Dec 31, 2018

The Bull Market - The Beginningof the End

In the last article, I covered the 3 indicators to watch out to signal an impeding global recession and a Bear market. In the month of Nov, one of the indicators, the US treasury yield curve, turned inverted for the first time in the last 10 years. Automated trading systems that are watching out for similar indicators triggered a sell trade on a wholesale basis leading to a 8% crash in the overvalued US stock market within a single week. Some of the analysts lay blame on Trump for shutting down the US government while trying to get the government pass a bill to build the Mexican wall, others blame the US Federal Reserve for rising the interest rate when the stock market is going through a soft patch. The tension between US and China in their arrest of the Hua Wei CFO and various Canadian citizens created doubt if the trade war can ever be resolved in the near term. On the other hand, there was an influx of good news such as a record year end shopping sales revenue, low employment and low inflation rate.

Nov 2, 2018

3 Reasons Why This is not the end of the Bull Market yet.

Just when people think that US is impervious to the problems that has plagued the Emerging Markets since the start of the year, the day of reckoning finally came as the US stock market joined the Europe and Emerging Market counterparts and plunge into correction zone.

The first question investors have been asking since the start of the fall - "Is this the start of the bear market?" Let us look at some market indicators to help us estimate how far we are in the economic cycle.

Aug 13, 2018

How a Tweet Crashed the Turkish Lira.. and Affected the Rest of Asia

Picture from NY Times

The Turkish Lira crashed 20% within a few days and the fall was accelerated by a speech by Turkish President Erdogan and a Tweet from US President Donald Trump...

"There are various campaigns being carried out. Don't heed them," Erdogan said Thursday "Don't forget, if they have their dollars, we have our people, our God. We are working hard. Look at what we were 16 years ago and look at us now," Erdogan told supporters.

A few moment later, Donald Trump tweeted.

Jul 6, 2018

Kickstarter Fulfillment - What can go Wrong?

As we move into the fulfillment portion of the Debtzilla Kickstarter campaign, people are asking us why aren't we making a formal announcement that shipping has started. Backers often expect to receive their game in a matter of a week or two once we announce is that the shipping process has started. However, we have learnt much from our previous kickstarter campaign how things can go wrong, from the simple process of moving goods from factory to the fulfillment center, which may delay the whole process up to a month or two. Therefore,  we are holding back any formal announcement until the game is safely loaded onto the planes and ships. Let me share with you what are some of the things that can go wrong during this process.

Jul 3, 2018

US China Trade War Escalate. What should Investors do?

The US steel tariffs initiated by President Trump on major trade partners was initially thought to his bluff leverage concessions from trade partners, especially China. Seems like Trump is serious about his threats and the tariffs went ahead. Major trading partners put together a list of tariffs ranging from orange juice and whiskey to inflict pain on the agricultural support base that has propelled Trump to power. With another round of US tariffs of $34 billion worth of China goods going to take place on 6th July, the world turns their sight onto the Chinese government and their counter response to the tariffs. The Chinese government has already indicated that they will not step down and with Trump seemingly going to fight to the end, a major global trade war seems to be looming on the horizon.

Jun 11, 2018

Hyflux Perpetual Securities Saga - Lessons to be Learnt

Hyflux, the once the poster boy (or girl) of Singaporean entrepreneurship has stunned the market by in May 2018 by applying to the court for bankruptcy protection in order to reorganize its debt. When the perpetual securities was announced in 2016 with an attractive interest rate of 6%pa, retail investors scrambled to subscribe to the bonds with its attractive yield. Lured by its status as a company that manages a strategic national resource and given endorsement by the government, investors piled into the perpetual bond thinking that it is a safe bet. Hyflux raised $500 million with an initial intention to raise $300 million. The default caught the retail investors by surprise, with some of them elderly folks who have invested their life savings into the bond, with little understanding the kind of risk they are taking on. With the securities suspended, this group of investors can no longer redeem their capital and can only pray that the government comes in and bail Hyflux out.

Government Backed doesn't mean it is Safe

One of the fallacy that Singaporeans have is that they place too much trust on companies that deemed to be protected by the government. For example, Noble group is invested by China's sovereign fund Chine investment corporation and still defaulted on their bond payment despite supported by CIC. Recently, the government rattled the widespread belief that the HDB is a "confirm make money" asset and they may let the lease on HDB run out, resulting in a wiping out of an essential retirement asset seen by many Singaporean.

HDB, once seen as a government guaranteed investment, is no longer seen as a safe bet.

As much as we want to place trust on securities that are backed by governments, political change and geopolitical risks can easily upend whatever assumptions investors have and turn a safe bet into a sour one. One good example is the political tsunami in Malaysia. Stocks of companies that are friendly to the previous administrations are knocked down while companies seen to be associated with the new government seen their share prices soar.

Diversify if you are Financial Illiterate about Bonds

One of the reason why the Hyflux saga became a human story is due to the fact that many mum and pop put their life savings into the bond. Retail bond, being a relatively new asset class in Singapore, is unfamiliar to many investors and is often mis-sold as a product comparable to fixed deposit in Singapore. This is something similar to the Lehman mini bond saga. Financial consultants should be the first line of defence to help investors understand the risk of such high risk bonds and should dissuade vulnerable investors from investing too much of their life savings into the product. Sad to say, many of those are lured by the promise of a big commission and probably has a hand in encouraging these investors to empty out their life savings as opposed to advising them to invest in a  well diversified bond fund. This observation is made base on a conversation with a friend whose elderly father invested his life savings into the Hyflux perpetual bond.

An investor who has invested in a Singapore bond fund with a small percentage of the fund size invested into Hyflux bonds will probably suffer as much damage as buying into an individual bond and investors can still have the chance to liquidate their funds even if one bond is suspended. 

A new Temasek linked bond - Astrea IV Bond 4.35%

As the damage of the Hyflux bond starts to ripple through the society, a new bond, Astrea IV Bond is
offered by Temasek, giving retail investors to gain exposure to private equity. Private equity is an investment into companies that are not listed on any stock exchange and is generally not easy to buy or sell. Imagine buying into Grab and Carosuell! However, we all know that many private equity companies fail, as testified by many angel investors and venture capitalist.

So from the lessons we have learnt from Hyflux and Noble, securities linked to the government are not as safe as people think and you should NEVER invest all of your money into a single bond issue unless it is explicitly guaranteed by the Singapore government, such as the Singapore Saving Bond.  

May 10, 2018

What is $70 Oil Price Trying to Tell Us

A year ago, I wrote about why commodities is in a sweet spot to invest in and at that point in time. Oil is hovering at around the $50 mark, and fast forward to 2018, oil has reached a new high at $70, having appreciated 40%. Even though oil has performed exceptionally well, its performance has been eclipsed by Bitcoin with a 500% yearly gain. For investors who are looking for a high risk investment and has a more practical use as compared to cryptocurrency, oil may be your answer.

Apr 10, 2018

Trade Wars Are Good... And Easy to Win! Not When you are Facing the Chinese...

The trade war initiated by President Trump escalated in the month of March as he instructed the US government to devise a plan and impose a tariff on $50 billion dollars worth of goods targeted at China. Unfair trade practices, stealing of US technology and intellectual properties are some of the reasons stated for the implementation of the tariff, in an attempt to narrow the $385 billion trade deficit with China.  In retaliation, the Chinese government implemented a 25% on 128 U.S. products, ranging from wine to soya beans. As of now, the proposed tariffs are just threats which will only be implemented come June 2018. Meanwhile, diplomats from both countries scramble to nail some form of agreement together, in order to let both superpower retreat from a devastating trade war with their face intact. Meanwhile, President Trump and President Xi took to the media to denounce the unfairness of the treatment to their respective countries.

Mar 13, 2018

US Trade Wars: Good or Bad?

The financial markets are thrown into turmoil once again, by the implementation of steel tariffs by the Trump administration as a barrier to the cheap China steel. However, instead of targeting just China, the steel tariffs are imposed on a global scale whether they are friends or enemies. The problem is that, US imports 70% of its steel from Canada and Mexico while China only constitutes 2% of its steel imports. After much protests from Canada and Mexico, the Trump administration excluded both countries and went on to impose the tariffs to include every other countries. What are the implications of this action to our investment portfolio? Let me address some of the frequently asked questions:

Feb 13, 2018

Market Correction! 3 Sectors You Can Buy Into

The recent market correction sent the news media into a frenzy, declaring that the stock market has "collapsed" or "crashed". The truth is that the stock market simply has gone way above its valuation and a good 10% correction will do some good to trip the fats down. Prior to this market cycle, it is normal to have a 10% correction on an annual basis, and it is a combination of easy money and low inflation that lead to years such as 2017 which we did not see a single correction despite a tightening monetary environment. However, is it time to throw your entire wealth into this window of opportunity and ride the market right to the stop? 

Once again, I will like to caution my readers that we are at the tail end of the economic cycle and the big crash might come in a year or two. So while it is a good thing to take advantage of this opportunity, investors should be selective in selecting sectors which are not overly expensive and be prepared to take profit when the opportunity is ripe. Here are the 3 sectors that are interesting to watch in the coming year.

Feb 1, 2018

Xeo's Annual Investment Review & Outlook 2018

Dear Friends,

2017 was a good year for the global stock market with the Asian stock market doing the best thanks to a combination of low inflation, low interest rates and a recovering Chinese economy after the hiccups suffered in 2016. The geo-political volatility caused by Brexit and Trump winning the US Presidential election was generally absent in 2017. The greatest geo-political risk of 2017 was the confrontation between North Korea and America, but even that fails to rattle the stock market as few people actually believe that a real military confrontation will ignite from the war of words. The most exciting development of 2017 was probably the rise of cryptocurrency as a potentially new asset class, with the prices of top traded cryptocurrencies such as Bitcoin and Ethereum soaring by a few hundred percent. The worst performing asset was surprising, the US dollar which lost 9% in Singapore dollar. Back in 2016, many analysts predicted that the USD will rise, thanks to the trade protectionism and tax friendly policies of the Trump administration and the rising interest rates. Instead, USD fell, in one of the worst routs seen in recent years. The question is, as the Trump administration policies started to be implemented and interest rates continue to rise, will the USD climb back in value?
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