HPH Trust going to test bottom again?

I have held HPH Trust from the start of its listing in SGX. One of the reasons for holding on till now would be the promised dividends. Their dividend returns remain above average compared to Bluechip stocks and some REITs even. Now I am wondering if its a good idea to stock up more at lower prices. Look at the chart below:

 At the bottom 57cents, it was over 40% discount to its IPO price and a great place to pick up the stock. Unfortunately i did not because at that time nobody knew where the actual bottom would be. Anyway, 2 years have past and we have all observed price movements, strengths and weaknesses of HPH trust.
Since that bottom in Oct-Nov 2011, it has been trending up 85cents but never crossing it. Recently it broke through (green line) uptrend in mid 2013, I knew it is time for major correction again. This time it is going to test the bottom 57 cents again. What is the fair value of HPH by local brokerages? its constantly ranging between 70-80cents. 

Even at the forecasted DPU at 40HKcents/share which translates to 5.2cents (US), buying HPH at 60cents or below will give dividend returns approximately 8.6%. Also giving me a chance to lower by buying price significantly. 

Time to be patient and just wait for the opportunity to get HPH at discount price.

*The above is not recommendation to buy or sell HPH, dont speculate. Most financial guru's will put HPH on "HOLD" or "SELL" but try not to let them influence your long term vision. Long term investors should not be swayed by price volatility but instead look at returns on investment and gradual growth in portfolio size over time. 

 

XOM target almost there, Other US stocks to watch

Referring to my last post on "ExxonMobil gets another boost". My profit target price is still $108". I believe this is just a matter of time as XOM closed last night at $99.54, gaining almost 7% since my last article. (i.e. if you have been following).

Other US stocks to watch: Goldman Sachs (GS), Coca Cola (KO), Mondelez (MDLZ), Johnson & Johnson (JNJ), Procter & Gamble (PG). 

Keep a close eye on leadership stocks in everysector to gauge an idea of market direction. For example Goldman Sachs price movement provides excellent market direction relative to US, it works for me. This is one the hints you can take away. When a leadership stock such as GS falters, it is time to be skeptical of the market in general. For the past year it has been bullish and last night it broke past $170 barrier. Where is the next stop? $180-$185. When GS reaches, $230-$240 next year, start packing up because some of the smartest people in the world work for Goldman, they invest in their own company. When markets are heading for a downturn, when the economy cannot expand further, M&A deals stop, things start t contract. These people are the first to pull their money out. 

Okay, realistically I have gone overboard and exagerrated the above sentiments, but it is true to a certain extent. It has worked for me in the past few years, to follow Goldman Sachs. Might also work for you :)
 
 

Suntec REIT potential upside

Looking at Suntec REIT today. In the past year, It was a good trade opportunity if only you took profit after hitting $1.70++ like me. Now the counter has come down to a significant buy level of $1.50
My target is going to be around the $1.90 - $2.00 region. Looking at the graph below, the uptrend line seems to have a strong support. Bearing in mind, in order for the bull run to be intact, it must not drop below the previous low of $1.12

There is also a possibility that it might break the supporting trendline. In which case next support is $1.30 region. If you have been holding for the long run, this might be a good opportunity to buy more into SuntecREIT. Not the forget that the revamped Suntec City Mall and Exhibition halls had opened in Sept this year. Looking forward, Suntec has alot of upside to increading rental returns as they also own some critical/vital property in MBFC.

 

Not All Markets Are the Same

Mixed feeling analysing my portfolio today. I know that my entry points have not been excellent in the past for Singapore stocks. Of course over the past several years, my timing has improved. My failure to have proper exit strategy in the past has haunted me and I still hold on to my biggest losses, namely Hyflux (30% loss) and ChinaGaoxian (still 67% loss after they re-enlisted into the exchange). Those two are the main culprits. Otherwise excluding them average loss is 8%. I'm not that worried as almost 65% is allocated to REITS giving me 7% returns on average. REITs on average are not performing well. Gonna get my rights issue+access @ $1 for Ascott REIT soon, so might bring my losses down slightly.

Anyway the reason for this post is to share an interesting point here. How come SGX is lagging while the rest of the world is moving towards new highs? I really dont understand. Thank GOD, I have spread or "diversified" my portfolio to stay invested in US, Japan, HK/China as well.

(*I didnt take into account dividends)

As you can see almost 60% is parked in Singapore. Most of them are in the red but only slightly, this year end rally will help me to exit some positions with profit + dividends. As for NYSE/NASDAQ, holding mainly consumer/defensive stocks like KO and MDLZ with decent returns of 20%. 

Best performing market for me is still the chinese stocks, timing was good, entry was just after the bottoming out after 3 years of sluggish growth in China. However i wish i had put more into chinese stocks. Mainly holding BYD Intl and China Insurance. 

A good lesson here is to stay diversified then only you can lower your risk.  

ExxonMobil gets another boost

Important news just yesterday, Berkshire Hathaway revealed last night that it has been holding roughly 40M shares of ExxonMobil since 30th Sept. To me, it just re-affirms my position held for the past year. 
XOM last trading price at $93.23 

I have written about Exxonmobil (XOM) in the past, and my previous profit taking target was $94. However three things have made me re-evaluate my strategy for XOM in the short term. 

1. It is the year end rally, there is absolutely NO WAY i am selling before end of Dec because it is a well known fact that non-defensive stocks tend to fair well in the last quarter.
2. Positive comments from Yellen, the future FED chairman who is going to take over from Bernanke, reassures many weary investors out there.
3. Warren Buffett is the ultimate value investor. He see's ExxonMobil to be undervalued.

Therefore referring to my previous article "How much is ExxonMobil worth?" , I said the following: " true potential for XOM is $125 but only if the market sentiments remain bullish all year long".  Now, I can confidently say that it is, XOM will break the $94 resistance either tonight or by next week and head much higher by mid of 1st quarter 2014.

My profit target price has been adjusted to a conservative $108. How did i come up to this value? Its based on my own risk appetite and individual profit taking target fitting into the timeframe or which i wish to stay invested.

Below is a historical chart of their performance, highlighting places where you could have bought this fantastic company. If you are like me, not having the privilege of being born in the 50s or 60s. Its OKAY. look at the chart and pick up stocks that are undervalued. Technically, when they are hitting the historical support line (red line) and about to bounce back.

 Something interesting you will notice, there has been ups and downs but staying invested in a value stock over the long term actually does pay off, BIG time.

Things To Come

This is not related to the famous science fiction book "The Shape of Things to Come" by H.G. Wells but rather my take on the stock market. Regular readers of my blog would know about my stance on the market today. Take advantage of the market exhuberance but beware of what is coming ahead in 2014. I have said in the past, history tends to repeat itself, even if the Feds keep printing money and delay the inevitable, the outcome will still be the same. Personally i have a bearish outlook for stocks in 2014, i let the chart below do most of the talking. 

   
Eventhough we have not reached market tops, we are quite close. I think DowJones Industrial average is a better indicator of global market cycles than S&P500, Nasdaq or other indices. Of course our very own STI can tell a different story but there is a high correlation between the two.

On first look, you might say the DJIA is moving perfectly between two parallel lines but the bottom in Sep'2002 does not touch uptrending line. Another fact is that the bottom in Feb 2009 was actually lower than Sep 2002, which lets some people believe that we have been in a bear market since 2000. I however, do not think technical analysis takes into account all the things that have changed. We have not taken into account how the index NOW has more components than it did 20 years ago, the revolution of the internet and increase in accessability to trade the market. All these things add to the volatility equation. 

What has happened since 1992? We have seen internet bubble and housing bubble. What has allowed for these bubbles to form? Ever since 2000, the central bank's policy has only delayed an eventual bottoming of the stock market. But i am not going to complain about that because it has made many, including myself, to get a decent return from investments. 
Recent activities in the stock market and other asset classes is sending a clear signal that bubbles are forming everywhere mainly due to loose printing of money and low interest rates. Many people are quick to forget how often central bank policies have backfired throughout history, as they try to artificially quell inflation. Central bank policies have only three achievements throughout history: 
1. Making a few successful traders, filthy rich over a short period of time >>> suddenly they become guru's and start conducting seminars and writing books.
2. Ensure Banks make more money, and also making the wealthy eventually wealthier
3. Eventually failing and sending the world into turmoil

What is happening recently? You must have seen Twitter jumping almost 73% on its IPO debut appearance. Everybody is probably thinking, hey i want a slice of that pie also. But did you stop and think about the business of twitter? How are they able to generate income through advertisements alone? I guess there will always be followers who will buy into the hype but i do not think its a sustainable business model, same goes for Facebook. Another internet bubble in the making perhaps.

In Asia, we see bigger bubbles forming across all asset classes. Look at the Indian stock market which has reached record highs over the past week despite all the problems and massive devaluation of its currency. Its definitely speculator's market, with no fundamentals. Look at the chart below for SENSEX, where is the supporting line for their post 2004 rally?

   
Housing markets in Singapore, Hong Kong, China and Australia are all in a bubble.
Australian housing market has been on an uptrend since the 1950s and is one of the world biggest housing bubble. Now Aussies are being allowed to use their "superannuation funds" as collateral to buy residential properties, reflating their bubble again.  Look at the charts below:

So just beware of things to come. It is not going to get easier. Central banks around the world are clouded by their hubris, endlessly printing money and stretching without contraints. Bear in mind, our financial system as it stands today has a very short history compared to the thousands of years of written history. No body is sure how the future will play out. But i do know for sure, increasing asset price volatility is here to stay. 

The best defense would be to: 
1. Diversify your assets (Stocks, Commodities, Property etc.)
2. Don't take on "bad" debt. (read Robert Kiyosaki's Rich Dad Poor Dad, in case you are not sure what is good debt and bad debt.)
3. Avoid hyped up IPOs (which gets undue media attention)
4. Hold some cash reserve (SGD is still one of the best in the world)


Since last week you will hear and read in every type of media that the economy is going to get better ahead. Yes it will, I am counting on it. Just be prepared to take profit and close positions.

I leave you with a statement in an article by BoeckhInvestmentLetter which i like very much:

"The fragile state of the economy and financial system will continue to require inflation of money and credit, heavy government intrusion into the private sector, and frequent resorting to subsidies and support programs. This will continue to distort relative prices of labor, goods, services, and assets. It will sustain the economy in an artificial state and will compound instability and make it impossible to understand what is real and what is not."

Be a Dividend Investor

A dividend investors goal should be to generate a increasing stream of sustainanle dividend income, through careful selection of dividend growth stocks. Their investment plan must not be dependant on daily market fluctuations. I am not being overconfident but a dividend investor must be able to say confidently that "daily fluctuations have no bearing on my investment plan" because i have bought this stock at a great discount and will keep building on it for the next 10 or 20 years (through 2-3 market cycles). 

Dividend investors out there, do not worry because most of your stocks will keep sending you dividends quarterly or annually (as long as the company is well managed, increasing in profitability year after year. What is most important is to focus on quality dividend stocks and purchase them at attractive valuations. In Singapore's short history, there are very few stocks that i can think of which have actually raised their distributions for at least ten consequtive years and may continue to do so for the next ten years. 
Companies like Singtel pay out dividends regularly, and it has increased over the past 11 years. They actually are a bit unpredictible because in 2003 and 2009, there was no increase. While on some years, you would get Special dividends, which is awesome. 
Take away the special dividends and other distributions and just look at Interim/Final dividends over the last 11 years and take the average:

2002 >>> 2013
5.5c >>>> 16.8c (dividends increased average 10.8% annually)
Which is not bad right?

As dividend investors, we should try and avoid unpredictability. I firmly believe that a strong management team which focuses on consistently sharing a portion of the profits with investors in the form of dividends will continue doing so, as long as the business is able to support it. Dividend Ranking website is pretty good to do the research on dividend history:
http://www.dividendsranking.com/index.php

I pulled this one for KeppelCorp from the above website:

There are of course another part of the dividend equation. In Singapore you can invest in REITs or Business trusts which promise you regular dividends (90% payout for REITs). But REITs  are not the same as company stocks. They did not promise an increase in dividends over time, just that 90% of the profits will be payed out, which means if they profit less in the particular year, you get less. Obviously. So there is the risk of unpredictability.

You know i wish investing in dividend stocks could be so easy that you can just buy it  and close your eyes. But you cant do that. Investors need to periodically monitor the financial health of their stocks. It should not be very complicated once you have done initial background research on the business and shareholding structure. Fundamentals of the company do not change overnight. Singtel will most likely be in the telecom business the next 10 or 20 years. Keep an eye out for news related to the particular stock such as mergers and acquisitions, that could prove very profitable or spell disaster in the making.

The bottom line is this: Market fluctuations should not scare intelligent dividend investors, instead it should be used as opportunities to build on your portfolio or trim off some profit. Steep drop in prices for dividend paying stocks provide excellent entry points for long term wealth accumulation. Personal note, Watch out for these in the next crash: Singtel, Singpost KeppelCorp, Jardine related stocks or if interested overseas, Coca cola; Colgate; Procter & Gamble; Exxonmobil; Kimberly Clark; Unilever; Merck & Co; Sanofi Aventis; Eli Lilly; Johnson & Johnson. If you noticed, Healthcare stocks have pretty good dividend payout rates but they are slow growth stocks.  

Genting Singapore 2013

I have a small amount invested in Genting. Currently wondering if it will be good to hold onto or sell and run. Looking at the graph below, I can only conclude one important thing. It has been very fiercely speculated in the past especially since the opening or Resort World Sentosa. One thing is for sure, they have been overbought in the past, they still remain overbought. Technical analysis proves nothing significant as there are no good supporting lines. Performing a Fibo retracement over the longest period available will show that the chart has bounced from the 50% retracement level. It would seem that $1.25 is a strong support price. However, the bottom has not been established for this great bull run. My exit price shall be $1.65 for two main reasons. Dont want to be too greedy and I believe it is in a short term down trend in search for a bottom. 

 

One more bullet for Hyflux

It seems like ages ago when i initially bought Hyflux. It was a rookie mistake; I was trying to catch a falling knife, cut myself and still not recovered fully. Having bought equal amounts at three intervals back in 2011, I have been sitting on my hands  throughout 2012. Still hoping that it will turnaround one day. 

After firing 3 shots, I am running out of bullets to spare for this counter. I only have 1 last shot left. This is a perfect example of how to break up your investments into 4 equal portions. Buy equal amounts at every 25% drop in value. However I could not do this blindly without technical analysis and/or without believing that the company have potential for future growth. Tech analysis will show me how to spend  my last bullet, see below:

From the chart, you can see a beautiful supporting uptrend line since 2001 to now. The question is whether the price now ($1.17) is going to respect this trendline. Since it has bounced twice from hitting this trendline, I can conclude for myself that there is higher chance of bouncing from this trendline once again. My risk of exposure is greatly reduced. My last bullet will lower my buy price to $1.50 region. It has taken me 2.5 years to come to this point. One of my worst performing shares in my portfolio (always been in the red).
It does not take a rocket scientist to see that current price levels seems to be well supported.

ON the positive side: Dividends collected from this counter comes to 4.38% over the last 2 years.(2.1% annually) 
Also things are looking good as they have finished the largest desalination plant in Singapore this year. Perhaps they will get more projects in the Middle East and China. There is one thing i know for sure, water is vital for life, we will face more shortages in water supply in the future. Therefor any company that is in this sector has potential for growth as long as they are well managed and reputable. To me, Hyflux fits the bill.

Far East Hospitality REIT

Are you surprised that the debt ceiling has been raised further? I am certainly not. 
The last quarter of the year has begun, everything is in full swing, an exciting time for people who are just coming back to the markets. 

I could have held on to my capital a little longer as the ongoing US government shutdown continued to bring the broader market down and with it many high quality stocks. However i chose to ignore the noise and buy on fundamental strength. Having a vision for the long-term is very important in investing in equities. Build on your portfolio when things are looking down, sit back and relax as people rush into the markets because you have already taken positions. 

For example, I have been buying more of Far East Hospitality REITs and CACHE REIT when they were down. My average buy price has come down quite a bit. Fundamentally FarEast is strong but still quite RISKY, technically speaking.

 
As it is with all recent IPOs, we cannot really judge the fair market value. However we know that there is support at IPO price of $0.93 and more recenly $0.84 (recent bottom). The problem is we do not know how low it can go. What i do know is that Far East is a great organisation and proper management and their property portfolio is strong. If its share price is a true reflection of how hotels and service residences perform during end of year tourism spikes, I am confident that its share price will definitely test resistance levels of $0.96. That is a critical resistance level to cross if the trend is going to reverse. Otherwise, we may be looking at a downward trend without a significant bottom.

OCBC Bank online features

Did you ever wonder why OCBC claims to be the worlds strongest bank? I know from the ratings that all 3 local banks are actually top 5 in the world. I have been most impressed by their customer service, their leniency to give me large credit limit as well as their online platform.
Only today i found myself on the eve of Hari Raya, feeling lazy to do any actual work, checking out OCBCs online platform features. I must admit that it is most impressive. If you have an savings/current/creditcard account with them, you must check out their feature which allows you to see how you are dealing with your finances compared to others. Some may say its invasion of privacy and probably be surprised they are being tracked so closely. For me I didnt really mind, it helped to see how I am doing, anyway it is all anonymous.
 

Quite interesting to see where most peope keep their assets, as for me I use OCBC mostly for the purpose of investments, so that would explain the chart below which shows most of my money being channelled into my investment account in iOCBC.

I was surprised to see relatively young unmarried people having 45% of their money in fixed deposits and 50% in investments. Personally I never bought any investment products (unit trusts) directly from banks and probably do not intend to in the future. Its just personal preference that i believe in picking my own stock portfolio. However this has got me thinking a little, I probably should allocate more money in fixed deposits, but at interest rates touching the floor, i do not see much incentive.

Next is debt. This chart is accurate, i never accumulate debt, always pay your bills in full every month. Quite surprisingly average debt for "people like me" is $3129 (credit card + Easycredit). If you are reading this and fall into this category, Please heed my advice, do not use Easy Credit if you dont intend to pay it off in a weeks time. Its just going to suck you dry. 

Lastly spending habits. This is accurate for me, I never go shopping. haha! Only spend on groceries and travel to get the points, most of my money will go towards investments. Wondering what "other financial services & charges" refer to?? Me too, i am guess these are the late payment fees which people get slammed by borrowing with EasyCredit.

All in all, I now understand why OCBC bank is one of the worlds leading bank. Their online features rival the best and it is very user friendly. Alot of lessons to be learned from this very interesting online feature. 

Disclaimer: I am in no way advertising for OCBC, or saying they are wrong in any way. I just found their features quite useful and decided to share with fellow readers.
   
As I am writing this, OCBC Bk is trading at 10.44 today. almost reaching its 52 week high of $11.40, overvalued and of course not really the time to get into banks. Wait for the next big crash, I will be keeping an eye on OCBC. Since 2002, a lot has changed of course, OCBC is not the same as it used to be back in 2002 - 2005. Next upcoming crash, we can definitely see up to 50% retracement. Just be patient.

.

Time for Action

If you are thinking in the same line as me for past month, you should be appalled by the greatest drama or stage play that is unfolding in the US. Its amazing how fear and uncertainty can be spread through our media. I have purposely stayed away from the markets for a month because there has been nothing as tempting or worth taking the risk.

We watch the news, read the papers everyday for our amusement but you should know deep down what really is going to happen. For the benefit of those who are still confused, let me just anticipate the possible outcome or rather the most likely scenario; US is not going to default, everyone is going to make a fuss about it but they will make the US pay for their debt. Debt ceiling may or may not be raised further, it does not make a difference. Once the fiscal "drama" is over, everything will be back to normal and we will see the next seasonal bull run for the rest of the year. Be prepared to take profits by the end of it.

Meanwhile in Singapore, MAS forecasts core inflation to be hovering in the 2-3% region for 2014. This is highly likely for 1st quarter of 2014 but it might be 4-5% for the rest of 2014. (that is just my opinion) So stocks with good dividends are still a safe bet. UNTIL interest rates go up late 2014.

 

Fed decides to postpone their tapering

I cannot say: "I knew this would happen" but my gut feeling was that all the news about Fed tapering their bond-buying was OVER-sensationalised by the News media. And I am glad this happened because i get to buy into some stocks at a discount. Good for investors and speculators alike.
 
Feeling lazy to type today but this is quite big news and should share with everyone so just copied and pasted the report from my broker. Its below for your reading pleasure:

-------------------------------------------------------------------------------------------------------------------------------
Fed Refrains From Taper as It Seeks Signs of Sustained Growth
2013-09-18 21:38:44.617 GMT
By Joshua Zumbrun and Jeff Kearns
     
Sept. 18 (Bloomberg) -- The Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs more evidence of lasting improvement in the economy and warning that an increase in interest rates threatened to curb the expansion.
     
“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said at a press conference today in Washington after a two-day meeting of the Federal Open Market Committee. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”
     
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, while Treasuries and gold rallied as Bernanke stressed that the pace of bond buying would be dependent on economic data, and the Fed has no predetermined schedule for tapering the purchases that have pushed its balance sheet to $3.66 trillion.
     
“There is no fixed calendar schedule, I really have to emphasize that,”Bernanke said. “If the data confirm our basic outlook” for growth and the labor market, “then we could begin later this year.”
     
The S&P 500 climbed 1.2 percent to 1,725.48 at 4:02 p.m. in New York. The yield on the 10-Year Treasury note dropped 15 basis points to 2.70 percent. Gold for immediate delivery jumped $55.61 to $1,366.25 an ounce. Oil rose more than 2.5 percent.
     
“It looks like the Fed has done a major reset in terms of expectations on what they need to see before they start to taper,” said Chris Rupkey, the chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
 
Rate Outlook
The central bank, in a statement, left unchanged its outlook that its target interest rate will remain near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent.
     
Bernanke added in his press conference that the first interest-rate increase may not come until the jobless rate is “considerably below” 6.5 percent.
     
“Even after asset purchases are wound down,” Bernanke said, the “Fed’s rate guidance and its ongoing holdings of securities will ensure that monetary policy remains highly accommodative, consistent with an aggressive pursuit of our mandated objectives of maximum employment and price stability.”
     
Bernanke said the Fed could also specify that it would not tighten if inflation was too low. “An inflation floor is certainly something that could be a sensible modification or addition to the guidance,” he said.
 
Forecasts Reduced
Fed officials today reduced their forecasts for economic growth this year and next. They forecast U.S. gross domestic product to increase 2 percent to 2.3 percent this year, down from a June projection of 2.3 percent to 2.6 percent growth.
     
“They feel the risks are too great to taper now, and the economy is not growing as fast as they had hoped,” said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina. “They are going to take a few more months and maybe start in December.”
     
Economists had forecast the FOMC would dial down monthly Treasury purchases by $5 billion, to $40 billion, while maintaining its buying of mortgage-backed securities at $40 billion, according to a Bloomberg News survey.
     
Fed officials were spooked by an increase in bond yields that followed Bernanke’s comments in May that the Fed may step down the pace of purchases in the “next few meetings,” said Scott Brown, chief economist for Raymond James & Associates Inc.
in St. Petersburg, Florida.
 
Treasury Yields
The yield on the 10-year Treasury note climbed almost 1 percentage point through yesterday since Bernanke’s May 22 comments, with yields on Sept. 6 exceeding 3 percent on an intraday basis for the first time since July 2011. That compares with 1.61 percent on May 1, and a record-low 1.38 percent in July 2012.
     
“They were really surprised back in May and June by the market’s response to the initial talk of tapering,” Brown said.

“The Fed’s view was that it’s the amount of asset purchases, not the monthly pace that matters. In that case, it doesn’t matter whether they start tapering in September or December, but the markets decided it does, so it does matter.”
     
“We’re seeing the reaction that bond yields are coming down, and that’s got to be helpful for their outlook.”
     
Kansas City Fed President Esther George dissented for the sixth meeting in a row, repeating that the policy risks creating financial imbalances.
     
Higher interest rates have started to take a toll on housing, one of the drivers of the expansion. A Commerce Department report today showed that builders began work on fewer U.S. homes in August than projected by economists.

Housing Starts
Housing starts rose 0.9 percent to a 891,000 annual rate, following the prior month’s 883,000 pace that was weaker than previously estimated. The median estimate of 83 economists surveyed by Bloomberg called for 917,000. Permits, a proxy for future projects, dropped more than forecast.
     
The average interest rate on a 30-year fixed home loan was 4.57 percent last week, compared with a record-low 3.31 percent in November 2012, according to Freddie Mac. The rate soared 35 percent in 10 weeks ended July 11, the most ever for a comparable period, the data show.
     
Bernanke, who is nearing the end of his second term as chairman, has orchestrated the most aggressive easing in the Fed’s 100-year history, pumping up the balance sheet from $869 billion in August 2007 and holding the main interest rate close to zero since December 2008.
 
Leading Candidate
Vice Chairman Janet Yellen, a supporter of Bernanke’s policies, is the top candidate to succeed him after former Treasury Secretary Lawrence Summers withdrew from contention, according to people familiar with the process.
     
The Fed’s asset purchases have fueled gains in asset prices. Counting today’s increase, the S&P 500 Index has climbed 23 percent since Aug. 31, 2012, when Bernanke made the case for further monetary easing at the central bank’s annual forum in Jackson Hole, Wyoming.
     
Officials have also credited the program, which began last September, with reducing the unemployment rate, which is the lowest since December 2008. Officials have said that they would maintain bond purchases until the labor market has “improved substantially.”
     
At the same time, recent data on payrolls, housing and retail sales have lagged behind economists’ forecasts.
 
Jobless Rate
U.S. companies created 169,000 jobs last month, fewer than economists projected, and increases in the prior two months were revised down. The unemployment rate fell as workers left the labor force. August and July were the weakest back-to-back months for payroll gains in a year.
     
Employment growth has nevertheless improved since the bond purchases began. The U.S. has added an average of 160,000 jobs over the past six months, compared with 97,000 originally reported for the half-year before the Fed decided to start the third round of purchases a year ago.
     
Faster employment gains may be needed to spur the consumer spending that accounts for 70 percent of the economy. Retail sales last month rose less than forecast, with purchases climbing 0.2 percent, the smallest gain in four months, the Commerce Department reported last week.
 
Bright Spots
Homebuilding and manufacturing remain bright spots for the economy. Companies such as Hovnanian Enterprises Inc. have said the recent rise in mortgage rates will temporarily restrain the housing recovery rather than end it.
     
Homebuilder confidence held this month at the highest level in almost eight years, even as mortgage rates rose. The National Association of Home Builders/Wells Fargo confidence index registered 58 this month, matching August’s revised reading as the strongest since November 2005.
     
Such optimism has found fuel from a recovery in home prices that pushed up the S&P/Case-Shiller index of values in 20 cities by 12.1 percent in June from a year earlier.
     
Factories turned out more cars, appliances and home furnishings in August, propelling the biggest increase in U.S. industrial production in six months. Output at factories, mines and utilities rose 0.4 percent after no change the prior month, the Fed reported this week.
 
Auto Sales
Cars and light trucks sold last month at the fastest annualized rate since 2007, according to researcher Autodata Corp. Sales at General Motors Co., Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. all exceeded analysts’ estimates.
     
Texas Instruments Inc., the largest maker of analog chips, is among companies with a brighter outlook as global markets stabilize.
     
“Orders continue to be quite solid” this quarter, Chief Financial Officer Kevin March said at a Sept. 11 conference.

“We continue to see strength in three of the four regions of the world,” with Asia, Japan, and the Americas expanding, he said.

For Related News and Information:
Fed Seen Paring QE to $75 Billion Pace This Month, Survey Shows NSN MSPWYG0D9L35 <GO> Fed Officials Rebuff Coordination Calls as QE Taper Looms NSN MS4UHC6TTDS0 <GO> Less Tapering Becomes Tightening Credit No Matter What Fed Says NSN MT8N176K50YJ <GO> Fed balance sheet graph: FARBAST INDEX GP W <GO> U.S. economic forecasts: ECFC US <GO> Treasury curves: GC I25 TODAY 1Y 2Y 5Y 7Y <GO> Global economy watch: GEW <GO> World economic statistics: ECST <GO>

--With assistance from Steve Matthews in Atlanta and Caroline Salas Gage, Aki Ito and Craig Torres in Washington. Editors:
James Tyson, Christopher Wellisz, Kevin Costelloe

To contact the reporters on this story:
Joshua Zumbrun in Washington at +1-202-624-1984 or jzumbrun@bloomberg.net; Jeff Kearns in Washington at +1-202-624-1806 or jkearns3@bloomberg.net

To contact the editor responsible for this story:
Chris Wellisz at +1-202-624-1862 or
cwellisz@bloomberg.net

Building a Dividend Portfolio

I came across a really good article on SeekingAlpha.com and i want to share it. It is called "DIY Dividend Investors Club: Building a Sustainable long term dividend portfolio". Although it is based in the US, many principles can be reused in Singapore. We can even invest in those stocks they have highlighted. They are great dividend plays, some of the most well established companies in the world. They sell things that we need everyday of our lives to make our day a little easier. [eg. Coca cola - soft drinks, Kimberly Clark - tissue/toilet paper, Colgate - toothpaste, Unilever - various consumer goods, Procter & Gamble - Various consumer goods, Mcdonalds, Wal-Mart etc.]  This is only Part I, they are going to publish more parts in the future. Do look out for them.

However my key issue with investing in the US for dividends has always been the 30% tax they charge on all dividends!! There is a way to get around this if you are a long term investor, engage in Dividend Reinvestment Scheme if the company allows it. 

Tried to do this, a year ago but I have fallen flat in my search to establish something, my broker at OCBC said "we don't have such scheme". I gave up for the time being. If anybody knows how to escape the 30% tax, do let me know. 

I think i read somewhere that if you open an account with an US trading platform, they hold your investments in their custodian account and reinvest the dividends to buy in more units each time. I am still quite a noob when it comes to investments.

Meanwhile FEELING INSPIRED; I am thinking of adapting this strategy to Singapore stocks with the following aims:

• Portfolio Size: $100,000
• Target # of Stocks: 5-10
• Maximum Stock Concentration: 10.0% of portfolio
• Maximum Sector Concentration: 20.0% of portfolio
• Maximum High Yield Concentration: 20.0% of portfolio
• Minimum Dividend Yield: 5.0%

      
Its entirely possible to build a dividend portfolio in Singapore with the expectations to earn a minimum of 5% per year. Lets see how it goes, It will be a 20 year plan starting from 2014. 

First REIT part II

Referring to my previous post titled: First REIT Oct 2013

OCBC research's take on First REIT below:
First REIT: Upgrade to BUY on valuation grounds

Summary: We visited five of First REIT’s (FREIT) properties (four hospitals and one hotel and country club) in Indonesia over a two-day period last week. The hospitals are operated by Siloam International Hospitals (subsidiary of Lippo Karawaci) and are generally well-maintained and equipped with modern medical equipment from international brands such as Siemens and Philips. Meanwhile, FREIT recently lowered its floating rate exposure from 72% to 46% of its total debt following a refinancing exercise. Its next refinancing need will only come in 2016. We believe that FREIT’s sharp share price correction has been overdone, as it has minimal exposure to the volatility in the IDR thanks to its lease structure. Hence we upgrade FREIT from Hold to BUY on valuation grounds, with an unchanged fair value estimate of S$1.20. FREIT also offers an attractive forecasted distribution yield of 7.6% in FY13 and 8.3% in FY14. (Wong Teck Ching Andy)


I have to agree with the above, based on valuation First REIT is quite attractive. In fact i really like their aggressive strategy in Indonesia plus they are doing a good service to the people by building more hospitals around the country. From an ethical standpoint, I like their business model. It is also going to give 7-8% returns looking forward into the near future. Obviously there are risks involved. Key risks would be volatility in the Indonesian Rupiah and rising interest rates for borrowing. Hmm... i wish had more money to invest, cannot really free up any cash from other investments just yet. 
Remember you can't just buy and sit on your investments, If it gets cheaper, buy another equal part or if it rises by 20%, sell half for profit and keep the rest. Key strategy is not to be greedy. 

First REIT Oct 2013

So here we are again in familiar territory, after the August sell Off which happens almost every year by the way. Stocks come down, Banks and financial institutions adjust their target prices. History keeps repeating in front of our eyes. Anyway lets look at First REIT, I enjoyed the ride from 90cents to $1.25, sold if off to early. Now i am taking a second look at this because it is more attractive now after plunging by >40cents. But i did not excecute the order after looking at the following graph.

If my memory serves me right. Fibonacci retracement will show us significant levels in a bull run. usually prices will correct to 50% level after a good bull run, that means a good place to buy into First REIT again would be in the $0.855 region. 

Hmm,,, what to do? just wait and see.

Cache REIT Oct 2013

Happen to look into Cache REIT chart today, seems interesting to do a bit of technical analysis on it. Here it is below:

 


I see an Ascending triangle formation, This is an explanation found on "Incredible Charts":

When an ascending triangle is formed by equal highs and higher lows. It is a bullish signal, whether encountered in an up- or down-trend. It is most often observed as a continuation pattern in an up-trend but is a strong reversal signal when witnessed in a down-trend.

It seems to have a good clean support line for continuing its uptrend. Lets look at it logically, even if i buy at $1.16, i'm going to get 7.36% returns/yr. Hmmm... If you have money sitting idle in the bank like me, your hands would be itchy too. It is best to do it in stages, buy one part now, then if it drops to <$1.00, buy another part. And if all hell breaks loose, be patient while you enjoy yearly dividends.

  

Market Sentiment vs My Sentiment

Past few weeks I am finding it difficult to adjust my sentiments to how it is being played in the stock markets. Referring to my previous post in mid August "Final Push", It is getting harder to stand my ground or belief that there will be a final bull swing before another major crash. Since the month of August has been a bloody one, markets all around the world taking a huge hit. If there is one thing i still do believe in, its that always stick to valuations. 

Chinese stocks for me seemed undervalued with a lot of upside. My timing has never been perfect but my investments in China Life Insurance and BYD have yet to drop below my buying price, which tells me that I bought them at strong support levels. 

On the other hand, Singapore stocks have not fared well in the past few weeks. Mixed feelings arise as prices drop reducing my profits but also creating opportunities to add into my portfolio. 
As for REITs, where do i begin? Sabana REIT has fallen by almost 20cents/share. Cache REIT (see pic below) It has become even more attractive at $1.10 - $1.20 range. Since their dividend payouts will give you >7% for just holding onto it at those prices. I am happy to hold onto my shares of CACHE but not going to buy at those levels. Since the last drop broke through their supporting trendline, technically there is no way i can say with confidence that it has reached a bottom. I have a feeling it will keep falling to the dollar region before news around properties and interest rates are not looking good. People (investors) are anxious about REITs and the smart ones are pulling their money out of it. As for me, It would make sense to buy more below $1.00.

 Ascott REIT also tells a similar story but it has not seen such a big drop. Maybe the investors of Ascott REIT know what a great investment it is. Especially since they are expanding strategically into rest of Asia. I like their business plan, and their dividend payouts even more. Its a steady stream of income. Just a note of the price levels. It has been trading around $1.20 this week, going forward, I think it will come back up to >$1.35, no doubt. 
Those people who missed the opportunity to get a piece of this REIT should do so before its too late (*Of course do you own research first and then make an informed decision)
Here the graph of Ascott REIT below:

Yes it has crossed the supporting trendline (that is worrying me) but it is being supported by a resistance turned support line at $1.15. Also note the volume being traded. Comparing it to CACHE REIT above, volumes being traded are below low. At $1.20 it is still very attractive to me. I have to say, still not worth add onto my position unless i get it at close to a dollar. 

I suppose my investment philosophy is simple. Always reserve money for further reinforcements. Usually break up your investments into 4 parts. Buy in more as it gets cheaper. Sell it higher to reap the benefits if the stock is not worth holding onto. Don't speculate and dont surround yourself with negative thoughts. There will also be people telling you negative things, "Get out now, while you still can" and "I told you so". You decide when its time to get out. Patience is a virtue, so be patient.  If you have been following my blog posts, you will realise that we are still in the late stages of a 3 year bull market. I would start to worry in the 1st quarter of 2014.  

End-of-Life Medical Expenses

Came across an interesting study done in the US.  I think most people are worried about having enough money to support ourselves in the last few years before death. Given that medical advances have increased life expectancy of the average person in Singapore to 81.89, just behind Japan @ 82.59. Medical bills during the last 5 years of our existence on Earth has also increased over the years. I understand the study was done in the US but basic principles will remain constant in other parts of the world. 
In this article mentioned, The correlation between Income and Medical expenses(out of pocket, not covered by insurance) were studied for the last five years of a group of people. To be blunt, the study is questionable to say the least. However I do agree that insurance will not cover everything and we still need to prepare a sum aside for other expenses. 

From the article, the average comes to about US$39,000 for medical care in the final five years of life, or about US$7,800 a year. It also says the number varies greatly with income. How much different is our Medical expenses in Singapore? Last time i checked, medical expenses should be cheaper for those on government subsidy. It is very hard to gauge how this will translate to cost in Singapore. So after doing some research on my own came up with these numbers:

Procedure (Cost in USD)	USA	Singapore	% Savings
Coronary Angiography	6,000	1,500	75%
Coronary Angioplasty	42,000	11,500	73%
Coronary Artery Bypass	55,000	13,000	76%
Hip Replacement	24,000	16,000	33%

source: http://www.expatmedicare.com/healthcare-singapore-expats-guide

Surgery in Singapore seems to be significantly cheaper than US. For my own sake, i will just take worst case scenario and say S$50,000 average for last 5 years of life or S$10,000/yr now, or in 50 years time (if i live that long) at 5% inflation rate: it will cost S$114,674/yr or S$573,369 over the last 5 years of my life if i live till 80. Of course this calculation is riddled with uncertainties and variables, but roughly i guess one should set aside 1/2 Million bucks. damn! Now that is something to worry about.

Here is the weblink of original article.

Credit Score

For some time now, i have been wondering what is my credit score. In this post, I try to answer some questions plus its an excuse to whine about some negative aspects of having certain cards.

Credit Score:
1. How  does it affect my ability to take loans?
2. How do banks make use of this information?
3. Lastly, how to get the best score and maintain it?

I knew for sure that my credit score would not be the best since i missed payments several times on my Diner Club either because i forgot about it, couldnt find an AXS machine or couldnt be bothered to queue up behind people who clearly don't know how to use one. 
However there seems to be too many SAM machines out there but they only take bill payment for Visa cards.

I even missed some payments on my AMEX cards before but their customer service is really too good, not only did i managed to reverse any late payments but also got my card renewal for free including supplementary card.

(Tell you what Diner Club in my opinion is the most useless card i carry around. Checking online statements is a horrible experience in the past, not sure how it is now since they upgraded their online platform. But i am convinced that i will cancel the card once by renewal time next year)

Anyway paid the $6.42 (incl GST) for the report through Credit Bureau Singapore and to my astonishment I got AA score. I think most people who make an effort to pay their bills on time would also get AA grade.

I still have to be careful because a score of 1933 is in the lower end of the AA, If it falls below 1911, i might have gotten a BB score. Must make sure I pay my bill on time every time from now on. 

To answer the questions just now: 

1. How did they come up with the score?

Obviously there is a formula but i don't know which one the credit bureau used. you just have to remember that credit score is reflecting several things:
a. Payment History
Measures how responsible you are at paying what you owe 
b. Amounts Owed
Also important. It looks at how much of your available credit you are using. Also known as credit utilisation ratio, it assesses how close you are to maxing out the credit that has been given to you.
c. Length of Credit History
Looks at age of all your accounts, individually and averaged together, and assesses how much time has passed since you opened the accounts.
d. Types of Credit Used
Considers the kind of credit you have, from credit cards to installment loans on your car, home or student loan.
e. New Credit
This looks are the number of accounts you have recently opened. In addition to the amount of inquiries that have been made lately by those checking your credit for purpose of lending you money.

2. How do banks make use of this information?

Payment History
Banks will look at payment history as an indication of how  you'll handle future debts. If you have met your obligations responsibly then lenders will think you'll continue to be responsible paying back your debt.

Amounts Owed
If you use alot of your available credit, lenders may think you are over-stretching and you might not be able to make future payments. Banks usually look at credit utilisation ratio of 30% for housing loans in Singapore. *Ever wondered why banks in Singapore usually give out 3/4 times your salary as credit limit? thats why. but some like UOB/OCBC gave me 4 times - good for me cos i can maintain a lower ratio.

Length of Credit History
Banks will see your track record of repaying debts. The longer you have used credit wisely, the better because they will trust your ability and determination to stay current on your accounts.

Types of Credit Used
Banks like variety of course. Different kinds of credit, both cards and loans.

New Credit 
Taking on too much new credit is a warning sign to lenders. They will want to know why you suddenly need so much new credit, maybe cos you are in financial trouble?  

to your payment history as an indication of how you’ll handle future debts. If you've met your obligations responsibly, lenders will think you'll continue to be responsible paying back your debt. - See more at: http://www.onyourown.org/blog/anatomy-of-a-credit-score.aspx#sthash.NnUmL5JT.dpuf

Lenders look to your payment history as an indication of how you’ll handle future debts. If you've met your obligations responsibly, lenders will think you'll continue to be responsible paying back your debt. - See more at: http://www.onyourown.org/blog/anatomy-of-a-credit-score.aspx#sthash.NnUmL5JT.dpuf

3. Lastly, how to get the best score and maintain it?

Payment History
Make payments on time, every time. If you have missed a payment, pay it off as soon as you can. If you cannot remember (like me) then set up reminders on your phone or use Giro services.

Amounts Owed
Try not to spend more that 25% of your credit limit. If you need more money, ask for limit increase. Maintain a good ratio, do not take it as a license to spend.

Length of Credit History
If new to credit, there's nothing you can do. Just let time go by and your credit history will build up over the years. But be careful not to open too many accounts at once because you will lower your average account age. Also keep a 1 or 2 of your oldest credit card open even if not using them, this will bring up the average age.
 
Types of Credit Used
Do not get unnecessary credit but pay attention to the different kinds of credit/loan available in the market. Remember Car loan is a liability, Home loan is a liability (unless you are renting it out with profit), Studen loan is a liability (However necessary if you want to make it on your own, but start paying it off as soon you land a job).

New Credit 
Opening new accounts can help your credit score, but everytime you do that, there will be an inquiry that will remain there for 12 months. If you are planning to get a home loan, avoid opening smaller accounts beforehand. 
I am guilty of this. Applied too many credit cards when i got my first job. Slowly realising that actually no need so many cards. Wish someone wise would have told me back then. 

4. I discontinued a few cards since last year and will stop renewing Diners Club. Will it affect my credit score?
My guess is cancelling a card does not result in an inquiry, but will affect length of credit history. I will still hang on to my favourite cards so on average i believe score will improve if you have lesser cards. What do you think?  

**I am no advertising for any banks or their cards here. But i never did regret taking up the OCBC Platinum, UOB One, AMEX Platinum and Citibank SMRT card. These are by far the most useful to me.