Spot-on market analysis and insights from the trading desk

Here are 5 Reasons Why Singaporeans May Never Get to Retire Despite working Harder

As the cost of living continues to increase year after year, you probably would have spent some time pondering about your financial security. You probably would have heard stories of or personally experienced a company downsizing, a pay cut, the loss of your job, mounting expenses, or just a sudden realization that the world isn’t such a stable place.

No matter when you discover this truth, it is critical that you come to terms with it. Only by knowing the truth can you deal with the reality of financial troubles ahead. Last year was marked by uncertainty, and it probably is just the tip of the iceberg of what can happen going forward.

1For most people, wages will never be enough to sustain their lifestyle at retirement.
Source: media.cagle.com

Talk to any taxi driver and he will probably complain to you about any of the following:

  • Rising healthcare costs
  • Rising petrol costs
  • Rising food costs
  • Rising housing costs
  • Instability in the economy

These money issues are real. However, before we go into the solutions, we have to understand where these problems come from.

 

1. Low Interest Rate Environment

A low interest rate environment means that you need to go beyond your bank deposits to preserve your wealth.

However, despite having more mobile phones than people in Singapore, we are painfully ignorant in financial matters. We are educated, but not wise; we are connected with each other, but disconnected with reality.

Truth be told, most people have no idea how to even match up to the bank interest rate, much less beat the bank interest rate. The average level of financial literacy in Singapore is still shockingly low. To be a decent investor, it would be necessary to at least understand basic financial instruments, financial asset classes, methods of speculation/investment, and simple risk management.

Financial literacy is the first step to fighting inflation. You don’t necessarily need to know exotic strategies like statistical arbitrage, premium collection on SPY options, futures pairs trading, spread betting, or betting on changes in the yield curve. But a basic understanding of market cycles and trading principles will make a large difference in one’s investment results.

2. CPF Alone May Not Be Sufficient

In years of economic boom, Singapore tends to experience inflation of 4-5%. The CPF ordinary account grows at 2.5%, which means your money’s losing value when the economy grows. Counting on CPF alone may help you get by, but would it really sustain the lifestyle you desire? Even if the inflation rate falls to 1-2% a year, very few Singaporeans can say they are able to retire comfortably.

It is more prudent to have something besides CPF to fall back on.

Some solutions include:

  • being willing to downgrade your apartment
  • holding structured deposits (can yield 4% or more)
  • holding high-dividend stocks

However, these strategies will probably only help in wealth preservation, not wealth creation.

For wealth creation, you need far more investment sophistication and dedication.

Doing a refresher for the setups before we embark on live trading! 💪💰🔥 #tradingarcade #realtraders

A post shared by Spencer Li 🇸🇬 Synapse Trading (@iamrecneps) on

 

3. Zero Inflation Could Be the Norm

A world of zero inflation is good for the average consumer (he thinks he won’t be paying more for his food/car/house/petrol), but it’s bad for wages.

Truth be told, when inflation suffers, it is normally a terrible situation for the economy to be in. Remember the productivity drive a few years ago? The government aimed for 2% productivity growth every year, because inflation was terribly low and the country had to do something about it.

sgInflation has fallen and fallen, and has even turned negative in 2015 and part of 2016.
Source: tradingeconomics.com

Stagnating or falling wages can become the norm. With wages in peril, it is even more essential to generate additional streams of income, or risk falling into financial destitution.

Examples of shrinking professions include:

  • F&B services
  • Marketing professionals (yes! because the supply has caught up with demand in recent times)
  • Insurance Agents
  • Property Agents
  • Logistics professionals (yes! because the supply has caught up with demand due to the euphoric onslaught of e-commerce firms)

If you have children, the best thing you can do is to advise them regarding these trends. Don’t be so concerned about their math scores, science scores, or whatever score; look to give them training in these skills, and to explore their interests in these areas.

 

4. Persistently High Property Prices

This is good news for existing property owners, but bad news for new property buyers. Singapore will continue attracting rich foreign buyers because that’s our value proposition as a nation. This problem keeps worsening as long as our property is affordable to wealthy investors from overseas. The government is likely to step in if property prices start falling.

The issue with high property prices is that most people end up taking 20 to 30-year loans and live with debt for most of their adult life. This keeps the economy stagnant and unable to experience growth like we’ve seen in the 1980s and 1990. A debt-ridden adult is much less likely to splurge. With an entire generation of people living with huge mortgage loans, we won’t see fantastic growth in a very long time.

Opening speaker for SMART Expo SG 2017! Thanks to everyone who came down to support! 😄 #suntec #property #guestspeaker

A post shared by Spencer Li 🇸🇬 Synapse Trading (@iamrecneps) on

 

5. Rising Medical Costs and Falling Government Support

Take note: it’s not the government’s fault; blame it on falling birth rates. With a smaller workforce, tax revenues will fall and Singapore will be less able to provide for its elderly.

Singapore will age, and more and more sick people will depend on a smaller proportion of working adults in this country. It’s inevitable that the government cannot support the large number of elderly who will reside in our hospitals and hospices. It’s the same ‘graying’ problem that Japan is facing.

Falling government support, along with higher demand for doctors and strained infrastructure will cause medical bills to rise. Sure, it’ll be great for healthcare stocks, but healthcare spending on the elderly is not expansionary. Basic health economics would differentiate between healthcare spending that improves economic well-being (vaccinations on children, basic sanitation etc.), and healthcare spending that does not improve economic well-being. We’ll be seeing a lot of spending that does little to boost the economy.

 

So, “What Should I Do?”

The fact that you’re reading this shows that you are concerned for your financial future. Keep learning, reading, and exploring ways to combat this reality. After all, people perish for the lack of knowledge, not the lack of determination. Acquiring the right investment skills, financial management practices, and general knowledge will help protect you and your family from financial destitution.

My greatest hope is that you, the reader, would be motivated to start educating yourself financially, and to get your hands dirty in the investment world.

Cheers, and see you all soon! 😀

P.S. If any of you are keen to start learning about trading, I strongly recommend you join us for our next “Trading Foundation Workshop”, where you will learn 4 easy strategies to tackle any market (stocks, forex, CFDs, etc), and how you can apply them with as little as 15 minutes a day to make 20-40% annual returns consistently.

In our previous workshop, during the live trading segment, one new trader made US$200+ from following our USD/SGD short trade, while Spencer made US$454 on the same trade and over US$1,200 of profits in total during the workshop.

Check availability and register here: http://bit.ly/2nxrly7. Each workshop is limited to 30 pax, so register early to avoid disappointment. See you there! 😀

 

RESEARCH SOURCES & REFERENCES

www.blog.linkedin.com/2016/10/20/top-skills-2016-week-of-learning-linkedin
www.cnbc.com/2016/10/20/the-top-10-skills-that-will-get-you-hired.html

Guest Speaker at the SMART Expo 2017 – How to Build a Solid Investment Portfolio

Yesterday, I got invited as a guest speaker at the SMART Expo to share about my investment portfolio and trading strategies.

Check out our event photos below:

Thanks for the invitation, and a big thanks to all those who came down to support! 😀

Invited to Speak at the SMART Investment & International Property Expo – See You There!

This coming Saturday (25th March 2017) at 12pm, I have been invited as one of the guest speakers to speak at the SMART Investment & International Property Expo,  where I will be sharing my “15 Minute Trading Strategies” which I used to achieve financial freedom at 27 while travelling around the world (50+ countries).

Last year, I also completed the RES (real estate salesperson) course for my own interest, and I have recently been looking around for some personal property investments. Hence, I will also be talking a bit about the property climate amidst the rate hikes (including property counters and REITs), and how I structured my portfolio to optimise trading and investments.

If you are free on Saturday, do drop by and have a chat with me! 😀

Find out about SMART Expo, and click here to register for FREE!

SMART Expo Details

Whether you’re a seasoned property buyer, someone who’s looking to make an investment, or just curious about the market, the SMART Expo is one to look forward to. This is the place to go if you are looking for professional advice, sourcing for global investment experts or hoping to take advantage of guarantee yields from “buy-to-lets”. SMART Expo is free to attend and will be held on 25 and 26 March, at Hall 405 of Suntec Singapore Convention & Exhibition Centre.

SMART Expos is one of Asia’s most established property and investment expos, with over 45 show track record in Singapore, Hong Kong, Malaysia and China. This year, you will receive first-hand information and direct overseas property developers’ prices. You’ll also be privy to luxury properties from some of the best current investment.

There will also be more than 20 educational seminars held over the two days, featuring speakers such as Fengshui consultant Adelina Pang, investor/trainer/mentor/author Jochen Siepmann and executive director of PropNex Kelvin Fong. There’s an eclectic mix of seminars, with topics including ‘Hydroponics and the link to food security’, ’5 Disruptive trends that are changing the Singapore industry’, ‘Property investment opportunities and risks in Asian emerging markets’ and ‘Weighing your options for financing overseas property investments’.

Find out about SMART Expo, and click here to register for FREE!

The Top Hedge Funds of 2016 Share Their Best Bets for This Year (With New Charts & Examples)

Bloomberg recently did a good cover on what hedge fund managers are looking out for in 2017. The general consensus is clear; the market is uncertain, and world events are causing markets to react in unexpected ways.

“You’re going to have to take way more risk today in order to try to make outsize gains versus a year ago,” -Hanif Mamdani, PH&N Absolute Return Fund

I found the article to be pretty insightful, with a handful of key take-aways. To make it easier for my readers, I’ve broken up the article into easy-to-digest sections, and added some charts and examples to make it clearer. Here we go:

1. Distressed Energy Companies

Hedge funds specializing in purchasing companies that are on the verge of collapse, actually profited from the rise in oil prices last year. Companies that were in the red started to turn profitable, and after purchasing companies at ultra-cheap prices, these assets were starting to bring in significant capital gains for hedge funds. Even though oil has risen significantly, hedge fund managers still see the potential for more gains.

It’s interesting to look at the related ETFs for oil and gas companies. I’ve pulled out 2 charts of U.S Oil & Gas company ETFs (XES and IEO). The gains over the year are impressive.

The charts above summarize the oil and gas sector for the year of 2016.

On the technical side, the Oil & Gas sector is still on an uptrend. It is prudent to remain bullish when the market is still trending up. It’s interesting that XES has broken out of a wedge, and looks to be gathering bullish momentum.

In the longer term, oil & gas companies seem to be picking up momentum.

 


A few weeks ago, I was invited to give a talk at the Singapore Stock Exchange (SGX) on the Offshore & Marine sector, and Keppel Corp was one of our top picks. 

2. “Global Macro Deceleration”

Some hedge fund managers are positioning themselves for the worst. For example, a border tax in the U.S could “cause a global depression and a major equity market decline,” says Carlson Capital’s Black Diamond Thematic Fund. They’re waiting for commodities to “correct meaningfully” (meaning a decline in commodity prices), and looking to scoop up good stocks at the bottom of the market decline.

Traditionally, sector rotation strategists have sworn by investing in stocks like semiconductors, industrials and miners during full-blown bear markets. These stocks are famous for having high volatility and are not for the faint-hearted. A famous example, Caterpillar Inc, is shown below:


Heavy industrials like Caterpillar Inc tend to move cyclically with the economy. Notice the 6 big swing it has had since 2012!

3. Long High-Yield Corporate Bonds Amidst Rising Interest Rates

Some hedge funds are betting on higher-yield corporate bonds rising during this period. High-yield bonds typically have both a short maturity and high coupon rate. With interest rates expected to rise in the coming decade, bond prices are likely to fall and bond holders will actually be worse off (Economics 101!). However, with the shorter maturity, higher-yield corporate bonds become more attractive as they are less exposed to the beating by rising interest rates. Bearing in mind these ideas, it is understandable why these have been attractive to institutional investors in the past year.


I’ve inserted a little-known ETF, “HYG”, a high-yield corporate bond ETF that tracks the prices of high-yield corporate bonds. You can see that the bear trend sharply reversed at the turn of 2016 and has been rising steadily since. The uptrend is still in force, and some hedge fund managers are looking to speculate on a variety of interest-rate products.

What They’re Saying:

In summary, what we notice to be the consensus about the market in 2017 is this:

  • Heightened interest rate, inflation rate, and economic volatility
  • Renewed interest in unconventional investment strategies

That being said, it’s important to keep yourself updated and continually learning about financial markets. In such a unique market climate, it would serve you well to continue reading up and knowing what market participants are paying attention to.

Want to Learn How to Tackle the Markets?

Join us for a 3-hour intensive “Trading Foundation Workshop” where you will learn all the necessary skills, and witness firsthand live trading, where many of our new attendees managed to make some profits from their very first trade! 😀

Register now: http://synapsetrading.com/trading-foundation-workshop/

 

Research Sources:

bloomberg.com/news/articles/2017-02-28/the-top-hedge-funds-of-2016-share-their-best-bets-for-this-year

Why Goldman Sachs Thinks a Stock Market Crash Might Be Coming Soon

Source: CNBC

“Financial market reconciliation lies ahead…”We are approaching the point of maximum optimism and the S&P 500 will give back recent gains…” – Mr. David Kostin, Goldman’s chief U.S. Equity Strategist

While the S&P 500 continues to break new highs, prominent economics and C-level staff in multinational banks are coming out to say it’s time it has to stop.

 

U.S Equities are at Extreme Highs

As the old adage goes, “what comes up, must come down”. However, this adage has a valid explanation in the world of stock trading. Prices that go up must come down eventually because at some point there will not be any more buyers in the market, buyers would look to take profits and sell, new sellers would short the market.

 

Markets move in swings; they often don’t go straight up.

As you can see above, classical technical analysis theory teaches that every uptrend swing must be accompanied with a correction downwards. Even though the price can go in one direction for “far too long”, there will always be a correction.

Riding the bull market 😄

A post shared by Spencer Li 🇸🇬 Synapse Trading (@iamrecneps) on

 

A Correction is Due, BUT…

Before I go on, let me state 2 very basic facts about market euphoria:

Fact 1: Euphoria in the Market Happens Often

In the forex markets, this happens very often. In fact, these are known as gentle trending markets and the easiest way to trade these markets is to buy, add on at every opportunity, and watch your profits grow.

If you zoom in to the 5-minute charts, 1-hour charts, or move to different financial products like Forex, Commodities or Bonds, you would notice that market euphoria is quite a frequent occurrence.

Euphoria in that sense, can happen in both directions, as seen in the diagram below (Hourly chart for EURUSD)

Euphoria can happen in both directions, and for very long. In this case,
there were many opportunities to short, and the trend lasted far longer than one would expect.

Here is another recent example of riding trends:

Trends can last far longer than one expects. That’s why it’s important to know this fact:

Fact 2: Markets Don’t Reverse Immediately!

It’s easy to jump on the hype when almost every news outlet is talking about it. But the truth is this; what’s important is on the chart. Price already gives you the decision-making tools you need!

Even though Goldman Sachs says that a correction is due, that does not mean you immediately go ahead and go all-in to short the market. Even if you are fully convinced that the market is going to crash, it is best to wait for actual price confirmation before taking any action.

Daily chart of the S&P 500, with a small pre-emptive short position which I have initiated.

In trading, it’s all about probabilities. The above technical levels show how far the market might go, but what actually happens will depend on price action. And since the reward to risk is pretty decent based on this price channel, I am winning to take a small short position, and add on more later if it goes in my favour. This will ensure that I have a decent profit from shorting near the top when the market does crash. Till then, fingers crossed!

Here’s some food for thought before we conclude this article:

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” -Sir John Templeton

Cheers and have a great week ahead! 😀

P.S. For those who want to start learning about how to make money from the financial markets, don’t miss our last 2 workshops for this quarter at the special price of $25.
Check workshop availability: http://wp.me/P1riws-6gw

Research Sources:

cnbc.com/2017/02/21/goldman-sachs-market-investors-have-a-letdown-coming.html
thefelderreport.com/2016/05/23/this-might-be-the-most-extreme-stock-market-euphoria-we-have-ever-seen/