Rounding up top reads from around the web, including articles shared by fellow investors in the Financial Horse Facebook Group.
And just in case you guys missed it, the Financial Horse Complete Guide to Investing for Singapore Investors launched yesterday! I’ve spent the last 9 months compiling everything I know about investing into this guide, and it’s all available to you now. Check it out here!
Hong Kong’s finance chief says record currency reserves give it enough fire power to ward off any attack on currency, recession possible (SCMP)
Canada’s largest insurer insurer Manulife Financial Corp on Wednesday edged past estimates for second-quarter profit, helped by the strength of Asia, its biggest unit. Insurers in Canada have been increasingly pivoting toward Asia for growth, looking to sell to the region’s middle class as domestic markets face stiff competition.
The company’s Asia unit reported a nearly 15 per cent rise in core earnings to C$471 million (S$491.8 million), while its domestic and US businesses slipped. However, the Asia business saw a marginal decline in annualised premium equivalent (APE) sales.
My point is that Chinese political leadership believes that they are the tiger and the current United States president is a braying donkey. Our political leadership believes they have “leverage” and are playing the stronger hand. Chinese political leadership believes that, too.
That’s what makes a Game of Chicken. That’s what makes a game that is decided by political will, not by resources or starting positions. This will get worse before it gets better.
China responded to President Donald Trump’s tariff threat with another escalation of the trade war on Monday, letting the yuan tumble to the weakest level in more than a decade and asking state-owned companies to suspend imports of U.S. agricultural products. The moves antagonized Trump, who used Twitter to accuse China of “currency manipulation” which “will greatly weaken China over time!” He has previously criticized Beijing for not keeping to promises to buy more U.S. crops.
Stocks and emerging-market currencies sank on concern a prolonged conflict between the superpowers will weigh on global economic growth, while haven assets including the Japanese yen, U.S. Treasuries and gold climbed. Investors increased bets on Federal Reserve interest-rate cuts.
“China appears to be posturing for worse to come in the trade war. Letting the yuan weaken past 7 against the dollar suggests it’s looking to buffer the economy from a more severe trade shock.”
In a video yesterday, Ray Dalio said investors should bet both on the US and China in this trade war. This approach will offer diversification to investors with any possible shift in the control of the “global world order.” Dalio also explained that the world order has shifted in the past from the Dutch to the British and then to the US. The US and China are now the world’s two largest economies.
Global investors might perceive China as a riskier investment. But Ray Dalio says that, with the current monetary policy and political division, Europe is very risky. He also highlighted that risk also prevails in the US. Factors like income inequality, the political system, and the fight between capitalist and socialist ideologies in the upcoming election could make the US riskier as well. Even emerging market have their own unique risks. So, similar to other market risks, investors will be exposed to China’s unique risk.
The greater risk investors could face is not taking on the advantage of diversification. Dalio added that although there are both pros and cons compared to US and Western economies, China has more room to deal with its monetary and fiscal tools. That’s why Dalio says that “not investing in China is very risky.”
When stocks are volatile, conventional wisdom says to stay the course. But what if you have tuition due or a pending home purchase and you just really need to cash out?
Ideally, if you have a big, scheduled payment coming up, you would plan ahead and move money from stocks to a high-yield money market account or other safer investments. Not all stocks in your investment portfolio are the same, so when you go to sell, do thorough research. For the most part, if you want to minimize capital gains, sell the stock with the least embedded growth. When it comes to exchange-traded funds, your holdings might have a different cost basis if you bought shares over time. Consider selling bonds at the moment instead of stocks.
Is there anywhere to hide out in this uncertainty? Some industries, like the industrial manufacturers, are going to be impacted directly by the tariffs. But others, like the social media giants, who are already banned from doing business in China anyway, probably will not. Gold has hit 6-year highs as investors have flooded into the yellow metal seeking security. Suddenly, it’s one of the hottest industries.
Why do retail investors lose money?
- Investors buy shares at relatively high prices and sell them at lower prices.
- Active trading results in high commissions, where costs become a big factor.
- Investors hold shares bought at high prices during euphoric, bull period with big unrealized losses and take small profits from other shares purchased.
- Investors buy ‘in-fashion funds’ promoted by financial institutions during a particular time window. This is despite the good past performance of the funds.
Underlying factors that cause the above-mentioned tendencies:
- Not knowing who you are in relation to the marketplace
- Not knowing what the marketplace is about
- Not understanding the basic human weaknesses of greed, fear, impatience, pride and laziness
- Listening to the counsel of those who do not have the skill-sets to help you make money.
- Not applying common sense but being confused by endless emphasis on unprofitable semantics of what are blue chips and what are not, what is investing and what is speculating, what is safe and what is not.
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