Commodity Market Archives - Page 2 of 3

3 Strategies for Crude Oil ETF (USO) 大小通吃

Posted on March 29, 2020 Written by Dr Tee (Ein55)

When WTI crude oil falls below US$20/barrel during current Crude oil price war (between OPEC and non-OPEC), price is cheaper than mineral water (same volume) for some countries, it is attractive to buy USO (WTI oil etf) for long term, I am not surprised if Jim Rogers (long term commodity lover) may be accumulating when crude oil prices are at low optimism.

OPEC (Saudi, etc) and Non-OPEC (Russia, etc) could not sustain for long term (over a few years) with WTI < U$20, despite low production cost (about US$5/barrel for Saudi, about US$20/barrel for Russia) as national expenses of oil produces countries are also high, money from crude oil is main source of national revenue.

One may leverage on crude oil crisis, either investor or trader could benefit if aligned with own personality. WTI and Brent crude oil prices correlate well, differences are about a few dollars per barrel of oil prices. When Brent is below US$25/barrel, WTI would be near to US$20/barrel, so either price may be used for analysis, then easy to take action through USO (WTI oil ETF).

Here are 3 main strategies to invest in USO crude oil ETF:

1) Long term investors

1.1) Contrarian investors

This is suitable only if one could hold more than 3 years, use low optimism and strong holding power on a commodity giant (oil won’t drop to $0, similar to property or land, also a giant by default). Risk management includes diversification (not just invest in crude oil) with position sizing and progressive entries (eg. 10 times x 10%).

Assuming $20/barrel is the first target (use either WTI or Brent for analysis, be consistent), trigger the first buy, then when drop to $15, $10, $5, $1 (similar to car COE drops to $1, assuming something nearly impossible happens), trigger possible more entries until extreme low optimism (no one would know the lowest point but likely not $0).

Saudi and Russia are pressing the oil price down but US & China and global giant funds, may standby to buy low as national reserves. Crude oil in the world is limited in supply, therefore it has its intrinsic value, especially world needs crude oil for energy (more demand when Coronavirus crisis is over).

1.2) Trend-following (short term traders / long term Investors)

After reaching lowest point one day (only history could tell), crude oil would start to recover. The same group of investors may use the remaining capital to add more positions (still low optimism). Traders who long would also join at this phase for short term trading

Since the market trend now is bearish, trend-following investors or investors who long the market would choose “Wait” action.

2) Short term traders (shorting)
This is suitable for short term trading, aligning with current bearish trend, aiming for every major support, eg $20, $15, $10, $5, etc (these levels are just for examples)… whenever breaking below, shorting would be initiated. Traders protected by position size and cutloss (risk could be high for leveraged trade in a volatile market). S&P 500 trend over the past 1 month of falling 30% following by over 10% of weekly gain is a good example of intense fight between bull and bear.

So, one could “Buy” (contrarian investors), one could “Wait” (trend-following investor or traders who long), one could “Short” (short term traders), all 3 actions are correct if aligned with own personality. If one follows others to take action, then all 3 actions could be wrong.

Since crude oil is a giant, crisis in price is an excellent opportunity to invest with at least 3 strategies. Learn from Dr Tee 4hr Free investment course on how to take actions in crude oil and global giant stocks.
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Filed Under: Commodity Market, Market Cycle Investing, Market Optimism, Market Outlook Tagged: crude oil, etf, investment strategies, uso

Investment Money Has Eyes (水涨船高)

Posted on March 22, 2020 Written by Dr Tee (Ein55)

Money has “eyes”, will find its way through the global investment markets (stocks, properties, commodities, bond, forex, etc), looking for higher and quicker return in bull market (eg. stock and property markets with stronger economy); seeking safe haven market for safety during bear market (eg. more cash in bank or higher demand in bond market with weaker economy).

When investment market is fearful, fund with global money would flow from stocks to bonds (especially for Level 3 country level bond, eg. US treasury bond) due to safety, resulting in higher bond price, therefore lower bond yield. US 10 years treasury bond yield even dropped to about 0.5% during the recent flash stock market crash, recovering to around 1.1% recently, but still at historical low level.

A few key points on investment money flow:

1) US is No 1 world economy, a safe haven, despite lower interest rate (0%), USD is stronger during current bear market, therefore USD/SGD at high optimism, about 1.45 exchange rate. Similarly, usually emerging market currency would be stronger during a bull market. Forex traders or overseas investors (require forex consideration in stock or property investment) have to understand impact of economy and stock market, etc, on each pair of forex.

2) US government bond yield at 1% is no longer for investment, more for safety. Therefore, it is possible even for bond market to have major correction (price down, yield up) but only when confidence of country is affected and there is opportunity in stock market recovery, then fund would flow from bond market or cash (in bank or under pillow) to stock market again.

3) When market sentiment is fearful, even Level 1, individual bond (corporate bond) would suffer but bond has fixed income and guaranteed for principal upon maturity, therefore it is possible to invest in corporate bond with higher return (eg. over 5% bond yield) but need to focus on shorter term bond (<6-12 months to avoid higher risk during potential global financial crisis) with strong business fundamental (unlikely to default in bond, supported by strong asset, earning or cashflow with lower debt).

Current global stock market crisis (about 30% is US / Singapore, 40% in Europe) is only a stock crisis due to fear (technical recession with falling in stock prices), not yet a global financial crisis (with declining economy) but investor has to monitor very closely, especially the 2 black swans of Coronavirus condition and Crude Oil market price war, making crucial decision before summer (Jun-July 2020).

Since global Quantitative Easing (QE or printing of money) is back again, the natural balance among the investment markets would be affected. With QE, it is possible for both stock and bond market to rise (flooding of money) and drop (exit of QE) together, not necessarily opposite to each other (usually when there is no QE).

Recent global stock crisis is a major reversal of how the smart money may flow among the 5 major investment markets (cash in bank, stock, bond, property, commodity, forex).

Readers should take proactive actions in next few months, especially for stock market, many global giant stocks are at very attractive discount (some even more than 50% correction) but positioning requires a unique combination of counter-trend and trend-following strategies aligned with own personality.

Learn from Dr Tee free 4hr investment course to position in current global stock crisis: What stocks and other investments to Buy, When to Buy / Sell.

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Filed Under: Bond Market, Commodity Market, Forex, Property Market, Stock Market Tagged: bond market, commodity, forex, investment money, Property Market, stock market

Strategies for Gold & Silver Trading and Investing

Posted on March 15, 2020 Written by Dr Tee (Ein55)

Gold and Silver are popular precious metals for commodity trading. However, they are no longer effective hedging tools against market fear (eg. inflation or uncertainty), when common pool of investors are fearful of stock market, especially during global financial crisis, commodity market (including gold, silver, crude oil, etc) would fall as well.

Over the long term, gold and silver move in similar mega direction for price trends. They have more unique mega market cycle of 30 years (dual peaks in 1980s and 2010s), therefore longer term investor of gold and silver must know their optimism level to lower the systematic risk due to market cycle. Both gold and silver have crashed in year 2013, after reaching the 30 years mega peak.

From investing point of view, despite gold and silver relatively at moderate optimism in long term but when global commodity market (eg. crude oil) and stock market are falling, the fear from similar group of investors may correct the gold and silver prices.

Relatively, gold and silver also have relative competition, maintaining gold/silver price ratio of about 20 to 100 over the past 50 years. Currently, gold/silver ratio is near to the historical (50 years) peak of 100, implying gold has more downside relative to silver. Some smart investors apply the spreading (20-100) of gold/silver ratio for trading, eg

1) Sell Gold Buy Silver

when gold/silver ratio is crossing below 80

2) Buy Gold Sell Silver

when gold/silver ratio is crossing above 40

After the major correction, since Year 2016, Gold has been bullish for the past few years, suitable for momentum trading to buy high sell higher. In the same period, Silver is also recovering but more cyclic in nature (silver is as if a more cyclic “penny stock” while gold is a more stable “blue chip”), suitable for swing trading over the past few years.

From trading point of view, gold has higher risk of falling for short term to mid term as gold prices are falling below US$1550/oz, the neckline of double top at high optimism (crossing below 75% optimism around $1600 was an earlier signal for exit for trading).

Unlike stock, gold and silver are pure trading tools, no business fundamental behind. So, follow Technical Analysis to position if interested. Gold has to break higher than US$1600 to resume the uptrend, therefore traders may wait if there is a reversal.

Long term trend for silver is similar to gold but short term silver is much weaker in price strength compared with gold. Currently both gold and silver are under shorting pressure due to short term bearish signals.

There are several major investment markets (commodity – eg gold / silver, stock, property, forex, bond, bitcoin, etc) with unique market cycles but they share 3 universal formula to make money from investing or trading:

1) Buy Low Sell High (Cyclic Investing)

2) Buy Low & Hold (Growth Investing)

3) Buy High Sell Higher (Momentum Trading)

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Filed Under: Commodity Market, Market Outlook, Technical Analysis, Trading Tagged: commodity, gold, investment strategies, market outlook, silver, technical analysis, trading

Crashes in Global Stock Market and Oil Market

Posted on March 10, 2020 Written by Dr Tee (Ein55)

Global stock markets crashed yesterday, dropping as much as 7% (with protection of circuit breaker) for US stock market, 6% for Singapore stock market. There could be more downside if fearful emotion continues.

Oil crisis comes faster than Coronavirus spreading, Brent crude oil price dropped to about US$30/barrel overnight. Saudi could cut oil price because the production cost per barrel is the lowest. Price war is lose-lose for for both OPEC and non-OPEC, see who could last longer. Eventually, this could trigger Level 3 country financial crisis as national income would be reduced significantly.

Crude oil is a giant commodity by default, it could not drop to $0 (unless end of the world when energy is not required anymore, then investment or money is also no longer important) as a stock but it could stay at low optimism level for a long period of time, especially under manipulation of certain forces (eg. OPEC). This drama is not new, episode #1 was about 5 years ago, aiming to wipe out shale oil producers in US with higher production cost. Eventually, the shale oil producers still survive but becomes more efficient in operation, harder this time in Episode #2 of global oil price war.

It could be no-brainer investing when Brent crude oil dropped to or below US$30/barrel, one could position in crude oil through USO (oil ETF) as Saudi and Russia could not sustain in long term at this low price (perhaps only Saudi could still make a profit due to low production cost). However, such a contrarian investor (similar to Warren Buffett style) needs to have strong holding power, at least can hold longer than oil produce countries before they burned out first.

Similarly there are many blue chip stocks, buy low could get lower in bearish short term market, not suitable for speculator. Global stock market is not yet very bearish yet, so far is only a major correction. Again, shorter term trend-following strategy is safer during this uncertain market, either for exit (could have exited last week if following signal, eg. S&P 500 below 3000 points) or entry again.

Everything has 2 sides, when oil price is crashed, consumers such as car drivers are happier with lower petrol cost. However, one has to look at a bigger picture, lower inflation or cheaper price is not always a good news because when global economy is weak, one could even lose the job because company may be eventually losing money as well.

Learn further from Dr Tee to leverage on current Oil Crisis and potential global financial crisis with stock market crash. Register for Dr Tee Free 4hr Course to position with crash in global stock market: www.ein55.com

Filed Under: Commodity Market, Macroeconomy, Market Cycle Investing, Stock Market Tagged: crude oil, global financial crisis, stock market crash

Triple Short Term Crisis of Oil & Gas Stocks （屋漏偏逢连夜雨）

Posted on March 9, 2020 Written by Dr Tee (Ein55)

Global Oil & Gas sector has been under crisis mode over the past 6 years, Brent crude oil fell from US$115 (year 2014) to $27 (year 2016) per barrel, about 25% of peak price, a very low optimism for the past 2-3 decades, ending the mega bull run for commodity market (including crude oil, gold, agricultural products, etc).

Over the past 4 years, crude oil together with commodity market in general has been struggling with recovery in prices, achieving an intermediate high of US$86 (year 2018), falling down again to $50, then gradual growth, stable between $60-$70 in last 2 years with joint effort by OPEC and non-OPEC (eg. Russia) oil producer countries to control the oil supply, in an attempt to stabilize the market prices.

Unfortunately, Crude Oil is currently facing triple short term crisis over the past 2 months:

1) Coronavirus

There is less global demand for crude oil. There is less manufacturing in countries such as China which is a major energy consumption country. Some global airlines also cut down flights by more than 30%.

Less demand = Lower price for crude oil.

2) Fall in global stock market

Fear driven stock market fall (especially in US) has affected the confidence of global investors who also invest or trade crude oil, anticipating lower demand for crude oil.

Bearish emotion = Lower price for crude oil

3) Political Conflicts (OPEC vs non-OPEC)

After expiry (end of Mar 2020) of agreement on production cut, it is possible for supply for both OPEC and non-OPEC to increase significantly. Of course, it is possible for interested parties to extend the collaboration but their influence would be weaker each time. The global market share of crude oil could be taken by countries who may not follow the agreement (eg. Iran which needs cash or US with shale oil as new major exporter with lower cost per barrel).

Higher Supply = Lower price for crude oil

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As a result of triple short term crisis, Brent Crude Oil drops to US$45/barrel currently. $40-$45 is an important support zone (low prices during 2009 global financial crisis), if breaking below $40 while there is no quick solution in a few months with reversal for 3 short term crisis above, it may challenge the last long term support, $27/barrel recorded in early 2016 during the earlier Oil & Gas Crisis.

If so, global Oil & Gas stocks would be under price pressure, falling back to low optimism again. Upstream Oil & Gas sector (eg. exploration of oil) would suffer the most from falling in oil price, following by integrated oil & gas companies. Mid-stream (eg. storage and delivery of oil & gas) and Down-stream sectors (eg. refinery, processing of petro-chemical) would have less impact on its business. Careful selection of Oil & Gas stocks are critical, especially if the current Level 2 (Oil & Gas sector) crisis may be combined with bigger scale of Level 4 black swan (Global Financial Crisis.

Oil & Gas stocks are generally cyclic in nature due to fluctuation of oil price, therefore better to position with Buy Low Sell High strategy, more suitable for trading.

“Crisis is Opportunity” is true only if one knows What to Buy (giant stocks), When to Buy (timing, too early may catch the falling knife) and When to Sell in future (taking profits or potential cut loss if trading in an uncertain global stock market at high optimism).

Learn from Dr Tee Free 4hr investment course to position in global giant stocks with discounted prices, mastering the investment clock for entry / exit. Register Here: www.ein55.com

Filed Under: Commodity Market, Macroeconomy, Stock Market Tagged: crisis stock, crude oil, oil & gas stocks

Selection Criteria of 5 Different Investment Markets (Stocks, Properties, Bonds, Commodities, Forex / Cash)

Posted on October 24, 2019 Written by Dr Tee (Ein55)

Stocks (eg. Dow Jones Index / individual stocks), Commodities (eg. Gold / Crude Oil), Bonds (eg. US treasury / corporate bonds), Properties (house / land), Forex / Cash, are 5 different investment markets, behaving in unique way with different market cycles, capital gains and probability of success. Investors need to choose or consider the right investment market as an overall investment portfolio, aligning with own unique personality. Let’s learn the main selection criteria:

1) In all investment markets over the past 100 years, Stock Market is proven to have the most upside potential over a long term (at the expense of more uncertainties in shorter term for traders) but requiring knowledge of choosing giant stocks (strong fundamental stocks), ideally buying at low optimism of stock market cycle (eg. during global financial crisis) and hold for long term or selling high at next high optimism of stock market cycle. Many investors fail due to selection of junk stocks with weak fundamental, holding for long term, resulting in tremendous losses (when company goes bankrupt eventually, share price would drop to $0). Strong fundamental giant stocks could grow in both business and share prices over 10 times or even 100 times over decades of long term investing.

2) Property Market by default is a giant (especially for country such as Singapore or Hong Kong with limited land and growing population and rising economy over the decades), main investment tool is leveraging (loan, which is similar to CFD in stock market) for higher return, best to integrate with low optimism of property market cycle (usually 3-6 months after the low optimism of stock market cycle), hedging against inflation (about 2-3% yearly) and collect rental income with capital gains. Property stocks or REITs are hybrid of property and stock markets, having the value of property and cyclic nature of stock prices.

3) Bond Market is lower return and “safer” but some could end up as junk bonds (eg. Hyflux and some oil & gas companies in crisis), business with high debt and negative operating cashflow or losses with high bond yield is a potential value trap as it may not be sustainable in long term. In the current market, short term corporate bonds are relatively safer (<12 months maturity) if the companies have strong fundamental, could be better than cash as parking fund to wait for next investment opportunity while enjoying higher return than bank interest for cash deposit in banks or government bond (eg. Singapore Saving Bond).

4) Commodity Market usually has longer market cycle (eg. about 20 years for crude oil, 30 years for gold), may not be suitable for long term investing as it could not generate passive income as stock (dividend) or property (rental) or bond (coupon) or even cash (interest). Commodities are mainly for trading to buy low sell high, knowledge of optimism in market cycle (short term or long term) will be important.

5) Cash is King when used at the right time. When other investment market optimism is high, investors may take profits, % cash or safe fund (eg. government bond) will be relatively higher as opportunity fund. Holding cash in different currencies require understanding of Forex. Saving cash in SGD has strength for holding (moderate appreciation against most global currencies) but more importantly, cash has to be converted into other investment opportunities above at certain point for higher return.

Learn from Dr Tee in Free 4hr investment courses to learn the investment clocks of Stocks, Properties, Commodities, Bonds and Forex / Cash: What to Buy, When to Buy / Sell. Register Here:

Filed Under: Bond Market, Commodity Market, Forex, Property Market, Stock Market

3 Strategies on Oil & Gas Stocks Investing

Posted on January 31, 2019 Written by Dr Tee (Ein55)

Winter time (low optimism) of crude oil is longer than expected, after recovery over the past few years, it corrected down again over the past 1 year, recovering again over the past few months. Many oil & gas stocks, especially for upstream sector, revenue of business is very much dependent on crude oil price, therefore the cyclic business performance has resulted in cyclic share prices.

For oil & gas stocks, besides business fundamental, success in stock investing or trading is mainly dependent on alignment with prices of crude oil which trends are time-dependent. Here are 3 strategies for 3 different types of investors with 3 different personalities:

1) Long Term Investor (decades): Uptrend (Low Optimism)

Unlike stock market with market cycle of about 10 years, crude oil is a commodity which has a much longer market cycle of 20-30 years, therefore a very long term view (decades) is required. Crude oil is a critical energy related commodity, its price could not drop to $0 as a commodity (possible for stock in crisis), therefore it is a giant in nature. Similar to property, long term trend of crude oil is increasing over the decades, currently at low optimism (potential buying zone). However, if an investor does not have holding power, could make a loss as buying low could ending up lower if holding power is weak.

Currently, the second dip over the past 5 years have established a higher low which is a strong support to crude oil long term investor. However, since global stock and property markets are at moderate high optimism, if the next global financial crisis is triggered by another asset class of investment market, commodity market could be affected despite the optimism is not high as global funds are connected through common pool of investor with money.

Therefore, it is relatively safer to hold a shorter term position, applying trading on oil & gas stocks. One could compromise to become a “short term investor”, i.e. buying strong fundamental oil & gas stocks as if an investor but buying or selling the stocks by following the price trends in shorter term as if a trader. This is an integration of trading into investing in view of global economy and stock market.

2) Medium Term Trader (years): Uptrend (Moderate Low Optimism)

Medium term trading is a compromise between investing and trading. Current trend is uptrend at moderate low optimism with recovery in prices of both crude oil (commodity) and oil & gas stocks over the past few months which is ideal for trader who is interested in buy low sell high for capital gains. However, since the market uncertainty is high (eg. unknown on outcome of US-China trade war negotiation by 1 Mar 2019), a trading plan with S.E.T. is required: Stop Loss, Entry Price, Target Price.

Despite focusing in trading, a trader could consider strong fundamental oil & gas stocks (eg. growing or recovery in earning and cashflow), avoiding stocks with relatively high debt (eg. Debt/Equity >> 1) which may not last through the winter time of crude oil.

3) Short Term Trader (months): Downtrend (High Optimism)

Over the past 6 months, for short term traders (buy low sell high every few months), the current trend for oil & gas stocks is downtrend at high optimism, aligning with direction of crude oil. The probability is higher for shorting, especially when supported by some negative financial news (eg. US-China trade war, UK Brexit, China economy slowdown, bankrupt of another oil & gas company, etc). Similarly, shorting in short term requires a trading plan with S.E.T., except the strategy is reversed (making money when price is falling). A trader who is not comfortable with shorting (higher potential risk when not managed properly) may also adopt a “Wait” strategy, waiting for stronger uptrend of crude oil and oil & gas stocks.

Of course, for very short term traders (weeks or days), there are different trends and optimism. There are always trends within trends, depending on timeframes of investing which is personality dependent. Therefore, before an investor or trader plan on position of stocks, should strongly consider own holding power, risk tolerance level, reward expectation, emotional control, etc.

Interested readers may learn from Dr Tee free 4hr course to construct a dream team stock portfolio with global blue chip stocks (including oil & gas crisis stock investing). Register Here: www.ein55.com

Filed Under: Commodity Market, Market Outlook Tagged: crude oil, oil & gas stocks

5 Stock Investing Lessons from Car COE

Posted on November 28, 2018 Written by Dr Tee (Ein55)

Latest Singapore Car COE for Cat A (Nov 2018) is $25000, falling from nearly $100000 over the past 6 years till now. Many people wonder if it is possible to get COE at $50 or even $1 again.

I review the last year Ein55 Graduate Homework (Nov 2017) in application of Optimism on Singapore Car COE, here are the 5 lessons which can be learned and extended to stock investing.

1) Trend of long term car COE is up, indicating COE has become an asset (although limited lifetime of 10 years) or commodity which has value.

– Similar to investing, even for giant stocks which could grow in share price over the decade, they may not be suitable for everyone, only for longer term investors. A key difference is stock value could remain or stronger after 10 years but Singapore Car COE would drop to value of $0.

2) Optimism has been declining over the past 6 years, COE price trends have been bearish in short term and medium term. Over the past few years, each time COE shows a record lower price since the peak of $100000, potential buyers would get attracted to buy car but get disappointed later as price continue to drop further the next year.

– Similar to investment, even for long term value investing stocks, their share prices could fall in short to medium terms. Therefore, integration of trading into investing is crucial, avoiding buy low get lower. More importantly, an investor should know the fair value of a stock, buying at a low optimism price.

3) Few people is able to buy at $1 historical low price of Car COE as usually it happens during global financial crisis when most people are fearful with limited cash or purchasing power. The timing of next possible $1 Car COE price depends on when will be the next global financial crisis and also the degree of low optimism.

– Similar to stock investment, we don’t have to guess when a crisis would come. Instead, we just wait for the low prices come to us. When the great sales of global stocks (global financial crisis) has come, one needs to prepare in advance, eg. selling stocks at high optimism first, converting to cash, waiting patiently for prices to drop below value again, more precisely, a low optimism price. This way, we don’t have to speculate on future happening, depend on known facts of value and prices available now to make a high probability decision: Buy, Hold, Sell, Wait, Shorting.

4) In general, Car COE Category A < $10,000 could be considered low Optimism price, any lower price (eg. $1 to $9999) is just a bonus. Value is what you get (10 years COE) and price is what you pay. Therefore, for 2 different car buyers, one may buy COE at $10000 while another one may be lucky to get at $1, but both will be happy, $10000 buyer may not think “losing” of $9999 when comparing with lucky case of $1.

– Similar to stock investing, investors should not speculate to buy at the lowest price as it is nearly impossible to know (reverse is also true, to sell at the highest price). Instead, we should apply Optimism to know when to buy low enough, when to sell high enough, which is more reliable from probability point of view. Some stock investors who acquires stocks at high value (eg. high quality assets of property or cash), they may still feel “lose” money when share prices fall down. One should train to view value and price as if buying a handbag at 2 different sales, one could be 50% sales, another one could be 70% sales, both are bargains, no need to buy at the best sales which no one would know exactly.

5) For car owners with COE expiring soon, there is an option to renew with 5 or 10 years extended COE (at the current rate of $25000), using the next 5 or 10 years to wait for the next global financial crisis, if it happens 2 years later, just sell back the remaining years of COE (eg. 3 or 8 years) at the original price of $25000, buying a new car with lower optimism COE price (eg. less than $10000 for Category A), “earning” from the difference.

– The strategy above is similar to shorting in stock trading, sell high buy low. Although there is no shorting in Car COE, this is a strategy as car owners may not able to wait for a period of time without car to buy car at low optimism price. However, it is possible for stock investors to keep 100% cash, waiting for the next global financial crisis to buy low safely with 10 global giant stocks, assuming one has the holding power through the winter time of stock market.

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Learn from Dr Tee in high-quality 4hr free stock investment course to learn the Optimism strategies with integration of Fundamental Analysis (FA), Technical Analysis (TA), Personal Analysis (PA) with integration from markets Levels 1-4 (business, sector, country, world).

Filed Under: Commodity Market, Market Cycle Investing Tagged: Car COE

Consumer Stocks: Discretionary vs Staples

Posted on February 23, 2017 Written by Dr Tee (Ein55)

Ein55 Newsletter No 052 - image - Consumer products

Stock prices will rise over time when business is growing. Consumer stocks depends on businesses in consumer market. A consumer business sells us products and services which could be in 2 broad categories:

1) Good to Have (we WANT)

Optional for us, eg high end restaurants, premium property, branded handbag, children enrichment programs, etc.

In stock market, “Good to Have” are Consumer Discretionary stocks, they are usually dependent on consumer purchasing power which subject to economy condition. In a bull market, many people could make money in stocks or properties or having a higher increment in salary, therefore having more budget to buy non-essential products, eg. a car with high COE price, even public transportation is easily available. In a bear market, this type of stocks are likely to fall down badly in share prices.

One could position with “Cyclic Investing” strategy for Stocks or Business with Good to Have products or services.

2) Must Have (we NEED)

Essential for us, eg. basic 3 meals in foodcourt or simple bread & coffee at home, a house (HDB) to stay (rent or own), a bag which we could carry when going for work, children public transport to school, etc.

In stock market , “Must Have” are Consumer Staples stocks, they are usually more defensive, needed in daily life regardless of economy condition. Whether good time or bad time, people still need to eat & drink, taking bus or train, wearing clothes. Most people are unlikely to cancel their mobile phone plans or cut their utilities (water/electricity/gas) supplies.

One could position with “Long-term Defensive or Dividend Investing” strategy for Stocks or Business with Must Have products or services.

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In actual stock market, most stocks are hybrid of Good to have and Must have, because the definition of needs are dependent on individual. Therefore, we could have a variety of investing strategies over a spectrum of needs for products and services.

Filed Under: Commodity Market, Stock Market Tagged: Consumer Stocks

How to Capture Falling Knife Safely for Stocks in Crisis?

Posted on August 3, 2016 Written by Dr Tee (Ein55)

Ein55 Newsletter No 035 - image - Falling Knife image

Every crisis is an opportunity. We have learned to be greedy when others are fearful. However, not everyone is mentally prepared to buy low and sell high following one’s personality. When a business is in crisis, the stock price is like a falling knife, one could get hurt when enters too early, buy low and may get lower, emotionally affected with the endless falling prices.

For example, over the last 2 years of crude oil crisis, stock prices of global oil & gas stocks are significantly corrected. Singapore oil & gas stock index is at 9% optimism (see chart below), a very attractive price level over the last 10 years, upside is much higher than downside from a long term perspective. However, whenever there is a technical rebound due to good news (eg. recovery of crude oil price), there could be another negative news who correct it down further (eg. Swiber plans to wind up the business recently).

Ein55 Newsletter No 035 - image - Falling Knife

Here are a few important considerations for us to safely capture the falling knife of a stock in crisis:

1) Fundamental Analysis

Some weaker stocks may not survive through the crisis. It is critical to always consider giant stocks with strong fundamentals. Based on the survival of the fittest, after the winter is over, these strong stocks will grow stronger, especially there are less competitors with higher demand then. For more conservative investors, one could wait patiently for signs of reversal in the business performance.

2) Technical Analysis

While long term view of a stock could be at attractive low price, the intermediate price trend usually is bearish for a stock or sector in crisis, eg. commodity, shipping, casino, etc. It is important to follow the trend before entry, waiting for the falling knife to drop the floor first, before pick it up safely. Confirmation of uptrend is required, aligning Level 1 (individual stock), Level 2 (sector / industry), Level 3 (country / region) and Level 4 (whole world).

3) Personal Analysis

One should know own’s personality before deciding whether short term trading or long term investing is a more suitable approach. It is hard to force a trader to buy low and wait for several years to have tremendous capital gains. At the same time, a true investor could grab an opportunity even with counter trend in prices, ignoring the daily market news, using strong holding power to reverse the trend eventually, buy low sell high.

Filed Under: Commodity Market, Fundamental Analysis, Market Cycle Investing, Personal Analysis, Technical Analysis Tagged: commodity, oil & gas

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