Crisis ? What Crisis?

The stock market has been been alot of crisis since 1980. To name a few, we have the Asia Financial Crisis in 1997, it was quickly followed by the Dot Com bubble burst in the late 1999. This two crisis affected the STI and NASDAQ but both quickly recovered from it and prices reverted back to values that were sustainable and realistic. Most recently, we have seen the sub prime mortgage crisis affecting major banking and financial institutes. The banks pay the price for dabbling in complex structured products which they did not fully comprehend. Overnight, millions of dollars in savings, housing values and stocks values were wiped off. Now, investors and traders are still fearful that these debts might spill over to other loans like credit cards and car loans. And now, we are hit with a double whammy of poor economic conditions and high inflation.




However, King of Shares feel that despite all these gloom and glum, the sun will come out shinning soon. The stock market has always exhibit a cyclic trend and this trend will continue. So for those badly affected by the recent crisis, fret not, hold on to your investments, re-evaluate your investments periodically, and if the fundamentals that made you buy the shares in the first place has not changed, then the value of the shares will shine when the crisis is over.

To quote Monish Pabrai, in his latest book, "The Dhandho Investor", he wrote that "any stock that you buy should not be sold at a loss within 2 - 3 years, unless you can say with high certainty that the current intrinsic value is less than the current price the market is offering".

Disclaimer: It is not the intent of the author to advice the readers to purchase any form of investments after reading this article. Any opinions, conclusions or other information expressed here does not constitute any personal advice. Information are given on a general basis and are subjected to change without notice. The author will not be held liable for any losses resulting from any errors, inaccuracies or omitted data or from the use of the published information.

Look out for the exit sign

As most traders and investors would have already known, the STI plunged below its support of 3000 points last week. When US market and other major Asia market sneezes, the Singapore market catches a cold.

One can quickly observe that STI mirrors that of HSI. And DJI usually leads the two by 1 trading day. The chart below shows the trading ranges of the various indexes from 9^th June to 16^th June.

Inflationary pressures coupled with rising crude oil prices sparked off massive selloff in the global markets. At the same time, there is a weary sense that Ben Bernanke and Co will have to hike interest rates to fight inflation. King of Shares however feels that interest rates should remain uncut because the US economy is still in a bad shape and any increase will send the wrong signals to investors and the market. Ben alone cannot bring the US of the current slump and he will have to act in tandem with the rest of the financial institutes. These big boys are expecting at least a constant interest rates and have priced the market accordingly hence any rates increment will spark off a massive round of sell-off and possibly be the trigger to bring the market into recession.

With the STI support of 3000 breached, King of Shares strongly feels that the next level of support should be at around 2800. We can see from the chart that STI has fallen out of its Bollinger Band, and in the short term, we see a quick rebound back it but the long term trend is still down. So look out for a quick exit and hold on to cash position until August and September time frame before revaluating the market again.

P.S: King of Shares has previously taken cash position when the STI reached 3400. He is seeking to buy in more sometime soon.

Disclaimer: It is not the intent of the author to advice the readers to purchase any form of investments after reading this article. Any opinions, conclusions or other information expressed here does not constitute any personal advice. Information are given on a general basis and are subjected to change without notice. The author will not be held liable for any losses resulting from any errors, inaccuracies or omitted data or from the use of the published information.

How to profit from inflation ?

Nobody would have missed the spectacular rise in inflation over the past few months in Singapore. See Figures below for Singapore rate.



The rapid inflation together with gloomy economy outlook has made the stock market very volatile and uncertain. Stagnation will continue to prove to be a challenge for monetary authorities worldwide. For the man on the street, King of Shares feel thats one can potentially "profit" from investments that can provide some sort of hedge against inflation. And he is sticking to the old cliché, “If you cannot beat them, join them.”

CPI (which measures inflation) is calculated by baskets of commodities that are used by people in their daily lives. And over the past few years, the prices of commodities have risen so much that few would not have notice them.

For example: Due to growth in demand and coupled with supply chain issues, crude oil has continuously breached record prices and most recently reached US$140 per barrel. Gold prices, with its demand driven by its use as a monetary reserve in central banks all over the world, have surged above US$1,000 per troy ounce. Just a year ago, crude oil was traded at around US$60 and gold at around US$650 per troy ounce. Against a backdrop of bad global climate, natural disasters, social conflicts and global population growth, the global prices of agriculture products like wheat, corn and live stocks has risen considerably. Due the expansion of emerging economies like China and India, metal prices have risen sharply as well.

Over the years, various investment vehicles have emerged to allow retail investors to “profit” from inflationary commodities prices. Example: commodities futures, funds that track the commodities indexes, stocks that are in the various commodities business. For diversification purposes, King of Shares prefers index trackers and he has identified a few here indexes here.

1. - The Reuter/Jefferies CRB Index (R/J CRB) – 39% Energy, 20% metal, 41% agriculture

2. - The Rogers International Commodities Index (RICI) – 44% Energy, 21% metal, 35% agriculture

3. - The S&P Goldman Sachs Commodity Index (S&P GSCI) – 74% Energy, 10% metal, 11% agriculture

In fact, King of Share himself has recently bought into a fund that tracks the RICI. This fund is managed by Barclays and sold through Standard Chartered.

The prices of commodities are cyclic in nature, this is because when prices are up, demand and supply will readjust itself thus the price will drop accordingly. At the same time, the prices of agricultural products and livestock usually trail that of energy and metals by 1 - 2 cycles. We have already witness the increase of oil and gold.

One of the potential downside of investing in commodities is the imposing of trade embargos by commodities producing countries. If trade embargos are impose to protect the country exposure to rising prices, then commodities cannot be traded and it might lead to downward spiral of commodities prices.

Another downside is that with modern technological and biological advances, farmers and miners are able to grow more and mine more at a unprecedented speed. With more supplies in the market, it will eventually drive down prices.

To make this post more complete, King of Share is going to share with you some of the available investment options, you can consider. Do update me your opinion.

Drool Now....




Disclaimer: It is not the intent of the author to advice the readers to purchase any form of investments after reading this article. Any opinions, conclusions or other information expressed here does not constitute any personal advice. Information are given on a general basis and are subjected to change without notice. The author will not be held liable for any losses resulting from any errors, inaccuracies or omitted data or from the use of the published information.

Preference Shares - Are they really preferred ?

Preferred shares usually carry no voting rights but may carry superior priority over common shares in the payment of dividends and upon liquidation. Preferred shares may carry a dividend that is paid out prior to any dividends to common share holders. They may have a convertibility feature into common share. Preference shareholders will be paid out in assets before common stockholders and after debt holders in bankruptcy. - This information is extracted from wiki. :)

A normal share entitles a shareholder to a percentage holding of a company and you get voting rights. You should and depending on the percentage of shares you have in the company, you can act as if you own the company. :)

As a preference share holder you do not get normal voting rights. Being a preference share holder, you are entitled to a dividend amount every year. This dividend is not guaranteed and the frequency of payouts will determine on the strength of the company. Preference share holders always get priority over normal share holders when dividends are given out.

Some information about OCBC preference share

Price : S$100 per share
Total number of shares : 10 million
Value : S$1 billion
Dividend yield : fixed at 5.1% p.a.
Purchase Options A: Contact OCBC.
Purchase Options B: Wait for it to be listed on the SGX.

Most important question: Would King of Shares buy OCBC preference share (assuming he has the money, which he admits, he does not have them) ?

Well, he would consider them. For obvious reasons, King of Shares like the dividends part, but he does not like the fact that preference shares are redeemable only by the issuer. And if the issuer does not redeem them, he can only hold on to them or sell them in a open market . Most of the preference stocks are of low volume and not actively traded. Darn....low volume means nobody buy/sell them. And to make matter worse, the price of the preference shares is determined by a blob of mumbo jumbo.

King of Shares hates to be confused so he would like to share with the readers other high dividends shares that are actively traded in the SGX.

Drool now......

Disclaimer: It is not the intent of the author to advice the readers to purchase any form of investments after reading this article. Any opinions, conclusions or other information expressed here does not constitute any personal advice. Information are given on a general basis and are subjected to change without notice. The author will not be held liable for any losses resulting from any errors, inaccuracies or omitted data or from the use of the published information.