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
Friday, May 6, 2011
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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