Why I like Frasers Centrepoint Trust

One of my most common confusion among investors is to think that The Centrepoint at Orchard Road is owned by Frasers Centrepoint Trust (J69U.SI). It is not. The Centrepoint is owned by Frasers Property. What are the shopping malls owned by Frasers Centrepoint Trust (FCT)?

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Covid19 STI update

Recap:

  1. STI crashed 33% from the 2020 high of 3270.
  2. STI has made a 21% recovery over the last 3 weeks.

In the long run, STI at about 2500 level is a great price to buy. But in the short run, its probably too late to buy now.

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Covid-19 update : This time is different?

The market has dropped 30% in less than 1 month.  Speed of the fall is the fastest in modern history. Everyday, I am opening new accounts of new investors. The recent trading volume is the highest I have seen in my period as a remisier. Everyday, optimistic retail clients are buying but shares has been falling almost daily.

Optimistic view:

  • Warm weather reduces infections by summer
  • Virus mutates and dies out (like SARS and MERS)
  • Remdesivir, originally developed for Ebola; and Chloroquine, an old anti-malaria drug; and a few other antiviral medicines, including a vaccine just announced by China, may defeat the Covid-19.
  • Co-ordinated decisive actions by countries contain spread
    • 1 month Lock down
    • vigilance and rapid response with contact tracing
    • 8 weeks social distancing
    • aggressive quarantining of exposed
    • health care products such as ventilators and mask are effective managed
    • hospitals not overwhelmed.

Pessimistic view:

I was initially an optimist, but I have now become a pessimist. Here are my reasons:

  • President Trump does not seem to be concerned about Covid-19. He is vague with plans to contain the virus.
  • Some experts say US is 8 days behind Italy on similar trajectory. They may have the highest deaths soon.
  • Some estimates that unprecedented border shutdowns across the world may take out half the world’s carriers. Global recession is now baseline forecast.
  • It is doubtful western countries have the political will to carry out draconian policies to stop the spread. China and Singapore now has mainly imported cases. The world as strong as its weakest link. As long as there are countries still suffering, border controls and social distancing will continue to be in place. This seems to be a perpetual cycle.
  • VIX, which also known as the fear index, continues to be the highest for past 10 years.
  • Recently, as equities fall, gold prices have also fallen, and US Treasuries bond prices have also fallen. USD is now at 1.45. Cash is now king.
  • Liquidity crunch has affected local bond markets. Banks are not willing to buy bonds. Investors of local corporate bond are stuck. Silver lining is that SGD corporate bond valuation are still high. How long will this last?

This time may be different. The corrections of the past 10 years were made-man. US-China trade war, crude oil crashes, were decisions made by man. Fiscal and monetary policies such as reducing interest rates and bond buying quantitative easing that has worked in the past, is not stopping the spread of Covid-19.

Covid-19 is a natural disaster and not engineered by human. As long as Covid-19 is not stopped, many companies will continue to suffer very poor earnings. I encourage you to watch this presentation by Vee, a very experienced global macro hedge fund manager, on his view of current market. https://youtu.be/j3vEePL5BvI?t=23

In the long run of 10 year time frame, be optimistic. But in the short run, be pessimistic. We got to survive the short term pain first in order to thrive. Here is my advice for this current market:

  • If you are bullish on stocks, slow down your dollar cost averaging. What is cheap now may be cheaper soon.
  • If you are holding bonds, it is very tough to exit now in this liquidity crunch. Plan your finances such that you can tide through one year.
  • Cash is king, if you are leveraged in your investments, be extremely¬† prudent and conservative in your deployment of money. Make sure you have enough to meet margin calls in worst case scenario.

I wish you safe investing and please take care of your health.

Where is the next major support?

The market is getting cheaper by the day. Some people are worried, while others are happy. The most common question I faced recently is “Is it a good time to enter”. It is really impossible to buy at the lowest, but I shall attempt to show the next major support for S&P500 and STI using classical technical analysis.

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Should buy DBS now to enjoy 5.9% yield?

Buffet once said “Only buy something that you are perfectly happy to hold if the market shuts down for 10 years.” One such stock for most Singaporeans is DBS (D05.SI).

At the moment of writing, the last done for DBS is 20.20. The dividend yield will then be 1.20/20.2 = 5.9%. Is it a good time to buy now or is it a falling knife?

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Elite Commercial Reit IPO

I have been wanting to invest in UK properties for some time, as I have the view that Brexit is good for UK. I was looking for Reits listed in UK, but did not find any that I like. This latest IPO will give me the opportunity to put my thoughts into action, and without hassle of managing lawyers, real estate agents, bankers, and renovation contractors.

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Comparing Debt to Earnings

I always compare my leveraged returns against the best practices in the market, such as professional REIT managers borrow banks to make money for their Real Estate Investment Trusts (REIT). This allows me to evaluate the risks that I am taking vs the potential returns.

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Is leverage good or bad?

Leverage is defined as the process of borrowing money to make an investment, with the expectation that the profits made from the investment will be greater than the interest on the debt.

In my investments in bonds and reits, I like to use leverage. On the other hand, some of my friends stay clear of leverage. They try to pay off their loans as soon as possible.

So is leverage good or bad?

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