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Head to the watch list on the above tab to see my what's on my radar and foreseeable future postings =)

Decided to make adjustments on the way I blog & share due to time constraints and other commitments. In the coming weeks you should see them. Short updates but more frequent & concise.

Tuesday, November 29, 2016

December Prediction of Pump Oil Price (Ron 95)

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**

November 2016
OPEC is trying to bring its members and non-OPEC producer Russia to agree on a coordinated cut to prop up the market, beset by a two-year glut in supplies, by bringing production into line with consumption. See link:
http://www.marketwatch.com/story/heres-how-ugly-it-could-get-for-stocks-if-opec-cant-reach-a-deal-2016-11-29. Anyhow I think the oil market is likely to remain oversupplied for some time yet even after the OPEC meeting, especially since U.S. oil production will soon start rising again. Price to remain subdued.

Emerging market assets have tumbled in general in the wake of Trump's upset win, as the dollar surged and U.S. Treasury yields jumped - Malaysian Ringgit is no exception. Also markets have been pricing in Trump's aggressive rhetoric on curtailing global trade with the U.S., which would disproportionately hurt trade-dependent emerging economies. To add salt to the wound our BNM's attempt to use moral suasion to support its currency threatens to backfire, increasing pressure on the ringgit and potentially hurting growth. Perhaps there is not much we can do since foreign-exchange reserves are uncomfortably low after having been run down in 2014 and increasing interest rates right now is politically suicidal for a possible GE14 next year.


Aboi's Dec'16 Prediction Analysis


A Trump victory was not very good news for us and this was combined with a central bank that did not handle Ringgit volatility very well. MYR continues to slide downhill (4.17 to 4.32). Fortunately average oil price went down from $53.51 to $49.12 so the RM/L between October and November strengthen: 1.87 vs 1.78. I will predict that fuel price to be maintained @ RM1.95 for RON95. There is a remote chance it might be reduced by 5 sen.

Below is a table of my previous predictions since the beginning. My predictions are based on Tapis crude oil price, performance of Ringgit and domestic political matter. My total savings to date: RM 50.75. As for YTD: RM 12.00.


**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the exact compute mechanism.**

Tuesday, November 22, 2016

Trumponomics 2017-2020


The election is going to have significant long-term consequences for US policies beyond its own borders. Expect the development of new policies in opposite end of the spectrum which should generally be less liberal than before to respond to Trump's core voters a.k.a middle class who were impacted by globalization. This piece is originally from The Edge November 7 2016 but is edited by me with my own thoughts. Let's think of two scenarios: Lite vs Full Trump. 

Plan
Lite: Reality sinks in and he must negotiate his measures with his fellow Republicans and forced to give up part of his original plan. Final proposals are more modest and neutral to the budget deficit. 
Full: He goes full steam ahead in the implementation of all if not nearly all of his campaign promises.

Impact on US economy
Lite: Slightly positive on US growth. No recession.
Full: US growth heading downwards. Expect a recession.

Impact on global economy
Lite: Global GDP growth to be approximately 3%. About 0.5% lower than initial estimates.
Full: Global GDP growth might be lower than 2% or minus if a recession occurs.

Impact on volatility of exchange rate/equities
Lite: Significant which we are feeling right now.
Full: Major. 

Impact on US monetary policy
Lite: No rate rise by fed in Dec 2016 as Dollar is too strong. Might have tightening in 2017 if reflation occurs due to his infrastructure spending plans.
Full: If US growth weakens or worse a recession, tightening will stop and QE4 would no doubt be considered.

Impact on US Treasury bonds
Lite: Increase in long term rates due to expectation of high deficits from his spending plans. Then a downturn.
Full: Same as above.

Impact on US equities
Lite: Selective sectors that benefits from his policies to go up as a knee jerk reaction. Others will go down particular technology sector.
Full: Defense, infrastructure and healthcare sectors to shine. Others no.
*Do not count on international strategies due to his closed door outlook but instead on purely domestic strategies and small-cap equities.

Impact on US dollar
Lite: Positive in short-medium term as investors flocks to long term bond yields that are more favorable.
Full: Negative if the US requires QE4 policy or if fiscal expansions plans are blocked by political gridlock.

Impact on gold
Lite: Purchase if the Dollar's strength means a weaker gold price. Buy if you hold USD physically. Not worth to convert Ringgit to USD as it merely offsets it.
Full: Purchase regardless if very certain of economic, geopolitical or financial stress.

Impact on emerging markets
Lite: Weakened at first by general uncertainty and by the rise of risk aversion.
Full: Weakened by increase in protectionist policies and risk aversion. Major trading nations to be impacted heavily such as China and Mexico.
*Russia might be the only exception since his "bromance" with Putin might result in the lift of US sanctions.

It's going to be a very interesting but at the same time nervous next four years for investors :) Trump is not going to be President just yet but he will on January 20th 2017. I would like to be wrong but until there is more certainty it is better to keep cash and wait for opportunities to present themselves. Signing off folks....

Sunday, November 6, 2016

EPF's Akaun Emas - What you need to know

I am for EPF's move to lock in savings until contributor turns to 60. There is word flying around that EPF will run of out money due to our government's overspending but that is largely bollocks. First EPF is independently run by professionals which has performed well over the years. Second EPF is bound a myriad of rules and regulations that bars it from investing recklessly. Third why on earth would our MO1 KowTow to China for funding if it could easily get it from EPF.

Whether you know it or not Malaysia is heading towards being classified as an ageing society by the year 2035 (only 19 years from now). Ageing here mean that individuals above 60 years make up a larger proportion of the total population (>15%). This is evident as life expectancy is rising (more than 75) and fertility is decreasing (an average family now has 2 kids compared to half a dozen 25 years ago). 

Tightening EPF withdrawal rules is not good enough. Hence the move to establish the Akaun Emas. This was done after following the Members Consultation Exercise last year. A total of 94% of respondents overwhelmingly agreed for the EPF to maintain the Age 55 withdrawal, with new contributions from age 55 to 60 to be locked in until age 60, hence the introduction of Akaun Emas.
Okay even a summarized chart might be technical for some folks. Let me help you with that.

[1] Below 50 and At 50 - no changes. You already know what you know now.
        - Seventy per cent of contributions goes into Account 1 and 30% goes into Account 2.
        - You can withdraw from Account 1 at age 55 only.
        - You can withdraw from Account 2 at any age subject to eligibility.
[2] At 55 - starting next year Jan 1 2017, everything will be transferred to Akaun 55.
[3] From 55 to 60 - you can still contribute while working but to the new Akaun Emas.

***The addition of Akaun Emas does NOT impact what we currently have AT ALL. Please don't listen to false rumours/fake news that govt is extending withdrawal to keep it for themselves - all those are bollocks

Other important notes:
- You will still get dividends from your Akaun 55 and Akaun Emas even when you are aged 56 to 60.
There will be no difference in the annual dividend payout % between both accounts to be fair to all EPF members.
- You can still make a full withdrawal from Akaun 55 from age 55 to 60. You cannot however withdraw any amount from Akaun Emas unless you are 60 years old and above.
- At age 60 both Akaun 55 and Akaun Emas will be combined. Name of account not known.
- If you are terminally ill say at age 58 you can withdraw from Akaun Emas under the Incapacitation Withdrawal scheme.

One short disclaimer. Aboi says that moving forward EPF returns will not likely be as good as it was in the last few previous years. Considering that equities markets around are the world are struggling and most funds are under performing. Likewise the low interest rate regime is likely to stay for many years hence impacting the performance of many pension funds globally, not limited to Malaysia. Fixed income investment instruments used to dish out high yields of 8% during the heydays in the 1990s but now yields on MGS and Treasuries have declined to less than 3.3% now - hence the term low interest rate regime thanks to the Financial Crisis of 2007/2008.