Wednesday, August 31, 2016

Price dictates sentiment and vice versa

Price dictates sentiment and vice versa, reflexivity at play.

Fundamentals change all the time and the only ones who are in the know are insiders who can calculate the various metrics and even They know that their calculations could change any time.

besides, their opinions are reflected in their buying/selling in the markets.

Not saying fundamentals aren't important, just that they matter more significantly only in the longest timeframe:forever.
 But above all, technicians respect the power of sentiment more than their fundamentalist counterparts. And sentiment, after all, is how valuations actually come to be – the P in the PE Ratio or the PEG Ratio or the P/B calculation. In the real equation, the only one that counts, the P is what pays, not the E, not the EG and certainly not the B. Buffett would tell you the B (book value) is what pays over time (the market going from a voting machine to a weighing machine). But Buffett can afford to ride it out, having permanent capital under management and an ocean of insurance premiums sloshing in over the transom every hour of the day. Most market players do not.

Sunday, August 21, 2016

Bonds carry the same absolute risk as equities, just different volatility

both can go to zero.

equities, when no one wants to buy yours.

bonds, when the company cannot return you your capital anymore.

just the speed and paths are different.

now, what about treasuries? ;)

Free wifi and mobile phone charging points at bus stop in singapore

much love.


Working closely with various Government agencies, they have now implemented their ideas in a bus-stop along Jurong East Central behind JCube.
This experiential bus stop incorporates several features:
  • Vertical greenery and solar panels
  • Free wifi coverage (available from Sep) and mobile phone charging points
  • Interactive smart boards to access information like bus timings, weather and the street directory
  • Books to browse and read, as well as e-books to download
  • Art panels depicting the evolving landscape of Jurong
  • Bicycle parking

Singapore stocks prices are cheap, but

cheap can get cheaper, so we need convincing of us.

The Thai economy was certainly a bit more Boleh in Q2. 2Q16 GDP expanded 3.5% yoy, the strongest since 1Q13 led by increased public sector spending as well as steady contribution frm the hospitality sector to offset the drag from exports and sluggish private consumption. Fingers crossed the Land of Smiles can continue to recover.
Despite sluggish global growth, the region’s macro picture is looking “less bad” according to 2 other countries who reported Q2 GDP growth during the week. Taiwan’s 2Q16 GDP rose 0.7% yoy vs. 1Q16’s -0.3% yoy. It was the first growth since the Q2 2015, and the fastest expansion since Q1 2015 on “less bad” exports.
Over in the Philippines, the economy is on fire. 2Q16 GDP expanded 7.0% yoy, the fastest expansion since the Q3 2013, as a stronger domestic demand (consumption and investment) offset a slowdown in exports.
What about the poor July trade performances of Indonesia, Singapore & China or the stagnant Japanese economy? Total trade fell 15% yoy in Indonesia while Spore’s total trade shrank 11% yoy in July, the worst in 6 mhs for both countries. While this is a reflection of the still sluggish global demand, the shorter working month due to the Hari Raya festivities could be the main reason for the sharp plunge in July trade while China’s data was partly affected by supply disruptions (the severe flooding in July).
What about Japan? On an annualized basis, the economy grew just 0.2% in Q2 as companies cut back on capital spending and exports fell. Spending by businesses was weak & household spending was also lacklustre. But we must also remember that earthquakes in April caused extensive damage and disruptions to production in western Japan, while exporters kena by stronger yen with more expensive Made-In-Japan goods. More pressure on PM Abe & the BoJ to spend and spend to lift domestic demand.
The disappointing Q2 GDP growth in Japan, so-so July US and Asian macro data fuel expectations that there will be more global fiscal stimulus from governments & monetary easing by central banks. Expectations of cheaper liquidity “add oil” to global equities (except in Spore where sadly there’s still minimal interest in our local stocks). In Asia, the interest this week is very much focus on the upcoming trading link between HK & Shenzhen that will give outsiders the chance to trade shares, not of stodgy SOEs (listed in Shanghai), but the smaller start-ups & leading Chinese tech companies.
The only thing we can say for SGX-listed stocks is that many are cheap cheap, and despite the rally, valuations for Spore REITs are not over-stretched. According to a recent report from CIMB Research. S-REITs are trading at mean of 6.3% dividend yield and 1x P/BV. Furthermore, S-REITs are still trading at a 450bp spread vs. the 10-year bond yield, 75bp higher than the average 370bp. Compared to the other key REIT markets, S-REITs is also one of the cheapest. And, Industrials replace the office as their most preferred sub-sector. So Spore REITs still Boleh.
Not so boleh was the US$ during the week. Expectations that the US central bank may hold off raising interest rate in September pushed the US dollar lower this week although it managed to recover some ground on Friday. The dollar index (DXY) ended the week 1.3% weaker (-0.5% last week) and the US 10Y Treasury note ended the week at 1.58% (1.51% the previous Friday). Gold, which usually benefits from a soft dollar and falling bond yields, ended Friday at US$1,341 an ounce, highest in 3 weeks.
Weaker US$ and (misplaced?) hopes that major oil producers can agree to an output freeze next month continued to underpin oil prices for the third consecutive week. Brent crude crossed US$50 for the first time in 5 weeks, to end Friday at US$50.88/bbl.
And speaking of oil, the Norwegian govt reported this week that it had to tap into its massive oil fund (US$890bn, the largest sovereign wealth fund) for spending for the first time in two decades. Given the current trends of low oil prices and low (& lower?) expected rates of returns, there is a big debate in Norway about how much risks this mega fund should take to grow or protect the fund if the govt were to continue dipping into reserves to fund spending. Here in Spore the same question is being asked at GIC/Temasek. It’s a indeed a very stressful time for SWFs, pension funds & long-term investors.
This question & more will certainly be asked at the key event for Week 34 of 2016, a gathering of central bankers, finance ministers, etc. at Jackson Hole, Wyoming, USA for the Kansas City Fed’s annual symposium (Thur/Fri). The theme this yr is ‘Designing Resilient Monetary Policy Frameworks for the Future’, or in simple Singlish, “What can central banks do ah if global growth and inflation stay low low for long long?” Fed Chair Yellen will cakap on Friday & we’ll wait to see if she will “show hands” (unlikely) on what the Fed may or may not do in its next policy meeting. 
There is no major central bank monetary policy decision this week but there is plenty of Developed Mkt data to test investor confidence. Among the key macro releases: Prelim Aug PMI readings from US, Eurozone & Japan, US Durable Gds Orders, revised Q2 GDP readings from UK & US.
Here in Asia, Taiwan will report July export orders (Mon) and industrial output (Tue). Spore will report July factory output data on Friday & PM Lee is off to Semarang, Indonesia for a 3-day meeting and makan with Pak Jokowi on Wednesday.

comments on Surrendering My AIA Prime Life Policy

comments on
the NTUC policy has no cash value. 
"For AIA, I’m paying $73.17 monthly for $50k coverage with some riders on it. In comparison, my NTUC Income policy has $200k TPD/CI coverage at $68.90" 
inaccurate calculation. at $73.17 monthly for 20 years, if you assumed the insurance costs was free, the yoy annual rate is about -0.67% 
"Yah ! for the past 20 teays,, you are just getting half of the return if you just invest in STI ETF ,, IRR just around 3.5 % ,,, with your own control ,, money shall double than that in enxt 20 years !!" chua's comment is particularly insightful.
kevin's policy IS from 1997. 
"We all know that the benefit illustration 20+yrs ago is flawed and XIRR based on my surrender value is about 2.6%. However, bearing in mind that I was 13 then and my parents are not financially savvy – they just hope to give me some form of savings when I grow up, I can live with it. If XIRR can increase to 3% when I reach the 30th policy year, coupled with the insurance coverage, – I will be contented." 
always a good habit. I do so for mine too. 
"At the halfway mark in 2008 when I started working, I began collecting these annual letters as much as I could, and I can see that the projected surrender value was revised downwards." 
freaking ****!
the plague of one size fits all.
freaking employee fund manager mentality! just protect his own rice bowl! 
"72% in fixed income20% in equities3% in real estate3% in other assets2% in loans" 
looks about right but that 2012 to 2016 is just wrong.
see above comment. 
"Year 1997 : $21,385Year 2008 : $17,544Year 2010 : $15,718Year 2012 : $16,448Year 2016 : $16,449" 
good timing now though if it is 72% fixed income! 
"I was told have to wait to next year, because the value at that point in time can fluctuate according to the underlying fund returns. Oh well."

comments on assi - Whole life insurance, universal life insurance and investing

comments on
that kenneth chua comment in 2014 is a very perceptive and insider comment.
I made extensive and intensive studies on my own whole life policies so I know that was a very good important comment. and most people won't understand it.

universal life insurance as it is marketed in Singapore, in this environment, is poison.
and ak, his question is not what you think it is.
"I don't think Universal Life Insurance is well known in Singapore and to me, it is just a more flexible form of Whole Life Insurance. "

kenneth chua's comments in 2014:

Kenneth Chua said...
Hi AK,

I chanced upon your blog this year and is impressed by your insights into the various financial topics. (Errh on oats as lunch occasionally yes, but not everyday..its quite filling :)

What works in the past for traditional whole life and endowment policies are not achievable now in the low interest rate environment. Your policy and mine are of different series of the same product (Prime Life). Thus, surrender value differs by about 15K. Life coverage is high with corresponding low premiums in the past. It was a struggle especially in early years paying the premiums for multiple policies. Hence, at age 65, it will be nice to surrender one or two policies at highest surrender value. However, it will be good too to keep these policies for your descendants as a gift.(Properties are a more preferable choice obviously..hehe..).

Current whole life policies offered don't even meet the inflation rate. The worst advice received is to purchase ILPs in order to increase the returns with wrong objective of insurance coverage vs investment returns. Thus, I don't encourage anyone to purchase whole life policies nowsaday.

20 Aug '2016

AK71 said...
From my FB account:


Hi AK,

A friend recently suggested getting Universal Life Insurance policy, taking a loan to pay part of the premium & service the interest only of the loan. The benefits highlighted is akin to getting high value Term Insurance coverage but with added benefit of cash value growth (i.e. form of wealth accumulation). Would you have a conversation with yourself on the value/risk of Universal Life policy and the circumstance that it might be suited for?

Thank you in advance 🙂

I don't think Universal Life Insurance is well known in Singapore and to me, it is just a more flexible form of Whole Life Insurance.

"You have the liberty to reduce or increase your death benefit and also to pay your premiums at any time and in any amount (subject to certain limits) after your first premium payment has been made." INVESTOPEDIA

It is still more costly than term life insurance as it includes elements of savings and investment. So, if you believe in not mixing up insurance and investment, this is not going to fly. 😉

Fixed or floating mortgage rates


I choose a floating rate home loan pegged to the 1 month SIBOR (+ 1%) because I believe that I have the resources to pay down my home loan rapidly if interest rates should spike.
 For example, when interest rate on my home loan spiked to 5.1% many years ago, I chose to pay down the loan for my previous home.
 5.1%? Yes, I know this might look unbelievable to younger readers but ask the older folks and they should remember and, for some, it might have even been higher.

comment on Scolded by wife for thinking about financial freedom

thinking further, the assi reader is not scolded for thinking about financial freedom but for not having the aspirations and looking to escape.

my personal opinion is both sides (only investing/career matters) are equally extreme.
though to be equally focused on both is an art in itself.
nothing wrong to have aspirations on both fronts.
but the more important thing I would ask myself is: are my reasons behind investing more aspirational or more of an escape?
and very often, for a lot of people, they find it to be the latter.
if we find that to be the case that we are looking to escape, then we need to question our mentality.
i find it important to find the courage not to back away from challenges.

Saturday, August 20, 2016

tax relief is free money comment at assi

at 20%, tax relief is free money. free money NOW.

as long as cash flow is good.

upcoming comment at

Thus, slowing down or stopping OA to SA transfer might be a good idea if tax benefit from MS Top Up to SA is something that is important to you.

Japanese government to force companies to pay higher wages

this higher minimum wage move is a dangerous policy. yet they are running out of alternatives.

ever easing monetary policy to give companies money to spend on investment and infrastructure has backfired onto reversing yen devaluation, almost back to 2011 values.
meanwhile, companies have stayed put.

and they have now to juggle both the effects of high debt, strong yen and cushioning both the JGBs and Nikkei stock markets.

their targeting has been off course for a while.

giving money to companies helmed by older people (who had ever only thrift on their minds with their elder ages and experiences in post war Japan) only inspires more caution.

giving money(rising yen!!!) to people/companies who are good at asset allocation means people like Masayoshi Son buys foreign assets, like Sprint and ARM, not reflating the economy.

They need to give money to the rising younger Japanese innovators with conditions.
They might hit something.

Higher minimum wage might still work. But foreign orders and companies in primary industries might move on. (already moved to Taiwan at one point with the taiwanese firms absorbing smartphone components manufacturing orders from Japanese firms culminating in Foxconn buying Sharp. until Xiaomi came along and brought orders to Sharp up until the recent yen strength from 2015)


But rather than employing it to try to contain salary and price pressures -- as U.S. leaders did in the 1970s -- the IMF wants Japan to use moral suasion, tax breaks and, as a last resort, penalties to prod companies into granting bigger pay gains and thus promote higher inflation.
“We need policies to support wage increases in Japan,” Luc Everaert, IMF mission chief for the country, told reporters on Aug. 2 after completion of the agency’s annual consultation with the world’s third-largest economy.
The IMF’s backing of such an unorthodox approach is an acknowledgment of how entrenched Japan’s “deflationary mindset” has become and how resistant it’s been to a more traditional mix of policies.
It’s also the lending agency’s answer to exhortations by some economists that Japan launch so-called helicopter money -- direct central bank financing of the government’s budget deficit -- a strategy Everaert said has “very large risks.”

Foxconn bought Sharp - Taiwanese takes smartphone orders from Japan and now their company(ies?)

nice move. good synergy and currency play.

Terry Gou is one sharp dude.


Foxconn and Sharp Corp (6753.T) on Saturday formally signed a long-awaited deal that would see the Taiwan firm take control of the Japanese display maker, as executives sought to dispel lingering doubts over whether Sharp can turn around its ebbing fortunes.
At a packed news conference following the signing of the $3.5 billion deal, Foxconn CEO Terry Gou ducked questions about how - and when - Sharp would become profitable again, but expressed confidence in the Japanese company's ability to bounce back with its highly regarded technology.
Gou pointed to Sharp's proprietary know-how to mass-produce the advanced IGZO (indium gallium zinc oxide) display technology as a standout, calling it superior to the popular OLED (organic light-emitting diode) technology. IGZO technology is used in products such as Apple Inc's (AAPL.O) iPad.

"Everybody is saying OLED," Gou said at the event held at Foxconn and Sharp's jointly owned liquid crystal display factory in Sakai, western Japan. "If I was an engineer, I would choose IGZO," he said, noting that they were more energy-efficient than OLEDs.

Friday, August 19, 2016

Mongolia hikes interest to 15%

The central bank of Mongolia raised its key interest rate to 15 percent to protect the currency, reversing a cut in borrowing costs to 10.5 percent in May.
The Mongolian tugrik initially rose after the announcement. By 4:26 p.m. in Ulaanbaatar it was falling again, and traded at 2,268 per dollar. The currency is headed for its 24th straight daily decline.

Rotation into cyclical shifts market into high gear, but first?

Rotation into cyclical?

not without a fat dip first, I reckon.



This may be about to change.  Below is the price ratio of the PowerShares S&P 500 High Beta Portfolio (SPHB) relative to the Powershares S&P 500 Low Volatility Portfolio (SPLV).  A rising ratio means high beta (riskier) stocks are on average outperforming low volatility (less risky) stocks. The top shows the relative strength of that ratio, and beneath the middle pane is the performance of the two Exchange Traded Funds since a significant “bull” market began in October 2011.  High beta, which should have led the last few years, ended up underperforming low volatility by a whopping 3,380 basis points.

Masayoshi at it again, first Sprint, now T-Mobile


SoftBank Group Corp.’s Masayoshi Son has a 300-year plan, so if combining Sprint Corp. and T-Mobile US Inc. takes a few years longer than he hoped, that’s OK.
Son, who became one of the world’s wealthiest men by turning Tokyo-based SoftBank into a telecommunications and technology powerhouse, still would like to merge the U.S. wireless providers, according to people familiar with his thinking. SoftBank owns more than 80 percent of Sprint after acquiring the majority stake in 2013, part of Son’s famed plan to build a business empire that can endure through the centuries.
Son considered buying T-Mobile in 2014, before abandoning the effort when officials at the U.S. Federal Communications Commission and Justice Department signaled they were against a theoretical merger. There’s a key figure who will determine if Son makes another run at T-Mobile: the yet-to-be named new head of the FCC. If Son feels that person is more amenable to a combination to take on market leaders AT&T Inc. and Verizon Communications Inc., he will probably try again, said the people, who asked to not be identified because the matter is private.

Chinese retail investors buying up US stocks, really?


One year ago, U.S. markets tanked because China surprised everyone with amini-devaluation of their currency and a clear indication it will further liberalize foreign exchange markets.
This lead to massive private sector capital outflows and the People’s Bank of China (PBOC) had to sell foreign exchange reserves to keep the exchange rate stable.
Much later we learned that China’s central bank had not only sold U.S. government bonds but also $126 billion in U.S. stocks over the period from July 2015 to the end of March 2016, contributing to short-term corrections in the fall of 2015 and the spring of 2016.
So why is the S&P 500 trading at an all-time high around 2200, despite the Chinese official selling, Brexit, and a possible meltdown in the Chinese economy?For two main reasons. First, while the Chinese central bank is selling U.S. stocks, Chinese people are buying them.
If a Chinese citizen wants to buy U.S. stocks, they have to first exchange yuan for U.S. dollars in the marketplace, either illegally or legally. If enough people sell yuan and buy dollars, this puts downward pressure on the yuan and the price falls.
Enter the PBOC: To keep the price stable, it steps in on the other side of the market and sells dollars into the market, buying yuan and therefore stabilizing the price. Of course, the two parties seldom interact directly, but rather through Chinese and international banks.
Real estate is by and far the biggest investment vehicle for Chinese, but they also like U.S. stocks, especially after their stock market crashed in 2015.
According to a Financial Times survey, Mr. Guo, who works as a manager in manufacturing in Nanjing, has invested two-thirds of his assets in U.S. equities. The percentage of respondents holding foreign securities increased from 27.3 percent to 35.1 percent over the course of one year.
“U.S. stocks are easier to understand when you spend enough time studying them. In China, the longer you are in the market the less certain you feel,” Mr. Zeng, a Chongqing-based factory owner who owns $600,000 worth of U.S. stocks told the FT.
The demand for overseas assets including stocks is so great, the first Chinese wealth manager has set up a trust firm on the British channel island of Jersey.
Other, less wealthy individuals, who can stay under the $50,000 cap on foreign exchange transfers use apps offered by companies like Jimubox to invest in stocks abroad without even visiting the bank.
“Chinese investors are actively seeking alternatives from the volatility of the local equity markets and have significant concerns about the valuation of the renminbi,” Jimubox Chief Executive Dong Jun told the Wall Street Journal. The IIF estimates citizens and companies will invest up to $237 billion in different kind of equity investments abroad for the whole of 2016.
Speaking of Chinese companies, they spent $134 billion on outbound mergers and acquisitions deals, some of them on listed companies like China’s Anbang Insurance Group buying Strategic Hotels and Resorts Inc. for $6.5 billion. 
Even the  134-year-old Chicago Stock Exchange was recently sold to a group of Chinese investors.
Central Banks
But there is yet another buyer of U.S. equities, helping them to reach record highs while many other institutional investors and domestic individual investors are selling: the central banks of the world.
For example, the Swiss National Bank (SNB) held $119.7 billion in listed U.S. equities at the end of the first quarter of 2016. It is allocating 20 percent of its foreign exchange reserves to stocks and it’s a fan of tech companies like Apple ($1.2 billion) and Google ($1.2 billion).
According to an analysis by investment bank Barclay’s, central banks may have been a big factor behind a $60 billion net investment in long future contracts in U.S. equities.
“You are essentially in the world where public sector signals dominate,” says Viktor Shvets, global strategist at Macquarie Securities. He thinks the aggressive involvement of central banks and the government in investment decisions could end investment theory as we know it.
“The public sector doesn’t have cycles like the private sectors. Investment theory evolved around cycles. If you are dominated by the public sector, then investment is no longer possible,” he says. 

Thursday, August 18, 2016

Insurtech is one of the leading innovation frontiers of fintech


Enter one of FinLeap’s existing portfolio companies, Clark, which operates in the insurance space with an app to help you stay on top of your various insurance products. Today the Berlin/Frankfurt startup is announcing it’s closed €13.2 million in Series A funding, made up of both equity and media-for-equity financing.FinLeap is investing “several million Euros” once again, while additional investors include yabeo Capital, Kulczyk Investments, HitFox, TA Ventures, Tenderloin Ventures, along with various unnamed business angels.Media investment, which I understand will mostly be in the form of TV advertising but will also include some online and print, comes from SevenVentures (the venture arm of the ProSiebenSat.1 Group), Axel Springer, and media investor GMPVC. The split between equity financing and media-for-equity financing is roughly 75 per cent to 25 per cent.(Noteworthy is that FinLeap, which itself raised €21 million in new funding this June, is backed by institutional investors from the insurance industry, including Hannover Re, the third largest worldwide reinsurer.)Calling itself an “insurance­ robo-­advisor,” Clark’s iOS and Android apps let you manage and purchase various insurance products. Specifically, it uses algorithms to analyze your current insurance situation and automatically propose opportunities to improve your coverage or the deal you are currently on. The startup’s insurance experts are also on-hand via the app to help with more bespoke insurance questions.
Since the start of the year, Clark claims to have increased the volume of its managed insurance premiums five-fold, to 30 million Euros. The startup employs close to 20 people, most of whom are software developers.Competitors include KnipGetsafe and Financefox, but Clark reckons it differs in the way it uses robo-advisors (ie a more automated approach) to assess each user’s insurance situation and to send chat-messages to alert you to insurance opportunities.“In addition, all clients have access to an in-app insurance cockpit,” the German startup says. “This works similar to fitness apps like runtastic or Nike running, i.e. the client can easily understand his ‘insurance fitness.'”

Tencent overtakes Alibaba, both probably still undervalued


Brent Lewin | Bloomberg | Getty Images
Tencent, the owner of popular social messaging app WeChat, on Thursday overtook e-commerce giant Alibaba to become China's most valuable technology company after posting a strong set of earnings.
Data compiled by spreadbettor IG showed Tencent's market capitalization was at 1910.3 billion Hong Kong dollars ($246.35 billion) as of 10:40 a.m. HK/SIN, compared with Alibaba's market capitalization of $242.04 billion. 
The Chinese gaming and social network company announced its second quarter and first half 2016 earnings on Wednesday, reporting strong growth in mobile gaming and advertising.
Total revenue for the second quarter came in at 35.69 billion yuan ($5.38 billion), registering a 52 percent on-year increase. Operating profit was at 14.33 billion yuan, which was 43 percent higher from the same period a year earlier.
The bulk of revenue for the quarter came from online gaming, which grew by 32 percent on-year to 17.124 billion yuan, driven particularly by smartphone games. 

Monthly active user accounts on Tencent's social WeChat/Weixin platform were 806 million, registering a 34 percent on-year increase. 
In June, Tencent deepened its presence in the mobile gaming space by leading a consortium to acquire a majority equity stake in Finnish gamemaker Supercell, which produced popular titles such as Clash of Clans and Clash Royale. 
Hong Kong-listed shares of Tencent climbed 5.08 percent in morning trade on Thursday.
Representatives from Tencent and Alibaba did not immediately respond to CNBC's request for comments.

Shenzhen-Hong Kong announced, to be launched 4 or more months later

Chinese equities already reacted ahead of time.


Stock investors in China and around the world will have easier access to hundreds of companies via the Shenzhen-Hong Kong link.
Institutional investors will be able to trade all dual-listed shares and most of the Shenzhen Component Index’s 500 members, as well as small- and mid-cap shares with a market value of more than 6 billion yuan ($904 million). Retail investors won’t have access to the ChiNext board of small firms at the beginning, according to the Securities and Futures Commission. The large number of small-caps in Shenzhen provides an additional opportunity for investors over the Shanghai-Hong Kong connect.
Global investors will gain access to some 870 Shenzhen-listed companies with a combined market value of about 7 trillion yuan via the northbound link, says Ting Gao, the Shanghai-based head of China strategy at UBS Group AG. Those firms include several high-growth technology and pharmaceutical companies in Shenzhen, which typically trade at higher valuations than Shanghai-listed firms. The ChiNext index trades at about 32 times its projected 12-month earnings, compared with a multiple of 13.4 for the Shanghai Composite and 11.9 for the Hang Seng Index.
Here’s what they get to trade:
  • Members of Hang Seng Composite Large Cap Index, such as China Mobile Ltd., the world’s largest mobile-services company by subscribers, and energy major Cnooc Ltd., which aren’t listed on the mainland
  • Members of the Hang Seng Composite Mid Cap Index, including logistics firm Orient Overseas International Ltd. and developer K Wah International Holdings Ltd.
  • Dual-listed firms in Hong Kong, many of which trade at a substantially cheaper price. The Hong Kong-listed shares of ZTE, for instance, trade at 10.6 times their 12-month forward earnings, a 29 percent discount to Shenzhen valuations
  • Hang Seng Composite Small Cap Index members with at least HK$5 billion in market capitalization, such as women’s apparel maker Koradior Holdings Ltd., or Bank of Chongqing Co.

USO not the way to trade oil unless short term

stolen somewhere.

Spot Crude Oil: +26.2%

Crude ETF: -0.1%

see more: roll yield and more roll yield.

"The US Oil Fund (Ticker: USO) holds long positions in West Texas Intermediate crude oil futures contracts, and rolls these contracts forward each month. Like most futures traders, USO buys futures with leverage, putting up a small portion of the money to buy the contracts. The rest of the money is invested in Treasuries, which generates interest income for the fund.
Three factors play a role in determining the performance of USO: 1) changes in the spot price of crude oil, 2) interest income on un-invested cash, and 3) the 'roll yield'. The first two factors are easily understood, but the third factor, 'roll yield' should be examined further in order to determine the extent, if any, to which traders of USO will be surprised by its performance in relation to spot crude oil.
First some background: Oil futures are available for each month of the year, so you can buy a futures contract right now which gives you the right to buy oil in February 2009, March 2009, April 2009, and so on. Currently, the price of oil in February 2009 is less than the price of oil in April 2009, a condition which is referred to as 'contango'. (If the opposite were true, the market for crude oil would be in backwardation.) Most commodity funds, including the US Oil Fund (USO) buy what is called the 'near month' contract and, because they do not want to take physical delivery of the commodity, they sell the current month's contract before it expires and buy into next month's contract. This process is called 'rolling forward', and it can result in the ETF paying up if the forward month contract is higher than the current month (contango), or cashing out if the opposition condition exists (backwardation).
good read:

Is the system of a simple majority vote in Politics the only way?


taken out of context and quoted here, but please read this by howard marks before you form an opinion:
We just cannot allow a simple majority of those who vote to directly decide important issues like Brexit.  First, fewer people vote than we would hope, so decisions can turn on the wishes of a relatively small group.  And second, many voters may lack the knowledge and analytical skills necessary for good decision-making.  Consider the questions asked most often on Google in the UK in the hours after the Brexit polls closed: “What does it mean to leave the EU?” and “What is the EU?”  Presumably many of the people asking these questions were the same ones who had just decided Britain’s future.  It might have been better if they had asked those questions before the vote. 

Inflection point in Gold?

there's been some transactions in gold holdings.




最近投资大佬减持黄金ETF或黄金股的消息不断出现,杜肯资本(Duquesne Capital)创始人亿万富翁德鲁肯米勒(Stanley Druckenmiller)已经清空他所有在黄金ETF SPDR Gold的仓位;索罗斯基金公司也大幅减持巴里克黄金公司股份,高位套现。全球最大黄金ETF--SPDR GOLD TRUST周三持仓较上日下降4.45吨,当前持仓量为957.78吨。
凯投宏观分析师Simona Gambarini表示你所看见的波动是基于对美联储加息的投机性,这已成为金价的主要驱动力。


Druckenmiller still owns just over 1.82 million shares of Barrick Gold (ABX), a position he opened in the first quarter of 2016. Shares of Barrick Gold have soared 198% in the first half of 2016.
Meanwhile, George Soros, the legendary hedge fund manager who runs his name-sake family-office Soros Fund Management, also closed a position on the SPDR Gold ETF that he had bought in the first quarter in the form of call options on 1,050,000 shares, the filing shows.That said, during the second quarter, Soros did buy 240,000 shares of the SPDR Gold ETF, a position valued at $30,365,000 at the end of the second quarter, the filing shows.Soros also massively pared back his stake in Barrick Gold, selling 18,348,235 shares in the second quarter. He last held 1,071,074 million shares of Barrick Gold, a position worth just over $22.8 million at the end of the quarter. Soros had been invested in Barrick Gold since the first quarter of 2016. 

As a reminder, hedge funds of a certain size are required to disclose their long stock holdings in filings known as 13-Fs. Of course, the filings only provide a partial picture since they do not show short positions or wagers on commodities, currencies, or fixed income. What’s more is these filings come out 45 days after the end of each quarter, so it’s possible they could have traded in and out of the position. Still, it does provide a glimpse into where some of the top money managers have been placing money in the stock market.

Tuesday, August 16, 2016

Farmland investing in the US

buffett on farmland in 2011 when commodities were at highs.

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.”

Planning for water shortages before a drought
Pests and weather pose risks to crop yields, but a season or even a few seasons of drought should not have a long-term impact on farmland investing. Many farmers have successfully managed droughts, pests and floods. Drought is a well-understood, age-old risk that can be planned for and mitigated, especially in short time horizons. The current drought is an excellent case in point. TIAA owns multiple properties in California across more than 37,000 planted acres, and as part of the property acquisition process, the stability of the water supply is always a primary focus of due diligence. This review includes research on the following water-related subjects:
Where possible, TIAA seeks to acquire properties with multiple sources of water, such as reliable groundwater wells that are supplemented by the right to receive surface water from water districts. Properties that are not serviced by water districts or other surface water rights are located in areas with historically reliable ground water supplies. Furthermore, advanced planning for those properties that typically receive most of their water from water districts, which are likely to have no supplies available in 2014, is required to ensure access to and availability of banked water. When droughts linger, however, they may cause problems for all farms—no portfolio is immune from a long-term drought. The current drought has demonstrated the value of planning for short-term water shortages.
In addition to acquiring land with fundamentally strong water supplies, actively managing farms may offset, to the extent possible, the impact of drought conditions. Strategies to accomplish this may include the installation of water-conserving technologies such as drip and micro-sprinkler irrigation systems; acquiring and banking water when possible; and winter transfers of underground water to above-ground storage to make the water more readily available to the farm during dry periods.

A long-term view of farmland investingLooking back at the 2012 drought across the U.S. Midwest, it is important to note that the drought impacts had no material negative impact on farmland values, and similarly we expect minimal long-term impacts for our California investments. This does not mean the danger of droughts, pests and floods are to be ignored; indeed, planning for these hazards is critical to maximizing returns and managing farmland investment risk. The longer a drought persists, the greater the potential for material impacts to any farmland portfolio. TIAA’s long involvement in farmland and deep connections within the agriculture industry provide us with the experience and expertise to properly analyze these risks, which fall outside the traditional realm of financial markets. We believe that farmland is among several private investments in real assets that offer the potential for competitive risk-adjusted returns, a hedge against inflation and improved portfolio diversification.

Farm real estate remains the most direct method of investing in the agricultural sector. In recent years, the agricultural sector has provided consistently positive returns as a result of high commodity prices and rising farm income levels. The success of the agricultural sector has led to increased attention from investors outside of the traditional agricultural finance sector.

The plan was relatively simple, in the absence of attractive fixed income yields, large asset managers (like TIAAmentioned above with $850BN of AUM) decided to purchase hard assets like farmland instead.  Farmland could then be planted with the highest value crop, which just happens to be almonds in California, to drive attractive ROICs on invested capital.  A few simple charts illustrate perfectly how the story played out. 
          Per the chart below, planted almond acreage in California nearly doubled from 2003 - 2016...  

We don't know about you but we're not sure about underwriting California farmland to a 4% return particularly in light of that "minor" little drought issue they're facing.  We would be looking for ROICs closer to 8% - 10%, at a bare minimum, which, at current almond prices, implies that acreage needs to come down around 45%-55% from the $35,000 per acre level.  

But the story doesn't end with almond acreage which only represents about 1mm of the total 8mm acres of irrigated farmland in California (see data from the United States Department of Agriculture).  So if we assume that California's 8mm acres are worth $25,000 per acre on average that implies roughly $200BN worth of farmland in total.  Now, even if that number is only inflated by 35% (and not the more draconian 45%-55% we suggested above) it implies that farmland owners, many which are New York institutional buyers, in California alone are sitting on $70BN worth of losses.

Asian economies sync with China

NEEQ the hidden Chinese exchange

a lot of short term explosive growth companies in NEEQ actually.


A boom on China’s over-the-counter stock market has seen its ranks of listed companies swell 9 percent in the past two weeks, amid a backlog of initial public offering applications at the country’s exchanges.
The National Equities Exchange and Quotations hosts 8,622 corporations, according to its website, up 68 percent from the end of last year. That compares with 2,914 listed on the bourses in Shanghai and Shenzhen. Companies have this year raised 78.2 billion yuan ($11.8 billion) from share sales on Beijing-based NEEQ, known as the third board.
NEEQ’s rapid growth is helping to ease the thirst of small firms for capital and is also allowing regulators to develop a system in which companies get more flexibility on the timing and valuation of their share sales, which has been difficult to implement on the main venues. More than 800 companies are waiting for IPO approval on exchanges, according to the China Securities Regulatory Commission.
“The third board helps solve a big problem in China’s economy, allowing small and medium enterprises to raise funds despite a long queue for listings,” said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong.
Companies listed at NEEQ raise money by issuing new stock in placements after listing at the venue. Guangzhou Evergrande Taobao Football Club Co., China’s first soccer stock and backed by Alibaba Group Holding Ltd., listed its shares without raising money in November and sold 869 million yuan of new stock in December, according to a January filing. The sale price of 40 yuan a share valued the company at 15.9 billion yuan.

Private Equity down in China

By the end of Julythe number of listed private equity fund managers had decreased from24,094 in June to 16,467, down 31.66 percent percentOf all firms dealing in securities,equitiesventure capital and other categoriessecurities and equities firms underwent themost severe clearingwith 35 percent of private equity firms removedAccordinglythenumber of practitioners was cut by 31.48 percent to 275,800.
By contrastthe scale and variety of funds have continued to increaseThe variety of fundsrose from 32,355 in June to 36,829 in JulyThe registered capital and paid-in capitalincreased from 6.83 trillion to 7.47 trillion yuanand from 5.58 trillion to 6.11 trillion yuanrespectively.

Consolidation in Brokerage industry


The first thing we would have expected to happen in any other market is that Interactive Brokers would sell its client book to one of the remaining players in the market. Both OANDA and GAIN Capital could use the added market share to effectively match the size of FXCM, and TD Ameritrade could almost double the client assets of its forex branch.
The problem is that neither Interactive Brokers nor any of the other brokers has so far announced that any deal is in the works. While it is possible that such an announcement will come soon, we need to consider that the situation in the American market might prevent this option from materializing.
The U.S. market has been contracting for years now under the heavy weight of compliance with NFA regulations. From feedback Finance Magnates received from firms that left American shores for greener pastures, it seems that the costs of operating in the US outweigh the benefits. Some even say that the only reason for brokers to remain in the U.S. at this point is branding – being an American player means that you stand in some of the stricter regulatory environments in the world, something that carries weight in unregulated markets such as China.

Where should we position in Gold

true that.

“The seniors have blown themselves out of the water,” the former CEO and founder of Goldcorp Inc. said in an interview in Vancouver. “They’re just going to be ships rising in the tide. It’s going to be the intermediate and juniors who have the big runs in this cycle, and that’s where I want to be.”
That trend has already begun. Gold companies listed on the Venture and Toronto Stock Exchange with a market value of less than C$2 billion have climbed on average 247 percent this year, while their larger peers are up 125 percent, according to data compiled by Bloomberg.

predications have always been useless.

Not all his predictions have materialized. In February 2009 McEwen forecast gold would top $5,000 an ounce in about six years. Gold futures in New York did rise dramatically from that point and reached an intraday record $1,923.70 in September 2011. But the metal subsequently swooned and, even after a 27 percent gain this year, traded on Monday at about $1,345. He now forecasts gold will reach $5,000 by 2021.

China rally due to Shenzhen-Hongkong stock connect?

wanna bet A shares still soar faster than H?

China’s rally was partly fueled by a surge in brokerage stocks, in turn propelled by renewed hopes for the launch of Shenzhen-Hong Kong Stock Connect within 2016.
Hong Kong Economic Journal reported Monday that the trading link could be announced as soon as this week and that it would be officially launched in December. The China Securities Regulatory Commission said last Friday that it had formed a special work team with its Hong Kong counterparts to prepare to launch the link.

Monday, August 15, 2016

Singaporeans, Worried Over Jobs and Pay, Are the Gloomiest Since 2009

firstly, it was in june?
secondly, singaporeans tend to downplay their optimism.


Singaporeans are the most pessimistic about the economy in seven years as they’ve grown more gloomy about their quality of life, their income and job security.

Between June and July, survey respondents were asked to give a six-month outlook on the economy, employment, regular income, the stock market and quality of life.

Low unemployment coupled with low inflation is ultimate happiness, will last?

sounds familiar?


The yen’s 22 percent gain against the U.S. dollar in the past year is another factor adding to deflationary pressure, suggesting the BOJ will have to maintain asset-buying stimulus that has supported prices of bonds commercial property.
For the average person, low unemployment coupled with low inflation is the ultimate happiness,” said Toru Suehiro, the senior market economist at Mizuho Securities Co. in Tokyo. “We’re actually in a kind of sweet spot now, where we’re seeing the positives of deflation. But it’s not going to last forever.