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High yields: Successes, failures and the in betweens.

Monday, March 1, 2010

In this post, I shall share some personal experience with high yielding trusts and provide some numbers in the process for the purpose of illustration.

High yielding trusts which have done very well for me are those which meet the selection criteria I have talked about so many times before for REITs.  Investing in such trusts is mainly about generating a steady passive income (cash flow) and to do this well, we have to look for low gearing, high yield and attractive discount to NAVs. These factors will ensure that the trusts' distributions are meaningful and sustainable.  Here are some which have done well for me:

First REIT:  I first bought some in 2007.  It had low gearing, high yield but did not have a great discount to NAV.  My initial purchase price was in the mid 70c.  The dpu was about 6c per annum.  As prices slumped during this last crisis, I bough more at 42c.  The dpu has risen to almost 8c per annum in the meantime.  First REIT didn't have to issue any rights or do any share placements as its gearing was relatively low and still is.  The unit price of the REIT now is 82c thereabouts.

LMIR:  I first bought some in 2007, not during the IPO at 80c, but after the price dropped to 70c days after.  It had low gearing, an attractive yield and trading at a discount to NAV.  During the last crisis, I bought more and the lowest price I bought more at was 18c.  The dpu is now almost 5c per annum.  It didn't have to issue any rights or do any share placements as its gearing was very low and still is.  The current unit price is about 48c or so.

Suntec REIT:  I always wanted some Suntec REIT units but looked on in amazement as the price hit $2.00 at one stage.  I bought some at $1.03 during the downtrend.  It went on in the coming months to make a new low at 50c or so, if I remember correctly.  As the price recovered, I bought more at an average price of $1.00 or so.  NAV per unit was almost $2.00. So, the discount to NAV was very attractive. The dpu is about 10c and provides a handsome 10% yield for me.  Gearing level is not very low though. 

Hyflux Water Trust:  A business trust, not a REIT.  This is an investment which many of my friends remember because I was talking about it a lot early last year.  They listened politely mostly.  I was always interested in this trust as it has regular cash flow through its exposure to the water sector in China.  In January 2009, I looked at it again in greater detail as the price was so low.  I found the yield to be almost 20% then.  Gearing was non-existent and it was trading at a very nice discount to NAV.  The unit price was 30c or so at that time.  I went on a buying spree.

I did not keep all of these investments bought at low prices. I sold most of them for very nice capital gains, cycling the funds into laggard counters like Healthway Medical to make more money.  I kept, on average, 10% of my original positions in each of these investments to collect passive income in perpetuity.  It would have been nice if I had been able to keep my investments in these trusts in full and yet have more money to invest in laggard counters but, unfortunately, my resources are limited.

As you could probably tell, I was not always rigorous in making sure that all three criteria I talked about were met in choosing a trust.  In part, such trusts did not present themselves all the time and I had to make do with the best choices available.  This last crisis, however, was an opportunity of a lifetime.

It was also because I was not rigorous that in my early years with trusts, I made many mistakes in my choices. What we must always remember is not to focus solely on yields.  Also, do not invest in anything without doing our own FA. Here were some of my mistakes:

MPSF: It just got suspended today. This must have been my worst mistake. I listened to a very young "analyst" who said it gave upwards of 10% in yield and that the yield was sustainable. I invested a five figure sum without doing any analysis of my own. I later found out that MPSF invests in other REITs in Australia and as some of these REITs are private in nature, they could gear up to 80%! MSPF froze all distributions with the credit crisis but what is worse is the complicated situation it is in with so many cans of worms. There is no passive income for unitholders and, as far as I can see, there is no clarity as to its future. Must remember not to be swayed by sweet talking analysts. Always do our own homework.

FSL Trust: A friend introduced me to shipping trusts saying that I should diversify my passive income stream. He also introduced me to Rickmers and PST but I only have a position in FSL Trust. I still get passive income from the cash flow generated by its business and I receive  >8% yield per year based on my average price. High gearing in excess of 100% and the fact that its assets depreciate whether or not the economy does well make this a mistake for me.

CitySpring: This is a business trust. I was emboldened by the fact that this has the backing of Temasek Holdings. It had very high gearing but the management (headed by Sunny Verghese) said that they did not have to issue rights and people who thought they had to didn't understand their business. A few months later, they issued rights. The yield plunged and unitholders became poorer as they subscribed to the rights. It yields an average of 6.5% per annum for me.

There are a few others but the essence of the negative experience is more or less the same. For examples, with FCOT (previously Allco REIT) and MI-REIT (now AMPS AMP Capital Industrial REIT), I overlooked their high gearing levels at the time of purchase.  This is also a reason why I tell people to be cautious with Cambridge Industrial Trust (CIT) which I am vested in as well as its gearing is still in excess of 40%.

As creating a significant stream of passive income is still a very important objective for me, trusts with high yields must still play a part in the grand scheme of things. Rather than remember the pain and avoid these trusts altogether, I choose to remember the pain and find a way to achieve mastery over them. I hope that by freely sharing what I have realised to be the right way to approach REITs (and other forms of trusts) here in my blog, other investors who might not be in the know would not have to suffer like I did.

49 comments:

la papillion said...

Hi AK,

I'm in saizen. Small position only. Thought it's courtesy to let you know that I got in too :)

Hoping to get more at a much lower price than what we're seeing now.

AK71 said...

Hi LP,

I extend my heartiest welcome to a fellow Saizen REIT unitholder. 16c, I guess? Hedging with a smallish position at 16c and hoping for a lower price is what I would do too.

From its charts, it does look like 15.5c and 15c remain probable. Everyday, I'm in the buy queue. ;)

CL said...

Actually i sold off all my HW shares and bought some Saizen also. :)

AK71 said...

Hi CL,

I hope you made some good money selling your shares of Healthway Medical. :)

Saizen REIT is a value proposition. It will take time but the market will recognise its true value one day. I want to be ready for the ride up then.

Anonymous said...

Thanks for telling is the lessons learnt in REITS and TRUSTS. Makes it hard for me to trust them, even their appalling record last year.

AK71 said...

Hi,

If a REIT is well run, just like any company, they would not have a problem weathering recessions. The badly run ones, yes, they will have problems like any badly run company. So, the responsibility is ours, as investors, to search out the well run REITs. :)

Anonymous said...

for those interested, we have got credit sussie buying a chunk of the mother share and UBS buying the big block for warrants on the 4th of march

AK71 said...

Hi,

Thanks for sharing. I guess you must be referring to Saizen REIT. With strong fundamentals and an obvious uptrend, the counter might be attracting more savvy investors. With Credit Suisse and UBS, they are probably HNW individuals. Nice. :)

RK said...

Hi AK71,

I have been following your blog and was hoping that Saizen's price would continue to be stagnant for a while so that I could have opportunity to increase my holdings. Seems that it has started to move... currently only holding a small volume in both the mother shares and the warrant.

RK

AK71 said...

Hi RK,

Most are comfortable with the idea of averaging down but less so with averaging up. Somehow, the idea of paying more for something which we bought at a lower price before doesn't sit well with most of us.

If I had not bought more Healthway Medical at 11c, 12c, 12.5c and even 13c after my initial purchase at 10c, I would have made a lot less money, for example.

If an undervalued stock starts to move up but remains undervalued, I would buy more. When would I stop buying? When the stock is no longer undervalued and/or when the potential reward is no longer attractive.

Have I been buying more Saizen REIT units at higher prices? You bet! I started buying Saizen REIT at 13c. I bought more at 13.5c, 14c, 15c, 15.5c, 16c and now, 16.5c. Fundamentally, Saizen REIT is still very much undervalued even at 16.5c.

Having said this, technically, the upmove still needs confirmation but it looks promising. Good luck and thank you for following my blog. :)

zaki_77 said...

Hi ak71,

After following your recommendations on Saizen, I have been doing a little reading myself and am looking to vest. However the following reasons are holding me back:

1) Market cap to shares-in-issue ratio
2) 100% investment exposure in Japan
3) Highly likely that another rights issue will be called in 2010

Your thoughts would be very much appreciated.

zak

AK71 said...

Hi Zak,

Good to hear from you again.

1) The market cap is the price of one Saizen REIT unit multipied by all the shares in issue. This is likely to increase in time for Saizen REIT as the warrants are exercised and as the price of the units appreciate in time.

2) Yes, Saizen REIT's apartment buildings are all in regional cities in Japan.

3) There is no necessity for Saizen REIT to raise more capital this year as they would have repaid another CMBS by April, next month. They will not have another loan due until mid 2011 and that is a conventional bank loan which would most likely be re-financed with less difficulty.

I have probably not addressed your concerns regarding points 1 and 2 as I am not sure what they are. Please let me have the details of your concerns and I will share what I know with you.

zaki_77 said...

Hi AK, you have actually addressed no. 1 in some way so many thanks. A large gap between 'Market cap to shares-in-issue ratio' scares me as there remains a whole lot more shares (good for liquidity perhaps) than what the company is worth.

My 2nd concern was that Saizen has put all its eggs in one basket: the Japanese basket. What are the indicators for economic recovery in Japan?

Saizen is high on my list, along with AIMS AMP and LippoMaple; I think all 3 stocks share my point no. 1

AK71 said...

Hi Zak,

I think you are more worried about the NAV per share than the market cap. The NAV per share will definitely reduce as the warrants are exercised. In the event that all the warrants are exercised, the worst case scenario is a NAV of 28c per share. So, at 16.5c today, Saizen REIT is still trading at >40% discount to its NAV.

You are also worried about the Japanese economy and how it would affect Saizen REIT. I have mentioned in my blog before that the demand for Saizen REIT's properties is relatively inelastic and this is verified by the high occupancy rate of >90% even as the recent crisis shook the global economy.

Demand for office, retail, industrial and warehousing space is more elastic compared to demand for residential space. This is reality and unlikely to change whether the Japanese economy does better in time or not.

The Japanese economy has been in decline for two decades. Its real estate prices have been in decline for just as long. Its valuation is extremely compelling and the yield is very alluring. I would take Marc Faber's advice. I would think contrarian and invest in Japan. It is when things are the bleakest that the best opportunities are to be found.

zaki_77 said...

And with that, I got the little 'push' I needed and bought a small holding of 50k units today @ 0.16. I also liked your comments over at nextinsite.com - I will look into topping up my holding if + news become apparent.

I need to do a little more research into LippoM before I decide to buy.

Also looking at AIMSAMPIReit, do you think they can sustain their divi payout?

One other property stock that looks enticing is Allgreen (A16) - <1.10 would be a good entry point I think. Again your thoughts on that would be appreciated when you get a chance of course.

Good luck to all Saizen holders and regards.

AK71 said...

Hi Zak,

No, no. I did not give you any push to buy anything. ;)

AIMS AMP Capital Industrial REIT is more than able to deliver a 2c dpu annually. They currently have the lowest gearing amongst all industrial properties S-REITs, they have a high yield and the units are trading at a large discount to NAV. They also have a strong sponsor now, AIMS. I am expecting big things for this REIT in future as AIMS has the ambition to use it to hold their industrial properties which they expect to acquire or build in China. I have not mentioned this in my blog as it is premature to talk about it but AIMS has mentioned this during an interview with The EDGE last year. Interesting? You bet.

Allgreen? I liked this property company a year ago for its low gearing, big discount to RNAV and mass market projects. However, I have not been following up on property companies for a long time now. So, I am not able to comment as to the current situation.

You might want to check out DBS Vickers and their latest figures on property counters in Singapore. :)

http://www.remisiers.org/research//sgproperty080310%20DBSV.pdf

zaki_77 said...

Well I'm in LippoM today as well. Now looking to choose between k-reit and first reit. After this, reits will occupy 1/3 of my portfolio diversification.

Thanks for all your help and I'll be sure to keep in touch.

AK71 said...

Hi Zak,

I hope that the REITs will become a valuable part of your portfolio in providing strong passive income streams for some time to come.

I am glad to share what I know and I look forward to hearing from you again. :)

Anonymous said...

Hello AK71

Do you happen to have in your mind, what would be the DPU like for Saizen Reits per annum ?

AK71 said...

Hi Anonymous,

You want to read my post titled "Saizen REIT: March 2010 Presentation" as well as the comments which follow. You will find all the calculations there. :)

http://singaporeanstocksinvestor.blogspot.com/2010/03/saizen-reit-march-2010-presentation.html

Anonymous said...

Hello AK71
Thank you.
Had found the info.
Is an estimated 2cents per annum for the distribution. A good source of passive income

AK71 said...

Hi Anonymous,

You are welcomed. Please bear in mind the assumptions I made in arriving at a dpu of 2c per annum. It could be more or less when the time comes. ;)

zaki_77 said...

Take a look at PacShipTr, there is a lot of talk about and fundamentals look good.

May have a realistic potential to becoming a winning REIT. Hmmm...

For me it remains a 3-way toss between k-reit, first reit and now this one. Any help in deciding would be appreciated (as usual)!

AK71 said...

Hi Zak,

PST is not a REIT. It is a shipping trust, like FSL Trust. You might want to read my above post again on why I think FSL Trust is one of my past mistakes. I am no longer interested in shipping trusts. So, I can't comment on PST.

I have, however, heard from many sources that amongst the three shipping trusts in Singapore (PST, Rickmers and FSL Trust), the strongest is FSL Trust.

I would advise that you do a thorough FA before making a decision. Good luck. :)

zaki_77 said...

I certainly will and thanks for the correction.

Cube said...

Hi AK,

May I know your opinion on 2ndChance? Seems to be a high dividend stock too at 12 %.

AK71 said...

Hi Cube,

I used to think that 2nd Chance was just a clothing brand until the MI-REIT saga late last year when the CEO revealed that they heavily invested in the REIT as he saw value. In the latest issue of the EDGE, the CEO revealed that he is thinking of retiring and might sell out if he cannot find a successor.

In the interview, he revealed that 2nd Chance is like a mini REIT and has many property investments. The company's move into real estate investment has helped to increase earnings significantly over the years.

Bearing in mind that the CEO says 2nd Chance is like a mini REIT but with retail businesses, I took a look at the numbers. The company has a NAV of 31.5c. So, it's now trading at NAV. Gearing is at 47%. EPS is estimated to be 4c per annum. It pays out about 90% of its earnings as dividends for a 12% yield based on current price. If it's a REIT, I would not buy due to its gearing. So, it's probably a mistake on the part of the CEO to describe the company as a mini REIT.

If you think of 2nd Chance as a company, its PE of 7.9x makes it look like a bargain. If you think of 2nd Chance as a dividend instrument, it's attractive as well.

However, the downsides are I cannot see any growth catalyst for 2nd Chance as a company and as a dividend instrument, it does not have any incentive to maintain a high payout unlike REITs.

zaki_77 said...

Hi AK, I decided to top up a little with LiMr today. There seems to be a lot of unfounded negative chatter about this reit and I think someone wants in on the cheap.

I have been looking closely at Starhill Gbl. I think it remains possibly the last of the few under-valued stocks in this category. Pretty impressive property itinery as well. Your thoughts?

AK71 said...

Hi Zak,

I would like to have more LMIR on the cheap too, if you don't mind. ;) Yes, disregard the noise and stay objective. :)

As for Starhill Global, would you like to share the reasons why you are interested in this REIT? Any numbers to share?

zaki_77 said...

Well, its trading at 45% below NAV, with a 10.2 yield. Gearing is at 27%

Presence in sg (valued at S$1.6bn), oz, China and Japan (with 7 quality real estates in Japan) is 'risk diverse' as I see it. Its focus remains on quality over quantity and potential to join the 'big players'.

Their debt profile is questionable however, with a S$571m expiring in September 2010. Need more indepth study and confirmation from the management (I have initiated through email).

Strong support at 555 with a near-term target of 62c while broker target remains above 80c. Just my thoughts and apprehensions.

AK71 said...

Hi Zak,

I took a look at the latest presentation by Starhill Global REIT dated 28 Jan 10:

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_3600588AEFCC024E482576B8007BD81A/$file/StarhillGbl_4Q09ResultsPresentation_28Jan10.pdf?openelement

I think you might have been mistaken. Based on today's price of 55.5c and an annualised distribution for 4Q 2009, the yield is 6.99%. The REIT has a NAV of 81c, so at 55.5c, it is trading at a discount of 32% to NAV.

You are right to worry about its debts. Although gearing is at 27%, much of it is due later this year in 2010 and $380m is a CMBS. I would wait for greater clarity on this matter.

Anonymous said...

But to buy stock for dividend is not so good an ideas...

Some stock yield are high becos the shr px have been whack down low for some good reason...

and worse if the px is whck far below your buying px...u are virtually paying yourself your own dividend.

but i see that you bought most at crises px...so you are ok..but what if there is really a double dip which i thk is 80% chances base on ECRI..

if there is a really double dip..the mkt will be so pessimistic that a new low is possible...then your px u bought will no longer be cheap...

and worse...since most reit are gear..at crises time...credit will be a tough call...so is the refinancing...

I wish you all the best...just remember not to go long...long term vesting no longer work...have a trailing stop for all stock..

last, i wish you all the best...hope i have not sound offensive...if it does, then i am sorry...

Anonymous said...

Hi,

I see that you always mwmtion NAV..nav is just part of the equation...PB ratio does not means a stock is cheap...if it does...invester wont pay 1.0 abv for OSIM...

why invester are willing to pay so much for OSIM?...you search it out...

AK71 said...

Hi Anonymous,

If we buy shares of well managed companies at good prices and if they pay good dividends, there is little to worry.

Price is what we pay and value is what we get. Mr. Market could be most irrational and when pessimism overshoots, I hope I would find the courage to buy more. When optimism overshoots, I hope I would be realistic enough to sell some.

I do not know if there would be a double dip although many are debating this issue. Even economists are divided on this. Warren Buffet seems to think that there won't be a double dip. Well, not something for me to lose sleep over. ;)

As for REITs and their gearing, some gearing is usually necessary for businesses to do better. For REITs, it is just part of their business model. Low gearing is one of the things I look for when investing in REITs.

I enjoyed your comment. Not offended at all. However, could you leave your name or initials in future comments? Thanks. :)

AK71 said...

Hi Anonymous,

Which ratios we use or what we look out for would differ between REITs and companies, I believe. This post is primarily about REITs and trusts. I liken buying a REIT to buying a piece of real estate.

Just like we would not want to pay too much above valuation for a piece of real estate, we would not want to pay too much above NAV for a REIT. If we could get a discount to NAV, that is a plus.

Could you leave your name or initials in future comments? Thanks. :)

Anonymous said...

AK71

It is me again..cheongwee(u ask me for name)....i would say balance sheet for blues listed in Singapore can be trusted...but for mid cap and penny...i can hardly believe..we shd not believe everything that is reported by auditors...auditor audited base on what is given by the coy...

If coy director and management want to hide...we are done for...look at ENRON...but to say that blues are risky too.i agree, but chances are rare...

Yes..nobody know where the mkt is heading for...in reality ...not even WB..or LKY can tell us..becos the mkt is just too big...for any individual.

But ECRI..have predicted in advance 7 out of the 9 past recessions accurately...and of course they can still be wrong 20%..but 80% chances is high..good enough for clear action on our part.

I suggest you go to ECRI..and click on the resource...every Friday they publish weekly indicator...whenever -8....recession follow some 2 to 3 months later...you can check their data and compare to a dow historical chart..u be surpirse.

At first, i was skeptical, but later when i investigate further..they have convince me...now it is flat at -10...and also this baltic dry index..they tend to lead S&P by some 5 month..

So..if they are accurate..i thk we see recession at latest either 4Q 2010 or 1Q 2011..

Never mind abt recession or not...mkt is base on invester confident and we shd not shy away from this rally...join in and make money, but must be prepare to run fast....

What is more important is quick action on our part...dont stay vested and follow the stock down and up for nothing...we shd sell and buy back later cheaper..this is so call opportunity cost..make use of crash to make a killing..or get kill...hope not!!!

You are right to be brave to buy at mkt crash...i believe one big one is just ahead..much worse then March 2009...banks in Europe are still bad...US are still bad...have u ask why no inflation when economy are growing...we shd be seeing at least 2%..but how long can they hide? very soon all hell will break loose..

I know we go long..someday it will come back...but for blue only please...no mid cap and reit, or trust..

I believe there are several blues which can give 6%..and we can sleep well with them..though i do not invest for their dividend yield...look at reit..alway raise fund in the mkt...why???

Better be safe then sorry...i would be wrong only if there are no double dip...but i ride on the trend...double or not i will play along..how on earth u can stay on the side seeing your favourite stock flying...

I wish you all the best..really not my wish to have a double dip..so all my friend loses their jobs...but pls take a look at ECRI..go there and see for yourself and come back here to discuss with me on this...i always welcome ppl comment...i am sure i do miss out something which u guy can "see".which i miss....so pls do share ...like u shr here...millions thanks

cheongwee

AK71 said...

Hi Cheong Wee,

Yes, if the management is dishonest and cooks the books, there isn't much we can do. Unfortunately, that's largely what we have to work on, the books. :(

ECRI, I have heard before and I have watched some of the interviews they gave on Yahoo Finance's TechTicker. Quite impressive but like you said, they are not right all the time either and neither is Warren Buffet. ;)

Personally, I try not to be too attached to my investments. There is a time to be invested and a time to be divested. Hopefully, I would be able to do it more adroitly this time round.

I don't know if a recession is coming in 4Q2010 or 1Q2011 and I am definitely not qualified enough to comment on ECRI's reports or Warren Buffet's ideas. ;)

We do what we must to protect our own interests. If I am able to make more money than I lose, that would be an achievement for me. I am very realistic. :)

The investments which I am most bullish on, I hope I have done reasonably good FA and I hope that the use of TA would keep me informed on market sentiments.

There are still uncertainties and stealth risks around, probably. To avoid exposure to such, it might be better to leave our money in the banks and not invest. One could only hope for the best. ;)

Thanks for sharing your thoughts here. Much appreciated. Do visit again soon. :)

Anonymous said...

Hi AK71
What you thk of SPH? or SATS..6% and safer than reit...

cheongwee

AK71 said...

Hi Cheong Wee,

I don't know about SATS but I am vested in SPH. I like SPH for its exposure to the real estate sector in Singapore. Its print business is of course nice to have. It is widely perceived to be a relatively safe company to invest in. Hence, the relatively lower yield.

I see a lot of buying up by institutions and insiders in the REITs I am vested in. I believe that a couple of the REITs offer potential capital appreciation and very attractive yields in the meantime. :)

Anonymous said...

Hi AK71

What stocks and reits are you currently vested...can share with me..i will make a serious study of them...it is for the good of all...yes i will do it...it will definitely benefit me..

Just list them here...thanks.

why? i will go thro them detail by detail to ensure everything they report are in line..with what they said...and i will also list what they go wrong as well...i will go thro their balance sheet..one by one...for all here to share.

may you be well...thanks for your reply.

cheongwee

AK71 said...

Hi Cheong Wee,

I am vested in so many counters, some of which I would rather not remember. Hahaha.. ;p

My three largest investments are currently:

1. Saizen REIT
2. AIMS AMP Capital Industrial REIT
3. LMIR

For blue chips, two which I am vested in and which I like are:

1. SPH
2. ST Engineering

For penny stocks:

1. Courage Marine
2. Golden Agriculture

Thanks for offering to do a detailed FA on these. :)

Anonymous said...

Hi AK71

I will only be able to do late...cause i have heavy project at hand..too busy...

I have just completed Batam ferry point..CCTV project..next itme if u visit Batam...on alighting the ferry at Batam...smile at the first camera u see...that is my project...and also the auto gate...nw will be in Vietnam and follow by Wuhan...

I will not simply read report...i will have to call them to verify certain fact...so u be glad to know that it is not blind reading...and i will have question for them to answer...esp those mid cap u memtion..

Please be assure i will get back here as soon as i am done with my project.

Hope u ride this rally well and make $$$$..good luck to all here..

cheongwee

AK71 said...

Hi Cheong Wee,

You sound like a very busy man. :)

You also sound like you do some serious FA of companies before making decisions. I am very impressed. :)

Hope you have good trips to Vietnam and China.

Hear from you when you are ready. Thanks. :)

Anonymous said...

Hi all

In order for Europe to succeed in their austerity measure and thus solve their debt problem is difficult to achieve...why?

Look at the angmo...can you call them to eat less...if they are Japanese...Korean or Asian..i believe it(the austerity measure) will be successful...but not for Europe...they are done for....just increase their retirement age...strike across the board...cut their benefit ...and bank and cars will be burn...how the hell they can convince creditor abt their austerity measure..

We are waiting for all hell to break loose..they will eventually declare bankruptcy...their citizen cannot co-operate with the govt to carry out all the austerity measure required by creditor..

Look at the Thai for instance...during the financial crises...they even donate gold bar and jewellery to the govt to help them...i am really move...u dont see them go on strike...and even during the red shirt rally against the govt...i was amongst them with not incident...they only go against govt..not tourist..

I believe head win are still ahead...as such...for me no long..."trade as u go basic"...u pls do your diligence...

And to thk US is out of recession is questionable...how can an economy out of the wood without inflation at all???and furthermore ..GDP does not indicate who is spending..if you see data...public spending is ZERO....all those 1.6% growth are fr govt stimulus and spaending..the real economy growth is ZERO..

I thk double dip upfront ..but that does not means we shy away fr the rally...just go along with the flow...but be alert and not be naive to thk the water is blue again so soon...

We are definitely not out of the wood yet....deflationary long deep recession is 80% sure...i suggest not to long...if there is one more dip we will see new low....dow will be below 5000 for sure..

I am no party popper but just look at the data...what recovery is that...housing is still in deep hole and getting worse, but Wall st choose to say "not so bad as expercted"..consumer is not spending...and worse..at current a few ten thousand job created per mth...it is going to take some 20 yrs for employment to be back the pre-crises...US is still the 800 pound gorilla...not China..not even India and China combine can save us...

We got to be safe...or sorry...but i thk if you long...pls do with blues...only blues..

see you a month later...off to Vietnam...

cheongwee

AK71 said...

Hi Cheong Wee,

Thanks for the comment. Here is what I have to say:

Across the board, consumers are spending less in Europe and it was just reported in The Straits Times on 15 Sep that consumption in Europe is down 1% compared to pre-crisis level.

As for the US, they are experiencing mild inflation. As of Aug 10, inflation is at 1.1%. In 2009, it suffered deflation: -0.4%. In the same report in The Straits Times on 15 Sep, consumption in the US is 0.3% above pre-crisis level.

My formal education in Economics stopped at A levels and although I did some Economics in the university, it was in a complementary role in Geography.

I understand that Economics is a subject that thrives on linear reasoning and it stands to reason that if the Europeans need to cut spending for their austerity programs to succeed which would allow them to resolve their debt problems, would this not lead to lower demand all round and result in deflationary pressures?

By definition, if a country must show signs of inflation in order to show that it is growing economically, then, isn't cutting back on consumption defeatist as it would more likely than not result in business failures and deflationary pressures? Is this not a variant of the Paradox of Thrift.

If the US were to avoid deflation which it has done so far, even if the inflation number is marginal, then, additional stimulus is the way to go. A restoration of confidence in businesses is important and before the private sector takes over the reigns, the government has to keep priming the pumps. Whether the private sector would take over the reigns to steer the US economy into a sustainable recovery is the most important question here.

I am not at all sure that anyone has the answer to this question. Warren Buffet probably comes close as he owns so many large businesses in the USA and he sees things picking up and he sees his companies employing more people.

Let's not be overly pessimistic. Things are not, by any means, set in stone.

I am, however, open to contributions by guest writers who would like to contribute articles which are well written, well researched and well supported by data. If you would like to make such a contribution, please email your article(s) to ak71@sillypore.com. Of course, I would have to reserve all editorial rights. :)

Anonymous said...

Hi AK71

Have you ever wonder why they(US) keep revising their figure...last time was 2.6%...then nw adjusted to 1.6%...and that was not the only time...they do that to almost all other data and figure for their own selfish political motive..

Even , in Singapore..dont ever believe in every figure they publish..inflaton 2 to 3%...you know better when you go to the market..

Even food and energy are excluded from inflation figure in the US...what a joke?..i believe your inflaton figure if include food and energy will be a negative,not 1.1%..becos American are poorer now,got no $$$ to spend as before.

And the unemployment actual fig is 16%!!!..no 9.6%..if you include those who given up looking and are survivng on church and charity handout....i saw with my own eye that the line is longer...queueing for food outside the church..

If you visit the Union Square now...there are more homeless people then before..i just came back fr US.2 mths ago...shopping center are ghost mall...the owner told me he is closing down soon...and all along the way...forclosure sign are very common...

But optimistic or pessimistic...we must have some means of protection plan...just like an insurance...i do hope all here have their...must have a plan , for the just in case...dont let the bear takeover your finance...faster thk of a plan to protect your $$$...the best is we share here what is our plan...

Currently, we are in a rally...ride on it and go with the trend...this is my way...the market is dead, but we are alive..market is always right...we dont quarrel with it...

My post here is meant purely for AK71 and some interested non player...my English is lousy...my highest standard is Sec 3....really no bullshit...so i dare not post in your "main ones" that the general mass can read ...

I am a sub-contracter...and i am more verse and confident in Chinese...

Sorry that i cannot really post well....i am off tonite to Vietnam...then back a few day then off to Wuhan...dont judge on my business..saying it is good...if it is...then my business would not have fail during SAR...i am now more prepare for coming crises...and i hope you all are...

I am not out to cause you worry and have sleepless nite...but rather caution you all here...hope u see my point..

may you all be well..bye for now

cheongwee

AK71 said...

Hi Cheong Wee,

As usual, I appreciate your candid opinions and willingness to share. It doesn't matter to me if you did not go beyond Sec 3 in the study of English Language. I do get what you mean and that is what effective communication is all about.

Recently, I tutored a student reading Law and you would be amazed at the convoluted sentences some English judges are capable of forming! Good English? Perhaps. Effective communication? I very much doubt it.

Regarding your warnings, it is never wrong to be more cautious. I agree with you there. I guess we just have to take everything with a pinch of salt. ;)

Have a good trip to Vietnam and I look forward to hearing from you again when you are back in Singapore. Bon voyage. :)

Anonymous said...

It's bear market.. Stocks will plunge and reits the same.

Do we clear out now and load later ?

Matt

AK71 said...

Hi Matt,

That is for you to decide. ;)

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