Archives for posts with tag: STI


Do not pray for an easy life, pray for the strength to endure a difficult one.

– Bruce Lee

2018 hasn’t been a very good year for me – the stock market hasn’t helped with building my net worth, I fell had to take sick leave from work twice in the last quarter alone when I usually go a whole year without taking sick leave. At times, I haven’t felt like doing much either because of this sense of boredom and jadedness with life and work.

Within the family, there have also been some health scares. Earlier in the year, our cat had a little bit of tummy troubles following his visit to the groomers. Then, the older family members faced some health problems.

Thankfully, 2018’s about to be over. And we should recognise and celebrate the things that made the year great. These are my “Best of 2018” and I hope you find yours too.

Market Calls and Cryptocurrencies

One of the few things I identified right was how overhyped crypto was at the beginning of the year. Of course, by then, cryptos had already fallen quite a bit from the peak reached at the end of 2017 but let me pat myself on the back for calling the bullshit on the investment that is crypto.

3 Feb – More tales from the crypt(ocurrency)
14 June – So, who still wants to buy bitcoin?

But even more prescient than Crypto which I was largely skeptical of as an investment in 2017 was recognising the flow of easy money into the tech space.

10 July – State of the (U.S.) markets
11 Aug – State of the Markets (1 August 2018)

Now, before I get too swell-headed, I must confess that it’s not like I made profits from my views. I just got lucky that the tide against tech turned so much in such a short period of time.

Easy credit could have continued and I’d just as easily be labelled as someone who made a prediction and got it wrong. That’s the danger when shorting markets and unless you’re as experienced as someone like Jim Chanos, you shouldn’t do it.

This isn’t a how my portfolio did in 2018 post so I’ll leave it here. Look out for that when the year actually ends.

Learning New Skills

2018 was the year that I finally put whatever programming I picked up to good use. I wrote a script to automate some super bothersome tasks at work and if I had the time, I probably could write more scripts. I also messed around with some webscraping for stock data (shhh! Don’t tell anyone.) and I guess the next step would be having that data on a site for everyone to view. More importantly, I created a page to document the STI’s PE10. It went live at the end of July and I update it every first day of the month.

You can check it out here.

I’m hoping that in the not-too-far future I’ll have the chance to learn programming with a little more guidance and that I’ll actually have a chance to create sites that are useful. Best part is that I’m going to have my job give me time off (with pay!) to go do that. That’ll probably happen end 2019 or in 2020.

New Knowledge – habit formation

If I didn’t learn anything new all year, then that year would be a certain disaster.

James Clear’s Atomic Habits is easily one of the best things I’ve read this year. He gives really sound strategies on how you can form new habits and ditch bad ones. In fact, I didn’t know it then but I was using some of the same strategies to lose weight and practice mindfulness meditation.

This led me to cut sugar from coffee and I’ve lost even more weight than before and am at the same weight that I was in high school. Once again, the message is instructive – you have to make it a paradigm shift/lifestyle change rather than use willpower to make the change.

To drive the point home, let me give you another example.

I also developed the habit of writing roughly 3 blog posts a week this year and while it isn’t much, that’s helped boost traffic to my blog this year.

My blog stats across the years…pathetic but hey, this is a personal blog after all. I’m writing for personal amusement and not to bring in some dough.

You can see that this year is the year where, apart from April when I was on holiday for a week, the views each month were consistently above 2,000 (coloured blue). So what gives?

Well, the main things that happened was (1) that I finally got my new device, and more importantly (2) my wife started going to gym every weekend.

What has that got to do with anything? Well, every weekend, while she at the gym, I pumped out blog posts over coffee while waiting for her to be done.

This is precisely what Clear was talking about in his book. New habits need to have some place in your routine in order to become part of your life. This might be particularly instructive for some people as the new year is coming around and new year usually means new resolutions. If you really want to achieve something in the new year, you need to change your habits and not just hit some targets for a couple of weeks through sheer willpower.

Personal Front

On the personal front, this year marks the 6th year that my wife and I have been married and I couldn’t be happier. I’ll be lying if I said that we are happy 100% of the time but I’m pretty sure that on average, we’re happier together than we are apart.

I need to work on communicating with my wife more. Maybe it’s a guy thing or it could be just me but I’m not very good at communication (that’s why I have this blog!).

Our cat is also just the best thing that’s ever happened to us. He’s the one thing that makes me wake up at 6:45 am every single day and he really bosses me around until he gets his food. Then, he’s just the sweetest thing who will do whatever he wants: chilling under the bed, on his cat tree, cat window or on the sofa because he wants some attention from us.

This is his first full year with us and I know he’ll be with us forever. If you love cats, check him out on Instagram (@kingteddy_thetabbycat). Also, please donate to the Cat Welfare Society if you can. If you want a cat, adopt. Don’t shop.

2019, please be nice to me

I hope 2019 will be good for you and if anything, I’ll be working on the things I can control – my emotions, my temper, my actions, my reaction to events that are out of my control.

Goodbye 2018.

Advertisements

Markets have had a horrible December so far. For those outside the U.S., the whole year has been terrible. The problem with all of this is it only seems like it’ll get worse.

Here’s an opinion piece by former banker, and author, Satyajit Das, that was on Bloomberg and republished in The Business Times:

THE “everything bubble” is deflating. The fact that it’s happening relatively slowly shouldn’t blind us to the real threat: The world is dangerously underestimating how hard it’ll be to deal with the fallout once it pops. 
 

Frothy markets can’t disguise the warning signs. The shift to tighter monetary policies in the West is putting pressure on global equity and real-estate values. Even more critically, it’s weakening credit markets. Over-indebted emerging markets face headwinds from rising borrowing costs and dollar shortages. 

I don’t have any particular insight into the financial sector or the rumblings in the corporate debt markets but from what I’ve been reading, it seems that tighter credit markets have finally hit home.

What we’ve yet to see a a major default by a corporation that is Too Big To Fail. Once we have that, it’ll be the catalyst for a further drop in the markets that will take markets down to bargain bin territory.

A Market of Our Making

The funny thing is how this whole mess is a market of policy missteps. Barry Ritholtz made a good case for how Trump basically did everything wrong – he did a terrible job replacing a Fed Chief that’s more partial to a gradual tightening with one that’s more hawkish. He also screwed up on trade with his trade policy, and now it seems that he’s bent on taking the U.S. close to a shutdown.

Over in the U.K., things aren’t looking so hot either and you can argue that it all started with David Cameron’s promise of a referendum on Brexit. Now it seems that lawmakers can’t agree on Brexit and the deadline is looming.

Closer to home, one Dr. M across the Causeway isn’t making things easy for us. What and how big the fallout will be from the increase in tensions between Singapore and Malaysia remains to be seen but I’m pretty sure that any major hit to our economy and markets isn’t going to come from Malaysia.

Take cover but be ready

In short, I think things could get worse before it gets better. This is particularly true for U.S. markets because valuations there haven’t come down as much (major indexes there have only just reached correction territory).

For the local markets, things are cheap but we’re not quite at basement bargain levels. We’ll need at least another 7-10% drop in the index to take us there. And at that point, people invested in more leveraged counters like REITs will be feeling a lot of pain.

Updated the STI PE10 stats.

airport bank board business

Photo by Pixabay on Pexels.com

 

As of 1 Dec 2018, the STI closed at 3,117.61 with a PE of 11.53x. That gives it a PE10 of 12.6x or if you prefer, a ten-year average earnings yield of 7.94%. On this basis, markets haven’t been this cheap since early 2017.

In fact, the STI was cheaper just a weak ago which shows us how fast sentiments can change. The STI would have been cheaper still if we go back to late October where it briefly dropped below the 3,000 mark.

Over in U.S markets, November was probably a horrid month for most investors. Major drops in the Dow, S&P, Oil and even Bitcoin marked a month where the only refuge was in cash.

 

 

 

In case you weren’t following the crypto scene, “hodl” is a typo for “hold” and someone that became a meme for crypto fanboys to buy and hold crypto for the long run.

close up of coins

Photo by Pixabay on Pexels.com

As Josh Brown reminds us, this week is roughly the one year anniversary of when most of the world suddenly realised that people were “making tons of money” from investing in something called “bitcoin”.

Plenty of other cryptocurrencies followed but we haven’t really heard of the widespread use case being implemented. That basically means that the usefulness of bitcoin and other cryptos have not been proven yet. The only thing that has been proven is that the technology consumes a shit ton of energy.

I hate to say I told you so but I told you so (here, here, and here).

The next shoe is already dropping

airport bank board business

Photo by Pixabay on Pexels.com

By the way, remember when I said that bitcoin and cryptos were just a symptom of easy money going into certain areas of the market and those areas ride a lot on optimism which has a high chance of not coming true?

That whole setup largely explains why tech has been getting hammered the way it has. Just a few months ago, we were talking about companies with trillion dollar market caps. As of today, Apple’s market cap has fallen to just under $750b and is no longer the largest publicly-traded company as measured by market cap. As of writing, that honour belongs to Microsoft.

Now, don’t get me wrong. I’m not saying that Apple is a lousy investment or a company on the brink of disaster. What I’m saying is that the fact that what’s happening in the markets right now is all a reflection of Mr. Market’s mood swings. Just a few months ago, he was totally positive on tech which propelled Apple and Amazon to trillion dollar market caps. Right now, the bipolar Mr. Market is obviously running the other way.

 

In local news

So what does all the above mean for the local market?

Surprisingly, the STI has held up relatively well despite the carnage in tech. Possibly because the STI is financials-heavy and our markets don’t really have a huge pie in the tech sector. The property and financial sector will hit the STI much harder than anything in tech and to be honest, those sectors have been hit pretty hard already in the last few months.

However, MAS has come out to warn that interest rates are on their way up and that households need to “be prudent”*. For some months now, I’ve been saying the same thing. That if mortgage holders aren’t able to service their loans with an interest rate of at least 3%, then they need to be very careful.

The STI is going to fall much further if an economic downturn happens and interest rates in the U.S. continue to march upwards as that will directly impact defaults in the loan sector. I mean, what could be worse than losing your job while your loans get more expensive?

Having said that, valuations on the STI are not demanding. If you ask me, it’s on the cheap side (but not dirt cheap!) but the macro headwinds seem to be blowing hard.

Notes:

*It’s nice that MAS gives a mention that interest rates in SG are closely linked to rates in the U.S. If you want to know why, here was my take on it.

Sorry for the late notice but the PE10 has been updated.

airport bank board business

Photo by Pixabay on Pexels.com

 

Following the selloff in the last week of October, the PE10 reached lows that we haven’t seen since early 2017. At a PE10 of 12.2x, that translates into a 10-year earnings yield of slightly over 8%.

It’s cheap but it certainly isn’t dirt cheap. Dirt cheap would be when the PE10 is hovering around 10x average 10-year earnings. That would mean that the STI would be at levels of around 2500 or so.

Having said that, there’s no guarantee that the STI will fall to those levels. The market has run up a bit since I took the reading so who knows where we’re headed. What I’m confident enough to say is: based on what we’re seeing in the market, we’re certainly close to cheap than expensive.

Updated one day late! (check the stats out here)
But still representative of the overall picture of the markets.

Markets have climbed a little in the last week of September. I’m lucky that I stuck to my plan and committed some capital to the STI ETF a couple weeks back.

Anyway, Q3 is over and we’re heading into Q4. Sentiments are kinda pessimistic around the world with all the trade spats going on but markets don’t seem to care that much.

 

airport bank board business

LOL. I didn’t mean to choose a pic of such an exotic exchange.

 

We’re heading deep into the 3rd quarter of the year. The STI’s been largely directionless while U.S. markets have continued to hit new highs. Nothing surprising here as markets outside of the U.S have been weak since the start of the year. It also reminds me of a post by Ben Carlson on how U.S. markets and World Markets don’t exactly have a one-to-one correlation. In fact, the correlation can sometimes be negative. A good reminder of why we need to be diversified beyond our home markets.

Having said that, it does mean that other markets are cheap relative to the U.S. If that’s the case, then where should you put your money?

I think the answer’s fairly obvious.

Check out the PE10 stats here.

Following a reader’s comments on the STI PE10 data, I’ve decided to make it available for download. If you go to the site, you’ll now notice that I’ve added a “Download Data” button in the ‘Background’ section.

dwnloadData.JPG

Have fun with the PE10 data. It’s something I’ve compiled every month for the last 5-6 (?) years.

There are five pieces of data in the file:

(1) the STI close,
(2) the PE  ratio,
(3) the date,
(4) the implied earnings, and
(5) the average 10-year earnings.

(1), (2) and (3) are self-explanatory. You may find some discrepancies with actual data as there were certain months that I failed to update the data in time and therefore had to extrapolate the data, or I updated a day or two later than I was supposed to. However, for all intents and purposes, it should reflect the PE10 fairly accurately.

(4) and (5) are calculated based on (1) and (2). In order to get an average of the past 10 years’ earnings, I need the current earnings. This is where the “implied earnings” is easily calculated by taking (2) divided by (1). With (4), you can then calculate (5). The PE10 which is not in the file is then simply (1) divided by (5).

Some people may prefer to use an exponential moving average of 10-year earnings or you want to adjust earnings for inflation like Shiller does. Feel free to use the data as long as it’s not for commercial purposes.

If you find anything wrong with it, feel free to let me know.

 

 

In case you haven’t heard about it, I have an STI PE10 site that will track the STI PE10 and generate some simple statistics.

And I’ve updated it! It now displays a chart showing the STI’s PE10 versus its closing price all the way back till 2003.

stiPE10chart

Here’s what you’ll see on the site. Generated the chart using chart.js

STIpe10ScreenCap

It’s not much but I’m proud to say that it works and I made it from scratch (with a lot of dependencies and googling)

 

Finally, I got down to creating a page for the Straits Times Index’s PE10. Right now, it’s very simple. it just displays the latest month’s PE10 as well as the historical average and median values.

I’ve picked up coding for some years now but my progress was and still is, slow. However, it looks like I learned enough python and javascript to create a page where I can share the STI’s PE10. The page will be updated monthly.

What I did is really hacky because:

  1. I have to manually key in the STI closing price and PE.
  2. Run a python script locally to process the latest entry, calculate the PE10 and output to a json file.
  3. Upload the json file to the server for the page to retrieve the data, do some calculations for the average & median, and display it.

At some point, I hope to add a chart to the page so you can track how the PE10 has changed over the years and the subsequent capital gains based on a certain year’s PE10 ratio.

You can check out the page here or from the list of resources on my blog.

If you have any tips on how I can improve the page, please let me know in the comments below.