How to Invest in a Bear Market? - Advice from a Veteran Fund Manager with 54 years of Experience

 

If you are heavily invested in China Tech, it is not an easy time in the past few weeks. Baba has fallen by 30% within a week and the end seems not in sight. Even the almighty Tencent was not spared from this perfect storm.

The reasons for their drop could be from the possible implications of delisting from the US, China's regulatory claw and the more likely cause which is similar sanctions imposed on Russia slapped on the Chinese companies.

Would the US and its allies impose drastic sanctions on China? Based on a realistic assessment, it is unlikely to happen as China is playing the neutral role well so far. However, it was also unlikely too for Russia to wage a war on Ukraine without negotiations so it is anyone's guess in this crazy world.

It has been a long while since I saw HSI testing 18000 levels, the way it is going, it looks like they are going into bankruptcy administration. Many of the companies are currently trading close to value stocks status despite their growth characteristics. Tencent at PE of 12 and Baba at PE of 11 (excluding one-off writing down of goodwill).

The Chinese Government have to step in soon unless they want to have a crumpled capital market which will not be in line with their goal of China being strong, independent and vibrant. Statements to provide support for the Chinese market would be most welcome in such dire conditions.

They have shown their prowess and proven their point that no one is on top of the powerful government. Jack Ma is nothing but just a cloud in the sky. Is it perhaps time to spare the rod and shower some care and concern?

The merits of being able to do valuation of a company based on financials rather than concepts would come in useful at this juncture. If we are convinced China would not let their titans fall, this is the time to be brave and accumulate the "best of the class stocks" in China.  

The Graham crowd would be excited to hunt for gems in this current massacre of China's market where Mr Market is getting moody and throwing bargains at us. Even strong names like Ping An is not spared this time around.

Here is some advice from a veteran portfolio manager with 54 years of experience from Royce Investment Partners as he gives his input on how to invest in a bear market. I hope you will find it useful to navigate the current challenging conditions.

What’s your take on the sharp market decline?

I think it was overdue and I believe we have more to go. The reason that I think more drawdowns and declines are likely is the Fed has yet to implement the measures they need to take to restrain and hopefully bring down inflation.

I feel that they’re dramatically behind the curve, meaning that they have to catch up to do. They should have been removing stimulus and should have been raising rates earlier. They haven’t done so. And that’s ahead of us.

Do you think there are other parallels in your career?

I’ve been doing this professionally for 54 years, which means I was actually a young portfolio manager managing a pension fund in 1972-75, also known as the Nifty Fifty era. And this was at a time when, much like the FANG stocks of today, there was an anointed group that sold at very high valuations. We’ve obviously seen this in the dot.com bubble. It repeats itself. So history is a good instructor in these matters.

And the market, from top to bottom, went down 50%. That insight that I learned then was instilled in me by a veteran trader. And he says to me, Charlie, hold your horses. This is the beginning of a bear market. What you’ve got to do is you’ve got to pace your purchases, dollar cost average. You don’t know how long this is going to take.

So what I learned then was a pyramid. What you do is you buy, think of the top of the pyramid, you buy a little. And as the price declines, you buy more. And on days that market goes up, you stop buying, on the presumption, it’s going to go down tomorrow or the day after.

Here is the link for the Full Article:

https://www.royceinvest.com/insights/2022/1Q22/how-a-veteran-pm-invests-in-bear-markets

Navigating the Investment Landscape in a Stagflation World- Revisiting the 1970s

Contributed By: The Big Fat Whale

Stagflation is the buzzword in recent times. The definition of stagflation will be persistent high inflation combined with high unemployment and stagnant growth in a country's economy.

The most relatable period in which we can have insights into the impact of stagflation would be a relook into the 1960s-1970s period. This was the only time in modern history(20th and 21st century) that this economic phenomenon has happened.

Inflation was persistently above the 8% mark throughout the period from 1972 to 1981.

History Rhymes

As Mark Twain famously quoted:

"History does not repeat itself but it certainly rhymes"

There are many market analysts and commentators that dismissed the possibility of stagflation happening and argue that the situation is different this time. One of the main arguments is that stagflation is caused by the oil shock in the 1970s which send oil prices spiralling up and the US was heavily dependent on it.

Currently, the US is a net exporter of oil as they have the largest shale oil reserve in the world and with the advent of alternatives (Solar, Wind and Nuclear), the impact of oil on the economy would be less pronounced.

But we might not have an oil shock but a debt shock could be on the cards which have been built up from trigger happy Quantitative Easing in the past. Debt to GDP is at a record of 124% versus 35% in the 1970s.

Click Here for the Full Article: 

https://thebigfatwhale.com/navigating-the-investment-landscape-in-a-stagflation-world-revisiting-the-1970s/

Investment Opportunities in the Gene Editing Field

Contributed by: The Big Fat Whale

The birth of the first genetic edited twins, Lulu and Nana in November 2018, has brought the gene-editing field into the spotlight.

This was made possible by He Jiankui who was at first lauded for this achievement by China's government but after a day, they changed track as there was international attention to this controversial milestone.

The scientist was trying to rid the twins of the HIV virus, where one of the parents was a carrier. He was eventually jailed for 3 years for this feat.

Bill Gates has highly recommended the book, The Code Breaker, which follows the events leading to the invention of the CRISP gene-editing technology by Jennifer Doudna.

For this breakthrough, Jennifer Doudna and Emmanuelle Charpentier earn the esteemed Noble Prize. This technology was also utilised by He Jiankui for the birth of the gene-edited twins.

They have opened the floodgates for the launch of this field and the different applications could lead to possibilities that will allow us to cure diseases, fend off viruses, and enhance our children.

 

Gene-Editing Industry Outlook

We will look at the potential of the sector outlook through the lens of the different market research companies' insights.

The global gene editing market is expected to grow from USD 4.2 billion in 2020 to USD 13 billion by 2028, at a CAGR of 15.2% during the forecast period 2021-2028.

Source: Fior Markets

According to Emergen Research, the global gene editing market size was USD 5.20 billion in 2020 and is expected to reach USD 18.50 billion in 2028 and register a revenue CAGR of 17.2% during the forecast period, 2021-2028.

Market Dynamics:

The global gene editing market revenue growth is majorly attributed to factors such as the growing prevalence of chronic and genetic disorders globally, increasing research & development activities in the field of genomics, continuous advancements in gene therapy, and increasing applications of genome editing technologies in the pharmaceutical, biotechnological, and agricultural sectors. Technological advances in gene-editing tools, the rapid spread of the novel coronavirus worldwide, and the increasing use of CRISPR-based diagnostic tools to detect the SARS-CoV-2 virus are among the other key factors expected to drive the global market revenue growth over the forecast period.

Source: Biospace

Click Here for the Full Article:

https://thebigfatwhale.com/investment-opportunities-in-the-gene-editing-field/

Food Economics: Rustic Pet Haven Food Hub

It is always exciting to discover new places that will create a different experience, especially if gives a laidback and nostalgic feel. We were looking for a place that is pet friendly for a relaxing weekend outing.

It brings us to Faber Drive which is in the Clementi vicinity with Nanhua Primary School as a good landmark that is nearby. The cafes and eateries are nestled in the middle of a private estate in a possibly 1980s building.

We went to the gelatolabo which is famed for its mochi waffle with ice cream. There were 2 more eateries, a pub and a cafe situated in this hub. The prices are generally reasonable and the waffle from gelatolabo is indeed unique as mochi was embedded inside the waffles.

There are seatings outside the eateries and cafes where pets are welcomed. It gives me a feeling of being transported back to the 1990s or 2000s when the pace is slower and brings our heartbeat down a notch.

You can choose to sip on a coffee and just idle your afternoon away while reading a nice book or you could take your dog for a stroll around the estate.

It is indeed a great find and would be back to try out the other eateries and cafes where the food looks great and prices are friendly to the wallet.

Have a great week ahead and Faber Drive could be a chill-out place for you to check out this weekend!

Would you wait for a deceased for 9 years?- Story of Hachi

In the midst of the current gloom and doom of the war coupled with the fear of economic armageddon- tech and innovation stocks have already felt the ripples, it is good to take a step back and reflect on what really matters.

Over the weekend, I have caught this 2009 movie, Hachi: A Dog's Tale, featuring Richard Gere. It is based on a true story in Tokyo during the 1920s of a Japanese college professor and his dog. The professor passed away in 1925 due to a brain haemorrhage. The dog continues his daily ritual of waiting for his owner at the train station for 9 years before passing away.

There is a statue erected in memory of Hachi at the Sibuya Station where he has waited for his owner.

It certainly brings many thoughts such as life could be really simple with a simple goal such as for Hachi; which is to see his owner once again. The devotion, dedication and determination are what every one of us could learn from.

So if we desire a simple lifestyle, we could gain financial freedom earlier and do what we love and desire instead of it being another job. With the ever-increasing expectations- a bigger home, a better car and an ideal lifestyle- that society is piling on us and with simple goals- owning a home- fleeting away due to it being out of reach, it has even inspired the "Lying Flat" movement in China.

The advent of technology and social media, it has led to their own set of problems such as cyberbullying, wastage of productive time, scams and misdemeanours. Nonetheless, from the productivity angle, it has really helped to boost up the economy and address workers shortage issues.

I would strongly recommend this show as it would evoke not only emotions but hopefully self-reflections in these challenging times. It will make us more appreciative given that there are many that are worse off than us- imagine those in the war zone now.

Hope everyone would enjoy the show as much as I do. 

Life could indeed be very simple and meaningful.

Here is the link to the actual Hachi story:

https://www.cesarsway.com/hachiko-story-hachi/