I’ve been getting myself updated with the views (At least, the publicly stated ones) of experts attending the World Economic Forum in Davos. Not sure why it’s always held there. It looks terribly cold. How to think? LOL.
Several years ago, I was stuck in Switzerland for an entire month, and I used that time to travel around the entire Switzerland, yet I never thought of going near Davos. It’s just so… isolated.
How did I get stuck in Switzerland? I was in Geneva for a conference. Around that time, an Icelandic volcano erupted, and the ash cloud drifted south towards Europe. Literally on the last day of the conference, while I was on the way to the airport to go onwards to US, the cloud reached Switzerland and all flights were grounded.
Check this out. Have you ever seen a complete shut down of the airport?
Yup. That’s what it looks like.
And it was during this time of chaos, that ONLY Singapore Airlines bothered to take care of their passengers who got stranded. We got a complimentary night stay, complete with meal vouchers, at the 5 star airport Crowne Plaza Hotel. OK, it was only 1 night, and the airport was shut for almost 2 weeks, yet it was a nice gesture. At least passengers could then make their own subsequent arrangements.
And the meal vouchers weren’t scrappy ones. It was literally excellent fine dining. A little comfort for the sudden disruption:
None of the other airlines did anything for their passengers who were stranded, simply because they didn’t need to. (Events due to acts of god were not covered apparently)
Well, that was a great move by SQ, cos ever since then, I have never been on another airline. Not even once.
Anyway, since I was stranded, I had 2 options. Either try to take a train down south asap, and try to beat the ash cloud and reach a still open airport and fly off, or just wait it out. I chose the latter option, and decided to go travel around the entire Switzerland instead. Hence, yours truly became somewhat of a mini expert in all things Swiss.
Even then, I looked at Davos and thought, gosh what is there to do there? And decided to give it a miss.
Anyway, I get the impression that the experts at the WEF……. don’t really know what’s going to happen either.
Ray Dalio says that the rally has room to run, and “if you’re holding cash, you’re going to look pretty stupid”. Certainly bullish comments. In fact, I think he’s probably the most bullish amongst all these experts. He thinks cash waiting on the sideline, will now flood into the markets, as participants grew tiring of waiting.
But then again, he says the Fed’s interest rate policies will be key, and that it “just takes a little change in interest rates to make a bear market”. He also says it’s very difficult to get the rates exactly right.
And then of course, there’s our dear Nobel winning economist Robert Shiller, who says that “Stock markets might be continuing their run higher this year, but a market correction could come at any time and without warning.”
Markets could “absolutely suddenly turn”
LOL… What does that even mean? Stock markets MIGHT be continuing their run higher this year, but a market correction COULD come at any time and without warning??
TTI could say that too without going to Davos! It’s just a bunch of many words, with absolutely no information. Here, let TTI have a go at it:
“We could be seeing heavy rainfall tomorrow, and if so, it’d be accompanied with dark rain clouds. But we have to be cognizant of the fact that sunny weather cannot be ruled out, and this could come without warning”
Seriously, why do they say shit like that? To a global audience too. I previously railed about this, almost a year ago:
TTI’s Options Strategy – Results Thus Far In 2017
In the last paragraph, I wrote
“There’s a long statement by El-Erian some months ago about his outlook on the economy. And it’s so long it took up like 4 lines of the Bloomberg article, and basically it says “the economy can go up from here, but I won’t be surprised if it goes down either. There’s a small chance it can also flatline and trend, which investors would be wise not to discount…. blahblahblah.”
Well, not exactly like this, but similar. I tried finding the article to substantiate but it’s some time ago and I can’t pinpoint the exact title so can’t find it. But I remember sending that to some friends and we totally had a good laugh at it.
Imagine if doctors can act like that:
“There’s a chance that this radio-opaque lesion is cancer. We have to monitor it closely, but don’t be too worried because it may not even be cancerous either. It can grow and spread quickly, although I won’t be surprised if it stays the same when we take a review x-ray in future. We gotta remain vigilant though, and not forget that there’s always the likelihood of metastasis with this being fatal eventually, although at this stage this likelihood is not high.”
So when you’re on your deathbed, the doctor can tell you “I told you it can grow and spread quickly right? I told you there’s a chance it can get fatal right?”
Then there’s George Soros, who didn’t say much of value to investing, but used the stage to rail against social media like Google and Facebook, in particular, saying that “their days are numbered”
So I guess it is investing related if you are vested in Google and/or FB.
Oh, and he took the chance to bash Trump too. What’s new?
Then, there’s one of my personal favorites: Howard Marks.
Basically, he’s leaning towards the cautious/bearish camp, telling clients that “the easy money has been made”
And I quote:
“Most valuation parameters are either the richest ever … or among the highest in history,” Marks wrote in a note to clients Tuesday. “In the past, levels like these were followed by downturns. Thus a decision to invest today has to rely on the belief that ‘it’s different this time.'”
I wouldn’t say he’s bearish actually…. just… cautious. He has always said it’s a fools’ game to try to predict accurately, a crash. (Specifically, he says it’s not possible to be that specific).
So what should a lowly retail investor make of this whole mess?
I don’t know man. But the experts in Davos are divided amongst themselves too. Kinda like bitcoins. Buffett and Klarman scorn it, but Miller loves it.
Some of them have to be wrong right.
Personally, I’m remaining mostly vested, but with important caveats:
- New ideas/positions need to have a visible catalyst, a storyline, a plan in place. Undervaluation alone is not enough. Contrarian positions in crises would suit me just fine, just like my most recent positions in Shinsho Corporation. More on that later.
- I’ve lightened up positions since the start of 2018. Thus far in Jan, I’ve a net liquidation of $62,215. That is, the summation of all activities for SG portfolio is the conversion of $62,215 worth of equities into cash. It’s not a large sum, relative to my entire portfolio value, but I have a separate un-utilized property fund held in cash, and the 6 digits of cash doing almost nothing is burning a hole in my pants. I figured if I expand my scope to look at overall net worth management, I do have adequate cash on hand for a horror scenario to happen anytime now.
- More of my activities now would revolve around the use of relatively short dated options (3 weeks or so). The premiums collected provide a layer of safety, plus there’s a lot of flexibility in going short, or even neutral. That is, I can build positions that would do best if the markets don’t go up or down, but just flatlines.
So there. That’s my plan, for now at least.
More on Shinsho Corporation now.
About 2 months ago, I took up a core position in Shinsho Corporation, and a much smaller position in Kobe Steel, in light of the Kobe Steel scandal. (2,500 shares in Shinsho Corp and 2,000 shares in Kobe Steel. Yes, I added to Kobe Steel since the initial thesis)
TTI’s New Core Position: Shinsho Corporation & Kobe Steel
2 months on, that move is starting to look like an inspired one:
Of course, I didn’t manage to get it at the bottom, as always.
As with most other instances of deeply contrarian investing, the most difficult phase, is always that continued drop AFTER having entered and built up your positions.
It’s always difficult to see it continue dropping at the same rapid clip. Self doubt starts to set in, and you start thinking if you have missed out on something that the markets knew.
As always, I responded with the only way I know. I continued digging deeper. Knowledge is always comforting.
And here is where a bit of luck comes in. Of late, the JPY has just gotten stronger all of a sudden.
The strengthening of the JPY vs SGD added, at the time of typing this, adds approximately 100,000 yen in fx gains. (100k yen, not SGD la!)
I am not a FX expert (if there’s even such a thing), so I won’t say that I knew this would happen.
I just got lucky here. Changing SGD to JPY to build my core position when SGD was strong, and now JPY is rapidly strengthening in the past month.
Anyway, I have reassessed my positions in both companies, and continue to hold them. I still believe there’s significant upside from here, despite the 15% or so increase. The obvious catalyst is the Kobe Steel’s earnings release, which is slated to be on the 1st Feb 2018, which is next thursday.
I continue to believe that the markets are overstating the effects of the scandal, and the appreciation is just a reflection of the diminishing scandal. All other Japanese steelmakers have risen, but Shinsho’s rise has been much more rapid, and there’s room for more, based on a PE basis.
With frothy markets, and little opportunities in the local markets, my newer ideas are not listed on SGX. (except Q&M Dental).
That’s all I have for this update.
As always, to all embarking on your exciting investing journeys, Godspeed!