I’m at at a Chinese New Year gathering now and the atmosphere here is still as lively as compared to last year. No one is talking about the Wuhan flu and I suppose it is not auspcious to mention this.
Once news broke last week that human to human transmission is possible, I ordered N95 masks immediately for the adults and for my kid as well and luckily it arrived the next day and as you may know, N95 masks are in short supply now although government has reassured that there is sufficient stock. The online shop that I bought from no longer has stock for masks.
Investment wise aside, I was surprised that my double bagger Riverstone opened with a price increase of 7%+ due to the perceived increased demand of gloves during a flu epidemic. Defensive stocks certainly perform well last week.
My view on this is that I believe that this flu epidemic will reach SARS kind of proportion. Since the transmission mode is human to human and the incubation period is long which means people could already be infected and be infectious without showing any symptoms, the growth rate of this flu will increase exponentially
Using SARS as comparison, I’m looking to buy stocks which will sink temporarily due to this situation and I do have a watchlist in place to scoop these stocks up. I believe retail will perform poorly since if the situation worsen, people will avoid going out and crowds will dwindle. I can also presume property will perform poorly as well since people will avoid going to showrooms or going for viewings.
Saturday, January 25
Friday, January 17
Strategy in a low interest rate environment
Posted by
Kay
at
Friday, January 17, 2020
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I still remember a couple of years ago that I was having my usual breakfast with my colleagues from my 2nd previous company. Back then, we have been in the workforce for a couple of years and was in the early life stage cycle of collecting keys to our flats, renovation or getting married.
"Aiyah, confirm the interest rate will rise. Now interest rate is so low at 1+%. Sooner or later, it will revert to historical means"
As so it turns out, the interest rate did rise but only for a short while up to 2%+ before retreating back to the current levels, not anywhere near the 3% to 7% seen historically.
And as I mused in my previous post, I see it most ironic that folks who are prudent in their investments suffered the most as the interest rate has been really low resulting in savings account and bond yields being low and folks who took on risks are well-rewarded in being over-leveraging given that there has been no crash for the past 10 years and still counting.When interest rates are low, it is easy to juice up on your investment, be it stocks, crytocurrency, properties etc.
It is my long term and enduring view that a low interest rate environment spur irrational risk taking -> too much money chasing too little yield for too much risk. Within the system, the risk is being transferred and being exchanged somewhere in the system and it will implode one day.
I found a good read in Howard Mark's memo which my current strategy is based on. You can read the memo here
Here, I extract one of the pointers from his memo;
In a world like the one described above, perhaps the most reliable solution lies in buying things with durable cash flows. Bonds, loans, stocks, properties and companies with the likelihood of producing steady (or hopefully growing) earnings or distributions that reflect a substantial yield on cost all seem like reasonable responses in times of negative yields. In my view, durability and dependability are highly desirable (rather than hail-Mary attempts at a moonshot).
Currently, i am keeping a sizable amount of war chest that is yielding above inflation to take advantage of any possible market downturns or any crashes. At the same time, I am tweaking my portfolio to slowly add to positions of companies and REITs with consistent and reliable cash flow and is able to thrive in a low interest rate environment and this should result in good dividends on my receiving end.
"Aiyah, confirm the interest rate will rise. Now interest rate is so low at 1+%. Sooner or later, it will revert to historical means"
As so it turns out, the interest rate did rise but only for a short while up to 2%+ before retreating back to the current levels, not anywhere near the 3% to 7% seen historically.
And as I mused in my previous post, I see it most ironic that folks who are prudent in their investments suffered the most as the interest rate has been really low resulting in savings account and bond yields being low and folks who took on risks are well-rewarded in being over-leveraging given that there has been no crash for the past 10 years and still counting.When interest rates are low, it is easy to juice up on your investment, be it stocks, crytocurrency, properties etc.
It is my long term and enduring view that a low interest rate environment spur irrational risk taking -> too much money chasing too little yield for too much risk. Within the system, the risk is being transferred and being exchanged somewhere in the system and it will implode one day.
I found a good read in Howard Mark's memo which my current strategy is based on. You can read the memo here
Here, I extract one of the pointers from his memo;
In a world like the one described above, perhaps the most reliable solution lies in buying things with durable cash flows. Bonds, loans, stocks, properties and companies with the likelihood of producing steady (or hopefully growing) earnings or distributions that reflect a substantial yield on cost all seem like reasonable responses in times of negative yields. In my view, durability and dependability are highly desirable (rather than hail-Mary attempts at a moonshot).
Currently, i am keeping a sizable amount of war chest that is yielding above inflation to take advantage of any possible market downturns or any crashes. At the same time, I am tweaking my portfolio to slowly add to positions of companies and REITs with consistent and reliable cash flow and is able to thrive in a low interest rate environment and this should result in good dividends on my receiving end.
Wednesday, January 1
Predictions are futile and changes are inevitable
Posted by
Kay
at
Wednesday, January 01, 2020
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I took a break of more than 3 years from blogging. Now that I'm back, I was looking at some of the predictions that I've made and the majority of it turns out not to be too accurate ^^
- Market did not crash for the past 3 years in terms of equity or property. It stayed cool but there was no winter.
- I was recommending the STI ETF but in terms of capital gains, it was pretty flat for the past 3 years. Meanwhile, the US market continue to rocket. The dividend yield is still pretty respectable at around 3.6% based on recent trading price
- Interest rate continues to remain low which means prudent folks suffer because they stayed prudent while risk taking folks prosper in this environment of no crash and low interest rate.
For the past 3 years, I was also faced with some significant changes that had some financial impact.
- I sold my 4 room BTO HDB flat in the North East area for a decent profit after the minimum occupation period (MOP) of 5 years and moved to a 5 room resale HDB in the central area. On hindsight, it was not really a good move as I had to suffer quite significant cash outflow for the renovation since it is an older flat but I free up sufficient equity now in my CPF above the Full Retirement Sum (FRS) with excess to spare. On the other hand, my housing bank loan is actually less than 2% which is an oxymoron given that HDB loan is still at 2.6%.
- After surviving a retrenchment in my previous job as written in my last post, I found a new job with a pay increase. However, this new job lasted me for 2 years as I had a hunch that I would be retrenched in the next restructuring exercise which turns out to be true. As such, I left my previous job for the next job with a significant increase in pay. Looking back, my base pay has actually increased by more than 350% as compared to my starting pay 10 years ago. For most of us, our career still bring home more dough than the yield from our portfolio and career development is of paramount importance. Having a versatile and in-demand skillset is very important as my skillset has enabled me to work in 4 different industries to date.
- I became a Dad. Being a dad brings a lot of meaning to me in terms of my life experience, way beyond what I imagined before when my wife and I were DINK. Financially, it represent cash outflow all the way from birthing, nanny, diapers, childcare, hospitalization etc., not that it's a bad thing by itself but my planning at the start was insufficient to say and the journey is still a long way to go for another 2 decades at the minimum.
- I actually bought a car even though I loathe to own a car due to the cash outflow, given how expensive cars are in Singapore. I guess cars were made for babies since bringing a baby on public transport is challenging, especially when you need to change diapers a few times a day, not to mention staring eyes from strangers when the little boss cries and pooping incidents on the travel.
Meanwhile, I am still adding stocks regularly to my portfolio based on the principles that I have been blogging ever since I started this blog and I'm quite pleased to say that the portfolio size is of a 6 digit size, yielding close to 4.5% which has been sufficient to defray many of my significant expenses although still some distance away from financial freedom.
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