The market has been trading sideways for almost two months now, and most of my expectations have not been met. I expected a correction in December to cash in my shorts, but that didn't happen. Then I expected a rally on Obama's inauguration, but that too was muted. And although the market did reject Geithner's initial rescue plan, the effect on the markets is still dubious. Nevertheless, I have also begun the process of slow accumulation, because I think we are bottoming out and it is time to start building my portfolio for the long haul again. I'm going slow, because I still think there might be one more major correction, but as yet it hasn't materialised.
So this is a chance for me to review the logic of the stocks and funds that I intend to accumulate over the next few months. This is really to capture a snapshot of my thought process for personal reference in the future ... read on at your own peril.
China
I really don't expect consumer growth to pick up in the U.S. (or even Europe) anytime soon, which is why I'm not particularly optimistic on Singapore's near-term recovery. It looks like the engine of growth for Asia will be China, so since everyone's growth will depend on China I might as well just invest directly in China. China has also been putting out some very aggressive stimulus packages to build up domestic demand, so although they have huge unemployment problems with all the factories closing, my money is on our motherland to recover first.
India
I'm pretty confident in India as a long-term bet (like 10 years) although I'm not entirely sure how it will fare in the next year or two. I just saw a report yesterday that the only three countries in the world to grow by more than 8% year to date are Brazil, Russia and China. That's the BR and C in BRIC. India has dropped almost 2%. So maybe instead of India I'll just focus on BRIC.
Vietnam
I first got interested in Vietnam when I visited it about 7 years ago. Back then, I wasn't into investing but applying the logic of Jim Roger's The Investment Biker, I was sure that this hardworking people just escaped from the grip of Communism would surely do well in the next century. They have potential very similar to China a decade ago, and they can also rely on China as a hinterland of sorts. The Singapore government evidently thinks so too, because they have invested in commercial districts in both Ho Chi Minh and Hanoi. My interest in Vietnam was rekindled with another visit to Hanoi last year where it was evident they have already come a long way. So now that prices are down, it's time to do a little shopping.
Australia
Australia has been badly hit by the current economic crisis. As the commodities boom ended, their exports have dropped tremendously. And in the current climate of fear, investors pulled out all their Aussie dollars and dumped them in the Yen instead for refuge. So Australia has been doubly-hit. In the months ahead, I expect both trends to reverse, so a strong recovery (at least in the stock market) should be on the cards. Maybe after all the fires go out.
I've been a big fan of Google since I first read about it in 1998. Perhaps it is finally time to buy its stock. Firstly, tech stocks in general have high cash levels, which is why the NASDAQ has been doing pretty well. I'm also tempted to test the economic theory that periods of high inflation are good for employers because they reduce the real cost of wages. It looks like America's money-printing is finally catching up with it, and if there is any company that pays out most of it's operating cost in wages, it is Google - they hardly make any physical products (no raw materials) and 40% of their workforce are PhDs. The downside is that precisely because Google's ad sales continue to well, their stockprice hasn't been impacted as much so there is less upside potential. But I figure it is a decently safe bet. Reading Google Planet now reminds me why I have always been enamoured of this company.
Berkshire Hathaway
My Jan 2008 edition of Fortune said to buy BRK because in an economic downturn, you can trust a smart person like Warren Buffet to know where to put his money. Sadly, when the entire market crashed, there really was nowhere to hide. Good thing I didn't buy then, but I'm thinking now the time is becoming ripe. (I'm still really sore that I missed the boat when I tried to buy BRK.B for 2650 some months back. I think it hit an 52-wk intra-day low of 2651 that day.) And reading Warren Buffet's biography now, I really do get the feeling this is a business genius I don't mind putting my money on.
Apart from these, most of my previous stock picks still hold. The exceptions are CHK which I have liquidated, and NVDA which I anticipate will weaken in the near term due to weak consumer demand, so I may wait a while to buy more. I am basically in accumulation mode now, trying to put all my money into the market over the next 3-6 months so I can just sit back and enjoy.
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