Merry Christmas and Happy New Year

It has been a long time since I last updated this blog. Almost 10 months since the last posting in February 2013.

In Jan 2013, I had shared with you the Greed and Fear Index and I had warned about caution going forward. Interestingly, STI rallied for a short period of time before coming down since middle of the year. It has stayed within a range for half a year now. Last week, we have QE tapering but S&P continues to move up. Obviously, money is flowing back to US and it is clearly shown in SGD/USD exchange rate. 

Today, for Christmas, I would like to share with you the latest Greed and Fear Index.  Although this is benchmarked against S&P, you do have to take note that Singapore economy is really very small and open, and any crisis in US or the major economies will hit us. If you have exercised caution in 2013, please continue to do so. Risk and return is not in our favour.

Merry Christmas and Happy New Year!

SMRT

SMRT has seen its profit dropped 31.2% in Q3 and issued warning that it will not see good results in the coming quarters. This is a big concern because the problem comes from higher cost of operation that is still rising. Recently, I received a brochure from SMRT on sleeper replacement works. To most laymen, we really do not care what is a sleeper as long as the train service is working fine. If you may excuse me, I think some of these expenses are unnecessary and I am quite sorry to say that I still do not know what is a sleeper after reading that brochure. Unlike a government organization, SMRT is a public listed company and hence it must ensure that cost of operation be controlled and unnecessary expenses be removed.

To be fair to SMRT, it has been trying its best to improve on its services and reduce train disruptions. However, this is coming at the expense of lower profit due to more frequenct maintenance and more train trips. The inflationary pressure from higher staff cost and the government control on the public transport fare hike have not helped it either. With less profit and therefore less money and less resources to spare, will it be able to continue to invest in more trains and improve on its operations?

As a public listed entity, one of its key missions is to earn a certain level of return for its shareholders. It has been able to do it quite well in the past years (about 4%). With escalating cost and inability to bring in more revenue, the sustainablity of its dividend payout policy is questionable. However, as highlighted in my previous blogs, this is one of the few companies that we can afford to fall into a deep sleep for many years and be confident that it will still be around when we wake up. Personally, I feel that the problem it is facing right now may be short term. If it is able to execute its plan well, it will be out of the woods sooner or later.

Being a small country, MRT lines have already become the backbone of our transport system. In a way, most of the people cannot live without MRT. And, frankly, I have no question of its long term survival.

Be careful

It has a long time since I last wrote about anything. Time flies. It still amazes me that Greece is still in the European Union after a year. That's strong political will. And, it can carry far. Anyway, I was looking at the fear and greed indices today when I realized that we are now at the top end of the greed index (around 120). Bull market has started sometime back and the stock indices are still trending up. If you have read my previous posting, the last time we hit above 100 is around 2007. Given the unusually low interest rate environment, this trend may persist for months or more than a year. But, if you are a value investor, you will know that the risk and return is no longer that fantastic anymore. In fact, I will advise more care when investing these days.