Success in investing doesn’t correlate with IQ once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.Warren Buffet, 1999.
Counters bought in April
Micro Mechanics @ $1.45
Netlink NBN Trust @ $0.88
Fraser Centrepoint @ $1.75
Mapletree Commercial Trust @ $1.64
I’ve never spent so much money in the stock market until March and April this year. Thanks to the pandemic, many stocks have become very attractive in prices. Nevertheless, it was quite unsettling even as I made my purchases … should I wait for prices to drop further … will prices go south after I’ve made my purchases?
That’s the thing about investing, there is no way of knowing if the stock price will go up or down at any one point in time. Thus, having a plan and sticking to it help me to weed out the uncertainties, keep perspective during this tumultuous time in the stock market, and stop me from making heat-of-the-moment decisions (e.g. the recent speculation on Biolidic).
Here are the stocks that I plan on maintaining in my FOREVER portfolio:
With the 4 purchases made in the month of April, my Forever portfolio is now 2/3 complete. I still plan on accumulating the following as planned:
I’m also considering adding Fraser Logistics and iReit Global to my watchlist. I might also switch out Vicom with SBS Transit (already accumulated).
Thanks to the recent rebound, the overall portfolio has improved and registered a positive XIRR of 0.35%. The question on most people’s mind is, has the market already bottomed out and is now on the ascent?
Depending on who you ask, you are going to get different answers.
Well, it does seem like the market is no longer singing the blues, but crooning strains of “hallelujahs” and “glad tidings”. Has the new bull market already started or is this just a series of dead cat bounces?
Tens of thousands of people are hospitalised and dying because of Covid-19, graveyards are getting filled, the world economy has been substantially paused, Singapore is practically in lock-down mode (semantically, circuit breaker mode) and yet very strangely, people are flocking to the stock market. The great disconnect between the rallying stock market and the economy’s slump is unmissable and certainly very perplexing.
Here’s how I try to make sense of the situation:
The worst is behind us?
I think it is fair to say that for many investors the worst of the falls has already been “priced in”. The stock market does not dance in step with the economy. In fact, the stock market is always many steps ahead. At the expectation of a downturn, investors begin to dump shares. Hence share prices go south quickly while the economy takes its time to approach a recession. By the time the recession arrives, all the bad news have been “priced in” and dusted. At that point, investors are already looking forward to the recovery.
But the thing is, is recovery even close to be seen on the horizon? Let’s not forget that the government has yet to declare a recession which economists have been saying Singapore will be entering a recession in the 2nd half of 2020.
According to the latest MAS monetary policy statement published 30th March: The COVID-19 pandemic has led to a severe contraction in economic activity both in Singapore and globally, due to the combination of supply chain disruptions, travel restrictions imposed in many countries and a sudden decline in demand. The Singapore economy will enter a recession this year, with GDP growth projected at −4 to −1%.*
How long will this recession last? Nobody knows for sure.
Again from MAS: The Singapore economy will contract this year. GDP growth will eventually recover following the abrupt downshift in the level of activity, but there is significant uncertainty over the depth and duration of this recession.
We have been warned by the media that there will be more job losses and wage cuts in the months ahead.
So, good times are back? We are in a V-shaped recovery, you say? You might be right in your optimism, but I’m not so sure.
It’s not difficult to see how people are getting optimistic. The SG government is doing a great job handling the pandemic, the earlier complacency notwithstanding. Local transmission is coming down (although transmission in the foreign worker dormitories is a different story), and we don’t have a high fatality number. The government has come in with guns loaded to rescue the economy. The Resilience Budget announced on 26 March, and the earlier Unity Budget, totalled 55 billion! In the USA, they don’t fight the Feds; in Singapore, we don’t fight the PAP.
We all have confidence in the SG government to contain this crisis. I mean, when it comes to resolving a crisis, nobody does it better than the PAP, and no one people can come together as united, and as quickly, as Singaporeans. The circuit breaker period will most likely not be extended past June, some lockdown measures will be relaxed, kids will go back to school, adults will go back to work (after having their hair cut), shopping malls will see a lot more footfall, etc. So with this level of optimism and the view that the worst is already behind us, coupled with the fear of missing out, investors begin to rush into the stock market and chase perceived gains.
Yes, Singapore will open up … but to a very different state of affairs.
On restarting the economy, Mr Lee said in his May Day speech: After we bring down the number of new Covid-19 cases, we can ease the circuit breaker measures, and progressively restart our economy. This will not be straightforward. We need to step up Covid-19 testing and speed up contact-tracing. And we must proceed cautiously, with safeguards, so infections do not flare up again. We have kept essential services going. But the rest of the economy will have to open up step by step, and not all at once. Some industries will open up earlier than others, and recover sooner. For example, those critical to keeping our economy going domestically. And those that keep us connected to the world and to global supply chains. Other sectors will have to wait, especially those which attract crowds, or involve close contact with other people, such as entertainment outlets and large-scale sporting events … Significant structural changes to our economy are likely. Some industries will be disrupted permanently. Companies will have to change their business models to survive. Some jobs will simply disappear. Workers in these industries will have to reskill themselves, to take up jobs in new sectors. But there will also be new opportunities, and new jobs created too.
Mr Lee did say in an interview with CNN on Mar 29: By the time it (Covid-19) goes around the world, and then finally runs its course, I think that is several years, unless something happens to abort that process.**
Yes, the Singapore economy will open progressively but due to the length of time this virus will run its course, we are not returning to status quo ante any time soon.
If your employer is a responsible one, you might find yourself sitting 1.5 metres away from your colleague.
Restaurants will not pack diners in.
You might find empty seats on your left and right when you next enter the movie theatre.
Businesses will be making significantly lesser money or take a longer time to return to profit. Some will go bust. Dividends to share holders will either be suspended or materially reduced (some Reits have already cut dividends, ranging from 20% to 70%).
Also, with wage cuts and job losses mounting across the economy, many people will be spending carefully and investing circumspectly.
So really, do all that paint a nice rosy picture of the Singapore economy from now till the end of the year? Not really.
The health of the world economy is fast deteriorating. Economists are even saying that the world is possibly entering a period of depression.*** Trump is also threatening to reignite the US-China trade war to punish China for the mounting economic costs of the pandemic in the USA (actually, Trump is making China the scapegoat for his own failure in handling the health crisis).
First, the Covid-19 pandemic. Next, the collapse of the oil price. And coming, a renewed US-China trade conflict. Considering all these, is it fair to expect the recent recovery momentum in financial markets to recede and fade in the near future? Maybe. Can’t really affirm this in absolute certainty though. Remember, the market is irrational.
Honestly though, should we expect another wave of cold front even as we see currently tender shoots of recovery in the Singapore stock market? Will we revisit (or not) the low of March 23? Are some investors getting ahead of themselves and throwing caution to the wind? I don’t know for sure although I’m leaning on the view that there is further pain to come in the next half of the year.
During this time when the market can swing either way, I need to be calm, patient and disciplined. I’m neither optimistic nor pessimistic. I want to approach investing during this period logically, rationally and cautiously. In the midst of uncertainties as a result of the disconnect between the stock market and the local economy, having a plan for investing and a price list help … a lot. I find it easier to live with a simple story line than one that is convoluted, i.e. if A happens just do B, rather than, if A happens in the absence of B, and C and D align, then execute E.
In a perverse way, I do wish the low of March 23 to return just so I can snap up more stocks at those attractive prices. Better still, a new low lower than that of March 23. Will that happen? Don’t know. But should that happen, I’ll be singing a glorious song and visualising pots of gold as I put in my buy orders.