Caveat Emptor

The year of the rat was greeted with the onset of an extreme infectious disease. Although the means of transmission are dissimilar to the bubonic plague / Black death of the 14th century, the fear and rumour mongering on social media in China and SG is perhaps equally contagious.  Seeing red during CNY on the stock market is not exactly an enjoyable experience although I was emotionally prepared for it. I am happy to have stockpiled my war chest to prepare for market corrections like this. Although I do not exactly rejoice on the fact that people are dying and suffering from possible loss of their loved ones, my job as a contrarian investor is to seek out undervalued opportunities in averse market sentiment.  Short term impact  Healthcare stocks  Raffles medical - solving of overcapacity issue on Chongqing and Shanghai.  IHH Healthcare, which has eight ParkwayMedical health centres in China Medtecs, a manufacturer and distributor of medical consumables, San...

20/20 Foresight is something that everyone loves to have. 20/20 hindsight is something that is much more achievable. Steve Jobs famous quote below highlights a useful point about uncertainties of the future and how to plan your journey forward in an unknowable future.   Quote   You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. Unquote  For a invetment / personal finance blog that is crowded out by personalities seeking to pursue financial freedom and flaunt their CPF statements, the fact that a high capital base is required to achieve FF is grossly neglected. Much is discussed in the investment blogger space about ways to min/max spending and savings, but mere mortals still need to focus on increasing their reliable income through their career / side jobs to build...

Quantitative Measures Beta = 0.76, VaR = 8.92%, Expected Shortfall = 17.43% Overall - Time = 19.99% Performance Review for 2019 Beating the STI ETF benchmark is not difficult this year. As a market capitalized ETF, STI ETF was a late buyer in the REIT rally, which highlighted the downside of this methodology. Moreover, a lot of retail investors with larger proportion to REITS performed way better than me. My returns were also punished as I averaged down on Silverlake Axis on the recent price correction. I also sold off a percentage of STI ETF to increase my war chest instead of reallocating to US Stocks, resulting in the missing out of the Christmas rally and the year end momentum play. The S and P 500 trounced the returns of most market participants. I am not certain whether the blind money / DCA via index investors resulted into this phenomenon. There is significantly high PE stocks in the index constituents. Stocks could be simply getting more ...

Important points 1) Distinguish between Risk and uncertainty. It is possible to determine a low but imprecise probability of permanent loss.  The Cameron School of Business put forth an important perspective. In casinos, the odds of winning, while quite small, are clearly defined.  If one plays at the roulette table, one knows that there is a likelihood of 1/38 that one can beat the spinning wheel. Or in the game of poker, one can calculate quite accurately the probability of being given any particular winning hand. The players are facing the so-called “known unknowns.” The gamblers are facing Risk, where the odds are given, as opposed to Uncertainty, where they are not. However, the odds of beating the stock market are rarely clearly defined. As a result, many investors face Uncertainty as opposed to Risk. That is to say, the investors are faced with the “unknown unknowns.”  2) Market Prices / Sentiment may not coincide with economic reality. Loo...

The Blind spots of indexing The MSCI indices are  market cap weighted indices , which means that stocks are weighted according to their market capitalization, calculated as stock price multiplied by total number of  shares outstanding . Therefore, the stock with the largest market capitalization gets the highest weighting on the index. This reflects the fact that large-cap companies have a bigger impact on an economy than mid- or small-cap companies. A percent change in the price of the large cap stocks in an MSCI index will lead to a bigger movement in the index than a change in the price of a small-cap company. Each index in the MSCI family is reviewed quarterly and rebalanced twice a year. Stocks are added or removed from an index by analysts within MSCI Inc. to ensure that the index still acts as an effective equity benchmark for the market it represents. When an MSCI index is rebalanced,  ETFs and mutual funds  must also adjust their fund holdings since they are...

Priced for Perfection October and November passed by in a blink of an eye due to increased work responsibilities. There were many weeks whereby I ended the day mentally drained. Making the decision to blog on a monthly basis is the correct move. I can focus more on portfolio allocation decisions and record tracking in this blog, and granular analysis and peer feedback of the thesis of individual stocks in that financial community. Making Macroeconomic forecasts is not my forte. As countless shrewd fund managers and economists continually made predictions and yet again missed out on the important boom / bust periods, I am wary that I will fall into the same trap. Nonetheless, portfolio allocation decisions based on risk-reward analysis is still pertinent for the purpose of value investing. The 8-10 years macroeconomic cycle is on its late periods, and there is considerable risks, leverage and fiscal deficits incurred by the governments (sovereign debt, US debt ceiling) as well as ...