Thursday, December 18, 2008
Friday, December 12, 2008
Moving in A Little By Little
Now seems like a good time to move into Energy funds and BRIC Funds by now. Let me elaborate a bit further on the basis of my decision.
1) The initial strategy is to move 10% of the portfolio into Equities each time the market dips to a new low. That's what we are doing now. Some of you may be asking that the stock market is soaring right now. Why are we going in? The reason is simple: The soar we have been seeing is a bear market rally. The fundamental hasn't improved dramatically since the market began to rally 3 weeks ago. Therefore, it will fall back to a low sooner or later. The market is in the process of correcting downwards as I write this email as the bailout for auto makers in US is shot down by the US senate.
2) Why energy and BRIC. First thing is that Oil prices has tumbled from $147 to $40 range. At one point of time, it tumbled below $40. One of the key trends that we will observe after the entire financial debacle is over will be the result of a global inflation. The world government pumped in billions, if not, trillions to rescue banks and now, potentially, other industries. If US is technically bankrupted, where do they get the trillions to rescue the banks? The answer lies with the issuing the US treasuries to the rich Asian countries. This wanton printing of money will result in a massive devaluation of the US dollar in the future once the economy recovers. With that, Industrial commodities, Gold and countries producing these commodities will be the direct beneficary of the booming commodities market. For the cash investors, we can directly invest into stocks of energy companies like Esso Mobile, Shell and BP where else, there are multiple restrictions on the type of funds available for CPF-OA investors. Therefore, BRIC with Brazil and Russia as key commodities producers for the world will benefit. Of course, let's not forget the rising economic powers of India and China. These countries stock market has been hit the worst as the commodities and manufacturing collapse. These countries will be the first benificiary once risk appetites returns.
3) All in all, there are silver linings along with all the horrible news we have been hearing. The US real estate market has stablized a little, the world governments (except Singapore. No GST Cuts, No Tax Cuts, No ERP Cuts) are throwing everything they got to combat the financial crisis. It seems like government interventions do bring some stablization to the stock market in general so the government will continue to find innovative solution to solve the present crisis. For clients who still wish to invest now, do not throw in every, save some for reserves. For those who can afford it, Hedge Funds are still returning the best returns of all the asset class for now, with an average return of 15-20%. If not, energy and BRIC are an attractive alternative with these market already lost more than 70% of their value and the downside will be limited unless something disastrous of the scale of Lehman Brothers occurs again. Maybe, this time will be the Auto makers? Maybe not.
1) The initial strategy is to move 10% of the portfolio into Equities each time the market dips to a new low. That's what we are doing now. Some of you may be asking that the stock market is soaring right now. Why are we going in? The reason is simple: The soar we have been seeing is a bear market rally. The fundamental hasn't improved dramatically since the market began to rally 3 weeks ago. Therefore, it will fall back to a low sooner or later. The market is in the process of correcting downwards as I write this email as the bailout for auto makers in US is shot down by the US senate.
2) Why energy and BRIC. First thing is that Oil prices has tumbled from $147 to $40 range. At one point of time, it tumbled below $40. One of the key trends that we will observe after the entire financial debacle is over will be the result of a global inflation. The world government pumped in billions, if not, trillions to rescue banks and now, potentially, other industries. If US is technically bankrupted, where do they get the trillions to rescue the banks? The answer lies with the issuing the US treasuries to the rich Asian countries. This wanton printing of money will result in a massive devaluation of the US dollar in the future once the economy recovers. With that, Industrial commodities, Gold and countries producing these commodities will be the direct beneficary of the booming commodities market. For the cash investors, we can directly invest into stocks of energy companies like Esso Mobile, Shell and BP where else, there are multiple restrictions on the type of funds available for CPF-OA investors. Therefore, BRIC with Brazil and Russia as key commodities producers for the world will benefit. Of course, let's not forget the rising economic powers of India and China. These countries stock market has been hit the worst as the commodities and manufacturing collapse. These countries will be the first benificiary once risk appetites returns.
3) All in all, there are silver linings along with all the horrible news we have been hearing. The US real estate market has stablized a little, the world governments (except Singapore. No GST Cuts, No Tax Cuts, No ERP Cuts) are throwing everything they got to combat the financial crisis. It seems like government interventions do bring some stablization to the stock market in general so the government will continue to find innovative solution to solve the present crisis. For clients who still wish to invest now, do not throw in every, save some for reserves. For those who can afford it, Hedge Funds are still returning the best returns of all the asset class for now, with an average return of 15-20%. If not, energy and BRIC are an attractive alternative with these market already lost more than 70% of their value and the downside will be limited unless something disastrous of the scale of Lehman Brothers occurs again. Maybe, this time will be the Auto makers? Maybe not.
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