US. I am choosing to ignoring it first because I have absolutely no interest in the political wranglings of corrupt politicians trying to use this issue as a bargaining chip. In my view, nothing is going to happen by July on this issue. So no worries.
Just buy aggressively in this weak market. I will start buying when the dollar index hits 76.5, that is when I go out and start buying. It is not far from that point. This is just a technical rebound on the USD from oversold territory, it will not be too long lived. So take this opportunity to buy into higher beta stocks to ride the next wave of upside.
One headline that caught my attention was poor IMF Chief Dominique Strauss Kahn getting accused by a chamber main for sexual assault and being sent to Riker's island in reprimand is just the funniest story over the past few days. It is just perposterous to think that a man of his stature would do such a thing. He has been one of the more outspoken experts on the financial crisis in 2008 and has been particularly critical on the US. He is not exactly the most complying and submissive IMF chief the US would have liked. Throw in the fact that he is seen as a possible front runner for the French presidential elections, it is not surprising that he is being taken out the picture.
Remember Eliot Spitzer the disgraced US Attorney General who was known to be a hardliner on bankers? What happened? He was also caught for soliciting prostitutes. Considering how prostitutions and high end social escorts are part and parcel of Wall Street, it is just hypocritical that Eliot Spitzer was taken out of the picture for doing so. It was because he was coming down so hard on his investigations on investment banks and high flying bankers prior to the blow up of the subprime crisis. Conspiracy theory...what do you think? Just something interesting to think about.
Am I going to write about any stocks today? I guess not but I am currently looking at the a very interesting company which should be posted over the next week or so. You must understand that researching on companies is a tough job and it is even tougher to find companies to have conviction on. Why I am posting today is because I foresee a busy schedule for the 2nd half of the year and it will be tough to catch up with the postings. Need to make at least 52 postings this year which looks like I am far behind schedule. It is a discipline I am trying to keep to. Wish me luck.
Have a great rest of the holiday.
Best,
SVI
Sunday, May 15, 2011
Thoughts on bubbles and risks ahead for the market.. Buy more Heng Long should be good.
Sitting here wishing it was a long weekend but no complains because Tuesday is also a holiday. One has to be contented with the little breaks which the government gives us because work life is one long journey.
Did any of you see the phenomenal rise of Artivision Technologies over the past 8 trading days? Ever seen a stock move up 400% in a matter of 8 short trading days? If you can ride on a few more of these stocks, you will shorten your retirement period by quite a few years. How many of these stocks are there? There was absolutely no sign of this stock delivering the returns it just did.
Listed on Catalyst in 2008, Artivision was a stock that promised plenty but did not deliver any. On average, the company has lost 4.5 million per year since listing and burning through its cash horde at record pace. It is currently sitting on 1 million cash and that will not last long. If Artivision does not place out shares any time soon, it will really be a shocker to me. The company has recently announced that it was in talks with a large social network company who is looking to monetize its assets. That has caused the share price to move so drastically. Considering Artivision is dealing mainly in video technology, it would only make sense for social networks to look to using Artivision's products but it is just madness that a stock that was only $0.05 a couple of weeks ago and it hit a high of $0.27 and closed at $0.25 on Friday. Hahaha. You cannot deny that stocks are just so unpredictable and lovely. This is not a solicitation for you to buy this stock, in fact I would caution on this because the price looks attractive for the company to finally raise money through equity placement. Just wanted to show how interesting things can get. Although I still like the Malaysian market more, but it is always nice to see a Singapore company show such interesting movements.
So what happened this week? Commodities staged a shortlived rally. If you bought silver at $34 like I called for it, you would have been able to sell it at $39. Now its back to its $34 level. You have missed the first rebound, not to worry, there will be more to come. Just allow the USD to continue its rebound. Like I said, the USD is the best gauge of whether the market is going to do well or not. Since it was so oversold, you can expect it to do well for at least a couple more weeks.
The same old stories are sill being told about how Greece is going to default and it is really playing like a broken record, repeating the same note over and over again. Greece is not the problem, trust me. So don't even bother wasting your time reading about it. I am more concerned with the US fiscal position and how long it can continue to maintain such a deficit and high debt levels. The debt ceiling in the US will be hit this monday and only has room over the next ten weeks before they run out of money. If they do not raise the debt ceiling, government spending will have to be cut in many places and the cost of debt will only rise when creditors wonder whether there are any default risks in the US govt. Pressure on interest rates will not do well for the country. That is just the beginning.
In recent weeks, I have been thinking more on the size of the Federal Reserve balance sheet and the bubbles that it is creating through the liquidity pumping into the system. The size of the U.S. Federal Reserve's balance sheet reached another record in the latest week, due to the central bank's plan to spur economic growth, Fed data released on Thursday showed.
The balance sheet - a broad gauge of Fed lending to the financial system -- expanded to $2.729 trillion in the week ended May 11 from $2.703 trillion the previous week. The central bank's holding of U.S. government securities
grew to $1.466 trillion on Wednesday from last week's $1.442 trillion total.
The Treasuries purchases were part of the Fed's second phase of quantitative easing, dubbed QE2, a $600 billion purchase plan meant to stimulate investment and growth. The central bank has signaled it will complete QE2 at the end of June, but will continue to reinvest proceeds from the bonds as they mature. Which means QE2 continues to linger on albeit at a slower rate.
The Fed's ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) totaled $927.02
billion. Mind you, these are not exactly credit worthy securities considering Fannie and Freddie are not in their best shape.
What I am trying to prove here is the size and quality of the portfolio within the Fed's balance sheet. Size is just gargantuan and quality is totally questionable. If you think Treasuries are high quality, then you must be the most ignorant investor in the world. US treasuries are probably the biggest ponzi scheme in the world. Using new money to pay old money, yet people are still willing to give them new money.
Do you know how much money is USD$2.7 trillion? How about we put this in perspective? It is equivalent to 794 DBS banks or 1897 SIAs or how about 660 Singtels. 332000 Heng Longs. Ok lets stop the math and just look at the sheer amount of money in the system. Do you know that amount of money in the system coupled with the money multiplier at work, that could double the Dow Jones Industrials given enough time. There are bubbles somewhere being formed right now and should they burst, what can the Fed and Treasury do? It is scary to think of it but we cannot ignore it. The good thing is, if we can figure out where the bubbles are being formed, we may be able to profit from them. Or if not we can also avoid them to prevent ourselves from being burnt.
Did anyone out there buy Heng Long after I called for it? Looks like the stock is going to continue its move up. It broke out of the $0.40 mark and it will continue to move because valuations are still quite reasonable and the company is still not operating at full potential. Look for it to test $0.50 and above. This is a company that will be able to price itself at a premium due to the niche nature of the business. Book value wise is $0.32 but it will definitely be priced at more than 1.5 times book value should the acquisition come through. Note that this is already considered very prudent on my part.
Personally, I wish I bought more of the stock but sad to say, resources are not the only thing that is limited in this world, apparently money is limited in my world too. Well all I can do now is to sit back and watch another value pick go straight up. There will be more to come, trust me. Too many good stocks out there, it is only whether you have the patience or not.
Enough for this week, lets hope I come back with a nice stock to talk about next week.
Have a great Vesak day holiday!
Best,
SVI
Did any of you see the phenomenal rise of Artivision Technologies over the past 8 trading days? Ever seen a stock move up 400% in a matter of 8 short trading days? If you can ride on a few more of these stocks, you will shorten your retirement period by quite a few years. How many of these stocks are there? There was absolutely no sign of this stock delivering the returns it just did.
Listed on Catalyst in 2008, Artivision was a stock that promised plenty but did not deliver any. On average, the company has lost 4.5 million per year since listing and burning through its cash horde at record pace. It is currently sitting on 1 million cash and that will not last long. If Artivision does not place out shares any time soon, it will really be a shocker to me. The company has recently announced that it was in talks with a large social network company who is looking to monetize its assets. That has caused the share price to move so drastically. Considering Artivision is dealing mainly in video technology, it would only make sense for social networks to look to using Artivision's products but it is just madness that a stock that was only $0.05 a couple of weeks ago and it hit a high of $0.27 and closed at $0.25 on Friday. Hahaha. You cannot deny that stocks are just so unpredictable and lovely. This is not a solicitation for you to buy this stock, in fact I would caution on this because the price looks attractive for the company to finally raise money through equity placement. Just wanted to show how interesting things can get. Although I still like the Malaysian market more, but it is always nice to see a Singapore company show such interesting movements.
So what happened this week? Commodities staged a shortlived rally. If you bought silver at $34 like I called for it, you would have been able to sell it at $39. Now its back to its $34 level. You have missed the first rebound, not to worry, there will be more to come. Just allow the USD to continue its rebound. Like I said, the USD is the best gauge of whether the market is going to do well or not. Since it was so oversold, you can expect it to do well for at least a couple more weeks.
The same old stories are sill being told about how Greece is going to default and it is really playing like a broken record, repeating the same note over and over again. Greece is not the problem, trust me. So don't even bother wasting your time reading about it. I am more concerned with the US fiscal position and how long it can continue to maintain such a deficit and high debt levels. The debt ceiling in the US will be hit this monday and only has room over the next ten weeks before they run out of money. If they do not raise the debt ceiling, government spending will have to be cut in many places and the cost of debt will only rise when creditors wonder whether there are any default risks in the US govt. Pressure on interest rates will not do well for the country. That is just the beginning.
In recent weeks, I have been thinking more on the size of the Federal Reserve balance sheet and the bubbles that it is creating through the liquidity pumping into the system. The size of the U.S. Federal Reserve's balance sheet reached another record in the latest week, due to the central bank's plan to spur economic growth, Fed data released on Thursday showed.
The balance sheet - a broad gauge of Fed lending to the financial system -- expanded to $2.729 trillion in the week ended May 11 from $2.703 trillion the previous week. The central bank's holding of U.S. government securities
grew to $1.466 trillion on Wednesday from last week's $1.442 trillion total.
The Treasuries purchases were part of the Fed's second phase of quantitative easing, dubbed QE2, a $600 billion purchase plan meant to stimulate investment and growth. The central bank has signaled it will complete QE2 at the end of June, but will continue to reinvest proceeds from the bonds as they mature. Which means QE2 continues to linger on albeit at a slower rate.
The Fed's ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) totaled $927.02
billion. Mind you, these are not exactly credit worthy securities considering Fannie and Freddie are not in their best shape.
What I am trying to prove here is the size and quality of the portfolio within the Fed's balance sheet. Size is just gargantuan and quality is totally questionable. If you think Treasuries are high quality, then you must be the most ignorant investor in the world. US treasuries are probably the biggest ponzi scheme in the world. Using new money to pay old money, yet people are still willing to give them new money.
Do you know how much money is USD$2.7 trillion? How about we put this in perspective? It is equivalent to 794 DBS banks or 1897 SIAs or how about 660 Singtels. 332000 Heng Longs. Ok lets stop the math and just look at the sheer amount of money in the system. Do you know that amount of money in the system coupled with the money multiplier at work, that could double the Dow Jones Industrials given enough time. There are bubbles somewhere being formed right now and should they burst, what can the Fed and Treasury do? It is scary to think of it but we cannot ignore it. The good thing is, if we can figure out where the bubbles are being formed, we may be able to profit from them. Or if not we can also avoid them to prevent ourselves from being burnt.
Did anyone out there buy Heng Long after I called for it? Looks like the stock is going to continue its move up. It broke out of the $0.40 mark and it will continue to move because valuations are still quite reasonable and the company is still not operating at full potential. Look for it to test $0.50 and above. This is a company that will be able to price itself at a premium due to the niche nature of the business. Book value wise is $0.32 but it will definitely be priced at more than 1.5 times book value should the acquisition come through. Note that this is already considered very prudent on my part.
Personally, I wish I bought more of the stock but sad to say, resources are not the only thing that is limited in this world, apparently money is limited in my world too. Well all I can do now is to sit back and watch another value pick go straight up. There will be more to come, trust me. Too many good stocks out there, it is only whether you have the patience or not.
Enough for this week, lets hope I come back with a nice stock to talk about next week.
Have a great Vesak day holiday!
Best,
SVI
Friday, May 6, 2011
Cooling day? What does that mean anyway?
What an interesting week it has been. Is it me or has it become more interesting as time passes? We started off with Obama's present to US voters, Osama's death. If that is not going to improve his lagging ratings, I really do not know what will. Especially with the news that Donald Trump is going to make himself eligible as a Republican candidate, Obama is showing some sense of urgency. The question I would like to ask Mr Trump is whether he will be going for a proper hair weave or will he stick to his current toupee. For those people who claims that our beloved PAP bought votes through their growth dividend payout before the elections, Obama has gone one better by handing voters a corpse to buy votes. As we get older and become more experienced, we become jaded by realising how everything on the surface is not what it really is. That is the story of our lives in this society today.
Today is "cooling day", a day reserved for us to cool down and let our emotions rest before deciding who to hand the next five years of Singapore's future to. The rallies have stopped and all those meaningless figure pointing and rhetorical problem identification has finally stopped. I think the real purpose to "cooling day" is to allow our ears to cool down from all the bull shit that has been spouted over the past 2 weeks. Pardon my french. Really can't wait for this election to be over. Sick and tired of people telling me their political views and asking about mine. Let me just set it straight. My view is that I will vote for the party that will not only point out problems or mistakes but also provide the solution for them. Which opposition has clearly outlined all their proposed solutions to make Singapore a better place? None. I rest my case. If rallies are all about finger pointing and assigning blame, then there really is no meaning to it. You may or may no agree with me and I respect that. To each his own. Lets get on with this week's posting.
Last weekend, I said that Silver and Gold looked pretty elevated. I guess someone in the CME read my post and raised margin requirements twice! Silver has fallen 31% in a matter of 4 days. That is impressive. Well it is looking like a very good trade now. What do you think? I am going to come out and call for a short term buy on silver at $35 bucks an ounce.
Internet fever is back! Especially Chinese internet IPOs listing on the Nasdaq...RenRen (China's version of Facebook) rose up to 40% percent on its opening day. This is equivalent to 100 times price to sales. It is a wonder how no one sees it as insanity. If we cannot learn from history, then we are beyond help. The current valuation of RenRen is even higher than that of Facebook (in the private listing market), just when you thought Facebook was trading at crazy valuations, RenRen comes along to make Facebook look like a value stock. Mark Zuckerberg is going to be a very happy man. Now he can justify even higher valuations for his beloved creation.
For me, I prefer to stick to things that are more down to earth. When I was younger, my dad always felt that I did not have my feet planted on the ground, ironically now I feel I am so deep rooted on value that it would take a excavator to pull me out from the ground. This week ISDN (my recent call) reported a great result from the last quarter which makes this call look even better.
Another great call was Heng Long which announced on Friday that their substantial shareholders have received indication of interest from external parties to buy into the business. If you can recall, Heng Long is one of the top 5 tanneries in the world. Niche business that is highly profitable will always attract investors. Just buy and hold and pray someone will see the value you see in them. My fair value for this stock is $0.56 cents but do not ask me how I came out with this valuation. I explained it to my protege so I am not too keen to explain it now.
After Heng Long's announcement, it got me thinking, why did I not buy more? Greed is settling in once again. So it got me started on the search for the next possible candidate for a takeover. I have a few in mind but I am a little too tired to write about it because of all the brain juices spent on thinking of who to vote for in tomorrow's elections. So I will leave it for another time.
My prediction of "Sell in May and go away" seems to have gotten off to a nice start. The USD has started rebounding, commodity prices have fallen and equity markets have pulled back. Lets focus on the STI index. Most of the pull back has been due to jitters over the election results. I have listened to so many so called "experts" on how the market would react to the election results and this has caused a little anxiousness in local investors. With all the hype of the opposition winning possibly one GRC, investors are not ready to hold positions over the weekend with a possible poor election result hanging over the horizon. Cannot blame them for feeling that way.
No doubt there is a good chance that the PAP may actually lose quite a high percentage of the popular vote but we have to consider what will change even if that happens? Do you believe that the few opposition seats is going to make a difference? Why would the companies underlying those stocks be hit? As I always say, when there is a change, we got to ask ourselves whether this change is really a fundamental change to the market or whether the change will affect the businesses on a permanent basis. My answer to you is, not a chance. The PAP will still be in power, the opposition will make more noise, but remember, majority vote will still lie in the hands of the PAP. Therefore, let me just put it straight to all of you, THIS IS YOUR BUYING OPPORTUNITY. If you are a lover of blue chips and government linked companies, you should look at any weakness after the elections as a good entry point.
Do not worry, elections in Singapore tend to have a negligible effect on the Singapore market over a 3 month period. There will be knee jerk reactions but do not get too emotionally involved and start getting caught up in the irrational reactions of short term minded investors.
Not going to write to much this week because I am just too tired to type anymore. Too much cooling for me today.
Have a great polling day and vote wisely!
Best,
SVI
Today is "cooling day", a day reserved for us to cool down and let our emotions rest before deciding who to hand the next five years of Singapore's future to. The rallies have stopped and all those meaningless figure pointing and rhetorical problem identification has finally stopped. I think the real purpose to "cooling day" is to allow our ears to cool down from all the bull shit that has been spouted over the past 2 weeks. Pardon my french. Really can't wait for this election to be over. Sick and tired of people telling me their political views and asking about mine. Let me just set it straight. My view is that I will vote for the party that will not only point out problems or mistakes but also provide the solution for them. Which opposition has clearly outlined all their proposed solutions to make Singapore a better place? None. I rest my case. If rallies are all about finger pointing and assigning blame, then there really is no meaning to it. You may or may no agree with me and I respect that. To each his own. Lets get on with this week's posting.
Last weekend, I said that Silver and Gold looked pretty elevated. I guess someone in the CME read my post and raised margin requirements twice! Silver has fallen 31% in a matter of 4 days. That is impressive. Well it is looking like a very good trade now. What do you think? I am going to come out and call for a short term buy on silver at $35 bucks an ounce.
Internet fever is back! Especially Chinese internet IPOs listing on the Nasdaq...RenRen (China's version of Facebook) rose up to 40% percent on its opening day. This is equivalent to 100 times price to sales. It is a wonder how no one sees it as insanity. If we cannot learn from history, then we are beyond help. The current valuation of RenRen is even higher than that of Facebook (in the private listing market), just when you thought Facebook was trading at crazy valuations, RenRen comes along to make Facebook look like a value stock. Mark Zuckerberg is going to be a very happy man. Now he can justify even higher valuations for his beloved creation.
For me, I prefer to stick to things that are more down to earth. When I was younger, my dad always felt that I did not have my feet planted on the ground, ironically now I feel I am so deep rooted on value that it would take a excavator to pull me out from the ground. This week ISDN (my recent call) reported a great result from the last quarter which makes this call look even better.
Another great call was Heng Long which announced on Friday that their substantial shareholders have received indication of interest from external parties to buy into the business. If you can recall, Heng Long is one of the top 5 tanneries in the world. Niche business that is highly profitable will always attract investors. Just buy and hold and pray someone will see the value you see in them. My fair value for this stock is $0.56 cents but do not ask me how I came out with this valuation. I explained it to my protege so I am not too keen to explain it now.
After Heng Long's announcement, it got me thinking, why did I not buy more? Greed is settling in once again. So it got me started on the search for the next possible candidate for a takeover. I have a few in mind but I am a little too tired to write about it because of all the brain juices spent on thinking of who to vote for in tomorrow's elections. So I will leave it for another time.
My prediction of "Sell in May and go away" seems to have gotten off to a nice start. The USD has started rebounding, commodity prices have fallen and equity markets have pulled back. Lets focus on the STI index. Most of the pull back has been due to jitters over the election results. I have listened to so many so called "experts" on how the market would react to the election results and this has caused a little anxiousness in local investors. With all the hype of the opposition winning possibly one GRC, investors are not ready to hold positions over the weekend with a possible poor election result hanging over the horizon. Cannot blame them for feeling that way.
No doubt there is a good chance that the PAP may actually lose quite a high percentage of the popular vote but we have to consider what will change even if that happens? Do you believe that the few opposition seats is going to make a difference? Why would the companies underlying those stocks be hit? As I always say, when there is a change, we got to ask ourselves whether this change is really a fundamental change to the market or whether the change will affect the businesses on a permanent basis. My answer to you is, not a chance. The PAP will still be in power, the opposition will make more noise, but remember, majority vote will still lie in the hands of the PAP. Therefore, let me just put it straight to all of you, THIS IS YOUR BUYING OPPORTUNITY. If you are a lover of blue chips and government linked companies, you should look at any weakness after the elections as a good entry point.
Do not worry, elections in Singapore tend to have a negligible effect on the Singapore market over a 3 month period. There will be knee jerk reactions but do not get too emotionally involved and start getting caught up in the irrational reactions of short term minded investors.
Not going to write to much this week because I am just too tired to type anymore. Too much cooling for me today.
Have a great polling day and vote wisely!
Best,
SVI
Sunday, May 1, 2011
Labour day is here, labour pains are also just around the corner for the equity markets.
Writing this post while I am waiting for my basketball game to start in the middle of the night. You guys like the new look? I wanted to give it a sleeker look with more beef. What inspired me to do so was the realisation of the importance in packaging during the elections. So I decided to have a makeover on the blog. Expect more changes in the near future as I try add improvements in most aspects of my life.
While doing up my blog's latest look, I realised that I have only had 10 posts for the year of 2011. That means I have been really slacking and I just wanted to do some catching up while I can.
Labour day is here and this month will be important for me and my credibility because I predicted a weaker May going into June.
Is it a wise prediction? Let's look. Well, April gives the impressions of a solid market rally. The S&P 500 (SPY) rose, 4%, 4% and 10% respectively in each of the past three years and is up another 2.2% this month. That rally has recently extended into May, as the S&P 500 has rallied an average of 3% in the past three years. But by the end of May, the party seems to end. Some say its the summer holidays that cause the sell down but I believe this year there are better reasons than this.
The market has fallen in six of the past 10 Junes of the past decade, three times the rate at which the various positive months have risen. Was there a July bounce-back? Well, the five Julys of the last decade were split, but the average loss was greater than the average gain.
An analysis by Standard & Poor's shows that in the past 60 years, the market has fallen by 0.04% on average in August. It's even worse in September, with that figure dropping to 0.78%. In fact, September is the only month to produce negative average results through the past 80 years, according to Ibbotson & Associates. Lastly, here's a sobering stat: according to S&P, since 1950, the Dow Jones Industrial Average has produced an average gain of 7.4% from November through April and 0.4% from May through October, I hope this will not be true this year because that would mean the best part of the year has already come to an end. What makes things worse is that I have not made my returns for the year yet.
Commodities such as precious and industrial metals tend to slump as major purchasers compete their full-year purchasing needs in the spring. China is said to be sitting on more-than-ample supplies of copper, silver and other surging commodities, right at a time when the Chinese government is trying to cool its economy. A drop in demand would pull the rug out from some of the highest-flying commodities. Watch the commodity sector, especially as it should be fairly priced in the short term and highly vulnerable to any pull back.
From my previous posts, you guys would know that I believe that the USD weakness is the main reason to why the market is so strong. The USD carry trade has moved markets and I love the fact that Tim Geithner had the nerve to claim that the US still wants to have a strong dollar. How many times have we heard this from Paulson, Geithner and Bernanke over the past 3 years? Which way has the USD gone? Down into the sewers.
In the latest Fed reserve policy statement, they decided that QE2 would end as per scheduled but the balance sheet of the Fed will remain the same size because the money from the maturing securities held in their books will be recycled. So that means continued buying of treasury securities by the Fed. Now that is similar to continued quantitative easing just that there is no more expansion in the money supply. What that means is that the USD will continue to be weak but will it weaken more from here? I find it hard to see how it will be. Support levels are being hit right now and I believe a short term bounce is in sight. What that means is that commodities and equities will experience the sell off soon.
According to the Fed, they see inflationary pressures rising but they believe its transitory and that the economic strength although decent may be slowing a little. Personally, I feel that the Fed is getting a little complacent on inflation and they are really putting the US in a perilous position. But who am I to say? I am no PHD or bonafide genius like those on the Fed committee. There are things in this world however, that are so obvious that you do not need to be a genius to see and this is one of them. The US is in deep trouble and we all know that in the long run, all these actions will come back to haunt them. All I can hope for is that they do not drag the rest of the world down with it. Knowing the US, I bet they will. Do not forget, they were the ones that managed to convince the world to use their USD as the reserve currency. So basically what they did was to tie the world's fate with theirs. Scary to even think about how bad the next crisis is going to be. But like what Keynes said, "in the long run, we are all dead." Lets hope he is right.
Well just wanted to post something while waiting for my game. Game is starting.
Have a great night and labour day holiday ahead!
Best,
SVI
While doing up my blog's latest look, I realised that I have only had 10 posts for the year of 2011. That means I have been really slacking and I just wanted to do some catching up while I can.
Labour day is here and this month will be important for me and my credibility because I predicted a weaker May going into June.
Is it a wise prediction? Let's look. Well, April gives the impressions of a solid market rally. The S&P 500 (SPY) rose, 4%, 4% and 10% respectively in each of the past three years and is up another 2.2% this month. That rally has recently extended into May, as the S&P 500 has rallied an average of 3% in the past three years. But by the end of May, the party seems to end. Some say its the summer holidays that cause the sell down but I believe this year there are better reasons than this.
The market has fallen in six of the past 10 Junes of the past decade, three times the rate at which the various positive months have risen. Was there a July bounce-back? Well, the five Julys of the last decade were split, but the average loss was greater than the average gain.
An analysis by Standard & Poor's shows that in the past 60 years, the market has fallen by 0.04% on average in August. It's even worse in September, with that figure dropping to 0.78%. In fact, September is the only month to produce negative average results through the past 80 years, according to Ibbotson & Associates. Lastly, here's a sobering stat: according to S&P, since 1950, the Dow Jones Industrial Average has produced an average gain of 7.4% from November through April and 0.4% from May through October, I hope this will not be true this year because that would mean the best part of the year has already come to an end. What makes things worse is that I have not made my returns for the year yet.
Commodities such as precious and industrial metals tend to slump as major purchasers compete their full-year purchasing needs in the spring. China is said to be sitting on more-than-ample supplies of copper, silver and other surging commodities, right at a time when the Chinese government is trying to cool its economy. A drop in demand would pull the rug out from some of the highest-flying commodities. Watch the commodity sector, especially as it should be fairly priced in the short term and highly vulnerable to any pull back.
From my previous posts, you guys would know that I believe that the USD weakness is the main reason to why the market is so strong. The USD carry trade has moved markets and I love the fact that Tim Geithner had the nerve to claim that the US still wants to have a strong dollar. How many times have we heard this from Paulson, Geithner and Bernanke over the past 3 years? Which way has the USD gone? Down into the sewers.
In the latest Fed reserve policy statement, they decided that QE2 would end as per scheduled but the balance sheet of the Fed will remain the same size because the money from the maturing securities held in their books will be recycled. So that means continued buying of treasury securities by the Fed. Now that is similar to continued quantitative easing just that there is no more expansion in the money supply. What that means is that the USD will continue to be weak but will it weaken more from here? I find it hard to see how it will be. Support levels are being hit right now and I believe a short term bounce is in sight. What that means is that commodities and equities will experience the sell off soon.
According to the Fed, they see inflationary pressures rising but they believe its transitory and that the economic strength although decent may be slowing a little. Personally, I feel that the Fed is getting a little complacent on inflation and they are really putting the US in a perilous position. But who am I to say? I am no PHD or bonafide genius like those on the Fed committee. There are things in this world however, that are so obvious that you do not need to be a genius to see and this is one of them. The US is in deep trouble and we all know that in the long run, all these actions will come back to haunt them. All I can hope for is that they do not drag the rest of the world down with it. Knowing the US, I bet they will. Do not forget, they were the ones that managed to convince the world to use their USD as the reserve currency. So basically what they did was to tie the world's fate with theirs. Scary to even think about how bad the next crisis is going to be. But like what Keynes said, "in the long run, we are all dead." Lets hope he is right.
Well just wanted to post something while waiting for my game. Game is starting.
Have a great night and labour day holiday ahead!
Best,
SVI
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