The Market is a Bloody Mess!

So the headlines are now all gloom and doom.

What is Yuan may not be round

China devalues its Yuan and the rest of the world suffers a cold. As if Winter isn't cold enough for them. They need to export their cold to the rest of the world too.

Does it mean the Sing dollar will strengthen against the regional dollars? If so, then it's a good time to exploit the stronger exchange rate to go on holidays. I know, I know. Holidays are expenses. But what's life if we can't spend on gaining positive experiences discovering the wider world beyond our 700 sq km? Within limits of course.

At the same time, it's going to be bad for most local business as Singapore companies are often dependent on exports (Qian Hu). So that end of it doesn't look bright. I'd hate to be an exporter right now. Worse if you're an employee in a shaky company. Thy job is at stake too. Troubling.

What is zero can only go up

US Fed interest rate hike has taken the first step uphill and I'm sure the rest of the world will gradually follow suit. With interest rates going up, that means new bonds issues will be pegged at higher interest rates too? Sounds exciting for new bonds issue, especially since new rules are expected to be introduced soon to ease the issue of "seasoned" retail bonds in Singapore. I look forward to subscribing to new retail bonds.

The banks (OCBC, UOB, DBS) are suffering from heart attacks and are at incredulously low Price-Earning (PE) ratios. Is that a Big Singapore Sale going on here? Or are there more heart attacks to come? I think they are worth a close look. Very close. I'm suffering from irregular heartbeats from excitement.

What is going down must hit a bottom somewhere

The oil and gas, and consequently the marine industry (Keppel, SembCorp) have yet to pan out. The price of oil is now at a historical low. But the Saudi strategy of creating a glut to kill off its competition seems to be a long drawn process. It's bleeding oil until a turning point can be reached. The Saudis are patient people. Guess they have a lot of oil to spill.

How come the air tickets are still so expensive, and likewise the price of petrol at the petrol kiosks!? There's a de-sync somewhere. Somebody is making the money. And it ain't the consumer who are benefiting from the low price of oil (ExxonMobil, Chevron).

What is shiny may yet shine brighter

Amidst all these, we have a friend who has significantly faded in recent years - Gold. Is it now glittering brighter yet again? I'm not betting on it, but will keep watch. I might yet be blinded. Eventually.

Overall, as the Brits might say, "It's a bloody mess!"

Fuel - Fluctuating with the Tide

It's strange. When the price of oil was in the century mark, everybody was feeling the pinch as the cost of business went up. The masses felt the pinch with the rapidly spiraling cost of petrol for car owners and the cost of electricity to power the home. It was all doom and gloom, with inflation eating into the bottom line for everyone.

This situation gave rise to higher cost means of recovering energy sources becoming viable. And so we then have shale gas, particularly in the US. It has grown so rapidly that it is shifting the US from a net importer of energy to becoming a net exporter. Suddenly, OPEC and Russia no longer hold the only big strings that pull the puppet.

And now we have an oversupply. The collapse in oil price has been rapid. Along with this, stocks in the oil and gas sector are dropping day by day. And yet, many of these companies are still generating growth in revenue.

Oil price go up, gloom! Oil price go down, doom! What a strange world.

The simple truth is that the demand for energy can't possibly get any less. The world continues to grow. As economies develop, surely the demand for energy can only grow? If the reverse is happening, we must be moving back to the stone ages.

With this, my hypothesis is that eventually a tipping point will be reached, and things can only return to the uptrend, be it the global economy or the cost of energy.

As a long term investor, such short term fluctuations are irrelevant. In fact, it is another opportunity knock. So are we accepting the knock or taking the knock and continue to watch?

I finally bought into ExxonMobil, after having bought Chevron a year back. Their prices continue to fall. But do we see the price of fuel at the pumps falling in lock step by the same proportion? Hmmm ...

Meantime, I should keep a closer lookout on flights for overseas holidays. It should be cheaper since aviation fuel is a big ticket cost item. Upgrade to Business Class anyone?

Disclaimer: Do your own due diligence! We all have different risk profiles and considerations.  

X'mas 2014

Its X'mas 2014. I've been lazy with blogging of late. In part, this was because I've been travelling on holidays. And watching with some excitement the ups and downs of the stock markets.

Bob the Builder

In recent weeks, I've visited KL and Sydney and couldn't help noticing the extent of construction work going on in both cities. There can be all kinds of bad news (e.g. impact of oil on Malaysia, and mining for Australia), but their economies appear to do fine. Economic activities continue to thrive. Life goes on.

As a trivia ... I didn't realise the significance of the location of the Lindt Cafe at Martin Place, Sydney. Guess what's just across from the cafe?

Slippery Oil

The rapid reversal of the price of oil I think has created opportunities. It's time to start watching the big US oil companies. After all, we need oil for plenty of things don't we? It may just take awhile to see results. I read an article a few days ago which highlighted news from the last major oil crisis. The parallels were indeed stark. So much fear. Opportunity! ExxonMobil or Chevron anyone?

All that Gloom May Not Be Doom

Look at what happened to China recently. It was all doom and gloom a few months ago. Its stock market took a nosedive. It was bleeding nose affair. But in the last few weeks, it  appears to have risen rapidly. There is so much disjointedness between the stock market and economic data sometimes.

Global Business Diversification

It's great to have companies that are global in nature and does business across the global. Consider Johnson & Johnson, Proctor & Gamble, McDonalds and such. In contrast, a company like Empire Food which does most of its business in Russia suffers horribly when hit with a shock like currency devaluation. Roubles rubbles, bubbles jumble, absolutely trouble.

The End of 365 Days Since X'mas

It's X'mas today. That means the New Year is just round the corner. Time to take stock of my portfolio's growth over the year. Looking forward to the crediting of interest to my CPF as well.

Merry X'mas & Happy New Year!

p/s: Actually X'mas is coming again. It's just another 364 days away!

3 Events in Recent Weeks

Thoughts on 3 events over these past weeks:

1. SGX Crashed. Traders must have moaned and groaned until it was recovered. Pity those software and systems engineers involved in the fiasco. Must have stressed until 'lao sai'. Who benefits? Maybe nobody. Who suffers? Those who trade. But being a value investor, it was a non-event. Fascinating, and marginally amused.

2. Oil Slips. It's been a steep and slippery slope downhill. Beginning to look like Gold. Who benefits? Those who use a lot of oil in the first place. So transportation companies ought to benefit. Yeah for SIA! Who suffers? Those who make money selling oil. Oh no for Chevron. How will it affect Union Pacific? Mixed feelings, given that it is a transportation company but its current business loads seemed to be from moving fuels around. Not doing anything, but watching with interest.

3. The Glass Splits. Not that it's broke, but the shares of The Hour Glass went through a stock split of 3 shares for every 1 share. Effectively, that meant the price also dropped to 1/3, all else unchanged. Interestingly though, there was quite a bit of selling thereafter. Probably some people didn't know what had happened and thought it had crashed. Sounds like an opportunity, so I bought more.

A US Team of Dividend Growth/Value Stocks

Aside from investing in SGX stocks (My World Cup Team (of Dividend Value Stocks)), I also own a smaller portfolio in US stocks as part of my globally diversified investment portfolio. Other regions are held in the form of Exchange Traded Funds and Unit Trusts.

At the moment, my US team looks like this:

Goalkeeper:
  Berkshire Hathaway-B

Defense:
  Johnson & Johnson

  Proctor & Gamble

  Chevron

  Anheuser Busch

Midfield:
  Wells Fargo

  McDonalds

  Target

  Union Pacific

Forward:
  IBM 

  Philip Morris

Berkshire Hathaway is a steady goalkeeper that has proven its worth over the long history since its founding by Warren Buffet and Charlie Munger.

The defensive line of 4 is made up of various companies that are likely to float in good time or bad. Toiletries, consumer medical and household products are things that have high repeat value, regardless the market situation. Oil will always be needed, until alternatives start to make oil irrelevant. But I can't see that happening anytime soon. And beer, will continue to be guzzled, perhaps even more so when things aren't looking good.

The midfield line up is an interesting variety of a financial heavyweight, fast food, large scale retailer and nation-wide train system. Of these, perhaps the more risky one is Target as it continues to face difficulty with its troubled expansion into Canada struggling. The Canadians are really not too enthu' with them.

The forward line up of IBM and Philip Morris will take some time to pan out. It's hard for a smoker to cut a smoking habit. A rapidly growing emerging market will likely generate an increasingly higher demand for their products. Of course, there are many risks given that this is a really unhealthy business and will face regularity pressures with high taxation and domestic product alternatives. IBM ... hmm ... let's see how this IT behemoth transforms itself. It has pretty much given up everything that is a commodity - i.e. the hardware business.

Two interesting key attributes of most of the above companies: (a) many are holdings of Berkshire Hathaway, and (b) they are dividend growth champions! Ironically, Berkshire itself doesn't give out dividends. Warren Buffet has always said that his company can do a better job of capital allocation and it makes more sense for them to invest the money than to give out as dividends. Besides, US tax the dividend payouts. As a Singaporean investor, I would lose 30% from withholding tax for dividends that are paid out.

The first team with the above 11 players are doing well.  However, my bench isn't doing too well - i.e. Coach. My holding in Coach has dropped a third in value.

Coach has been suffering from competitive pressures from Kate Spade and Michael Kors. Its attempt to generate more sales via atfactory outlets has devalued its branding. But still, we see many ladies holding Coach products. The company's financials look good. Let's see if it survives the challenge from the new brands and turn things around over time.

It's an irony isn't it? The problem is the Coach. Muahahah!