Olam buys sugar mill at US$73.8m, EBITDA accretive in yr 1

By TEO SI JIA


Agricultural company Olam International Limited on Wednesday announced that it has bought 100 per cent of the shares in Hemarus Industries Limited (HIL) of India and its accompanying assets for US$73.8 million.

It will acquire a sugar mill that produces 3,500 tons crush per day and a 20 MW co-generation facility in the purchase.

Olam will be injecting US$6.6 million to bring the sugar mill's capacity to 5,000 TCD, following the transaction.

The sale will be fulfilled in part by US$8 million in cash and US$66 million in debt assumption.

'This acquisition strengthens our position in the Indian sugar industry and is in line with our stated strategic objective of building an annual sugarcane crush capacity of between 2 to 2.5 million tons over the course of the next 5 years,' said Sanjay Sacheti, Olam's India and SAARC regional head.

HIL, which has a book value of US$70 million, is expected to contribute US$90-100 million in turnover and a 32 per cent return in equity.

The acquisition is expected to be Ebitda accretive in its first year and earnings accretive in the next.

Competency versus Expectancy

Just For Thinking ....

Read? Knowledge versus Competence

How to raise competency level?

If we continue to be happy with low expectancy e.g. 4-5% ROC even after years of investing in the stock market. Are we be able to raise our competency level with such low expectancy?

I like to think that it will be hard. Right?

To raise competency level, we will have to continuously challenge ourselves by setting higher progressive investing goals. In this way, we may be able to identify any competency gaps when we are unable to meet progressive higher investing goals. But, we must also be realistic that we may not have the necessary skill sets to fill up all these gaps and continuously learning and changes in this journey is a must.

Olam reports full-year net profit of S$444.6m

By Amanda Feng


SINGAPORE : Mainboard-listed Olam International on Monday reported a net profit after tax (including exceptional items) of S$444.6 million for its full year ended June 30, a growth of 23.6 per cent compared to S$359.7 million achieved last year.

This is despite significant volatility in commodity markets, which saw a rally in prices across commodity asset classes during the first nine months, followed by a weakening of prices during the last quarter, particularly towards the end of June.

Olam added that its decision to invest selectively in upstream and midstream growth initiatives with attractive returns, such as plantations and value-added processing, helped enhance margins and strengthen returns.

Olam, which processes agricultural products and food ingredients, said commodity food prices might continue to go up in the light of inflation.

Olam International's CEO, Sunny Verghese, commented: "Although all this economic turmoil has happened, commodity prices and food prices have only come down about one and a half per cent."

"This reflects the strong underlying demand and supply side drivers which will keep commodity prices over the middle and long term pretty elevated," he added.

- CNA/ms

Gone Fishing: 28 - 30 Aug 2011

Batam

Don't Be a Yield Pig

By Seth A. Klarman

I have thoroughly reviewed the U.S. Constitution (and the Bill of Rights for good measure) and, contrary to popular belief, there is no mention of a right for savers to earn high rates of interest on government guaranteed principal. Nevertheless, it comes as a terrible shock to a lot of people that some current short-term interest rates are only one- third of early 1980s levels. The correct response to this shock can be crucial to your financial health.

There is always a tension in the financial markets between greed and fear. During the 1980s investor greed frequently got the better of fear, with the result that yield-seeking investors, known among Wall Streeters as "yield pigs," were susceptible to any investment product that promised a high current rate of return, the associated risk notwithstanding. Naturally, Wall Street responded by introducing a variety of new instruments--junk bonds, option-income mutual funds, international money market funds, preferred equity return certificates (PERCS)--anything that promised high current yields to investors.

Unless they are deluding themselves, investors understand that to achieve incremental yield above that available from U.S. government securities (the "risk-free" rate), they must incur increasing levels of principal risk. There is no risk-free yield enhancement on Wall Street. The painful result: Higher risk investments often erode one's capital and produce lower returns--the worst of all investment worlds. Higher-returns-for-higher-risks only applies on average and over time.

Investors must carefully examine alternative investments to assess when they are being adequately compensated for bearing risk and when they are not. When the yield differential between riskless and more risky securities is sufficiently large, even a conservative investor might reasonably venture beyond U.S. government securities. Thus, for example, it made sense to buy the Federated Department Stores senior-secured bonds,

Harcourt Brace debentures and Manville preferred stock when panic hit the junk bond market in late 1990 and early 1991.

These days, however, I don't believe investors are being compensated sufficiently to venture beyond risk-free instruments. Yield spreads between government bonds and corporate credits have contracted sharply this year from levels a year ago. Some bonds of such highly leveraged issuers as Burlington Industries and Unisys now trade above par. A year ago they sold at substantial discounts from par.

Yield-starved investors also have been bidding up the bonds of such deeply troubled issuers as Chrysler, Stone Container and Marriott. The General Motors PERCS--a newly created instrument that only a yield pig could love--recently traded at a level so high that the common stock became a better buy no matter where GM common traded and no matter what action GM's board took on its dividend.

Some investors, desperate for better yield, have been reaching not for a new Wall Street product but for a very old one--common stocks. Finding the yield on cash unacceptably low, people who have invested conservatively for years are beginning to throw money into stocks, despite the obvious high valuation of the market, its historically low dividend yield and the serious economic downturn currently under way.

How many times have we heard in recent months that stocks have always outperformed bonds in the long run? Funny, but we never hear that argument at market bottoms.

In my view, it is only a matter of time before today's yield pigs are led to the slaughterhouse. The shares of good companies and bad companies alike are vulnerable to sharp declines. Moreover, many junk bonds that have rallied will tumble again, and a number of today's investment-grade issues will be downgraded to junk status if the economy doesn't begin to recover soon.

What if you depend on a higher return on your money and can't live on the income from 4% interest rates? In that case, I would advise people to ignore conventional wisdom and consume some principal for a while, if necessary, rather than to reach for yield and incur the risk of major capital loss. Stick to short-term U.S. government securities, federally insured bank CDs, or money market funds that hold only U.S. government securities. Better to end the year with 98% of your principal intact than to risk your capital roofing around for incremental yield that is simply not attainable.

I would also counsel conservative income-oriented investors to get out of most stocks and bonds now, while the getting is good. Caution has not been a profitable investment tactic for a long time now. I strongly believe it is about to make a comeback. Seth A. Klarman, president of The Baupost Group, Inc., a money management firm, is the author of Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful

Current Dividend Yield is good but avoid falling into potential Dividend Traps (3)

Read? Dividend Yield is good but avoid falling into potential Dividend Traps (2)

Recently, I realized that I have been reading more blog posts championing dividend yield investing as the way forward to invest as the market diving deeper into the Bear Market. We can easily understand the sentiment of fears in a bear market of falling stock prices. It can hurt us badly and force us to appreciate the attractive bird-in-hand element in dividend yielding stocks.

But avoid falling into dividend trap by seriously looking and evaluating their dividend payout ratio and potential capital appreciation when the Bull comes roaring back. In Bear market, potential good dividend yield and high capital appreciation is not mutually exclusive.

For example, I realized that my long-term holding position in Noble which is never a dividend yield play stock still gave me decent yield for the past 3 years: 6.7% (FY 2008),  5.3% (FY2009), and 4.5% (FY2010).

Noble reports its earning and pays its dividends in USD so dividends received will be subjected to currency risks.

When blue chips give you the blues

Beware - while value-investing may seem easy, human frailty often turns it into 'unconscious speculation'


By WILLIAM CAI

IN THE third quarter of 2010, a slew of positive economic data was evident in the media. The idea of investing for the long term - by picking Singapore's 'solid' dividend-paying blue-chip stocks - became an attractive proposition in a low-interest-rate environment. Coincidentally, this was also when the Singapore Investor Confidence Index Poll reached a high. From a contrarian perspective, that's when one should worry.

A 'death cross' occurred when the Straits Times Index (STI) fell to 2,797. It's a term used when a security's 50-day moving average price line crosses over its 200-day moving average line from the top, generating a long-term bearish signal which suggests that investors should adjust their bullish view to bearish.

While 12 out of 18 'death crosses' resulted as false signals (whipsaws) over the past 30 years for the STI, investors should still take the bearish signal seriously. Firstly, as a lagging indicator, the signal usually occurs after the STI has fallen by 10 per cent or more, and only to be compounded by further losses if a severe bear emerges. Secondly, six out of the 18 signals resulted in losses ranging from minus 22 per cent to minus 54 per cent. Thirdly, it is worrying that more than 60 per cent of the STI constituents, which are classified as 'blue-chip' stocks, have generated the 'death cross' signal.

More importantly, the 'death cross' has also occurred for various other global markets, increasing the odds of a full-blown bear market.

The definition of an 'investment', as offered by Benjamin Graham in 1934, 'is an operation that promises the safety of principal and satisfaction of return. Operations not meeting these requirements are speculation.'

Contrary to popular belief, Warren Buffett is a great market timer. He plays the game well by raising cash when he cannot find attractively-valued stocks. He waits for opportunities to pick up stocks at fire-sale prices, especially when there's blood in the streets.

The biggest mistake an investor can make is to focus only on the idea of getting stable dividends, with disregard to price. For example, when investors buy blue chips at a high price during the mature stage of an economic cycle, this increases the possibility of seeing their stock value fall 50 per cent or more in the next economic slowdown.

Despite the potential poor risk-adjusted ratio, investors stick to the concept of buying blue-chip stocks as they harbour the hope of capital appreciation which bonds may not match. This does not make sense as corporate bonds can do the job of providing a steady income better without similar risk to equity.

Untrained investors would focus on buying blue chips with the highest reputation, quoting their good management and their ability to continue to deliver profits for the long term as reasons for investing in them. Such investors do not wish to engage in market-timing activities as they equate these to speculation. Therefore, they pay insufficient attention to prices given their assumption that well-chosen blue chips would recover from an economic downturn. Ironically, that is a speculative assumption as many of today's blue chips could become tomorrow's losers.

For example, an investor who bought SGX shares at $14.40 on Oct 2, 2007 would have seen the price fall 53 per cent as at Aug 22, 2011. Assuming dividends reinvested, the loss would be large at minus 46 per cent. Investors who bought stocks like Cosco, NOL and Yangzijiang at their peak in 2007 would still be nursing losses of between minus 50 per cent to minus 84 per cent.

Contrary to popular belief, Warren Buffett, the famous value investor, is a great market timer. He plays the game well by raising cash when he cannot find attractively-valued stocks. He waits for opportunities to pick up stocks at fire-sale prices, especially when there's blood in the streets. As the key to long-term investment success is to first avoid losing big, a true long-term investor should do the same and wait for a market crisis to buy stocks at attractive prices. Then, they can ignore the madness of short-term volatility and sell the stocks when they become overvalued. Over time, this strategy can substantially increase the wealth of investors.

For most investors, professionals included, qualitative factors like good management are difficult to deal with intelligently and such an evaluation can be clouded by an investor's own confirmation bias. Quantitative factors, like the continued ability for a business to deliver steady earnings growth, would need investors to have a considerable amount of investigation and business acumen.

Savvier investors could argue that Singapore stocks are now reasonable, based on their current price ratios and forward-looking evaluations. This requires the calculation of the intrinsic value of a business as determined by its future earnings. However, history has repeatedly shown that during the good times, many analysts become over-optimistic and assume a sustainable earnings trend. In reality, the concept of intrinsic value is arbitrary at best. It is elusive and hard to determine, due to the uncertain future and the irrational market.

In addition, few analysts dare to offer views different from the herd as it is often safer to err with the masses. For an analyst to be wrong alone, it can lead to the demise of his reputation and career. Even if the trend of earnings and intrinsic value can be determined reliably, it does not sufficiently provide a safe basis for investing, especially during a bear market.

Currently, the price-to-book (P/B) ratio for the STI stands at 1.3 times and history has also shown that since 1994, whenever the P/B ratio drops from 1.5 times, its downward momentum would bring it to lower levels. This assigns a high probability that the STI could have more to fall as it just breached its 1.5 times P/B level this month.

Unfortunately, during a mature economic cycle, undervalued blue chips are uncommon and many investors end up investing without sufficient regard to price. Investors should focus on value investing as it helps investors invest better by selecting stocks based on the margin-of-safety principle. This means that one buys undervalued stocks at a price lower than their intrinsic value.

This helps to prioritise the safety of capital while dividends are viewed as of secondary importance. While dividends come in handy as a 'cushion' to effectively lower losses when stock prices fall, dividend yields are lower when blue chips are bought at higher prices. Furthermore, during an economic downturn, companies do slash their dividend payouts to preserve cash holdings. This was true during the last crisis for blue chips like SIA, NOL, SGX, CapitaLand, DBS, UOB and ComfortDelgro, as their earnings fell.

While value-investing may seem easy, human frailty often prevents successful implementation. It is hard to prevent human emotion from corrupting an investment framework. Even if the necessary fundamental analysis is used to scan for value stocks, investors may end up with a handful of stocks from boring industries which are not what he initially deemed as blue chips. More importantly, it is hard to be fearful when others are greedy, and vice versa. It is hard to think independently and go against the herd.

Nevertheless, I hope that this article has helped instil a new level of consciousness to replace unconscious speculation. When the stock market enters a bear phase, extreme fear rather than fundamentals rules the day. Even the bluest of blue-chip value picks can fall by a considerable amount. Dividends are often insufficient to cushion a market bloodbath. How much more refuge can an expensive blue chip provide? Investors who buy stocks at a high premium during a stockmarket high unwittingly end up as 'long-term investors'.

With the current global economic slowdown, coupled with the lingering US and European sovereign debt crisis, the recent market carnage could be the beginning of something worse. Buying blue chips based on dividends alone while ignoring price, potentially deteriorating fundamentals and the economic cycle can be disastrous. It's never too late to avoid unconscious speculation and to invest wisely.

Portfolio Peak-and-Trough over Market Cycles

Portfolio = Capital + Realized Gains + Unrealized P/L

Realized Gains = P/L + Stock Dividends received

(23-Aug-2011)

Not again!

Singapore CPI up 5.4% on-year in July

SINGAPORE: Singapore's consumer price index (CPI) rose by 5.4 per cent on-year in July, due largely to higher costs of accommodation, private road transport and food.


According to the Department of Statistics on Tuesday, the higher accommodation cost was largely contributed by higher imputed rentals of owner-occupied accommodation, while the higher transport cost was due to the sharp increase in Certificate of Entitlement (COE) premiums compared to a year ago.

Excluding accommodation costs, the CPI went up by 4.2 per cent compared to the same period last year.

On-month, the CPI was up 1.5 per cent, on higher costs of housing, transport, food and clothing.

Housing cost went up 3.2 per cent due partly to higher accommodation costs and electricity tariffs.

Transport cost saw an increase of 2.7 per cent, due to higher petrol price and car price.

Food prices crept up by 0.2 per cent on dearer prepared meals, fresh fish as well as rice and other cereals.


- CNA /ls

Keppel says Aqua to buy rest of Floatel shares at NOK19.50 each

By ANGELA TAN

Keppel Corporation Limited said on Monday that its associated company, Aqua Pellentesque Limited, will buy the Floatel International Ltd shares that it does not already own at NOK 19.50 each.

This follows Aqua's amalgamation agreement on August 21, 2011 with Floatel to form a Bermuda exempted company.

Keppel already holds a 31.7 per cent stake in Floatel through its subsidiary, Wideluck Enterprises Limited. Wideluck is also the 50 per cent shareholder of Aqua. The remaining 50 per cent of Wideluck is held by Jonathan Fairbanks.

'The amalgamation is entered into in view of the long term attractiveness of Floatel's business which generates a recurring and stable cash flow secured through term contracts with reputable customers,' the company said in a statement.

It added that the deal will allow Floatel to be privatised via an efficient and cost-effective mechanism and to put in place a more efficient capital structure for the amalgamated company after the privatisation.

Choo Chiau Beng, CEO of Keppel, said the move reflects the company's growing confidence in the long term prospects of Floatel in its ability to provide high quality floating accommodation semisubmersibles for Brazil and the North Sea.

"Through this amalgamation, we hope to increase our interest in Floatel, to enable us to play a more active role in growing the company," Mr Choo said.

The offer price was arrived at taking into account the share price of Floatel in the last six months, the control premium, Floatel’s new fleet and the potential synergies between Floatel's business with Keppel's offshore and marine business.

Floatel was established in 2006 to satisfy a market demand for a new generation of offshore floatels.

Investing Made Simple by Uncle8888 (23)

Read? Investing Made Simple by Uncle8888 (22)

Beware of Little Black Swan in your Portfolio

What does Uncle8888 fear most? Bear or Swan?

Uncle8888 fears that Little Black Swan in his portfolio most.

Some people have been asking him when he is going to add more of this stock or more of that stock. No, no, no once he has enough he is not going to add more. Uncle8888 is terribly scare of keeping a Little Black Swan in his portfolio.

Why did Uncle8888 can't keep buying more of the same stock?

Firstly, he is not so smart. Secondly, he doesn't have deep pocket. When you have deep pocket; your mind is calm and can buy whatever and whenever.

Uncle8888 always like to think of risks before profits and that has been his strategy.

When it is uncertain

When he is faced with uncertainty in the stock market; he will choose to diversify. When you diversify you are actually spreading your risks when you get it wrong. But, when you are right; your rewards/returns will be diluted too. 

When more certainty seems to return

When he senses more certainty in the stock market; he will choose to concentrate by trimming those laggards in his portfolio as not all his stocks are expected to recover at the same speed. Some will lead while others will lag.

Diversification across stock and time domain

He will diversify across stock domain by adding more new members into his portfolio and diversify across time domain with his Money Plan. Read? Money Plan

In this way, he will not fear of that Little Black Swan appearing in his portfolio.

Sanity Check on the Money Plan against STI Support Levels

Read? Money Management Plan for Big Bear 2011/12

The Money Plan

checked against STI Chart for support levels

So I will be looking closely at these support levels.

Good luck!

SCI Weekly

Crash? You ain't seen nothing yet: analysts

$21 billion wiped off Singapore market - but observers say stocks could fall another 20-30% before hitting bottom


By VEN SREENIVASAN

THE bloodletting which wiped some $21 billion off the Singapore market yesterday could be the beginning of a selldown which could lop another 30 per cent off the value of stocks here.

That seems to be the view of some analysts and strategists following a rampage which dragged the Straits Times Index (STI) down 3.2 per cent or 91.33 points to 2,733.63 points yesterday - its lowest in 15 months.

'What we are seeing is a perfect storm - a confluence of negative factors,' said Prabodh Agrawal, CEO of Singapore-based IIFL Institutional Equities.

'Despite the selldowns we are now seeing, most blue chips and bellwethers here are still trading at just below their long- term price-book levels. During the last recession, they were trading at about two standard deviations below their long-term average. If we assume the same numbers and circumstances, stocks could fall another 20-30 per cent from current levels.'

The selldowns here and across the Asia Pacific region came on the heels of similar overnight savaging of Wall Street and European markets following more disappointing US economic data and intensifying concerns about a potential global economic recession triggered by the European sovereign debt crisis and a sharp US economic slump.

The dive across Asian bourses followed 3-5 per cent plunges in the US and Europe. And the selldown intensified as Wall Street futures remained deep in the red and Europe opened sharply lower again yesterday.

In Tokyo the Nikkei 225 gave up 2.51 per cent to 8,719.24, while Hong Kong's Hang Seng lost 3.08 per cent to 19,399.9 and Sydney's ASX200 dived 3.51 per cent to 4,101.90.

In Singapore, with yesterday's plunge, some $117 billion has been lopped off the value of Singapore equities this month alone.

And technical analysts see more downside. Kim Eng Securities' technical charts suggest a potential low at 2,350 points - a whopping 14 per cent under current levels.

'Based on the weekly chart trends, our chartist sees the STI trading within the 2,600-2,680 area in the short term, which coincides with the 50 per cent Fibonacci level,' it said in a note yesterday. 'The index could further correct downwards to the 2,350-2,420 area if this support area is broken.'

But many analysts also point out that medium-term fundamentals-wise, many stocks are turning attractive and thus providing opportunities for bottom-fishing.

Melvyn Boey, head of research and strategy for Asean, Bank of America/Merrill Lynch, added that although there's a looming crisis in the West, this region's fundamentals are intact.

'Asean, and especially Singapore, remain vulnerable to the impact of a global recession,' Mr Boey said.

'But, that said, South-east Asia's fundamentals are a lot stronger today than five or 10 years ago. Investors should look at stocks of companies with revenue growth, pricing power, cashflow and strong overall fundamentals to ride through the recession.'

Mr Boey added that while a recession seemed imminent, the down-cycles were getting shorter and tighter.

In short, the recovery could be as swift as the slide is brutal. So stick to fundamentals.

On the other hand, Mr Agrawal was more circumspect. 'The 2008/09 crisis lasted only four quarters because governments and central bankers were able to act aggressively and in concert to recapitalise distressed asset markets. Today, government balance sheets are in poor shape, thus diminishing their ability to act as aggressively,' he said.

Mr Agrawal noted that the intervention in 2008/09 had reflated the asset markets, but not the economies concerned. He now sees a potential for several rounds of continuous deleveraging dragging all asset markets - equities, commodities and property - further southwards. In Singapore, he cautions against jumping back into stocks too early.

But then, asset markets - especially equities - could get another reflation if US Federal Reserve chairman Ben Bernanke unveils a new stimulus package or 'QE3' at next Friday's Jackson Hole meeting.

Work Less and Gone Fishing Planning Room (7)

Read? Work Less and Gone Fishing Planning Room (6)

Someone said she don't quite understand what I wrote. May be it is easier to understand by illustrating it using a picture and saving me thousands of words to explain it.

I am setting up three Money Pots for my retirement. The first money pot is from CPF OA/CPF RA and it is not expected to be an investment based money pot for generating returns.

Fattening your Wallet or Fattening your Ego?

Just For Thinking .....

When investing in the stock market, do you want to flatten your Wallet more and then laughing to the bank or you are fattening your Ego much more than your wallet.

If you want to flatten your Wallet much more than your Ego; then do this -  More Investing and Less Analyzing. Check your 3M's - Method,  Mind, and Money. Place more focus on Mind and Money. Your method may be simple; but your Mind must be strong and steady. Your Money management must be sound so that you will have some money to invest in long bear market - buy slowly. While you may not buy at the actual market bottom; you may be able catch at least some near the actual market bottom with sound money management.

Check back how were you doing at the last Bear market. If in the last Bear market, you have to dip into your emergency fund in the earlier part of the Bear market to invest. It could be an indication that you may have to seriously review your Money management this time to prepare for Mr. Bear. He may or may not come.

Look closely the picture above. Who did Mr Bear caught?

Tell me if you know the answer? hee hee.

Bear market is here. Let's accumulate more by average down? (2)

Read? Bear market is here. Let's accumulate more by average down?

Let me repeat it again. If you are small retail investor like me; then must learn to know the big difference between Average In and Average Down in term of risks control and portfolio management.

Average down

How do you know you are averaging down and not averaging in?

You must ask yourself these two question:

(1) Did you plan for this level of capital into your beloved stock? e.g. 20 or 30% of your capital

(2) Did you bought more of it due to its falling stock price since it has become cheaper, more attractive and more under-valued?

If your answer is (1); then you are Averaging In.

If your answer is (2); then you are Averaging Down.

When you are averaging down, you are actually taking more risks than initially expected. You are thinking of profits ahead of risks. As small retail investors, most of us may have limited incoming stream of new capital so it is better for us to think of risks first before profits. This sort of thinking will help us to survive in the stock market to fight another day.

Next time, when you seek advice or see your favourite bloggers, chatters, gurus or sifus in cboxes or stock forums who are buying more of the same beloved stock as you.

Don't be fooled by that buying action of your sifu.

Your sifu may be Averaging In; but you may be Averaging Down. Your sifu may be taking reasonable risk due to his portfolio size; but you may be taking too much risks and has ignored the importance of portfolio management for survival in a prolong bear market where there are many more other gems to be found. Diversification is a key survival for not so smart in the stock market.  If you are the smart ones in the stock market then people should be following you. Right?

BTW, one young man whom I know failed to appreciate it when I replied to his email; but has to learn this lesson through a more painful way.

"Think of Risks before Profits" - Createwealth8888

A look at the Dow's worst drops since 1899 - updated

Read? A look at the Dow's worst drops since 1899 - updated

Createwealth8888: If you think it is like 2008 again, then a few more big drops will be expected.

1. Aug. 04, 2011: 513 points, or 4.3 percent
2. Aug 08, 2011: 635 points, or 5.6 percent
3. Aug 18, 2011: 420 points, or 3.7 percent

1. Sept. 29, 2008: 778 points, or 7 percent
2. Oct. 9, 2008: 679 points, or 7.3 percent
3. Oct. 15, 2008: 733 points, or 7.9 percent
4. Dec. 1, 2008: 680 points, or 7.7 percent

Stock Volatility to Leave Lasting Scars

By Laura Keeley

Last week’s record volatility in U.S. stocks ended after four days. The anxiety it instilled among mutual-fund investors may linger for years.


Investors pulled a net $23.5 billion from U.S. equity funds in the week ended Aug. 10, the most since October 2008, when markets were reeling from the collapse a month earlier of Lehman Brothers Holdings Inc., the Investment Company Institute said yesterday. The period tracked by the Washington-based trade group included three of the unprecedented four consecutive days in which the Standard & Poor’s 500 Index rose or fell by at least 4 percent.

The roller-coaster ride was unnerving for fund investors who have already endured the bursting of the Internet bubble in 2000, a 57 percent collapse in the S&P 500 Index (SPX) from October 2007 to March 2009 and the one-day plunge in May 2010 that briefly erased $862 billion in value from U.S. shares. The debacles, combined with falling home prices, unemployment above 9 percent and a lack of trust in government to bring down spending, may sour individual investors on domestic stock funds for an additional three to five years, according to Andrew Goldberg, a market strategist at JPMorgan Funds in New York.

“You can’t keep having bombs, so to speak, go off,” Goldberg said in a telephone interview. “If the second you walk outside another one goes off, you’re going to stay inside for longer, and that’s what’s going on.”

History Not Repeating

The $12.2 trillion mutual-fund industry has historically been able to count on investors to come back to stocks after a significant selloff. They did so following “Black Monday” in October 1987, the Asian currency crisis in 1997 and Russia’s debt default in 1998. In the year after the 2000-2002 bear market, U.S. equity funds attracted $130 billion, ICI data show.

Funds that buy domestic stocks lost $98 billion in 33 straight weeks of withdrawals last year after the 20-minute plunge in May, ICI data show. They’ve had redemptions of $74 billion this year. The latest withdrawal streak began in 2007 and didn’t end even as stock surged from their March 2009 lows.

“What we have seen this time is a much slower return to risk-taking,” said Francis Kinniry, principal at Vanguard Group Inc. in Valley Forge, Pennsylvania, the largest U.S. mutual-fund manager. He attributes the difference to falling home prices. In bear markets prior to 2008, residential property values were rising.

“There was significantly more wealth destruction this time around,” Kinniry said.

Index Funds, Bonds

Investors have compensated by shifting some of their money into passively managed index funds and exchange-traded funds that track stock benchmarks, forsaking managers who select the investments they buy and sell.

U.S. stock index funds have posted net deposits every year since 2001, according to Morningstar Inc., a Chicago-based research firm. Investors have similarly poured $851.5 billion into ETFs for all asset classes from 2001 to July 2011. Unlike mutual funds, ETF trade throughout the day like stocks.

Bond funds also have been winners, adding $75 billion in deposits this year, while funds that buy non-U.S. stocks took in $15 billion, according to ICI.

“Over the past couple of years and especially the past couple of weeks, I have heard a large number of clients and acquaintances express fear and dislike for the stock market,” Eitan Tashman, a financial planner in Beverly Hills, California, said in a phone interview. While “many investors are scared of the volatility and seeming instability of the stock market and would even like remove their money from the stock market,” there are few alternatives, he said.

Baby Boomers

The post-World War II generation known as the baby boomers is the largest group of investors in mutual funds, said Geoff Bobroff, an investment-management consultant in East Greenwich, Rhode Island. As they go into retirement, they might not return to equities after two bear markets and the volatility this year, he said.

“They are already thinking now about their retirement years,” Bobroff said. “They may be in fixed-income of different flavors, but equities may no longer be on their horizon.”

The recent volatility makes Mark Beller, 42, a physician in Northridge, California, want to put more of his money into real estate.

“The market is so volatile, 1,400 points in a week? Give me a break,” Beller said in a phone interview. “I have money to invest, and my portfolio is down about 15 to 20 percent, so I’m going to wait for it to come back to where I feel comfortable.”

Cash is King

Younger investors aren’t replacing their retiring counterparts. Cash holdings are at the highest levels since the record in March 2009, according to an Aug. 16 survey by Bank of America Merrill Lynch. Investors from 18 to 30 years old have the highest cash position of any age group at 30 percent of their portfolio, MFS Investment Management said in an Aug. 8 report. Almost three in five investors cite fear about volatility or needing money someday as a reason they hold high or increasing levels of cash.

“Investors are in cash for a reason and, regardless of time horizon, conventional investing wisdom no longer applies,” William Finnegan, senior managing director of retail marketing at the Boston-based firm, said in the report. “The Great Recession of 2008 has had a profound and longer-lasting impact on investors’ confidence than expected.”

The average investor tends to hold large amounts of cash when the markets are at a low and thus miss out on gains, JPMorgan’s Goldberg said. The previous high of cash as a percentage of portfolios was in October 2002, right before the start of a five-year bull market.

Institutions Hold Tight

“Households had become so conservative that they were sitting on all this cash that should’ve been seeking out opportunity,” he said. “To the extent that emotions drive decisions, they’re going to get it wrong.”

Brad Durham, managing director of research at EPFR Global in Cambridge, Massachusetts, said retail investors are exiting funds while institutions are modestly adding to their holdings. Retail investors pulled $26 billion from U.S. equity funds from May 1 to Aug. 10, while institutions added $689 million, he said.

“Institutions are using this period to change their exposures around and they’re not selling as aggressively, while retail investors have just been fleeing,” Durham said.

The return of the S&P 500 during the past 10 years has been about 3 percent including dividends. Investors have experienced “a far greater degree of volatility than one would expect for such meager returns,” Greggory Warren, a Morningstar analyst, wrote in a June 29 research note.

Toll on Managers

“The problem is you don’t really know what to do,” said James Dean, 67, a salesman for an information-services company who lives in Panama City, Florida. “There’s no rhyme or reason for the market to be doing what it’s doing other then the mess our government has gotten us into.”

The investor exodus is taking a toll on publicly traded fund companies. The S&P index of money managers and custody banks has fallen 15 percent since the May 2010 plunge, compared with the 5.8 percent increase by the S&P 500, a benchmark for the largest U.S. companies.

Janus Capital Group Inc. (JNS), which is off 47 percent, led the drop. About 89 percent of the Denver-based company’s assets under management is in stock funds. It has had eight straight quarters of net withdrawals totaling $21.6 billion.

Closely held American Funds and Fidelity Investments are among the big asset managers bearing the brunt of investor defections from U.S. stock funds, according to Morningstar. American, owned by Los Angeles-based Capital Group Cos., had an estimated $43 billion in redemptions this year through July, while Boston-based Fidelity lost $8.8 billion, Morningstar data show.

Best Positioned

Diversified managers such as Invesco Ltd. (IVZ), BlackRock Inc. (BLK) and Franklin Resources Inc. (BEN) are the firms best prepared to capitalize on the environment, Morningstar’s Warren said. Invesco, based in Atlanta, bought Morgan Stanley’s Van Kampen mutual funds last year, giving it a broader domestic base. San Mateo, California-based Franklin has 89 percent of its assets outside of domestic equities. The Templeton Global Bond Fund attracted $10.9 billion through June, the most of any U.S. mutual fund.

BlackRock of New York, the world’s largest asset manager with $3.66 trillion assets under management, owns iShares, the biggest provider of ETFs.

Vanguard, which has about half its mutual-fund assets in index funds, saw net deposits of $30 billion this year through July, according to Morningstar. At Pacific Investment Management Co., the Newport Beach, California-based manager of the world’s biggest bond fund, investors put in $25 billion this year.

Not all investors are panicking or leaving the market.

‘Pleasantly Surprised’

“Generally, they’re holding tight, and I’ve been pleasantly surprised,” Kevin O’Reilly, a financial adviser based in Phoenix, said in a telephone interview. “I haven’t gotten, really, nearly as many calls panicking as I thought I would have.”

Investors may be getting used to the volatility, which isn’t necessarily a good thing, said Lee Ann Knight, a financial adviser in Bedford, Massachusetts.

“They may be immune to worrying about it when they should be,” she said. “What surprised me is that I have had a few phone calls from people wanting to use this opportunity to invest. That’s great, that’s good, but I feel like I had these conversations for 10 years, and people were like, ‘No way, no way.” ‘

PE: Candidates unveil election symbols

Just For Laugh ....

What does it mean to me and how should I choose?

1. Heart: When you really care about other people around you.
2. Hand: When you really desperate and want to grab it.
3. Spectacle: When you really short-sighted about the future.
4. Palm Tree: When you really dream of going to Dubai for holidays.

I have a good laugh. Did you?

Shake Off That Seller's Mindset (2)

Read? Shake Off That Seller's Mindset?

How many retail investors (not those BBs) are still holding high yield multi-baggers across multiple market cycles?

To shake off that seller's mindset in a falling market to lock in profit is very difficult as we always worry that our paper profit may vanish into the air. We may also like to think that we can easily buy back at lower price to keep the stocks back and realize the gains. You may think it is easy; but actually it is not.

You think you can easily buy back?

When you think that my Kep Corp at $1.44 (after split) in 2001 is cheap. It is actually not. Some one that I know got it cheaper at $1 in 1997/98; but he didn't hold it long enough and didn't buy it back.

Yes, in 1997/98, he might be young and inexperienced at 20+; but neither he didn't buy back at 2001 (Sep 11 WTC attack), 2003 (SARS), 2008/09 (Sub-prime). Even when he is older and more experience in the stock market, it has not made it easy to buy back. We may suffer from anchoring bias in our stock buying decision and it may be difficult to overcome it. Get it?  

How to hold high yield multi-baggers?

Think again. Learn to shake off the seller's mindset when the company is still growing and still paying you consistently high dividends. These are the stocks in your SWAN (Sleep Well At Night) investment account.

CapitaLand ups stake in Shanghai office building

SINGAPORE - Singapore's CapitaLand, South-east Asia's largest property developer, said on Wednesday it had acquired an additional 50 per cent interest in an office building in Shanghai, China, for 298 million yuan (US$46.7 million).

The 23-storey Innov Tower is located in Caohejing High-tech Park and has a total gross floor area of around 40,445 square metres, the company said in a statement. -- REUTERS

Lessons on Investing From America's Richest Family

After the stock market lost 20% of its value in October 1987, Sam Walton, then one of America's richest men, was unfazed.


In less than a week, the value of his Wal-Mart Stores stock had dropped almost $3 billion, reducing his wealth to a mere $4.8 billion. "It's paper anyway," he told the Associated Press. "It was paper when we started and it's paper afterward."

Given the wrenching swings of the past two weeks, many of us may wish we could be so sanguine about our own losses. But even without a few extra billion dollars in the bank, there are useful lessons to be gleaned from the way the Waltons and other ultrarich families cope with investments and market volatility.

Just like us, the rich want to maintain their lifestyle, preserve wealth and have money for their heirs or philanthropy. And when it comes to investing, there are several ways the rest of us should take a cue from them:

The very wealthy have a plan.

Sam Walton's plan started in the early 1950s, when, on the advice of his father-in-law, he set up a family partnership, made up of him, his wife, Helen, and their four children, to own his two variety stores. By doing that, he began planning his estate and building family wealth years before he opened the first Wal-Mart in 1962.

Nowadays, most very wealthy people have a team of advisers and an investing strategy in place that should work even when the worst imaginary case becomes real. Small investors, too, should have a comfortable investment process that works in good times and bad.

A financial adviser can be invaluable in helping you with this, but so can a trusted family member or friend who will help you stick to your plan when you start to doubt it.

The very wealthy live below their means.

Walton, who died in 1992, was famously frugal, driving an old pickup truck and flying coach. Many very wealthy people spend much more extravagantly, but even so, "most of our ultrawealthy clients have a lifestyle that is well below their means," says Craig Rawlins, president of Harris myCFO Investment Advisory Services, which serves wealthy families.

When you don't spend everything, he says, "you have a better opportunity to weather this volatility because you know there's a cushion there."

The very wealthy value cash flow.

One of the most painful lessons of 2008 was the recognition that we need to keep enough in cash or liquid investments to weather a stretch when the value of everything else is in flux. Martin Halbfinger, managing director, wealth management, at UBS, says every investor should have a "SWAN" account—for "sleep well at night."

(Createwealth8888: Totally agreed, that is reason why I have a dedicated bank account for investment activities and the rest are SWAN accounts)

"That's a different number for every investor," he says, but you should have enough in bank accounts, bonds or other liquid investments that you can leave your stocks alone when market volatility defies logic.

Sturdy, dividend-paying stocks also can help. Annual dividends on the Walton family's 1.68 billion shares of Wal-Mart stock add up to $2.45 billion a year, enough to buy plenty of groceries and just about anything else.

The very wealthy focus on risk, not return.

Larry Palmer, managing director, private wealth management, at Morgan Stanley Smith Barney, said he has never had a client say, "My objective is to have my family wealth beat the S&P 500." Rather, he says, clients focus on what kinds of risks they are taking with their portfolio.

The Walton family wealth long has been tied to its Wal-Mart stock, now valued at $83.6 billion. But Sam also bought the tiny Bank of Bentonville in 1961, and it is now part of the family-owned Arvest Bank, an $11.5 billion banking company. Walton Enterprises also owns a chain of small newspapers that, along with other interests, offer diversification and push the family's estimated combined wealth close to $100 billion.

Small investors need to similarly manage their portfolios, making sure that their holdings of stock and other volatile investments aren't so great that they are putting more at risk than they intended to.

The very wealthy hang on.

The super-rich don't sell because they are fearful—though some may be selling right now for investment reasons, such as cutting the tax bite on holdings with big gains. The Walton family ownership of Wal-Mart stock hasn't changed since late 2002, when some shares were transferred to charitable funds.

In that sense, Sam was spot on. Though the Walton family's Wal-Mart shares have dropped by more than $10 billion since mid-May, until the stock is actually sold, the losses really are nothing more than paper.

(Createwealth8888: When you still have plenty of cash on hand to invest; there is no good reason to be overly concerns over these paper losses if you don't forsee companies going bankrupt)

Karen Blumenthal is the author of "Mr. Sam: How Sam Walton Built Wal-Mart and Became America's Richest Man" (Viking).

Investing Lessons Learned From Poker

By Peter Gorenstein

Granted, the stock market is a casino analogy is a cliche. But the truth is it's been used in countless investing stories because there's lots of truth to it. And, recent events with markets swinging 400+ plus points make it feel more true than ever. In the accompanying clip The Daily Ticker's guest Lance Roberts CEO and chief economist of Streettalk Advisors says poker, more than most parlor games "provides a great set of rules for the average investor."


So what are the lessons to be learned?

Investors don't need to be "all in."

Roberts says ignore brokers or pundits who advise investors to be fully invested 100% of the time. "In a game of Texas hold'em if you bet yourself all in every hand you will lose. Same goes for being 100% invested at all times." This is especially true for baby boomers headed into retirement. As he notes, being 100% invested during the crash of 2001-02 and 2008-09 did irrevocable harm to portfolios in after the 2-year bull market that followed. "Professional poker players they understand the risk versus the reward for every potential hand that they bet on," says Roberts. "And you know what? when they don't have a good hand they don't bet they fold and walk away."

Bet heavily when the odds are in your favor.

On the other hand, when opportunity does present itself, bet big. In most cases you don't want to bet it all in one hand or put too much of your portfolio in a few stocks but when there's panic in the streets and everyone is selling, that's when it's to bet big. (See: March 2009)

(Createwealth8888: Theory is cheap. How can we know when to bet bigger?)

Don't get emotional.

At the poker table it's important to keep your cool under pressure. The same is true in investing. When others are panicking it's important to keep your wits about you. "You want to be a seller when markets are rising and getting extended you want to be a buyer when people think that world is coming to an end," says Roberts.

CapitaLand acquires prime residential site in Hangzhou

Singapore, 16 August 2011 – CapitaLand Limited, through its wholly ownedsubsidiary CapitaLand China Holdings, has secured a prime 32,040-square-metreresidential site in Hangzhou’s Gongshu District for RMB1,113.98 million(S$213.27 million) in a government land tender. This translates to about RMB13,906(S$2,662.35) per square metre per plot ratio.

CapitaLand plans to build an estimated700 units of mid- to high-end homes on the site, with the launch of the first phaseexpected in 2013.

The site has an approved potential gross floor area of 80,105 square metres and is inHangzhou’s upcoming Grand Canal central business district. It enjoys scenicwaterfront views and is surrounded by lush greenery. Hangzhou, as the provincialcapital and the largest city of Zhejiang Province, is set to play a strategic role in

China’s economic growth as the government’s Yangtze River Delta Region Planning gains full steam.

S’poreans feeling blue over stock market turmoil

By Seah Chiang Nee


One investor closed his stock market account and swore never to return, while another detailed his portfolio — now covered in red — asking fellow-traders for advice on what to do.

Even as the answers began to come in over the day, the shares had dropped further, deepening his losses.

Like previous meltdowns, this one has its fair share of victims, who are wondering what went wrong, what caused the worst stock tumble in three years.

Between 1 and 10 Aug, some S$105 billion was wiped off the Singapore stock market. Whenever something like this happens, there is pain and despair, at least a few bankruptcies and plenty of soul searching.

I was told by a friend that the pastor in his small suburban church prayed on Sunday for divine help for congregation members to survive the turmoil.

One blogger said he had been unable to sleep for several nights after losing money on the market, adding: "I told myself to go on. My heart will go on."

As the country celebrated its 46th National Day, many Singaporeans — especially speculators — are nursing large losses that were sparked off by America's historic credit downgrading.

The worst victims are short-term speculators who borrowed money to trade, often treating the stock market like a casino.

There had been moments of panic in the market these past few days, people dumping shares for whatever price they could get, said a broker.

"They feared that keeping it another day could mean bigger losses," he added.

The losses ranged from a few hundred to hundreds of thousands of dollars per day. But those who buy for long-term investments are less vulnerable to such sharp meltdowns.

The debt woes of Washington (and Europe) are affecting the world, particularly Singapore more than any others in Southeast Asia.

About a third of Singapore's merchandise exports go to the U.S. In addition, the U.S. had invested some S$40 billion in some of the biggest corporations here.

A U.S. in trouble would be a severe blow to Singapore, and equity holders know it.

For several months now, the government has been gearing its citizens to prepare for more global financial trouble.

Technical recession

It now warns that Singapore may fall into a technical recession — growth declining in two consecutive quarters — by the year-end.

For many Singaporeans, this sudden shift in fortunes from boom to gloom is a bit akin to the Twilight Zone. It was something that ran counter to what they had been told earlier.

Until the U.S. downgrade, things seemed to be going well for this city of millionaires. Properties, houses, cars were selling at record high prices and luxury products were virtually flying off the shelves.

Last year, the economy grew by 14.5 percent. So how can this turn into a technical recession within such a short period, many asked.

In fact, the government warnings had been more serious. The next financial crisis, which could come in the next four or five years, would be worse than any previous ones, several leaders had warned.

But the people had paid little heed to the warnings of approaching crisis since early this year. This probably explains why many Singaporeans were poorly prepared.

Instead of being cautious, people were still indulging in a buying spree — of stocks and shares, properties and cars, instead of adopting a cautious approach.

As a result, prices of houses and cars were pushed to historic highs.

The Straits Times Index (STI), for example, rose and rose until it reached a record of 3,227 on Aug 1. Crisis then struck, and it crashed nearly 420 points or 13 percent to 2,810 (at this writing).

Among the pessimists were Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, who urged Singaporeans to prepare for a rough road ahead in the next three to four years.

Another, a presidential candidate and former finance minister, Dr Tony Tan, also warned of major difficulties ahead for the republic.

Asked if it would overwhelm Singapore, Tan replied: "We are in unchartered territory here."

Singapore has developed into a materialistic society, in which many youths want to make a fortune — quickly, rather than earn a steady income. (CW8888: So many young ones are busying chatting at the famous cbox and many more lurking quietly behind. LOL)

When the days were promising and stock prices rising, the market had been attracting a rising number of fresh graduates and inexperienced housewives to start trading accounts.

Investment clubs had been mushrooming in tertiary institutions in recent years, with more and more students being active in the market.

The past few days, like previous market tumbles, serve as a valuable lesson that fortunes are seldom made by speculation. The growing balloon of stock gambling has been pricked.

Some of these newcomers are today staring at huge paper losses and probably having to hang on for some time. In some cases, parents will have to help.

And the uncertainties still have some way to go.

A writer calling himself "a new improved investor" in lamenting his losses of S$7,000 said: "I think I may not survive this one.

"Anyway, a lot of people feel that I should not play shares. Looks like its true!"

Amid all the gloom and doom is this advice by DoReMi, in case there are one or two victims too overwhelmed by losses to consider doing something desperate: "Cheer up! No matter how much you lost, you still have a life to live. Think of your loved ones!"

Swiber nets more work

Offshore service provider Swiber Holdings has landed a $30 million contract to carry out platform installation services in South Asia.

Work Less and Gone Fishing Planning Room (6)

Read? Work Less and Gone Fishing Planning Room (5)

Next month, I will have the option of unlocking my CPF money for more investment or retain them in CPF for 2.5% compounded returns.

I have been thinking very hard on few options for retirement planning. What is the best for me to meet my future investing goals and money plan to fund living, medical and health care expenses; and emergency fund for unexpected expenses.

I clearly understood that one of the biggest fears or risks in my retirement is facing a prolong bear market. If the passive income from stock dividends is not enough and I will have to sell stocks in a falling market to make up for it. I will risk depleting my investment portfolio by selling at market low and by locking in negative returns it may be bad outcome for portfolio recovery at the next bull market.


To minimise fear or risks in the next few bear markets in my retirement has become a critical success factor in this retirement planning exercise. Sometime a peace of mind is worth more than potentially more money in the bank.

I have finalized on this plan consisting of four sources or money pots.

1. Fixed Income Fund (CPF OA+ CPF Minimum Sum)

This fixed income fund is non inflation adjusted payout similar to CPF Life. It will fund 67% of my estimated yearly living, medical and health care expenses. I will retain enough money in my CPF OA and CPF Minimum Sum for subsequent draw-down starting from 56 till 80 years old for this purpose. The rest of the money in CPF OA will be transferred to the second fund to generate passive income to meet the remaining 33%.

I believe I should be able to trim some discretionary spending and still live comfortably at 67% income level during bad years.

2. Income Portfolio

I will build up an Income Portfolio diversifying into 8-12 stocks from different sectors. Each stock component must have at least 6% dividend yield to qualify.

Based on the yield estimation of planned capital injection into this income portfolio, the yearly passive income from stock dividends is still able to fund 33% at 3% inflation adjusted living costs for next 8 years.

The passive income stream from this portfolio is expected to be volatile to market conditions. So during good years I will have more discretionary money to spend; and during bad years I will have to tighten my belt to spend less.


3. Growth Portfolio

I still like to spend some time doing more short-term trading in the stock market to grow this portfolio to help to fight inflation and to grow wealth to meet unexpected life events.

4. Emergency Fund

I don't expect returns from this fund so it will be in bank FDs and cash.

Lastly

I have planned to start the draw-down starting from my next birthday at 56 in 2012 (CPF allows members to withdraw fund at their next birthday) and if I happen to be still working; I will transfer money not spend at 31 Dec 2012 to Growth Portfolio.

Bear market is here. Let's accumulate more by average down?

Read? Average Down or Pyramid Up? (2)

The Bear market is coming soon. Are you looking to accumulate more by average down strategy?

But, I don't. I am looking forward to diversify my current base into more sectors and stocks. I am more into Noah Ark strategy i.e. a pair of each kind is nice for survival.

Keppel to deliver the first FPSO for Brazil’s OSX

Singapore, 13 August 2011 – Keppel Shipyard Ltd (Keppel Shipyard) is on track to complete the modification and upgrading works on FPSO OSX-1, the first floating production storage and offloading (FPSO) unit for OSX Brasil S.A. (OSX).


Chartered to OGX Petroleo e Gas Participacoes S.A. (OGX), FPSO OSX-1 will be deployed in the Waimea field, in Campos Basin, offshore Brazil. This project will deliver OGX’s first oil, just four years after the company was founded. Production is expected to commence in the last quarter of this year.

Lady Sponsor Cristina Pinto named the vessel today in the presence of Mr Joao Ziccardi Navajas, Minister Counsellor at the Embassy of Brazil in Singapore, and Mr Reinaldo Belotti, Production Director of OGX.

Mr Carlos Bellot, Director of Engineering, Leasing and Operations of OSX, said, “FPSO OSX-1 is our first unit, and was developed to meet OGX´s demand. With a strong track record in FPSO projects, Keppel Shipyard is the choice yard for the modification and upgrading of FPSO OSX-1. The unit was accorded dedicated and professional services, and I am confident that it will be an asset to OGX and the Brazil’s oil and gas industry.”

Keppel Shipyard’s work scope on FPSO OSX-1 includes fabricating, modifying and upgrading the topside process modules. The yard had partnered sister company DPS (Bristol) Ltd to undertake detailed engineering and procurement work for the topside modules.

OSX had engaged BW Offshore Ltd (BW Offshore) for project management, engineering services and technical guidance services for this project.

Mr Nelson Yeo, Managing Director of Keppel Shipyard, said, “We are honoured to have been selected to work on OSX’s first FPSO unit. Through our close collaboration with OSX and BW Offshore, we have made steady progress on this project and ensured no lost-time incidents. We will continue in our efforts towards a safe and successful delivery.”

Previously named Nexus-1, the FPSO OSX-1 is expected to leave the yard in the third quarter of 2011.

Keppel Shipyard was also recently awarded the conversion of FPSO OSX-2 by Single Buoy Moorings Inc (SBM), which had been contracted by OSX to supply a FPSO for OGX’s field in Campos Basin, offshore Brazil.

Cut losses - The Truth, The Pain, and The Chance! (2)

Read? Cut losses - The Truth, The Pain, and The Chance!

For the past two weeks, have you been cutting your losses in the stock market or you are preparing to cut losses soon and then stay sideline to wait for clearer confirmation of rebounding to re-enter. I am not sure how many of us are that technically savvy and seasoned enough now to spot that clear market reversal signal.

What looks like a Rebound may actually be a Dead Cat Bounce too.

In a full blown Bearish market, there will be several instances of Dead Cat bounces.

Cutting losses

Classic textbooks advice that you should cut your losses fast and live to fight another day. Paper losses are real and they may cause you opportunity cost in the stock market.

But, how sound are these classic advices?

Actually, it will depend who are you in the stock market and your stocks pick strategy. By locking in those negative returns through cutting losses and thinking that you can get back in time for stock recovery. But, when you have missed it and coming back to the stock market too late. It may create bad outcomes in your investment portfolio recovery.

Who are you in the stock market and your stocks pick?

1. Do you have a long-term investing goals?
2. You DO NOT need to withdraw significant amount from your current investment portfolio in the next 2-3 years to meet some big expenses?
3. Does your stocks still expected to pay you decent dividend yield of at least 3-4% in coming 2-3 years?
4. Does your stocks have past history of staging strong stock price recovery in the bull market?

If your answers to 1-4 are all YES, you may want to think again of cutting losses. It may be better for you to leave your stocks alone to recover from paper losses while taking your next stock dividends payment as pain killer.

Swiber scores a hat-trick

Singapore-based supply vessel player Swiber Holdings said Friday it has landed three new contracts worth $82 million.


Upstream staff 12 August 2011 12:58 GMT

Swiber did not give specific contract details but said the projects were for Southeast Asian oil companies and include pipeline installation work, mobilisation of marine vessels, equipment, and personnel.

All three projects will start straight away with completion targeted for the second quarter of next year.

To date, Swiber has secured new contracts totalling $377 million this year.

The company also announced today that second quarter net income had risen 13 % to $14.3 million compared to $12.6 million in the same period last year.

SWIBER ACHIEVES 9.4% INCREASE IN NET PROFIT

SWIBER ACHIEVES 9.4% INCREASE IN NET PROFIT TO US$24.5 MILLION IN 1HFY2011

- Revenue rises 73.1% to US$331.2 million

- Strong orderbook of US$722.0 million, expected to contribute to Group’s results over the next two years

- Cash and cash equivalents increases 32.4% to US$94.2 million as at June 30, 2011

NOL Group reports US$67 million loss in first half of 2011

SINGAPORE, 12 August 2011 – Global container shipping and logistics group Neptune Orient Lines (NOL) today reported a net loss of US$67 million for the first half of 2011 compared to a US$1 million net profit in the same period a year ago. The Group said it lost US$57 million in the second quarter of 2011.


NOL reported a 9% revenue increase in the first half of 2011 to US$4.595 billion. It announced a Core EBIT (Earnings Before Interest and Taxes) loss of US$28 million.

The Group said first half 2011 results were affected by higher operating costs, especially for fuel, and declining freight rates. It added that its supply chain management business, APL Logistics, increased revenue and Core EBIT.
 
OUTLOOK


Deteriorating conditions in the global economy are resulting in weakened trade demand and continued pressure on freight rates. Unless these conditions improve, NOL will post a full year loss.

Fear, fear, fear. Just too much fear in the stock market if it is your first encounter.

I  think it may be a good time to re-post what I have written at the height of the previous greatest fear in the stock market.

Read? Safety Net in the Market?

Investors seek safe havens, snap up S'pore govt bonds

Createwealth8888: Return of Money is far more important than Returns on Money
By EMILYN YAP

(SINGAPORE) The popularity of Singapore government bonds has surged in recent weeks as investors seek refuge in safe havens, while playing on the appreciating Singapore dollar.

The signs? Bond yields have fallen to record lows almost across the board as bond prices rise on the back of strong demand. The drop in yields was particularly evident yesterday.

The yield of 10-year Singapore Government Securities (SGS) sank from Monday's 1.81 per cent to 1.62 per cent - beating the previous trough of 1.72 per cent in January 2009 when the world was reeling from the financial crisis.

The 20-year SGS yield dipped from Monday's 2.54 per cent to 2.38 per cent - again breaching an earlier bottom of 2.5 per cent. The 5-year and 15-year bond yields also reached new lows.

Several factors have driven investors towards Singapore government bonds. The eurozone debt crisis continues to fester, while the US flirted with a debt default earlier this month as politicians fought over plans to raise the government's borrowing limit.

The safest haven in the ongoing flight to quality would be to AAA-rated countries outside of the Western hemisphere.

- OCBC economist Selena Ling

But what really roiled sentiment this week was Standard & Poor's (S&P) cutting the US credit rating to AA+ from AAA. This has burnished the attractiveness of Singapore government bonds, backed by the country's AAA credit rating.

With debt problems in the US and European Union, coupled with fears of a double-dip recession, 'the safest haven in the ongoing flight to quality would be to AAA-rated countries outside of the Western hemisphere', said OCBC economist Selena Ling.

Supporting this view, doubts have surfaced over the stability of other developed nations' credit ratings. In a report on Tuesday, Citigroup chief economist Willem Buiter went so far as to say that other AAA-rated Group of Seven (G-7) sovereigns face risks of a downgrade.

In France, especially, public debt is high and there is popular resistance to welfare cutbacks.

'We could be moving towards a world without AAA G-7 sovereigns,' he suggested. 'The criteria applied by the rating agencies to the G-7 sovereigns in the past have been, in our view, far too lenient.'

What makes Singapore government bonds stand out further is the strengthening Sing dollar.

To cap inflation, the Monetary Authority of Singapore (MAS) has allowed the currency to rise and it has increased by around 10 per cent against the US dollar in the last one year.

'In a world where AAA-rated sovereigns are becoming scarcer, we would not be surprised if real money players and even reserve money managers have increasingly diversified into SGD assets,' said Citi economist Kit Wei Zheng in a report last Friday.

Market watchers see demand for Singapore government bonds remaining strong if financial markets stay choppy, and if MAS maintains or tightens monetary policy.

Nevertheless, 'I would also caution against hopping on the SGS bandwagon at this juncture since real interest rates are currently in deeply negative territory', OCBC's Ms Ling said.

Singapore's consumer price index rose 5.2 per cent in June over the previous year.

SGS yields were not the only rates which dropped yesterday. United Overseas Bank (UOB) noted that short-term Swap Offer Rates (SOR) fell into negative territory for the first time - the three-month SOR, for instance, hit minus 0.0119 per cent.

Economists Chow Penn Nee and Suan Teck Kin cited several factors for this: the US Federal Reserve indicated that it would keep the federal funds rate low till mid-2013; the US dollar is expected to weaken against the Sing dollar in the coming months; and investors will continue to flock to safe havens such as Singapore.

'With all these concerns still likely to persist in the short to medium term, this will exert a downward pressure on SOR,' they said.

The three-month SOR is a popular benchmark used for home loans, and so is the three-month Singapore Interbank Offered Rate or Sibor. The latter remained unchanged yesterday.

Noble: financial highlights for the first half year 2011

Strong Group net profit of US$343 million compared to US$201 million in 1H 2010 and up 79% to US$748 million in last twelve months (“LTM”) June 2011

▶ Record Group volume of 97.9 million MT compared to 86.8 million MT in 1H 2010

▶ Record Group revenue of US$39.7 billion, up 63% on 1H 2010

▶ Group operating income from supply chain up 38% to US$895 million compared to 1H 2010 and up 49% to US$1,880 million in LTM June 2011

▶ Return on opening shareholders’ equity of 17.3%

▶ VaR ranges from 0.42% to 0.86% in 1H 2011

▶ Net book value per share US73 cents

Money Management Plan for Big Bear 2011/12

Funding Your Child’s University in the Future? - Updated

Read? Funding Your Child’s University in the Future?

Updated:

This is what I have spend on the two kids so far- all expenses incurred on the kids themselves but excluding common expenses e.g. family meals


For two full years of study at local U on tuition fees and all living expenses are as follows:

SMU: $26.6K (Higher tuition fee and higher meal costs at campus) - Daughter


NUS: $21.3K - Son

Total = $47.9K

Remember that they are young adults so they may incur some costs in socializing with friends for entertainment and meals. And for daughters, they may have more costs for beauty care and clothings.

Sabana REIT : Bought @ $0.88

Kep Corp : Bought @ $9.85

Going for Round 94 ...

Round 93: ROC 5.7%, 67 days, B $8.50 S $9.05

Round 92: ROC 10.6%, 166 days, B $7.98 S $8.89

Negligible impact on our positions, says DBS

DBS, South-east Asia's biggest bank, says the impact of a US credit rating downgrade on its trading and investment positions is 'immaterial' and that it is adequately positioned to meet liquidity needs.


'Over the past few weeks, DBS has already taken proactive steps to understand possible repercussions of a US credit downgrade, including stress-testing our books and portfolios,' said Chng Sok Hui, DBS's chief financial officer, in an email yesterday.

'In terms of our trading and investment positions, on a net basis, the impact is immaterial,' she added.

DBS said its holding of European debt is negligible.

OCBC Bank, Singapore's second- biggest lender, also made a similar statement.

'Given the current level of exposures, the impact of the US sovereign downgrade is not material to OCBC Bank,' said Koh Ching Ching, OCBC's head of group corporate communications.

Analysts said Asia's banks are seen facing a bump-up in dollar-funding costs and potentially slower credit growth after Standard & Poor's US debt rating downgrade, strengthening China's case to push the yuan as a global alternative to the dollar. -- Reuters

Investing Made Simple by Uncle8888 (22)

Read? Investing Made Simple by Uncle8888 (21)

ST, Tuesday, August 9, 2011

S'pore retail investors make flight to safety. Massive volumes of stocks traded as many prefer cash to equity.

Engineer Sun Weixin, 28, liquidated his entire portfolio of mainly bank and blue-chip shares yesterday, worth less than $40,000. He suffered a loss but did not want to disclose the amount - but said he felt there is too too much uncertainty to stay invested.

Read? investors flock to low-risk assets, with focus on cash

Read? Should I sell all my equities and stay sideline?

Should Uncle8888 also sell out all equities and stay sideline?

Since 2001 he has been thinking very hard each time a Bear market arrived whether he should sell out all his equities and stay sideline until certainty come back to the stock market before reinvesting. This time is no different and he is thinking very hard too.

So actually what has happened to him during the past Bear markets for being stubborn or stupid?

He has been holding the following stocks across several bear markets:

1. Kep Corp since 2001
2. Semb Corp since 2002
3. DBS since 2003

The last Great Bear of 2008/09 didn't crash down Kep Corp and Semb Corp down anyway near his initial purchase price. In fact, his initial purchase for Kep Corp is now cheaper by 10% after 10:1 bonus share issue; and plus a small capital gain and small additional dividends coming from K-Green (dividend in specie).

His initial DBS holding is also cheaper by 16% after the 2:1 right issue; and internally price adjusted for all unit shares based on theoretical fair value of  right issue shares.

There was no corporate action on Semb Corp. :-(

TSR as on Monday closing, 8 Aug 2011
 

For the coming Bear market, he is even more stupid to slide with the Bear with more members on board.

Will Uncle8888 survive this Bear to write more stories on short-term trading and long-term investing using his Pillow stocks strategy and finding Touch Stones?