Top Reads this Week (18 August)

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Rounding up top reads from around the web, including articles shared by fellow investors in the Financial Horse Facebook Group.


Recession Countdown Begins: Treasury 2s10s Yield Curve Inverts For First Time In 12 Years; 30Y Yield Drops To All Time Low (Zero Hedge)

Critically, as Jim Grant noted recently, the spread between the 10-year and three-month yields is an important indicator, James Bianco, president and eponym of Bianco Research LLC notes today. On six occasions over the past 50 years when the three-month yield exceeded that of the 10-year, economic recession invariably followed, commencing an average of 311 days after the initial signal.

If the Treasury curve inversion is not producing a restrictive influence on the economy as it did in the past can the US still experience a recession? Yes, but it would come from different channels. The biggest recession risk today centers around the trade dispute between the US and China.

Of all of these channels, the biggest vulnerability for the US is the equity channel since the market value of equities relative to income and GDP is at record highs, providing consumers with vast sums of liquidity and wealth.

That is not a forecast or a prediction but merely an observation that all recessions have been caused by some form of a demand shock, and the inverted yield curve merely highlighted the vulnerability of the economy to a potential bad outcome.


Singapore slashes annual GDP forecast to 0-1% amid ‘strong headwinds’ (CNA)

Annual gross domestic product (GDP) is expected to come in “at around the mid-point of the forecast range”, said the Ministry of Trade and Industry (MTI) on Tuesday (Aug 13). This is sharply lower than the previous estimated range of 1.5 to 2.5 per cent, which was announced in May when MTI slashed the upper end of the growth forecast.

The downgrade in growth estimates for the second consecutive quarter came as official data confirmed the economy as growing at its slowest pace in a decade during the second quarter.


10 things I learned from the 2019 Netlink Trust AGM (The Fifth Person)

Netlink generated S$353.6 million in revenue and S$247.9 million in EBITDA in fiscal year 2019. The figures were 3.3% and 3.2% above management’s 2017 projections respectively.

Over 90% of Netlink’s revenues are recurring in nature. As seen earlier, Netlink has eight revenue streams: residential connections, non-residential connections, NBAP and segment fibre connections, ducts and manholes service revenue, installation-related revenues, diversion revenues, co-location and other revenue, as well as central office revenue.


The Game Has Changed (The Irrelevant Investor)

2019 has not been kind to a certain segment of the brick and mortar retailer. Not even five years ago, Bed Bath & Beyond was at $80 a share. Today it sits just above $8. A similar story has come to pass in JC Penney and Macy’s, with a few others not far behind.

Facebook is not playing around. They’ve basically turned Instagram into your personal shopper. Over the last six to twelve months, most of the clothing I bought was on Instagram, which is something I never thought I’d say.


No-deal Brexit will be blocked: former finance minister Hammond (Straits Times)

THE British parliament will block a no-deal Brexit if unelected people behind Prime Minister Boris Johnson try to wrench Britain out of the European Union on Oct 31 without agreement, former finance minister Philip Hammond said on Wednesday.

The United Kingdom is heading towards a constitutional crisis at home and a showdown with the EU as Mr Johnson has vowed to leave the bloc in 78 days’ time without a deal unless it agrees to renegotiate a Brexit divorce.

After more than three years of Brexit dominating EU affairs, the bloc has repeatedly refused to reopen the Withdrawal Agreement which includes an Irish border insurance policy that Mr Johnson’s predecessor, Theresa May, agreed in November.


Gold Rebounds As Investors Flee Risk On Recession Fears (Investing.com)

Barely a day after retreating on reduced trade-war tensions, gold was up and running again on Wednesday as an inverted yield curve drove investors away from risk and into the yellow metal.

Spot gold, reflective of trades in bullion, was up $18.51, or 1.2% at $1,519.86 per ounce by 2:43 PM ET (18:43 GMT) as the yield on the U.S. 10-year Treasury fell below that of the 2-year. It was the first inversion of the yield curve since 2007 and heightened fears of a worldwide economic slowdown.


Warren Buffett’s Advice on Investing in a Recession From 2007 (Yahoo Finance)

Buffett began by saying: “Charlie and I haven’t the faintest idea where the stock market is going to go next week, next month, or next year. We never talk about it. You know, it never comes up.”

Buffett then went on to explain that when he views the market, he ignores 99.9% of the information out there, because most of it is not relevant. However, “every now and then” Buffett and Munger “see something that looks like it’s attractively priced to us, as a business.”

The key words here are “as a business.” Buffett recommends that investors “Forget about the word ‘stock'” and concentrate on the underlying business instead. By using this approach, “We would be happy with that stock if they told us the market was going to close for a couple years. We look to the business.”


Tech firm Micron invests billions of dollars in Singapore for expansion (The Straits Times)

Deputy Prime Minister Heng Swee Keat has said that Singapore is well positioned to meet the global demand for semiconductors – a key driver of the country’s growth – after a multibillion-dollar investment here even though the industry is facing challenging times.

His comments come after the latest data showed a 14.6 per cent plunge in Singapore’s exports in the second quarter, with electronics exports contracting 26.9 per cent.

But Mr Heng noted: “Beyond smartphones and tablets, the consumer demand for other smart devices ranging from TVs to wearables is growing. We are also seeing the rapid advancement and deployment of new, innovative technologies… (These) will boost demand for semiconductor components.”

He cited Micron, whose major investment will not just ramp up its capacity to produce new flash memory structures, but also see it raise its staff strength as the new facility goes online.

Singapore accounts for 11 per cent of the global market share for semiconductors and is home to more than 60 semiconductor companies. The industry also contributes more than 7 per cent of gross domestic product, employing around 35,000 people with a value-add of $35.2 billion, based on preliminary estimates by the Ministry of Trade and Industry for 2018.


Big 3 Singapore banks face rising asset risk: Moody’s (Business Times)

DBS, OCBC, UOB have posted record net profits, stable asset quality and strong capital for H1 2019 but further improvement in profitability will be difficult as global growth slows.


Mitsui unit raises $1bn in Singapore for oil-drilling vessels (Nikkei Asian Review)

Japan’s Modec, a unit of Mitsui E&S Holdings that builds floating oil-drilling platforms, has issued $1.1 billion in bonds to fund a Brazilian offshore project as the resource sector explores alternatives to traditional bank lending.

Project bonds are issued against future revenue from the infrastructure projects they finance. Modec decided to list them in Singapore, where the instruments are actively traded by many financial investors, over the less-developed Japanese market. The bonds will reach maturity in June 2034 and have a coupon rate of about 6.7%. “This is a higher rate than interest on bank loans,” Modec said. The issue was oversubscribed by roughly 100%, mainly by institutional investors in the U.S. and Europe.


HSBC Singapore rolls out global mortgage solution, starting with Australia (Business Times)

HSBC Singapore on Wednesday launched its first overseas mortgage solution, that will initially be offered to customers looking to finance residential property investments in Australia, before being rolled out to other markets. Among other benefits, the HSBC International Mortgage will allow consumers to choose the loan currency in either Australian dollar or Singapore dollar, the bank said.

Ranojoy Dutta, head of retail products at HSBC Singapore, said: “Singapore and its people are amongst the most internationally oriented in the world and this extends to overseas investment. We went with Australia as the first market for this solution given the close affinity that Singaporeans have for the country on the back of their business, education, holiday or familial ties. We’re similarly seeing this reflected in our customers’ interest so we’re really responding to this growing momentum.”


How to be a happy millionaire (Standard Media)

A book by Japanese Zen millionaire Ken Honda, Happy Money, teaches people how to achieve peace of mind when the money comes.The first lesson from Honda is that you should be contented with what you have even as you look for more money.

“Even all the money in the world doesn’t prevent people from worrying about money,” he says. He says you should appreciate what you have, as well as the flow of money as it comes in and goes out.

Honda says making money as a happy millionaire would mean doing the things you love to do and sharing that gift or talent with others. You will live a miserable life doing things that you hate even if it brings you millions.

When it comes to creating wealth, Honda advises that you to take your time. “People who become wealthy slowly and deliberately over time tend to keep the money for a long time as well.”


What the Apple Card gets right, and wrong (Financial Times)

The first thing to know about the Apple Card is that it is not really a card. The differentiator is the software, which in this case is the Wallet app. That is where the debts are tallied and where Apple hopes to impress by bringing “transparency” to personal finance.

Among the main features is how the credit balance is displayed. If the cardholder owes, say, $7,000, but plans to pay off only $4,000 this month, Wallet will immediately do the maths and show how much the interest payments are if the remainder is paid over a few months or a few years. With a flick of the thumb, time is extended on a virtual dial, and the colour goes from a welcoming green to an alerted red as the interest charges rise.

Apple says the feature offers unprecedented transparency and, unlike banks that make money when you stick to minimum monthly payments and get burdened with interest charges, Apple “encourages you to pay less interest”.

Purchases also get colour-coded, similar to some personal finance apps, making it easy to tally up the cost of those Starbucks visits. Another feature is “daily cash”. In place of air miles or rewards points, which can be difficult to understand and fluctuate in value, Apple Card simply calculates the daily cashback payment and deposits it in the user’s account. A little grey box confirms, for each purchase, what cash reward was received.


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