Stock & ETF Investing Opportunity in BRICS – Emerging Countries

Ein55 Newsletter No 026 - image - BRICS

Due to global economy slowdown in the last few years, stock markets in the emerging countries have suffered significant corrections, resulting in Level-3 (country/region) crisis.  The leaders of emerging countries are BRICS (Brazil, Russia, India, China & South Africa), stock prices are now at very attractive prices.  When the global economy starts to recover and accelerate, these emerging stock markets will benefit as well.  One could use ETF to trade or invest global stock indices.

Due to economy and political instability, Brazil stock market now is at 18% Optimism, after 57% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Brazil

Russia has suffered from falling in global oil price, economy is severely affected. Russia stock market now is at 16% Optimism, after 65% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Russia

India is relatively stronger compared to other BRICS, stock market now is at 34% Optimism with only 13% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - India

China is world No 2 economy, although Optimism is similar to India at 34%, stock prices have heavily corrected by 43% after the last round of speculative bull run, falling down from peak of 5200 points (see chart below).

Ein55 Newsletter No 026 - image - China

South Africa is relatively smaller in economy size, Optimism now is at ideal 25% Optimism with only 20% correction in stock market (see chart below).

Ein55 Newsletter No 026 - image - South Africa

The level-3 crisis and opportunity mentioned above requires longer investing strategy because global economy recovery is a gradual and longer term. Political economy is also crucial for the recovery of stock markets.  BRICS have to compete with US which is now at moderate high Optimism of 68% (see chart below) with more bullish economy, challenging the next historical peak in stock prices.

Ein55 Newsletter No 026 - image - US

If there is still a last global rally in stocks, BRICS may recover strongly with US stock market may rise to new historical high.  Other smaller emerging countries stock markets (eg. Southeast Asia) and many individual stocks may follow BRICS as well. However, after the next bull run, there could be another perfect storm waiting ahead, level 4 global financial crisis may severely injured all the global stock markets, both US and emerging counties. The ability to know when to sell to take profit will be crucial.

 

 

Opportunity to Buy Stocks during Level 1 – 4 Crisis

Ein55 Newsletter No 024 - image - Crisis is Opportunity

“Be Greedy when Others are Fearful”, Warren Buffett. 

Many people buy stocks when they feel safe and comfortable, after seeing other people making money, only then they chase after the opportunities, sometimes caught again when market sentiments start to change.  A safe way of buying stock is to wait for crisis, when people worries about the stock market, only then they will sell their best value stocks at discounted price to us.  Every crisis is an opportunity!

There are 4 levels of Crisis:

Level 1 (individual stocks)

– company with falling share price or business, eg. Noble, Keppel Corp, Golden Agri, etc.

Level 2 (sector / industry)

– sector correction, eg. Oil & Gas stocks, Casino stocks, Shipping stocks, etc.

Level 3 (country / region)

– stock market correction, eg. Hong Kong Hang Seng Index, China Shanghai Index, etc.

Level 4 (world)

– Major economy slowdown, eg. China

For a falling stock price (Level 1 crisis), it is only worth considering if it is related to sector correction, not mainly because of own business is declining.  A business may go bankrupt but entire sector/industry would nearly always come back after the winter time is over.  A trader would require minimum Level 2 crisis to buy stocks, currently there are many opportunities for Oil & Gas stocks, commodity stocks, retail stocks, casino stocks, shipping stocks, etc.

However, an investor with higher profit target will need to wait for larger scale of crisis, either Level 3 (country / region) or Level 4 (global market).  The golden investing opportunity of life time is to buy stocks which consistently make money in business (even during crisis) but the stock prices drop more than half because people worry the sky will fall down during global financial crisis.

It can be very easy or can be very tough to grab on the trading and opportunities above to buy low during Level 2-4 crisis. If we follow majority of people to trade/invest normally, usually will end up buy high because we feel more comfortable in a bullish market.  If we could follow abnormal strategies like Warren Buffett did in the past, wait patiently for the giant stocks to fall down, buying them at great discount in Global Stock Sales (as if Great Singapore Sales, GSS) when other traders/investors are very worried, the reward could be significant.

 

 

How to Choose Stocks which Could Grow 30 Times in Price?

Ein55 Newsletter No 023 - image - Jardine Banner

Jardine Matheson Holdings (JMH) / Jardine Strategic Holdings (JSH) has over 180 years of history, the group includes famous brands such as Dairy Farm, Jardine Cycle and Carriage, Hong Kong Land, Mandarin Oriental, etc.  Although JMH and JSH were removed from 30 STI components in 2015, it is still considered a blue chip, suitable for investing.

The chart below shows the stock price history of JMH over the past 18 years.  For long term investors, there are 2 strategies for capital growth to achieve higher stock price:

1) Market Cycle Investing (Buy Low Sell High)

Long term optimism chart developed by Dr Tee could show the timing to Buy Low Sell High (circled, see chart), upside potentially in a few years usually could be around 50% – 200% (3X).  This is an investing strategy integrating trading principle of buy low sell high, following the market cycles to buy/sell blue chips.

2) Value Investing (Buy Low Hold Forever)

Some investors prefer to buy and hold the stock over the lifetime. If the right stock is chosen, one could benefit from passive income (consistent yearly dividend) and also tremendous capital gains.  From the chart shown, one could earn 30X if able to buy and hold JMH for the last 18 years.

Ein55 Newsletter No 023 - image - Jardine Matheson Holdings

The strong fundamental stocks with consistent earning could help to sustain the growing price over many years.  Whether to Buy Low Sell High or Buy Low Hold Forever, it depends on investor personality.  Not everyone can be a long term value investor because it involves 4 knowhow:

1) Know What to Buy

– not every stock is suitable for long term investing

2) Know When to Buy

– one could lose money if buying blue chips at high price, the ability to buy low will create safety margin to reduce the future risk

3) Know When to Sell or Continue to Hold

– a good stock now may not be a good stock in future, careful monitoring of yearly business performance is a must for long term holding

4) Holding Power

– emotional management of Fear and Greed is needed

How to find more stocks like Jardine which may have tremendous growth potential in stock prices? What are the potential of Jardine component stocks such as Dairy Farm, Jardine Cycle and Carriage, Hong Kong Land, Mandarin Oriental, etc? It will be interesting to understand these investing opportunities, from Level 1 (individual stocks), Level 2 (sector / industry), Level 3 (country / region) to Level 4 (world).

 

 

 

 

 

High Dividend Investing with Bank Stocks

Forum - 2016-03-04 - mentor - CT - Bank Analysis

An investor could invest safely for passive income through dividend earning from various global banks such as ICBC, OCBC, Public Bank, etc, which have very consistent business performance each year.  The 3 major banks in Singapore have corrected more than 20% in share price over the past 6 months, presenting excellent opportunities to the investors and traders.  Let’s learn how to invest in banks:

Invest in bank is like saving in Fixed Deposit in bank. The difference is one will only gain interest from bank for the money in saving account.  If invest in the bank, one will receive the interest plus potential capital growth.

Bank is the most important sector that drives the economy of any countries. So long the country is continuing developing and the population keeps growing, the economy shall continue the growth. The banks in the country will benefit because any activities will need financial support.  The big thing to focus on bank is the 2 different types of bank income that form the total income of the bank.

  • Net-interest income
  • Non-interest income

The core business of a bank is to make money by borrowing at one rate (via deposits and debt) and lending at another higher rate (via loans and securities). The spread is net interest income.

Meanwhile, non-interest income is the money the bank makes from everything else, such as fees on mortgages, fees and penalties on credit cards, charges on checking and savings accounts, and fees on services like investment advice for individuals and corporate banking for businesses.

In addition, 2 key ratios that indicate the strength of capital position of a bank:- 

  • Capital Adequacy Ratios (CAR)
  • Non-Performance Loan (NPL) v.s. Allowances

Capital adequacy ratios (CARs) are measures of the amount of a bank’s core capital expressed as a percentage of its risk-weighted asset.  MAS required Singapore-incorporated banks to meet a minimum CAR to ensure local banks are safe even under stress condition

‘Non-performing Loan (NPL) – A sum of borrowed money upon which the debtor has not made payments for at least 90 days. A non-performing loan is either in default or close to being in default. Once a loan is non-performing, the odds that it will be repaid in full are considered to be substantially lower and allowances should be provided. Similarly, MAS provide guidelines on loan grading and provisioning for local banks.

The amount of NPL and provision made by the bank will directly affect its net earning declared. Hence, it will affect its dividend payout. 

We should learn to find the top 10 global bank stocks with excellent business for our investment portfolio, buying at discounted price at low optimism, ahead of other potential big buyers who are also looking for these valuable assets.  Certain Bank stocks could be in crisis when there is global economy slowdown with high debt.  Therefore, we should only consider giant Bank stocks with strong fundamentals, not just any stock with price discount, buy low and sell high or hold patiently for both capital appreciation and passive income.

 

Buy a Stock is a Business Partnership

Ein55 Newsletter No 020 - image - Biz Partner

 

 

 

 

 

Throughout our lives, we have to make several critical decisions, eg. choosing our own profession and life partner.  We may not understand that buying a stock is actually same as finding a business partner, an important decision in life, especially if we want to grow our wealth.

Why some people become richer over the years?  This is because they get to know good business partners.  When we buy a stock, it actually means we are in partnership with someone doing business together, could be short term or long term partnership.  If our business partners could make money, we would also profit from them because the company earning could be shared with us in the form of capital gain (higher share price) and passive income (dividend).  If we make friends with partners who are losing money quarterly and yearly in business, this is as if burning money, we will lose out in the long run with these junk stocks.

Therefore, it is important to learn how to choose the right business partners who could make us richer over the time.  One could perform fundamental analysis to analyze the company performance through studies of 3 financial reports: income statement, balance sheet and cashflow statements.  However, choosing the right partner (stock) also requires the right timing.  We have to pay different prices to make friends with them, depending on how many friends they have now.  When there are many “likes”, usually the friendship is very costly, one has to pay a high price to buy a desired stock in bullish market.  On the other hand, when a good business is emerging or when the investment market is bearish, they will have less friends, it will be easier for you to make friends with these giants stocks or business partners at low cost because you pay relatively lower share price.

After we choose our career or life partner, it is hard for us to switch.  However,  we could have many choices for business partners because we could choose what stocks to buy.  A wise investor would review the investment portfolio regularly, ensure the business partners are strong, occasionally could be replaced with new blood to strengthen the future performance. When you like any good fund or business in the world, as long as they are listed in stock market, you could make friend with them easily by buying their stocks, just wait for the right timing.

Both traders and investors should learn the unique Optimism Strategies developed by Dr Tee to choose strong global stocks as the right business partners will help you to grow your wealth.

Golden Investing Opportunity is for those Properly Prepared!

Ein55 Newsletter No 019 - image - Opportunity

“For those properly prepared, the bear market is not only a calamity but an opportunity.” Sir John Templeton (Investing Master)

The safest time to enter stock market is usually after the correction, main difference for a trader and an investor is on how much discount is needed.  A wise shopper would wait patiently for the Great Singapore Sales to buy desired products in bulk at significant discount.  Similarly, an expert trader or seasoned investor would wait for the sales of desired stocks, when majority of the people are still fearful, only then the share price could fall to an attractive level.

The up and down in stock prices reflect both the business performance and the emotions of traders.  The best time to buy stocks is when people worry the sky will fall down but the same business still makes money consistently each day.  Such golden opportunities of investing only occur during global financial crisis, when majority of global investors are fearful, only then they would let go their most valuable stocks at tremendous discount.

3 major banks in Singapore have fallen more than 20% in share prices over the past 6 months.  Is it time to buy these giant stocks cheaply?  The current global market corrections could be a good opportunity for traders but it is still insufficient for value investors who aim for more than 50% discount of such blue chips, proven historically in each economy cycles.

How long should the investors wait for the giants to fall down?  We don’t have to time the market because the future is unpredictable, both the financial news and political economy could affect the stock markets daily.  However, there is a predictability within the unpredictability, if we could wait patiently, preparing for each opportunities to enter the market, aligning the strategies with own personalities as a trader or an investor.

Optimism Analysis is a probability calculation, both for trading and investing.  We would position ourselves to have higher chance of winning with limited downside, risk-to-reward ratio should be at least 1 to 2, every $1 of risk in investment should potentially bring $2 of return.  Gambling could give special edge to the casino, while Optimism Analysis could give unfair advantage to the traders / investors if ones could wait patiently to be the minority who could gain from the majority.  Golden opportunity is for those who are properly prepared, equipped with the investing knowledge!

 

Strategies for 3 Personalities of Traders and Investors to Profit in Bearish Stock Market

Ein55 Newsletter No 018 - image - success

Many traders and investors lose money in the past few months during global stock market correction.  With STI < 2600 points, there is a strong fear in the market. I have clearly pointed out in the past that greed and fear will continue to influence people to make wrong decisions.  We need to position our investment, choosing stocks with different characters, aligning with our personalities.

Here are suggestions of trading/investing strategies for 3 unique personalities (Short / Mid / Long Terms) to profit from the current bearish stock market with 4 decisions of Buy, Hold, Sell/Short, Wait.

1) Short-Term Trader (buy/sell every few weeks)

Strategy: Short / Wait.

Choose stocks with weak fundamental and bearish trend for the past few months (aligning with major stock indices), short with CFD for stocks at high optimism to profit from the falling market.  Most people only know how to long the market, therefore either lose money or doing nothing in the past few months of bearish market.  Trading could be 2 ways (long / short), as long as the trend is clear, either bullish or bearish markets could be opportunity to make money.

If shorting (requires training) is not a preferred style, those who want to buy low sell high, has to wait for a few more weeks for the global stock market to recover for short term, then long on stocks with positive trend. 

As a short term trader, not every day is a trading day, we need to wait patiently for the best opportunity of the weeks to long or short.  Short term trading is more speculative, reacting quickly to market news, therefore one has to apply Short-term Optimism + Technical Analysis (both price and volume) to have a high probability trading.

 

2) Mid-Term Trader (buy/sell every few months)

Strategy: Wait / Long.

The current market correction (20-30% for some stocks) is attractive for mid term traders who have higher risk tolerance level and looking for higher potential return than short term trading.  Since the short term trend is still bearish, one could wait patiently for the global stock recovery for the next few months, then buy those stock with strong fundamental stocks.

If your stocks are trapped in the stock market, likely now is at low optimism, too late to sell now.  Wait till the next rebound or rally above the support again, target to sell at intermediate high, either to minimize the losses (if bought too high last time) or making some profit.  Apply Mid-term Optimism analysis with integration of Technical and Fundamental Analyses as main strategies.

 

3) Long-Term Investor (buy/sell every few years)

Strategy:  Wait / Long.

Usually long term investors need to wait 5-10 years (typical economy cycle) for global financial crisis to buy strong fundamental stocks safely at amazing low price, future potential could be 50-200% higher.  Current global market correction is still not severe enough, there is room for further correction. Therefore, long term investors should wait patiently, could be next 6-12 months, partly depending on the political economy, ones could enjoy the best performance as the golden investing opportunity could be coming soon.

Apply long-term optimism with fundamental analysis to start prepare yourself for this gift from heaven in near future.  Blue chips will have more than 50% discount in stock prices, most people will get panic but you could profit from fears of others.  However, investor has to accumulate bullets (cash) to have chance to buy low and sell high.

 

Ein55 Charity Course for Both Graduates and Needy People

Dr Tee is not profit driven for his investment education programs, aiming to setup a low-cost, high-quality and sustainable platform for the general public to learn the right way of trading and investing, from free public workshops, low-cost 5-day course to long term coaching program for the graduates.  Dr Tee is supported by a team of graduate mentors (Chye Tin, Andrew, William, James, Victor and Kee Min), who are senior traders or experienced investors. These graduate mentors integrate their own trading and investing systems with Optimism Strategies learned from Dr Tee several years ago. After they become successful, they also have decided to contribute back as volunteers, helping Dr Tee to provide close guidance to Ein55 graduates through various graduate mentor courses.

On 29 Nov 2015, Dr Tee and graduate mentor Chye Tin, together organized the first Charity Course on REITS and Business Trusts for the graduates.  It is a huge success, the course was sold out within 12hr, because the graduates understand they are contributing to charity while learning useful investment knowledge.  The net income of the course with top up of personal donation, total amount of S$10,000 is donated by Ein55 Graduates to Tzu Chi (慈济) Foundation, accepted by the Deputy CEO of Tzu Chi Singapore, Mr Khoo on the same day.  The charity course has inspired more graduates, including Mr TG Ng, a successful business man, who matched the same amount of final donation of $10,000 by Ein55 graduates, total of $20,000 now is available to help more needy people through Tzu Chi Foundation (Singapore).

Below is a group photo of Dr Tee (red shirt), together with 6 graduate mentors and Mr TG Ng.

Chye Tin who is Ein55 Graduate Mentor, has committed to develop more charity courses for Ein55 graduates (about 1200 as of now, after graduating from 5-day course by Dr Tee) in future, ranging from investing for income (REITS/Business Trust and High Yield Portfolio) to investing for capital growth (Discounted Asset Strategy and Earning/Cashflow Strategy).  These are valuable strategies from his decades of personal experience, sharing without financial return to Ein55 graduates, net income will be donated to Tzu Chi.  These high quality courses are bonus for Ein55 graduates, integrating well with Optimism Strategies learned from earlier 5-day course by Dr Tee.

Here are valuable feedback from some Ein55 graduates who have benefited from the last Charity Course on REITS/BT taught by Chye Tin:

1) Mach Goh“Chye Tin is a meticulous mentor and give 100% effort in sharing his knowledge.on REIT & BT. His detailed analysis of the REIT & BT far exceeded my expectation. Thumb up 10/10!!!”

2) JS Tan“Personally i can feel that Chye Tin is a good mentor with kind heart and deep knowledge. My aim is to be successful of myself, and i will help more peoples by donating my knowledge or my wealth back to the society.”

3) PT Kok“It’s very well integrated with Ein55 styles – benefited many including myself.  I would recommend the instructor or his team members to conduct more sessions for the benefit of majority who missed it as soon as possible – dun miss the next market cycle to enter.”

4) KS Lai“This course has helped me to have deeper understanding of factors affecting the performance/total return of Reits when combine with Optimism method.”

5) GL Lee“Chye Tin is very meticulous and generous in sharing very detailed case studies as well as useful templates with all students attending the course. It covers both theory and practical in a very logical and progressive manner. I am sure it will benefit all students who have the diligence and patience to put them into practice. At the same time, I highly commend Chai Tin and Dr Tee for making this course a charity event.”

6) SB Tay“The instructor presented very well. The course notes were well prepared. The instructor must have done thorough research on the subject before the presentation and was very confident during the presentation. The Optimism Level was applied throughout the presentation.”

7) Vincent Seow: “Chye Tin is a very knowledgeable and experienced investor; he holds no barred in sharing his investing experience with the class.”

8) Albert Tay: “这個輔導課兼提醒学生通过義務服务或樂捐幫助社会的弱势群体。我深信每位学生或多或少,当他们投资有良好的成绩時更不会忘記需要幫助的弱势群体。今天這課,能够幫助我更明白REIT 及BUSINESE TRUST 的概念,如何分析REIT 及 如何用乐观指数分析投资海外股票市场中的REIT以降低風險。所講的概念与所分析三個公司的案例都能系统化的輔導有心学習的人。”

Ein 55 股票高利润秘诀将是我在投资道路上的指南針。這個課程教学生具有宏覌与微观的相関分析相关概念来分析投资,加上技术分析上的活用与投资心理調整的配合,特别是乐观指数(Optimism)的概念,是外面学不到的。”

 

Global Stock Market Crash?

Ein55 Newsletter No 017 - image - Market Crash

Global stock markets of 4 major economy: US, China, Japan and Germany have achieved 75% optimism. Therefore, it is not a surprise to see major correction in the past 1 month. We should follow Optimism from Level 1 (individual stock) to Level 2 (sector) to Level 3 (country/region) to Level 4 (world).

Although Singapore STI and Hong Kong HSI have been only 50+% optimism in the past few years, they are smaller market, we need to follow a bigger market to evaluate our probability of success with Optimism. High optimism = high risk, 75% World Optimism means the chances of falling down is 75% while there are only 25% chance to go up. Don’t over-trade or over-invest, keep at least 75% cash as world Optimism has reached 75% optimism. If we follow the rule of money management, taking profit with higher optimism, the risk could be minimized.

For those who want to grab on the opportunity of falling giants of global stock markets, adding Technical Analysis (TA) will be helpful because the falling knife could be severe, your personality may not be suitable to buy low with downtrend. Regardless it is a major correction (mid-term) or Level-4 (world) crisis at longer term, we should consistent to buy low (either long term, mid term or short term) and sell high later. If we could diversify over 10 different giants (through Fundamental Analysis, FA), even if the giants fall down, the chances of recovery is very high especially if the price correction is mainly due to the human greeds and fears (Personal Analysis, PA), not the FA (economy or company business performance).

TA = FA + PA

 (Share price is a reflection of business performance and traders emotions)

We shall continue to apply this FTP (FA + TA + PA) analysis around the Optimism Strategy to profit from the global stock market in a safe way. There is no need to guess the direction of the market, low enough, we could enter; high enough, we will exit. The low and high shall follow our personality for short term trading, mid term trading or long term investing. New Level-3 giants are falling down (eg. Malaysia, both stock and currency markets), grab on the opportunity to time yourself with consideration of Level 1-4 Optimism.

 

 

 

Q3/2015 Global Stock Market Correction: Mid-Term Opportunities to Buy Low Sell High

Chart of Global Stock - 2015-07-07

On 8 Jul 2015, I shared a newsletter when many readers were troubled by the global stock market correction (which turned out to be a mid-term low point if you compare with later second chart).  Figure above shows that in the past 1 month with charts till 7 Jul 2015, global stock market encounter series of negative news, from Greece crisis, bullish turned bearish China market, to speculation of possible US interest hike, etc.  As a result, most traders get worried, following herd mentality to exit or dare not enter the stock market again, especially observing more than 30% correction in China SSEC index.

After 1 week later, now (as of 15 Jul 2015) the global market has regained the confidence after Greece crisis has a new political solution, China stock market is strongly supported by the government. The figure below shows a strong rebound in global stock market. The last fearful point on 8 Jul 2015 happened to be a low valley.

Chart of Global Stock - 2015-07-14

 

“Normal” retail traders would wait for friends around them to make money first, after share price is up more than 10%, only then having the confidence to enter the stock market at relatively high price.  This is happening in China stock market now, those who got burnt with earlier 30% fall, some start to try their luck again with rising price.

Similarly, when market turned bearish, most people are losing money, despite significant discount given, majority of the traders would prefer to wait.  They have to pay for premium in price to exchange for confirmation in trends to overcome their fearful emotion.  The mentality of buy high sell higher depends on the support of market speculation which may not be sustainable. Any major global news could potentially erase the speculated gains overnight.  Since we cannot accurately predict the future, we need to always buy low sell high to put ourselves at low risk, regardless you are a short term trader or a long term investor, only difference is just the timeframe of interest: buy low sell high for 1 month or buy low sell high for 5 years.

In a bullish stock market, as long as the optimism level is not too high, every correction due to bad news is an opportunity for safe entry for mid-term trading.  Investing Master, Jim Rogers’ open secret of success is “Buy Low Sell High”, but how low is considered low? The world’s richest investor, Warren Buffett, has a famous saying of “Be greedy when others are fearful”, but how fearful is considered too fearful?  The Ein55 Optimism Investing Strategy developed by Dr Tee will provide the answers.