Tuesday, August 19, 2014

Are US Stocks Expensive?

There has been numerous debates since the start of this year regarding the rise of US stocks eg S&P 500.Many "experts" think that S&P is very expensive now relative to historical data. They used Robert Schiller CAPE index which now stand at 25. This was exceeded only three times since 1881 in 1929, 1999 and 2008. They preceded the Great Depression, dotcom burst and GFC respectively.Historical the CAPE for S&P run around 15.21 in the 20th century.

However, there is another camp that look at the data differently. To them, the S&P index PE is at 16.2 based on 2014 earnings. S&P earning per share is at $120. You typically need to get to PE at around 20 for sign of bubbles.So, to them, there are still a lot of legs of the current bull run.

What is my take? frankly, I do not know because I am not an expert and experts made all the wrong calls most of the time anyway. However, I do know of two things. The S&P now rely on a lot of overseas earnings compare to the previous decades. The emerging countries in particular China has grown by leaps and bounds and are now very important to S&P earnings. That is probably the reason why since 2009, Main Street is not doing well compare to Wall Street in the US. Main Street focus on the local US economy whereas Wall Street focus on corporate profits. Next, is that the low interest rate environment do push down the cost of debts and drive up earnings.

Sunday, August 17, 2014

Keppel Corp

Well, Keppel Corp is in the limelight again during PM Lee NDR speech.This time, it is about how a few non-graduates made it good in Keppel Shipyard climbing through the ranks despite being non-degree holders and how Keppel management pushed and supported these people along the way to achieve their maximum potential (which many degree holders will not be able to unfortunately). Keppel was in the limelight during a previous NDR where PM again describe with some pride how Keppel built rigs were being used to launch the rescue operations during the BP oil spill in the gulf of Mexico.

Well, I think the few people handpicked by PM are the exceptions rather than the norm as Singapore clearly lack an environment where the non-degree holders can excel in their vocations by choice or otherwise. The fact that Keppel was mentioned on both occasions point to the dearth of organizations locally able to provide the platform to foster such an environment where engineering and vocational competencies are highly valued.If you fire 100 shots at a target, one or two will hit bulleye. NNonetheless, what is needed are 30 targets for every 100 shots fired and we get 30 bulleyes.

However, I am not totally convinced that what Keppel is doing is really 'high-tech' where it is difficult for competitors to catch up and overtake.My gut feel is that what they are doing is integrated engineering ie putting different pieces together on schedule and under stringent safety requirements.The Chinese shipyards are also building submersible and jack-up.They may not have the same quality but it may be a matter of time.Of course, Keppel have the strategy to build their rigs near their customers but their is no intrinsic competitive edge as a financially strong enough competitor can also muscle in to do likewise.I am not certain that there are tons of internally developed IP, processes etc that go along with the building of jack-ups, sub-mersible that make it difficult for the competition to acquire or duplicate based on my observation that Chinese shipyards also can deliver, may not on schedule or with the same quality at this stage.I will be most glad to be proven wrong on this, though.

Hence, I have not added more shares on Keppel beyond what I currently have.I am not as optimistic as PM on Keppel long term prospect.Again, I do not mind being wrong on this too.

Thursday, August 14, 2014

EcoHouse - When it rain, it pour

Now it is reported in yesterday TODAY that the Brazilian Embassy claimed that they have NO dealings with Ecohouse and was not even aware of it until complaints lodged by Singaporean investors against the UK based firm.

“In view of allegations by Singapore investors regarding EcoHouse Group, a company linked to executives in the UK, the Embassy of Brazil would like to state that the Embassy had no prior knowledge of the existence of EcoHouse’s operations in Brazil,” the embassy said in response to TODAY’s queries

On its website, EcoHouse claims that it was chosen by the Brazilian government as “the only UK company to date officially authorised to build developments under Minha Casa, Minha Vida”, which aims to provide three million homes for the country’s growing middle class.

Obviously someone is not telling the truth when taken together together with the recent Brazilian Embassy statement.

About 800 to 1500 local investors have collectively ploughed more than $70m into three housing projects.

The company was recently put on the Monetary Authority of Singapore’s (MAS) Investor Alert List, which lists unregulated companies that may have been wrongly perceived as being licensed or authorised by the MAS. Last year, Shenton Wealth holding, Dolphin Capital Asia  and a few others similar type of firms are also put on the MAS alert list.

Monday, August 11, 2014

Ecohouse Shutters Its Doors

Just read in the ST today that Brazilian property developer Ecohouse has apparently shuttered its office in Singapore. The firm was recently placed on MAS alert list and since start of last week, the office in Suntec Tower has been closed. Calls to the office remain unanswered. These are tell tale signs of a fly by night operation.

It was reported that the firm managed to net $70m for three projects. I worry for those investors especially if their money are hard earned. They will most likely have to kiss good bye to their so called "investment". They forgot that sometimes investments that look real and maybe be real can turn out to be scams later on for various reasons. Most hedge funds operating with HIGH RISK are not even able to return 20% per year.

Last year, Shenton Wealth Holdings and a few others were similarly place on MAS alert list.In any case, MAS recent announcements to tighten and regulate investment schemes like landbanking, gold buyback etc will lead to the rapid demise of  a lot of these firms.

If you have to invest to beat the meagre returns given by the banks, do it with your eyes open.