From Mr Peter Lynch’s book Beating the street page 234, he stated that buying a cyclical after several years of record earnings and when the P/E ratio has hit a low point is a proven method for losing half your money in a short period of time.
I took a look at the P/E ratio of property counters like Ho Bee, SC Global and Keppel Land and noted that the P/E ratio of all three stocks are at 3. Furthermore, they reported record earnings in their recent results. It is a no-buy for me now in property counters now.
If the property stocks will not do well, then related industries like electronics goods, furniture, cement, tiles will be affected.
The next 2-3 years will be good for stock pickers. Let us await our opportunities. Thank you god.
Monday, October 31, 2011
Thursday, October 27, 2011
Invest in bonds and Reits now?
What a coincidence! Just when Jim Rogers declare there is a bubble in the bond market, advertisement on investing in Asian bond funds appears in SMRT trains. I believe it is risky to invest in bonds right now. If interest rate is hiked due to inflation, then bond prices will plummet and the investment will lose money.
How about investing in Shopping Mall Reits now? I suspect it is risky too because if the economy takes a dive, then the shoppers will stay at home and shun shopping malls. Retails sales will be impacted and rental rates may even be reduced. This will reduce the dividend yields of Shopping Mall Reits like Suntec Reits.
It is a No-buy for me in both investments.
How about investing in Shopping Mall Reits now? I suspect it is risky too because if the economy takes a dive, then the shoppers will stay at home and shun shopping malls. Retails sales will be impacted and rental rates may even be reduced. This will reduce the dividend yields of Shopping Mall Reits like Suntec Reits.
It is a No-buy for me in both investments.
Wednesday, October 26, 2011
There is a bubble everywhere the retail investor turn.
1) Stock market bubble. SGX at PE ratio of 24, Singtel at PE ratio of 12, OCBC and UOB bank both trade at 30 percent premium over their Net asset value. I believe that blue chips have 30-50% to fall from this price. For example, OCBC bank recent last trade is at $8.50 with a net asset value of $5.80. when the economy worsened, it may fall 50% to $4.25. At this price, it is a bargain for value investor if the net asset value still remain at $5.80. this is inline with Ben Graham theory to buy stock that is at 70-80% of net asset value. Buyers who bought blue chips for their dividend will be disappointed to find that in bad times blue chips can omit their dividends.
2) Property bubble. For example, Sunglade at serangoon ave 2 was transacted at 1100 PSF and this means that I can sell it for $1Million. However, the risk is a downturn in economy will shed jobs in Singapore. Without a job, foreigners will move back to their home country. This will depress rental yields for property buyers. A loan 80% of $1Million is $800,000. Even with interest rate at 1%, the monthly installment is $3,000 . This monthly installment is high even for a high family income of say $10,000 per month because 30% of their monthly income is sucked away by the housing installment. Besides this, there is also CPF deductions and an interest rate hike risk. If interest rate increases, then the monthly installment may rise to $4,000-$5,000 per month. Couple with a job loss in one party, the loan will turn bad.
3) Commodity bubble. In the internet, buy silver and gold ads appears everywhere. If the economy worsen, the demand for silver may reduce and prices of silver and gold will dive.
4) Bond market bubble. Why is there a bubble in the bond market? The prices of bond in the United States is at all time high. While interest rate is at 30 year all time low. Once interest rate rises, the price of bonds will plummet.
I believe the best bet now is to put my money in fixed deposit. At least, the value will not plunge and I can take advantage of any golden opportunity that comes along every 5 to 10 years.
1) Stock market bubble. SGX at PE ratio of 24, Singtel at PE ratio of 12, OCBC and UOB bank both trade at 30 percent premium over their Net asset value. I believe that blue chips have 30-50% to fall from this price. For example, OCBC bank recent last trade is at $8.50 with a net asset value of $5.80. when the economy worsened, it may fall 50% to $4.25. At this price, it is a bargain for value investor if the net asset value still remain at $5.80. this is inline with Ben Graham theory to buy stock that is at 70-80% of net asset value. Buyers who bought blue chips for their dividend will be disappointed to find that in bad times blue chips can omit their dividends.
2) Property bubble. For example, Sunglade at serangoon ave 2 was transacted at 1100 PSF and this means that I can sell it for $1Million. However, the risk is a downturn in economy will shed jobs in Singapore. Without a job, foreigners will move back to their home country. This will depress rental yields for property buyers. A loan 80% of $1Million is $800,000. Even with interest rate at 1%, the monthly installment is $3,000 . This monthly installment is high even for a high family income of say $10,000 per month because 30% of their monthly income is sucked away by the housing installment. Besides this, there is also CPF deductions and an interest rate hike risk. If interest rate increases, then the monthly installment may rise to $4,000-$5,000 per month. Couple with a job loss in one party, the loan will turn bad.
3) Commodity bubble. In the internet, buy silver and gold ads appears everywhere. If the economy worsen, the demand for silver may reduce and prices of silver and gold will dive.
4) Bond market bubble. Why is there a bubble in the bond market? The prices of bond in the United States is at all time high. While interest rate is at 30 year all time low. Once interest rate rises, the price of bonds will plummet.
I believe the best bet now is to put my money in fixed deposit. At least, the value will not plunge and I can take advantage of any golden opportunity that comes along every 5 to 10 years.
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