2018 Investment Outlook

[Behappyalways]

which-major-stockmarkets-are-cheap-going-2018-schroders
https://www.theedgesingapore.com/which-m...-schroders

[soros]

Cape stands for the cyclically adjusted price to earnings ratio. It compares companies’ average annual earnings over 10 years (adjusted for inflation) with their share price.

The ratio can also be calculated for an entire market or index – the London market’s Cape score, for instance, is 15.6, according to Star Capital.

Although a reasonable Cape score is not on its own a reason to buy a share or index, and a high value does not automatically mean that investors should steer clear, the ratio can offer a useful starting point for the selection of stocks or countries in which to invest.

Studies have shown that investing in assets with low Cape valuations tends to result in higher returns in subsequent years.

http://www.telegraph.co.uk/investing/sha...kets-2017/


The Singapore market is still in the lower range of cape and must be a good market for value buddies

[chialc88]

Good morning valuebuddies,
Wake up to another cool and relax morning.
Wish everyone a happy happy 2018.

#1. What's the best stocks to own (preparing for crash)?
After many years of soul searching, it seems like most valuebuddies got it.
Especially amperex post.

There is a theory that instead of cash out to prep for crash,
we should investigate a business that's relatively crash/recession proof (not laugh, they actually exist)
and vest in them prior to the crash.

#2. Timing the market, make sense?
Definitely make sense.
During the crash, cash is king.
Without cash, we got to suck our thumb and watch the cash rich and bold one quietly making the kill.

We don't win when the stock market is advancing.
We won the battle when the market is depressed.

We must time the market and hold cash before it crash.

The question is:
1. How do we know the market is crashing?
2. How much cash we should hold such that it does not impact our returns?
3. What's our strategy to buy when the market crash?

#3. This time is different, right?
I believed that by now, most valuebuddies already develop some sort of instinct to judge stock market performance.
As of 2015, 2016, 2017 (first half), the sentiment is the market is sucks.
Price keep dropping.
Wait for the price to stable.
Too risky to buy.

As of 2nd half of 2017, the sentiment switched.
More people are willing to invest.
(Unfortunately, 2 of my favourite financial bloggers sold 100% of their Micro-Mechanics (holdings))
(of course, they sold too early as the sentiment has just started to turn positive).

With today post, I sense that this time is different.
Everyone seems to be going in for a kill.


Question is: 
If your stock drop 50%, are you going to
a) buy more
b) sell some
c) sell all and then plan to buy back later
d) hold
e) do nothing as the price is already dropped so low
f) ______________________(fill in the blank)

4) Moving forward, instead of spending our precious time looking for new opportunities,
my thought is to re-evaluate current holding and trim those weak player.
Kept and if strong conviction, grow my top 3 strong play:
Singship, straco and MM:


Last but not least:
You are free - or freer -
to turn down the things that bore you
and spend time on matters and with people you enjoy.

[greengiraffe]

Hi VB,

Long time no posting.

Anyway, I have nothing much to post except for my outlook for 2018:

Be very FEARFUL when everyone is fearless. 

There is this old saying - It ain't over till the fat lady sings... perhaps the sexy lady just put on so much weight that it takes her a lot of effort just to get on stage...

I am always fearful of years ending with 7s but 2017 passed with extremely low volatility and we are getting further and further away from the last crisis. So are we edging nearer to the next unknown? 

Have a Healthy New Year
Health is Wealth
GG

[Wildreamz]

I mainly invest in secular growth stocks (mainly tech), and currently hold predominantly US stocks.

I've been watching US politics closely as well, my bet is Trump is going down within the next 6 months with the Muller investigations. And there are other potential risk factors as well: 2018 election, US government shut down, Crypto Crash, rising 10 year bond rates, North Korean wild card.

For 2018, I'm not intending to inject more cash into the market in the near term. I'm confident with the long term prospect of my positions (mostly monopoly like companies in secular growth) and will hold it through thick and thin.

[bardsmanship]

Riding all the ups and downs is easier said than done.
Have been thru 2 crisis in 1997 and 2007. Some notes.

1. Downturn will come hard and fast.
2. There is no way to call a bottom, it can go lower and it will.
3. When the time comes, liquidity will be in short supply.
4. Economy will take a hit, unemployment will increase significantly.
5. Most investors will be too scared or out of bullets during the best buying opportunities. I belong to the low liquidity side during the previous crisis, bought too much on its way down. (see point 2)

My best guess is that the next crisis is not close. Most indicators are pointing up, you dont get a crisis with unemployment rate this low and having bigger companies enjoy profit growth. More indicators are pointing to a continuing bull run locally. Having said that, I am seeing a lot of small to medium sized local companies being financially stressed out. Many start ups are disrupting the industries they are targeting but the funny part is that many if not all of them are just burning investors cash. Most have not proved to be a viable business. Besides start ups, I cant think of any industry which is mildly profitable that new entrants are not feverishly trying to enter. Price war and a race to the bottom is created and everyone loses.(Except the consumers) Nowadays you get to ride a bike for free, get cheap groceries delivered to your doorstep with margins insufficient to pay for the delivery van's parking at the HDB carpark.

You're absolutely right, as a consumer I am actually quite happy with all the "disruption" going on, with startups like Uber and Redmart making a loss on every transaction. Most of the cash being burned by these companies were raised from high-income folks, so I see this phenomenon as an unusual form of wealth redistribution. We should enjoy it while it lasts!

[thinknotleft]

Correction maybe, crash likely not. This is my current outlook, considering that STI's highest mark is 3,800 in 2007. We are 10 years away from 2007 and have not broke 3,800. Also, the market is optimistic but probably not euphoric. Crash more likely to occur in euphoric times.

[weijian]

Hi VB,

Long time no posting.

Anyway, I have nothing much to post except for my outlook for 2018:

Be very FEARFUL when everyone is fearless. 

There is this old saying - It ain't over till the fat lady sings... perhaps the sexy lady just put on so much weight that it takes her a lot of effort just to get on stage...

I am always fearful of years ending with 7s but 2017 passed with extremely low volatility and we are getting further and further away from the last crisis. So are we edging nearer to the next unknown? 

Have a Healthy New Year
Health is Wealth
GG

hi GG,
Always nice to hear from you.

Not just 2017, in fact betting for volatility has gotten crushed for the last few years on an annualized basis (of course, VXX is just a vehicle used for hedging purposes)

The other side of the short volatility trade is, of course, long vol, which has gotten absolutely annihilated again. VXX (basically the opposite of XIV) is down 73% in 2017. This is pretty impressive considering the yearly returns since 2009: -72%, -6%, -78%, -67%, -26%, -36%, and -68%. And, oh by the way, this fund still has $1 billion in AUM (this is mostly a trading vehicle but here has surely been an enormous amount of money lost on this product in recent years).

http://awealthofcommonsense.com/2017/12/...et-awards/

[specuvestor]

Welcome back GG

Maybe it's more like
1986, 1997, 2008, 2019??

1989, 2000, 2011, 2022?

😄

2018 I think the risk / reward favors Japan

[Dosser]

See the attached graph of the rate on 1 year US Treasuries. This bumped along at <0.5% between 2009 and end 2015, and has made a steady move upwards since July 2016. The rate is still not much, but the trend is there, and strong. Things are changing - or going back to normal. Will the trend continue? Economic growth is generally OK, and the Fed (and other central banks) look keen to normalise interest rates, so it looks likely that the trend is continuing upwards. At the moment this is pushing bonds down, but not the stock market. Maybe, if bonds don't look good, stocks are one of the few options left for all of the liquidity sloshing around the system. But QE is reversing, and interest rates are on their way back up, albeit from a very low base. All that QE and ultra low interest rates were a major factor in strong stock and property markets, so what happens as that reverses?

I don't have the answer, but worry that dramatic change will cause strains in the system. Maybe another emerging market debt crisis? We will see.

My current position is that:

• I sold off most of my small cap electronics/plastics counters last year - selling off my holdings in avi-tech, memtech, fischer, valuetronics, and spindex completely. The profits (many thanks to Valuebuddies, particularly dydx and BlueKelah) have not been reinvested, yet.
  
• I have reduced my REIT holdings recently. These have been strong over the last few months, in spite of rising interest rates, and i worry that there may be another taper tantrum. However, I continue with long term holdings in iREIT, First REIT and some industrial REITs, for yield and retirement funding
  
• I keep some other long term holdings - Chuan Hup, Nam Lee, Teckwah, E & E, and a reduced holding in TTJ. If there are dramatic price falls, I may consider increasing these holdings.
  
• My only purchases in the last few months have been some small speculations in the O & G sector
  
• At the moment, I am more in cash than ever before, including a proportion in US dollar deposits. The US dollar has not done well recently, so it has not been a good investment to date.
  

At the moment I am sitting on the fence, nervously waiting to see what happens.