Maybank Kim Eng invited Dr Doom, Marc Faber, to Singapore for a talk. I did not expect him to speak only 45 mins and charged $44 for the ticket. Although KE also invited prominent figures like Magnus Bocker (CEO of SGX), Pua Seck Guan (CEO of Perennial China Retail Trust), and Ron Sim (CEO of OSIM), they should have mentioned it in their promotional flyers. I suspect the latter 2 CEOs are issuing rights soon.
Mr Bocker encouraged more active trading. Of course, this would bring good business to SGX. He mentioned that 25% of the investors in Hong Kong are active and active means having trades on a daily basis. It is 17% in Australia and 10% in Singapore. I am not sure if I heard wrongly. These percentages look too large in my opinion.
I also disagree with him when he compared equity returns with property returns. Saying that Singaporeans are pro property investors, we should increase our exposure to equity. This is on the premise that the returns from equity in the last 10 years is slightly less than 10% as compared to weaker returns of 5% from property. This is true if there is no leverage. But one rarely buys property with no leverage, and conversely, investors rarely buy equities with leverage. Let’s say you buy a property at $1m and put $200k deposit initially. Then you sell the property at $1.05m and realise a $50k return. Your percentge return would actually be 25% instead of 5%.
Another interesting number that he mentioned was that there are currently 1.5m CDP holders in Singapore. This means that there are 1.5m investors. If 95% of these investors lose money to the 5%, there will be 1.425m losers and 75k winners. More interestingly, most of the 1.425m losers will not be in the market until the market is super hot. If you want to be the 75k winners, you must buy before the losers come to the market and sell them when they want to join in the fun.
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Next up was Pua Seck Guan and he shared the properties PCRT has in Singapore – Capitol, CHJIMES, Chinatown Point and 112 Katong. I sense that his strategy is to buy over these aged malls and rejuvenate them. PCRT is expanding in China as it sees many property development opportunities given the rapid urbanisation plans. He said China focuses on the residential property sector and does not have sufficient shopping mall development expertise. This is where PCRT brings value to the market in China. He likes properties within good transportation networks and population areas. PCRT already owned properties in 2 of the 5 High Speed Railway stations in China. He thinks that there is limited upside in first tier cities like Beijing and Shanghai. He sees higher rewards in second tier cities where one can buy land at RMB2,000 per sqm and sell at RMB15-20k per sqm.
Ron Sim shared 4 lessons during his 30+ years of business experience, including the 3 financial crises he went through.
- High Point – don’t lose your head
- Low Point – don’t lose your heart
- Correction Point – don’t lose your guts
- Breaking Point – don’t lose your spirit
The highlight of the event was when Marc Faber took the stage.
The monetary easing policies in countries all around the world have unintended consequences. This pushes the interest rates down and chases asset prices up at different times – he acknowledged that it is not possible to know where the money will end up. It would be NASDAQ tech stocks in 2000 and real estate in 2007-08 period. In other words, there will be times where one asset class is in hot demand. It can be equity, commodity, property etc. This is due to the negative real interest rates environment (inflation higher than interest rate) where savers are losing money in the bank. They would have to put their money somewhere to protect the value of money.
He said interest rate and commodity prices are positively correlated. When inflation is high, government would raise interest rate to cool the economy. However, he observed that despite high inflation, US is keeping interest rate low, and this created the negative real interest rate situation. He believes US will continue to print money and hence, he is pro-inflation in the future and expects the market to be very volatile.
Besides racking up huge debts, US is not producing enough and there is a growing trade deficit with China. For the first time in history, the emerging countries are consuming more oil than developed countries. He believes the differences will continue to diverge in ten or more years to come. And the increased demand for oil will create geopolitical tensions.
He thinks that we have come to an era where it is no longer about how much money you can make as an investor, but how little you can lose. He also briefly shared about how he would invest currently. He expects a crash is iminent and would keep some cash for opportunities – he says equities are good buy when the economic outlook is gloomy. This is so when the goverment prints money and devalues the currency to boost the economy. You would be able to make use of the exchange differences and buy more stocks of that currency. He also shared that he would buy real estate in Asia and buy physical gold. He believes keeping to time proven strategy – buy assets at discounts and diversify.