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Double dip recession or just very slow growth?

Saturday, September 24, 2011

Stock markets around the world had a very bad week. Everyone it seems is expecting a global recession and the accompanying deflation.

In a truly deflationary environment, all assets will suffer and see their prices fall. Equities and precious metals were all sold down across the board, therefore.

However, reading an article in Bloomberg, it is interesting to note that in the USA, "railroads shipments are the highest in almost three years." This defies concerns of an impending double dip recession.


Art Hatfield, a transportation analyst in Memphis, Tennessee, at Morgan Keegan & Co: “We’re not seeing declines in rail volumes that are synonymous with a recession... We remain in a slow growth environment.”
Read article: here.

If we were to look at the Baltic Dry Index (BDI), we see it rising in recent weeks and I wrote a piece on whether it could be time to load up on shares of Courage Marine again not too long ago.


The suggestion is that there is an increase in demand for shipping capacity and because "dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, ... the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity." Source: Wikipedia.

So, is there going to be a double dip recession after all? There are analysts who believe that a recession is a given and some who believe that Europe will get its act together and a recession will be averted. With such conflicting signs, at this point in time, however, it is just a sea of opinions.

Personally, I do not believe in being overly bullish or overly bearish. I believe in being pragmatic. Putting all our chips on a single bet either way could be quite disastrous if we should be proven wrong.

What is being pragmatic? Knowing what the current conditions are, what kind of investments are likely to do better and act accordingly. It is about wealth preservation, if not growth.

Related posts:
1. Courage Marine: Added at 10.5c a share.
2. Should we be staying invested or in cash?
3. Sleep well at night with a plan.
4. Why do I not panic?

What the very rich are doing with their wealth?

I read an article provided by Bloomberg News that Singapore will become the world's top wealth management centre by 2013, surpassing Switzerland and London.


It looks like our tiny island nation is attracting a lot of wealth from around the world and we are not just talking about HNW individuals. We are talking about super HNW individuals and families!

These families are setting up family offices to manage their millions instead of entrusting their wealth to private bankers. They view private bankers as salesmen instead of custodians of their wealth.

Clinton Ang, 38, prefers to manage his family's wealth of about $100 million himself.  About 90% of his family's investable assets are in cash after he sold from October to March its investments in stocks, bonds and most property assets.


Some family offices cater to more than one family to gain economies of scale. It is said that it costs at least $1.5m a year to run a family office that includes an investment team. So, a family will need a minimum of $100 million to justify the expenses.

Personally, I know some very rich people but they never talk about their wealth. So, it is not easy to get a peek into the way they manage their money. Usually, those boasting about their wealth are the newly rich and who might have just attained their HNW status.

There is wealth and there is WEALTH.

ARA: Initiated long position at $1.22.

Friday, September 23, 2011

I initiated a long position in ARA today at $1.22 a share. This decision is based on my TA last evening. Fundamentally, at $1.22, the estimated dividend yield is about 4% but investing in ARA is primarily for growth.


The counter's share price touched a low of $1.20 before closing at $1.205 on the back of very high volume. Such high volume sell down usually has some momentum to follow through. So, we could see ARA's share price head lower next week.

Based on the TA I did last evening, the next supports are at $1.17 and $1.08.  However, seeing how strong the selling was today, there is a good chance that $1.17 will fold if it should be tested.

I am not putting in any overnight buy order, prefering to wait and see how things will unfold next week, given the strength of the selling.

What about the potential positive divergence? It is looking extremely dicey as the MACD took a nosedive today.

Although a fundamentally sound company, its share price could weaken further from here. It might be a good idea to wait for the dust to settle before adding to my newly created long position.

Related post:
ARA: Breaking support. Going lower?

ARA: Breaking support. Going lower?

Thursday, September 22, 2011

I have been looking at ARA. The downtrend is persistent and I have yet to initiate a long position here.

Today, ARA's share price broke its previous low of $1.29, gapping down and touching an intra day low of $1.26 before closing at $1.27.


The DIs are negatively placed but the ADX shows that the downtrend is not a strong one. In fact, volume seems to be reducing as price weakens.

If this continues to be the case, the MACD could indeed form a higher low as price forms a lower low. A positive divergence in the works? Perhaps.

If we would like to do a bit of pre-empting, what price would we buy at?


$1.22 is a price that market participants would remember as that was the low of 21 Oct 2010 and the counter went much higher from there in the following months.

Next would be $1.17 which seems like a significant resistance which was tested many times before being overcome convincingly. It should therefore be an important support if tested. If that goes, we could see $1.08 next.

If we believe in trendlines and channels, we will see that ARA's share price seems to be nearing the support of its down channel.


Of course, this support could be compromised like it was earlier in August. However, when it was compromised, it recovered relatively quickly. Could it happen again?

Tea with AK71: Eldershield.

I am quite aware that I am ageing and, once in a while, I am reminded of the fact by other people.

Today, the government reminds me of this same fact by sending me a notice saying that I would be automatically insured under Eldershield come 31 December 2011.

Eldershield? Me? Wow, elder. This is cheerful.

So, being Singaporean, I want to know "how much"?

Annual premium: $174.96, payable till age 65.
Total premium from age 40 to age 65: $4,548.96

Second question, "what are the benefits"?

Benefits: $400 a month payout (maximum lifetime limit of 72 months).
Maximum claimable: S$ 28,800.00
Lifetime coverage.

OK, next question is harder. Do I need this? I mean is this really necessary? Opinions, anyone?

CapitaMalls Asia: Directions, please.

Wednesday, September 21, 2011

On 15 August, I mentioned that pre-empting a trend reversal did not work out and I ceased buying more shares of CapitaMalls Asia. Then, I used the rebound later in the month to reduce exposure.

On the daily chart, it is interesting to note that the Bollinger Bands are narrowing once more. This reduction in volatility when interpreted together with a rising 20dMA that is on the verge of forming a golden cross with the 50dMA suggests that price is more likely to rise than fall.


In the event that price should go higher, we could see it testing the declining 100dMA and even the downtrend resistance again. These are currently at $1.44 and $1.57 respectively. Gap resistance at $1.40 and $1.55 would have to be overcome first in these two instances.

What if price were to weaken instead? I would wait to see if the low of $1.13 holds up as support, failing which I would want to see if a higher low forms on the MACD. Looking out for a positive divergence? You guessed it.

$120k annual passive income from S-REITs next?

Sunday, September 18, 2011

With the end of 2011 more or less in sight, I decided to take a look at how my aim to generate at least $50K in annual passive income from the stock market has fared this year. Of course, compared to the end of 2010, many things have changed. Don't they say that the only constant in life is change?

Saizen REIT was my largest investment up till early this year. The massive earthquake that struck Japan on 11 March 2011 left huge areas of the country devastated, areas which are economically important. I reduced my investment in Saizen REIT even though its buildings were largely unaffected with only a handful requiring repair work.

It was a decision premised upon possibly more difficult times that would hit the country and from a technical standpoint, further upside in its unit price could be capped. So, reading the charts back then, I waited for a rebound in the REIT's unit price and partially divested my investment in the REIT at gap resistance.

Next, I tweaked my portfolio with funds freed from the partial divestment of Saizen REIT. I further increased my investment in First REIT and initiated long positions in Sabana REIT and Cache Logistics Trust after doing the necessary due diligence.

Not long after, I reduced my investment in AIMS AMP Capital Industrial REIT, shifting the funds from that partial divestment to Sabana REIT, in the process balancing the two REITs' weight in my portfolio.

In 2011, thus far, I have received income from the following S-REITs:

1. AIMS AMP Capital Industrial REIT
2. Saizen REIT
3. First REIT
4. LMIR
5. Cache Logistics Trust
6. Sabana REIT
7. Suntec REIT
8. Cambridge Industrial Trust
9. FCOT

Total: $75,785.49.

Therefore, I have exceeded my personal target of $50k in annual passive income generated from investments in the stock market this year and this is from S-REITs alone.



At the end of this year, I will calculate the amount of passive income which S-REITs alone would have generated for me in 2011. It is quite likely that it could surprise on the high side.

Taking the cue from the blogmaster of Bully the Bear, I might have to set a higher target for myself in 2012. What about $120k next? Why not?


12 of this every year? Wah!

I will end this blog post by again saying: "If AK71 can do it, so can you."

Joi Kin! (ala "Yan can cook, so can you!")

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