Sleep well at night with a plan.

Today's selling in the stock market here has not affected all counters in equal measure. In fact, for the vast majority of my portfolio, the selling has not been a big thing.

When there is strong selling down in the market, I am more interested in buying but not indiscriminately, mind you. I have a plan and I am sticking to it like glue.

Regular readers might remember me saying that I would like to accumulate the following counters if they should hit their next support levels:

1. AIMS AMP Capital Industrial REIT @ 19.5c/unit
2. Sabana REIT @ 83c/unit
3. First REIT @ 71.5c/unit

So, did I buy anything today? Nope.

Some people have advised me, with good intentions I am sure, to wait longer and I could perhaps get these at even lower prices. Indeed, what they think could happen just might. Really.

However, remembering how no one can time the market bottom, I have decided to pace myself as I buy at supports. I am more an investor than a trader, after all. I invest in these REITs for income and with distribution yields of 8+% to 10+%, everything remaining equal, they are pretty good investments.

In the last bear market, many who were expecting the market to bottom at 1200 points were sorely disappointed and quite a few missed the ride up. Those who bought at 1400 points or higher anyway were amply rewarded over the next one year and more.

This time round, I see many people are once again predicting where the bottom might be over the next few months. I won't go there.

So, what is my plan in a nutshell?

I might still indulge in some counter trend trading if the technicals look promising and I will continue to invest for income, adding at critical supports. I will continue to be invested in the stock market but keep a warchest for future acquisitions at bargain prices if they should present themselves.

This way, if the stock market reversed to move higher, I would not bang my head against the wall. Of course, if the stock market should move lower instead, I would have the resources to add to my long positions.

My plan is good for me but it might not be good for you. In fact, I am very sure that it is not good for everybody. Take stock of your own situation and decide what is best for you.

What is best for anyone, however, I believe, is usually a strategy that will allow the person to sleep well at night. That is priceless.

STI drops 3.2% to 2,733.63 at closing
Friday, 19 August 2011

© 2011 - The Edge Singapore

Another bloodbath?

At this very moment, stock markets in Europe and the U.S.A. are down between 3+% to 6+%! Will Asian markets be drenched in another bloodbath tomorrow? Buckle up because it seems like it would be a rough ride.

What am I going to do? Stick to my plan. What else?

If some of the counters I am eyeing should fall to my target prices, I will collect more. I am pacing myself as there is no way of knowing how much worse this will get.

Being invested for income, having regular dividends and income distributions will provide me with reliable cashflow during leaner times as I wait for the recovery which is bound to take place one day.

Stay invested in Asia. This is where all the growth is and will continue to be.

Read: DJIA falls below 11,000.

Singapore Presidential Election 2011.

Read online articles on the upcoming Presidential Election during my lunch break.

The candidates and what they say:

Tan Jee Say (symbol: heart):
1. The primary role of the Elected President is to act as a check on a possible rogue government.
2. Under the Constitution, the president has blocking powers in only five specific areas which include the reserves and key appointment holders.
3. On all other matters, the president has to act on the advice of the prime minister and Cabinet.
4. "I’m not anti—establishment. I’m for Singapore and my views are for the good of the country."
5. He added he estimates his campaign budget would run up to about S$200,000, and he would appeal for donations via his website from Wednesday night.

Dr. Tony Tan (symbol: spectacles):
1. Can help strengthen Singapore’s ability to weather the current financial uncertainties and protect its financial reserves.
2. Will raise issues dear to his heart, such as education, through formal and informal channels.
3. Will also champion the Singapore brand overseas, help raise the profile of local charities and encourage greater participation in sporting, cultural and artistic activities.

Tan Kin Lian (symbol: hand):
1. Intends to influence the government within the Constitution.
2. Views himself as being the only neutral and non—partisan candidate.
3. Wants to follow in the footsteps of the late former president Ong Teng Cheong.
4. Mr Tan said he has a shoestring budget of about S$50,000 for his campaign.

Dr. Tan Cheng Bock (symbol: palm tree):
1. Suggested that policies behind community—based groups like Mendaki, Sinda and CDAC be merged.
2. Dr Tan made clear he didn’t want to interfere in politics.
3. More than 1,000 posters and 200 banners have been printed, and volunteers are keen on securing the most visible spots.

I do not like the idea that Tan Jee Say is asking for $200,000 donation from the public to fund his campaign. The amount seems too large and why can't he fund his campaign himself? I remember reading that he is a multi-millionaire private investor.

I like Dr. Tony Tan's credentials and I know GIC did much better compared to Temasek Holdings in the last recession too. He has the brains but he has always kept a rather low profile. However, his links with the PAP might work against him as the party is not at the height of its popularity now.

I also like Tan Kin Lian as, being familiar with his blog on finance and insurance, he seems to give good advice and cares for the common people. I like how he is campaigning on a shoestring budget of $50,000 and made no mention of asking for donations.

I like Dr. Tan Cheng Bock's honesty and integrity. I remember watching Parliamentary debates on TV in my schooldays and I was always impressed with how he would just speak his mind against policies if he felt it was necessary to do so. I also like his down to earth approach in campaigning. I think this is a good person who seems to be a good balance between Dr. Tony Tan and Tan Kin Lian.

The choice is a tough one. Who will you be voting for?

First REIT: Partial divestment at 79c.

I was working late today. Trying to figure out some computer related stuff and trying to get used to a new software. This is likely to remain a challenge for me at least over the next few days. I am definitely one of the least IT savvy people around but this is life, I guess.

Although I would like to crash into bed right now, I thought I should blog about my sell order for First REIT at 79c which was partially filled today. Sold some First REIT at 79c? Why?

Given the volatility in the stock market, I guess it should be a prudent decision to lock in some gains if we could. After all, the REIT is not going to distribute income for at least another three months down the road and there is a chance of further downside with sentiments so weak.

The black candle today was formed on the back of relatively low volume, however. Selling lacks conviction although it does not mean that price cannot drift lower.

77c, the low of the day, is where we find the 100dMA. 77.5c, the closing price, is where we find the 200dMA. These prices are immediate supports. If these were to go, I would expect price to go lower.

79c is a natural candlestick support turned resistance. If it should break on the back of higher volume, we could see gap covering at 81c. Before that, 80c should provide some formidable resistance for various reasons, technical and fundamental.

Good luck to fellow unitholders.

CapitaMalls Asia: Pre-emptive strikes failed.

Quite a few regular readers and friends are perplexed why I was buying shares in CapitaMalls Asia when it is clearly in a persistent downtrend. I replied that I was pre-empting a possible reversal as it looked like a positive divergence could emerge. Today, that possibility went out the window as the MACD formed a lower low as price weakened.

So, the technical reason I had for buying more shares in CapitaMalls Asia is no longer valid and I will not add to my long position anymore until the picture changes. Will I cut loss? I will only do so in a rebound. I will not do so as price goes lower. That has been my practice.

Prices rarely go up or down in a straight line. They climb a wall of worries and go down a river of hope. With CapitaMalls Asia, a rebound in share price could see gap filling at $1.325 per share. Whether this will happen or not, nobody knows for sure. If it happens, I will reduce my exposure.

Fundamentally, I still like the company's exposure to the growing middle class in China. These people have greater discretionary spending power and shopping malls in China will see strengthening demand over time. This will translate to higher asking rents and higher valuations for malls.

I also like how the RMB is likely to strengthen in time and this would mean that the NAV of the company will only go higher in S$ terms. How long will this take? Your guess is as good as mine.

Only one person knows for sure and he is Mr. Market. He will decide when the share price of the company will trade higher. Having failed to pre-empt Mr. Market's movements successfully, it is now back to basics while I wait for clearer signs.

Related post:
An elaboration on my methods.

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Good luck!

Should we be staying invested or in cash?

All of us know how pathetic interest rates on savings are for quite some time now and with the U.S. Fed pledging to keep interest rates low for another two years or so, it does seem as if low interest rates are here to stay, even in Singapore.

We also know that the ultra low interest rate environment is pushing up prices of almost everything. Inflation? You bet. Is this going to persist? It certainly could. If it does, then, my decision to sell my properties in recent months might not be that brilliant after all.

However, if we remember basic economics, we will recall that prices are a function of supply and demand. With many more new homes to be completed from 2012 to 2015, we could very well face a supply glut in future. This is probably quite well documented by now but I will run through the numbers once more:

Year 2012: 
15,457 new homes to be completed.
Year 2013: 
17,111 new homes to be completed.
Year 2014: 
21,680 new homes to be completed.
Year 2015: 
22,520 new homes to be completed.
We should also bear in mind that, currently, there are still more than 30,000 completed homes unsold.
(Sources: URA, DTZ and Nomura.)

As long as demand remains strong, the supply could be well-absorbed. This would depend on the state of the economy and the level of confidence amongst buyers, of course.

To add to the supply glut concern, the very well publicised recent decision by the government to build more HDB flats and to build them faster is likely to weigh in on the matter. Read HDB has promised 25,000 more new flats next year, based on what it said the construction industry can handle.

So, when people ask me for my opinion on whether it is a good time to buy that investment residential property in Singapore, I usually would reply in the negative. However, when people ask me if it is a good time to buy their first home, that is a bit trickier. It really depends on how urgently they need that first home. Sometimes, if we have to pay a premium, we just have to do it. Who knows? Price could keep going higher although I do not think it likely through 2015.

What about me? I get the sense that many readers are wondering what I am going to do with the cash that will be coming in from the divestment of my properties. To be quite honest, I am not going to keep too much cash in my savings account for too long as inflation would rapidly erode its value. To that, some might say that because they are in cash, their cash is now able to purchase many more shares than it could a month ago. This is certainly a valid point as well.

So, what to do? I must have said this a few times before but there is no other option for me than to stay invested but have a war chest ready. We want our money to work hard for us. At the same time we want our money to be able to purchase more shares at lower prices. Why? So, that our money could work even harder for us. Therefore, in the final analysis, whether we stay invested or in cash, the objective is the same: to make our money work for us.

While I was holidaying this weekend, I noticed that I have a lot more white hair. Family and close friends know that I think a lot. I think I think too much. ;)