I just saw this interesting article from CNN Money
http://money.cnn.com/2011/03/29/news/economy/utah_gold_currency/
Imagine you are the shop owner who happens to receive a thousand dollar worth of gold coin (with face value of $20) from a customer for a few pack of snacks worth $5 dollars. Will you return another gold coin with face value of $15? Of course, this won't happen. In fact, if gold or silver coins are recognized as currency around the world, the likely result is that the market value of these coins will go up somehow to reflect the general acceptance of these precious metal as alternative to the fiat money (i.e. our paper currency).
Anyway, in Singapore, the commemorative gold and silver coins are legal tender too and they are valued at the price shown on the coins. But, these are considered as investment and taxes e.g. GST will be levied on them. And, try not to use it to purchase your daily groceries. I do not think the supermarkets will even accept these coins from you.
Thursday, March 31, 2011
Wednesday, March 23, 2011
Gold and Silver
Gold has been making news recently. It has set new highs repeatedly over the past many years. And, it is a hedge against inflation and deflation. So and so blah blah blah. The above is simply sales talk. To me, gold is a precious metal that is very scarce. Because of its scarcity, it commands a high store of value as compared to the other metals or precious stones. In gist, this is all about storage of value. When government prints more paper money, supply exceeds demand. When supply exceeds demand, the value drops. When paper money drops in value, people prefer to hold what they earn in other forms such as gold, silver etc. When demand for gold exceeds supply (and this is easily achievable since the entire reserve of gold on Planet Earth is only about the size of one or two swimming pools), the price of gold will fly. If you want to read more interesting articles about gold, please refer to my past postings.
As for silver, this is a second class citizen to gold. However, silver has more industrial usage as compared to gold. Silver can also tarnish and we lose silver to the environment through time. So, silver can run out too. However, as we have more reserve and supply of silver, the value of silver is about 30 to 40 times lesser than gold. Some months ago, this gold to silver ratio was about 60 to 70 times. However, it has narrowed to 39 times as of today. It could even hit lower than 30 like what it did in late 1970s. To invest in Silver, there are many ways. You can either get a Silver certificate or purchase a Silver ETF (only available in the US market at the moment) or open an UOB Silver saving account.
However, please take note that the prices of precious metals are very volatile. It can drop 5% or more on a single day. So, in a way, it is a very risky investment. Be very careful with your money.
Happy Investing.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
As for silver, this is a second class citizen to gold. However, silver has more industrial usage as compared to gold. Silver can also tarnish and we lose silver to the environment through time. So, silver can run out too. However, as we have more reserve and supply of silver, the value of silver is about 30 to 40 times lesser than gold. Some months ago, this gold to silver ratio was about 60 to 70 times. However, it has narrowed to 39 times as of today. It could even hit lower than 30 like what it did in late 1970s. To invest in Silver, there are many ways. You can either get a Silver certificate or purchase a Silver ETF (only available in the US market at the moment) or open an UOB Silver saving account.
However, please take note that the prices of precious metals are very volatile. It can drop 5% or more on a single day. So, in a way, it is a very risky investment. Be very careful with your money.
Happy Investing.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Friday, March 18, 2011
Dividend Stocks
I love dividend stocks. They are shares of companies who pay good return every year. If the company is safe and stable, it is as good as putting your money in a bank. When investing in dividend stocks, I also look at the following factors:
1) Management of the company and the business of the company
2) Sustainability of its business
3) How much am I paying for the stock i.e. P/E ratio?
4) What is the value of the company that I am paying for i.e. book value?
5) What is the profit margin and sustainability of the dividend policy?
6) What is the growth prospect of the company and whether the dividend can increase over the years?
The best deal is to invest in a company that can last a lifetime (or at least your lifetime). Most importantly, its dividend policy must be well estabilished. Not only it will pay you dividend over your lifetime, the dividend should increase over the years to cover the opportunity cost of investing that money in the company.
In Singapore, we have several good companies like Singtel and SMRT that belong to this category. Even if one were to fall asleep for 10 to 20 years, he can be pretty sure that these companies will still be around when he wakes up. These companies have good management and their dividend payments are sustainable. They may not have fantastic growth prospects but their returns are still respectable. Normally, these are mature companies that choose to pay out their profit as dividends instead of invest in some less rewarding projects. And, do be careful of companies that pay very high dividend because of some extraordinary gains e.g. one-off sales of investment. This type of dividend payout is not sustainable and the company may not be able to repeat the same dividend payment in the future.
At today's price, the dividend yield of some of the dividend stocks can range from 4% to 6%. As the current crisis deepens, their prices become more attractive and their dividend yield increases correspondly. Good stock, good price and good return - what more can we ask for?
Happy Investing.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
1) Management of the company and the business of the company
2) Sustainability of its business
3) How much am I paying for the stock i.e. P/E ratio?
4) What is the value of the company that I am paying for i.e. book value?
5) What is the profit margin and sustainability of the dividend policy?
6) What is the growth prospect of the company and whether the dividend can increase over the years?
The best deal is to invest in a company that can last a lifetime (or at least your lifetime). Most importantly, its dividend policy must be well estabilished. Not only it will pay you dividend over your lifetime, the dividend should increase over the years to cover the opportunity cost of investing that money in the company.
In Singapore, we have several good companies like Singtel and SMRT that belong to this category. Even if one were to fall asleep for 10 to 20 years, he can be pretty sure that these companies will still be around when he wakes up. These companies have good management and their dividend payments are sustainable. They may not have fantastic growth prospects but their returns are still respectable. Normally, these are mature companies that choose to pay out their profit as dividends instead of invest in some less rewarding projects. And, do be careful of companies that pay very high dividend because of some extraordinary gains e.g. one-off sales of investment. This type of dividend payout is not sustainable and the company may not be able to repeat the same dividend payment in the future.
At today's price, the dividend yield of some of the dividend stocks can range from 4% to 6%. As the current crisis deepens, their prices become more attractive and their dividend yield increases correspondly. Good stock, good price and good return - what more can we ask for?
Happy Investing.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Tuesday, March 15, 2011
Japan Earthquake
Last check on the Greed Index showed 52.48. It is fast dropping while S&P violatility goes steadily up. The market got its real bloodbath today. Nikkei goes down more than 1000 point in just one day and this is on top of the 600 over point loss yesterday.
Compared to the MENA crisis, this is more real and more critical. Japan is the 4th largest economy in the world. Any impact to Japanese economy will definitely affect the world economic recovery. A quick look at the decling oil price will tell you the importance of Japan economy to the world economy and in turn the global demand of oil. What's good of replenishing the loss of oil supply due to Libyan's crisis if there is no demand at all. Interestingly, US Treasuries shot up to the sky right after this crisis. This is what they called flight to safety. Is this true? Japan is the largest holder of US Treasuries. Like China, they have been purchasing US Treasuries to keep the Yen low. With this crisis on hand, I really doubt whether they can continue to do so. I suspect they will put these money in good use by rebuilding the infrastructure and confidence of the people. Without demand, is US Treasury still safe? Anyway, that's not the point of discussion today.
We have seen so many crisis since last year. First, we have the European sovereign debt crisis. Then, the North Korean crisis, the China inflation crisis, the MENA crisis, the Japan earthquake and now the Japan Nuclear meltdown. I really do not know how bad can it get from here. If there is too much pessimission, there is fear. Today, we have the first ultimate fear in the world stock market after 2008 and it may even get worse these few days. However, I cannot really see anything else that can make it any worse. Is it time to get back into the market? Probably. But, we also do not want to catch a falling knife. Prices of some of the growth stock are looking very attractive again. If we are able to get good dividend return and a good price-to-book value from these stock, why not?
Nevertheless, please remember to practise good risk management in case this crisis can really get worse further. Who knows?
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Compared to the MENA crisis, this is more real and more critical. Japan is the 4th largest economy in the world. Any impact to Japanese economy will definitely affect the world economic recovery. A quick look at the decling oil price will tell you the importance of Japan economy to the world economy and in turn the global demand of oil. What's good of replenishing the loss of oil supply due to Libyan's crisis if there is no demand at all. Interestingly, US Treasuries shot up to the sky right after this crisis. This is what they called flight to safety. Is this true? Japan is the largest holder of US Treasuries. Like China, they have been purchasing US Treasuries to keep the Yen low. With this crisis on hand, I really doubt whether they can continue to do so. I suspect they will put these money in good use by rebuilding the infrastructure and confidence of the people. Without demand, is US Treasury still safe? Anyway, that's not the point of discussion today.
We have seen so many crisis since last year. First, we have the European sovereign debt crisis. Then, the North Korean crisis, the China inflation crisis, the MENA crisis, the Japan earthquake and now the Japan Nuclear meltdown. I really do not know how bad can it get from here. If there is too much pessimission, there is fear. Today, we have the first ultimate fear in the world stock market after 2008 and it may even get worse these few days. However, I cannot really see anything else that can make it any worse. Is it time to get back into the market? Probably. But, we also do not want to catch a falling knife. Prices of some of the growth stock are looking very attractive again. If we are able to get good dividend return and a good price-to-book value from these stock, why not?
Nevertheless, please remember to practise good risk management in case this crisis can really get worse further. Who knows?
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
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