New Chapter

To add a little more to the last post on demographics, solar cycles and equities, here is the long term inflation-adjusted UK FTSE chart. The ‘xx years’ red/green colouring is not my work. I have instead marked the solar maxima in black.


Source: Monevator

Green circles are secular commodities peaks, every third solar maximum, equities buy point (note the equities buy point follows the secular commodities and solar peak by 1-4 years). Yellow circles are secular stocks interim peaks, every third solar maximum. Red circles are secular stock final peaks, every third solar maximum. It’s a very neat chart from a solar cycles perspective, and it may offer more evidence of the 33-year lunisolar cycle (3 solar cycles) creating sine waves in the markets.

However, the long term Nikkei chart that I presented in the last post did not conform. The secular peaks and troughs aligned with solar maxima but the 33-year cycle was not in evidence in the same way. What is consistent across the long term charts for FTSE, Nikkei and Dow was that secular turns aligned with solar maxima, and demographics dictated whether the market was in a secular bull or bear for any specific solar cycle, between maxima.

The reason the Nikkei made a secular bull in the 1970s solar cycle whilst the Dow made a secular bear was demographics, and the same applied in reverse in the 1990s solar cycle. It appears that a secular bull or bear is dependent on the demographic trend, whilst cyclical bulls or bears within the overall trend are not. During the 1990s, the Nikkei made cyclical bulls and bears that aligned with cyclical bulls and bears in the Dow. However, the Nikkei cyclical bulls were more sideways and the bears more downwards than the Dow’s respectively. In other words, stock indices around the world largely move together in cyclical bull and bear trends, but the gradient of the moves (and p/e progression) differs to create an overall secular bull or bear.

So looking ahead to the next solar cycle, from maximum to maximum, circa 2013 to circa 2025, out of the top 10 largest economies in the world, those with demographic trends in that period to support secular bulls are USA, Japan, Brazil and India (with Mexico and Indonesia just outside the top 10 potentially offering additional support); whilst those with negative demographic trends that would argue for secular bears in this period are China, Germany, France, UK, Italy and Russia (or we might simplify to China and Europe).

Compare this to the last solar cycle which was primarily a secular stocks bull, namely the one from the 1989 solar max to the 2000 solar max. The top 10 largest economies in the world were pretty much as now, just with slight differences in order. USA, Europe, China and Brazil made secular bulls, whilst Japan, Russia and India made secular bears. So not all countries made secular bulls, but out of the most important economies in the world, the total GDP of those in secular bulls exceeded those in secular bears. The same should occur in the next solar cycle, but by a lesser margin (having made a comparative calculation). The bottom line is, there are enough of the big guns in a demographic position to generate a K-spring, and if China were to draw down on its massive currency reserves to stimulate the economy in this period then it could potentially escape a bear too. The UK and the Eurozone don’t have such a fallback, and I think it therefore likely that they will endure another secular bear 2013-2025 (circa), if the demographic correlations hold true.

In summary, I think we see an overall up-cycle for equities for the next solar cycle looking out to 2025 or so (whenever the solar maximum falls), a K-spring. But I think buy-and-hold will do best targeted at USA, Japan, Brazil and India, with Mexico and Indonesia also likely outperformers.

My new chapter is moving home to Austria next week. The big trip inspired a big move (and maybe the solar maximum inspired both?!). Certain further-afield countries on the trip were highly attractive, but with two kids the option we have long had under consideration won out. My wife is Austrian, we have a network of family and friends there already, and the kids will become truly bilingual in both the language and culture of their second nationality. We get the better climate that the trip made me crave.

So Eurozone issues are going to have more resonance from now on. We will be living in Vorarlberg, in the very West of Austria on the Swiss/German border. If you live anywhere near there, e.g. Zurich, Liechtenstein, Bodensee, and would like to meet up, please get in touch with me at john(at)solarcycles(dot)net.

United Arab Emirates

The last stop on our 5-month trip was Abu Dhabi, and in 2011 I also spent a week in Dubai. Of the seven emirates, these are the two where the action is. If you have money, ambition and imagination, Abu Dhabi and Dubai are examples of what can be achieved. They are works in progress, young models of new cities and more time is required to both complete the projects and judge the success. But whatever the future holds, this is an exciting part of the world right now.

A potted history. Around 50 years ago oil was discovered here. Prior to that this region largely comprised desert villages, coastal souks and a pearl industry. The British were involved (again), having some say in the rule and protection up until around 1970. Finding oil brought about and funded the first wave of development. Then around 15 years ago, Dubai, faced with oil reserves that were due to run out around now, embarked on an ambitious diversification strategy, to bring business and tourism in to replace the oil industry. Abu Dhabi followed with its own similar programme of diversification, though not as urgent as oil reserves are still plentiful. It is the scale and imagination of the programmes that impress: from the world’s tallest tower (Burj Khalifa) to the world’s only (unofficial) 7 star hotel (Burj Al Arab), from a self-contained zero carbon zero waste city (Masdar) to a man-made set of linked islands in the shape of a palm (Palm Jumeirah). The breakneck development of the two Emirates de-railed during the financial crisis (as the funding flows came to an abrupt halt), but is now back on track.

This is a desert country, but coastal, so water is procured through desalinisation. It barely rains at all here, which means everything can stay outside, such as fabric sofas on the beach. Temperatures can rise to 50 degrees in the summer, so air conditioning everywhere is the norm. Fuel is subsidised and ultra cheap, whilst other things, such as tourist attractions, are expensive. You can earn a lot of money here as there is no income tax, but you can also earn very little too: many manual or service workers who come here from places such as Afghanistan and India live 4 to 7 men to a room and work long hours for very low pay. It is nonetheless more than they would make back home, so they keep coming. Immigrants now make up 90% of the people here, and the now-minority Arabs differentiate themselves by wearing the traditional robes. You are unlikely to come into contact with the Arabs in service roles (they are largely a rich upper class here) but they dictate the culture here which is then embodied by the immigrant workers. It is a culture of respect, high standards and service, and you, as a visitor, are treated like a king. But you need to be aware of and conform to the rules. This is a society where the culture and the religion are one and inseparable and Islam is written into the laws. Concessions are made to immigrants and tourists: alcohol is made available in some hotels and some supermarkets. But no being drunk in public, no kissing on the lips in public, no raising your middle finger in public, no thong bikinis – as a visitor you need to be aware of these laws. If you choose to live here, then no getting into debt, no homosexuality, no criticism of the religion, no (other) drugs. Expect harsh punishment if you are caught flaunting any of these. If some of these rules seem unpalatable, I’d nonetheless suggest to go visit at least once and experience the intriguing experiments that are Dubai and Abu Dhabi, then make up your own mind.

The Sheikh Sayed Grand Mosque (one of the largest mosques in the world) at sunset:


The traditional Arab robes: the men in white, the women in black:


We stayed at the Yas Viceroy hotel which straddles the F1 circuit – it is amazing modern architecture inside and out:


I have by now been to many waterparks with the kids, but Abu Dhabi’s new Waterworld is the best of the lot!:


The final scene – afternoon tea at the Fairmont. The big trip ends here:


New Zealand

New Zealand was the last major landmass to be settled by humans. Just 800 years ago or so, Polynesians arrived and established the Maori culture here. British colonisation took place in the 19th century and the demographics today reveal 15% Maoris and the larger part of the remaining majority of British and Irish descent. There are similarities then in the demographic make-up with Australia, but the indigenous people here are more significant in numbers and arguably less indigenous. Only around 4 million people live in New Zealand and over half of those are found in the 4 major cities. That leaves a lot of wide open nature and the landscape is both beautiful and rich in natural resources. The country scores highly versus the rest of the world in various measures, including environmental health, biodiversity, self-sufficiency in foodstuffs, education and female equality at work.

Despite being a world-leader in such rankings, there is a brain-drain occurring to some degree from New Zealand to Australia – however, this is being backstopped by migration to NZ from Europe and other parts of the world. Like much of the planet, New Zealand is suffering from global wierding – in the form of drought currently – and this threatens its farmed exports this year. Because of the natural resource bias to the economy, NZ has fared particularly well in the secular commodities bull since 2000. Like Australia, I think this is the wrong time to invest because the commodities boom has driven up the currency and elevated property prices to above 2007 levels. If I am correct that the secular commodities bull is shortly coming to an end, then I expect New Zealand to experience an appropriate pull back in its markets and currency. Looking further out in to the future, however, I see the country as a likely riser on the world stage, sharing Australia’s main key ingredients of being rich in natural resources, with lots of space to develop into, being a young country unimpeded by tradition, and being largely made up of ambitious, adventurous immigrants.

I spent 3 nights in Auckland then 12 days motorhoming around the North Island. If I can be a picky traveller, I found it lacked a few land animals with which to have encounters. It’s the kind of landscape that feels like it should have some large predators but it doesn’t and never really did have. On the flip side that makes it a safe place to do wild camping, and whilst the authorities have tightened up a little on freedom camping in recent years, it is still largely permitted, with the exception of just a few areas such as the Cormandel peninsula. I found 12 days in the motorhome too many, due to the impoverished living standard (cramped, cold in the morning, and so on). However, if you can put up with that, I suggest it is a country particularly suited to it, not least because you can share nights alone with large wilderness and amazing views, both with permission and without threat.

I found the large scale modern architecture at Omaha Beach very exciting, and the coastal towns around the Bay Of Islands very picturesque. NZ is also rich in geological interest. Highlights included the giant sand dunes at the top of North Island, ‘hot water beach’ on Cormandel and the geysers and mud pools at Rotorua. These latter phenomena reflect the fact that New Zealand is volcanic, and still active. There is a supervolcano centered around Taupo and a megavolcano building under the sea to the north of the island. Clearly, volcanic activity is a risk to NZ, and it is the kind of black swan risk that probably won’t happen for thousands of years but yet could surprise at any time – at least until volcanic prediction becomes more accurate.

As usual, some pics to finish. Giant sand dunes at the very top of North Island:


Recognise this place?:


Steaming geysers and a silicon landscape at Rotorua:


Four months and a lot of expenditure later, I have a tan:


Wild camping: just us, big nature and the sunset:



OK, I am a little jealous. This is a country rich in natural resources and the size of Europe but owned by just 25 million people. It has great climate and biodiversity and the vast majority of people live right on the coast, enjoying outdoor living. It is an old land mass and indigenous people have been here for 50,000 years, but as ‘Australia’ since mass European immigration, it is a young nation and economy, unimpeded by history and tradition (as an example. in terms of protecting and sustaining its nature it is trying to get things right from the start, compared to older countries with vastly depleted natural stock). The indigenous Aboriginals represent just 2.5% of the population now, and what is of particular interest to a Brit like me, is that around 80% of Australians can trace their descent back to the UK and Ireland, a migration that continues. More so than USA, which is more multicultural, that makes Australia ‘New England’, and visiting the country has left me with a respect for those who have had the bravery to migrate to the other side of the world for a country that not only offers good living, but excellent future potential. This is currently the 13th largest economy in the world but I believe this century it can become one of the leaders. For the UK, I don’t predict anything too terrible, but a continued gradual relative decline in wealth compared to other countries with greater natural resources and less debt, such as Australia.

It is not without problems of course. Like the USA,  nature challenges the country. A decade of drought and bush fires, followed by a couple of years of floods, make up recent history. The  interior of the country is very dry and tough, which is a reason why most live on the more fertile coasts. Many of the world’s most dangerous animals live here, from tiny killer spiders to saltwater crocodiles. But such natural threats did not stop the USA from becoming the world’s leading economy, and I suspect it won’t impede Australia too much either, because the two countries have something else in common: almost everyone is an immigrant (or descendant of an immigrant) who came in search of a better life. In other words, they are both nations of ambitious, adventurous people. But Australia, as an economy, is younger than the US. It was only when the USA successfully fought for independence that the Brits turned to colonising Australia, 200 years ago, and it is only in the last half century that Australia really began to find its feet. It was the only major nation to avoid a recession around 2008 and is enjoying a particularly golden decade on the back of the secular commodities bull. The result is an expensive Aussie dollar and a cost of living which to me, as a British traveller, was higher than in London. It was impossible to avoid paying what felt like significant overpricing for food, accommodation and transport. However, if a new secular commodities bear erupts for the next 10 years, I suspect the Aussie dollar will give back some of its strength, and the economy may slow too. Nonetheless, Australia is still just scratching the surface of its potential, and the population is expected to grow to over 40 million by 2050, with continued migration from other high density countries into Australia’s wide open spaces.

My Australia visit comprised a road trip from Sydney to Melbourne including the Great Ocean Road to the west of Melbourne. Sydney is supposed to be one of the most beautiful cities in the world, and having now seen it, I concur. It is glamourous and pristine and the waterside setting is optimised. Melbourne has a more relaxed, student feel to it, but also has its treasures in its ‘lanes’. The scenery between the two cities and beyond was beautiful all the way, and the wildlife interactions with kangaroos, wallabies, seals, penguins and more a real pleasure. One negative was dated motel-style accommodation (often this was the only option), and one positive was never paying for parking anywhere. If I was to repeat the journey, a motorhome might therefore be a better option. The empty roads made for great driving, and it is easy to find your own deserted bit of coast. I found the Australians themselves polite and friendly and whilst clearly showing some shared characteristics with the Brits, also their own laidback approach, not taking life too seriously. Very clear information was a theme: wherever you walk, drive or stay, you won’t ever be short of signs and instructions, and everyone seems to conform rather than abusing the rules.

The Aboriginal population lives largely together in certain designated parts of the country, but this group is troubled, with unemployment, drugs and suicide problems. For a long time they were treated badly by the European settlers, and whilst that has now been officially rectified, it is only very recent, in the last 20 years. It is they who have paid the price for this new flourishing nation. For 50,000 years they owned this country and in just 200 years they lost their nomadic lifestyle, became second class citizens, and now under official equality they are still struggling to adjust.

This sadness aside, I found Australia a very tempting prospect. I would very much like to be a part of this lovely country and its bright future. But the bravery of those who made the migration here from Europe, is that they left behind friends and family – it really is the other side of the world. So, instead I intend to come back and travel the rest of the country and I will look for investment opportunities in Australia from my armchair. I don’t see those investment opportunities right now – I believe a secular bear in commodities is ahead and that will pull back the Aussie dollar and economy to some degree, but once at a more reasonable level I will be looking. I end with some pics:



A wallaby:


Harbour-side entertainment from a wild seal, some cormorants and a large ray under the water with his tail out:


Koalas spend most of the day asleep in the eucalyptus trees:


Hanging out with the kangaroos:


Sri Lanka

We started off in Colombo, which is a noisy, busy, messy sprawl, with the 24/7 sound of peeping horns. Every journey on the roads was fairly hair-raising. It was interesting to soak up the chaotic atmosphere, but there is little in the way of attractions or sights in the city. It is not yet at the development or wealth level whereby it can be more than a functional city – maybe in the future. Despite the rawness, the people generally seemed friendly and there felt little threat, and that proved to be so throughout our Sri Lanka stay. In that I am mainly referring to men, because most of the service jobs are taken by men, with the women home. It was not uncommon for the complete range of hotel staff to be male, from cleaner to manager. Tuk-tuks are truly everywhere, used by locals and tourists alike, but every driver was a male. So here goes one person’s experience of the Sri Lankans (largely males) – backed up by a little research:

The Sri Lankans are often keen to sell you something, and if you stick only to the main tourist circular route (Galle – Nuwara Eliya – Kandy etc) then that it likely to be at the most intense. But they are generally friendly and keen to say hello, and it felt very safe. Personally, I would rather people came up to me wanting to make a living (as in Sri Lanka), rather than coming up to me trying to con a living (countries where it doesn’t feel safe), and like in Bali, if you step off the main tourist circular then you’ll experience less opportunists. I didn’t find the Sri Lankans as charming as the Balinese or Malaysians, as there appeared to be some pettiness, impatience and competition amongst the Sri Lankan men – not so much with the  tourists but with each other. There was also a little incompetence and lack of confidence, particularly evident at the higher-end accommodation, whereby the general standards didn’t measure up to other countries on the trip. Nonetheless, these were niggles in an otherwise positive experience, with these highlights:

The beaches of the south-west (down from Colombo and across to Yala) are excellent: palm trees, soft sand and dramatic waves. The staple ‘rice and curry’ dish on offer everywhere is in fact a great banquet-for-one at a very cheap price: you get a fish or meat curry, 3 vegetable curries, rice and poppadoms. We experienced great wildlife on the doorstep of a lot of our accommodation choices: chipmunks, bats, monkeys, fireflies, mongooses, and more. Plus on sea safari blue whales, dolphins and manta rays, and on safari in Yala elephants, eagles, crocodiles, water buffalo, and others. You can’t stay in Yala National Park, but the closest hotel is Chaaya Wild, which is completely open to the wilderness, and the wilderness comes in. In and around the hotel complex we saw iguanas, langurs, crocodiles, snakes, leopards and more. So as well as a safari in the national park, just being at that hotel was a real wildlife treat (rooms, beds and food all excellent too).

The Sri Lankans are mainly Buddhists, but various religions are practiced and there are statues of different gods in large roadside glass display cabinets, including Jesus and Hindu gods. One principle of Buddhism is anti-alcohol, and whilst booze is legal in Sri Lanka, it is therefore not moral for many of them. Instead, betel leaf chewing (stimulant with euphoria) is common, with red spit marks all over the streets as a result. English is widely spoken but not everywhere. There are 3 different main languages, with 3 different scripts. The far north, home of the Tamils (which is one language and script), is still considered unsafe for tourists, and it was only 5 years ago that the Sri Lankan army defeated the Tamil separatist movement, ending a 25 year civil war in that region. There are still many soldiers around guarding the streets throughout Sri Lanka, a reminder that those troubles are still fresh.

For some of the reasons outlined in this brief summary, I did not come away wanting to invest in Sri Lanka (shares/funds). But understand this is based on 3 weeks, in 6 different areas, in particular circumstances, and is only based on a shallow understanding. If a Sri Lankan reader wishes to pull me up on any inaccuracies or generalisations I shall humbly defer. But this was my experience, and I would return as a traveller for the beaches and the wildlife. Let me end with some pics.

P1050367 P1050486





Borneo is a lush green island with a rich variety of flora and fauna. With geological interest too, the main tourist draw is trekking. Borneo also has an interesting tribal history and although the tribes still exist, they now largely live in modern housing in towns. The modern world’s pressures apply here just as anywhere, and cutting down the jungle for timber or to make way for more profitable palm plantations has meant there now has to be a focus on ensuring migration corridors are kept in tact so that animal populations don’t become ‘stuck’ and their survival threatened. Nonetheless, around 50% of the island remains rain forest, and it is the oldest rain forest in the world.

The island is split between three countries: Indonesia, Malaysia and Brunei, and we spent our time solely in Malaysian Borneo (as the Indonesian part is malarial). I wrote about the country of Malaysia here, so just a little addition about Borneo today. I was interested to see whether we’d experience a rather different Malaysia to Pensinsular Malaysia, and the Borneo locals answered that their part of Malaysia is more relaxed and inclusive. From my traveller perspective, Pensinsular Malaysia was already very relaxed and inclusive, and it was a real pleasure to enjoy their warm, friendly, gracious hospitality again in Borneo. To try to quantify they way the people are, imagine no road rage, no wariness of strangers, and service industry people proud and happy. The quality Malaysian infrastructure and rich variety in food again mirrored peninsular Malaysia. Suffice it to say I am a big fan of this country.

Kuching is an attractive riverside town/city. From there Bako National Park is a bus and boat ride away, where we were treated to animal encounters galore as we trekked around the jungle and the mangrove. Up near Kota Kinabalu, we stayed at the Shangri-La Rasa Ria, with its own white sand bay and nature reserve. The whole experience at that resort was one of the best I’ve encountered, with the attention to detail. Time for some pics.

The wild beauty:


Silver leaf monkey:


A flying lemur:


The curious-looking proboscis monkey:


A highly venomous viper:


The iconic Borneo orangutang:



Tomorrow I leave Malaysia for Thailand, starting with 4 nights in Phuket. My Malaysian journey has been limited to Peninsular Malaysia (rather than Malaysian Borneo), taking in Melaka, Kuala Lumpur, Penang and Langkawi, and my overwhelming impression is the friendliness and peacefulness of the people. I found this most striking in Kuala Lumpur: a capital city where people are warm and respectful to one another is a curious and wonderful anomaly in my experience of capital cities. Now you are aware that I am accompanied by a family and that might influence the way people react and behave around me, so here is supportive evidence from a couple of studies.

Firstly, the annual Forbes friendliest countries rankings puts Malaysia in 10th spot globally:

1. Cayman Islands

2. Australia

3. United Kingdom

4. Canada

5. New Zealand

6. Spain

7. United States

8. Bermuda

9. South Africa

10. Malaysia

Secondly, the Global Peace Index by the Institue for Economics and Peace, which measures safety, security and conflict, ranks Malaysia in 20th spot globally:

1. Iceland

2. Denmark

3. New Zealand

4. Canada

5. Japan

6. Austria

7. Ireland

8. Slovenia

9. Finland

10. Switzerland

11. Belgim

12. Qatar

13. Czech

14. Sweden

15. Germany

16. Portugal

17. Hungary

18. Norway

19. Bhutan

20. Malaysia

Malaysia also was rated the second happiest nation in South East Asia after Singapore, in the UN World Happiness Report (measured between 2005 and 2011).

When I asked Malaysians why there was such apparent harmony and friendliness, the response was that this is a country of several peoples and cultures living together as one: out of the diversity has come unity (it is around 50% Malay, 24% Chinese, 11% indigenous, 7% Indian and 7% various others).

Clearly, in other countries disparate groups living together has led to conflict and unhappiness, so whether it be cultural, religious, political or social influences at work, it is what is, and the Malaysian people made it a real pleasure to be in their country – so we have been in no hurry to leave. Even in the rawer parts of Kuala Lumpur, I found the atmosphere remained safe and respectful.

Similar to Singapore, for an Englishman like myself, there is a nice blend of the familiar and the exotic. The legacy of British Empire rule is English language everywhere, driving on the left, UK plug sockets and the colonial-styled luxury of the Shangri-La in KL. Yet, the influence of Islam, the multi-cultural cuisine reflecting the multi-cultural society, the 30 degree heat, the tropical storms, the palm plantations, the rain forests, the monkeys and lizards, and the marine life on the reef all made for a terrific novel exotic experience. The icing on the cake was a cost of living that I found to be overall about half that of the UK – our accommodation, transport and dining. In an odd twist, eating out worked out cheaper than self-catering from the supermarket. How is that reverse premium possible?

One contributing factor to the lower cost of living is Malaysia’s oil production and associated energy subsidies (several oil-producing country governments subsidise fuel, to benefit their economies). Malaysia also has a rich natural resource heritage – it is a leading global producer and exporter or rubber and palm oil, and also wood and wood products. But it has also become a diversified economy, including becoming the world’s leading Islamic finance and banking centre, and operating one of the world’s only six 5-star airlines. In short, it is an economic success story since becoming independent half a century ago, and is the 28th largest economy in the world. GDP has grown at an average 6.5% per annum in that time, charted below:

Source: World Bank

The Asian Banking Crisis of 1997 made for the biggest dip in economic development, but it fairly swiftly recovered to trend. Debt to GDP is around 50%, a manageable level.

The housing market has been the 9th hottest real estate market in the world over the last 5 years, but property prices remain very reasonable relative to other hot property markets such as Switzerland and Singapore. The stock market (the KLCI) has also performed well, as shown below, but is currently valued at at p/e of 15 and a CAPE of 20, so does not represent an interesting opportunity at the moment.

Source: Bloomberg

There is also a government scheme to encourage foreigners to live in Malaysia on rolling 10 year passes, with fairly low entry criteria compared to most other countries. Details here.

Like anywhere, there are negatives, and the following are my such perceptions. Whilst the infrastructure and public transport is generally of a high standard, the common taxis are largely decrepit. Whilst the area of Kuala Lumpur around the Petronas Towers is very nice – there are large chunks of the capital city which are, to be blunt, an eyesore. Whilst Penang is a cosmopolitan island with some plush developments, there is also a fairly large contrast there between the poor and the rich. The open drainage system throughout the country causes some bad odours, and capital punishment and certain particularly harsh laws may not appeal to everyone.

As this is a country that can be currently considered in transition from a developing country to a developed country, it is easy to imagine some of these issues being resolved with continued growth. There is a lot of new build development occurring in Johor, Melaka and Penang – a lot of ambitious investment. I can contrast that with large parts of the UK where building has slowed to a standstill and high streets remain partially empty since the 2008 recession. All in all, Malaysia’s people, natural resources, sustained economic growth and investment, and geographic position in the world for this century (expecting Asia to lead global growth) make it an exciting and appealing country. I really can’t praise it enough.

Some pics. The Petronas Towers in KL – the tallest ‘twin-towers’ in the world. Chinese clans still living on stilts in the sea on Penang. The rainforest island of Langkawi. And monkeys everywhere…


Today we head into Malaysia for 2 nights in Melaka and then on to Kuala Lumpur.

Singapore – what a great place. One of the notable few where the lack of land and natural resources has in no way impeded its economic development. It may have a hybrid ruling system, not fully democratic, but it is clear the government has achieved great things for the city-state. It is the 4th top financial centre in the world, the 5th largest trading port, and has a deliberately varied economy so it is not too reliant on one sector. It is amongst the least corrupt countries in the world with a very high standard of living. 20% of its inhabitants are millionaires, the highest ratio for a country. It is in the top 10 countries in the world in terms of its financial reserves and is a world leader in technology. There are rules to adhere to – no littering, spitting, jaywalking, racist slurs, and more – and capital punishment for certain misdemeanors, but the net result is a country that is very safe, respectful and clean. Customer service is also of  a very high standard and feels very genuine.

For me personally, the English language, left-hand driving and English products around gives it an instant familiarity – all thanks to the colonial history – but the 30 degree constant heat, exotic plants and animals, and multi-Asian influences made it feel equally exotic. There are now 5 million people living in the 274 square mile land mass, but is doesn’t feel overcrowded, but vibrant, and it is sufficiently cosmopolitan not to stand out as a tourist. I spent an evening with a portfolio manager who lives here and he stated that the population had really grown over the last decade thanks to an influx of foreigners. The result has been a ballooning of real estate prices, shown by the red line in the chart below.


Underlying source: SingaporePropertyCycle

The chart also shows the Singapore STI stock index, and I have added the price/earnings valuation history at the key peaks and troughs. It can be seen that there was one historic episode of a speculative mania to valuation excess, around 2000, tying in with the dot com peak. Since then we can see the global secular stocks bear market unfolding in terms of gradually cheapening valuations, even though the nominal index has an upward slant overall. Like other key indices, such as the Hang Seng and UK FTSE, it has formed a large triangle, which I have highlighted, and is likely to resolve one way or the other soon. I suggest, like the other indices, that this is going to resolve to the upside, with a breakout, pullback to the midpoint (triangle nose), and then a couple of years hence, break upwards from there into momentum secular bull. The p/e valuations achieved at the 3 triangle low points of between 5.5 and 8.8 are all extreme secular bear low valuations that suggest sufficient secular wash out to enable a secular bull. Once again, this casts doubt on any deep cyclical bear ahead, but more likely shallow. At current p/e of 11.8, the index is at the cheap end of what has been largely an oscillation over the years between 10 and 25. I have opened a single long position in the STI Index today, and will add to it on any significant falls.

Some pics below. Family Hampson in central Singapore. The amazing engineering of the Marina Bay Sands building. And an experience I hadn’t imagined for the kids – swimming with a monkey at the Shangri La Rasa Sentosa – thanks to the monkey for that freebie!

Coming Up

From the end of October 2012 to the end of March 2013 I am taking a world trip with my wife and 2 kids. Trading will continue, as will, but the family adventure will be the priority. We’ll see how things unfold on the journey, but largely I expect to condense my analysis and trading into a couple of hours in the morning and switch off the rest of the day. This fits my trading style, which is medium term, most days no active trading, just monitoring developments. However, if there is a period of drama, in which timely trading and more detailed analysis is critical, then I will switch focus from the holiday to the markets. Rest assured, if there are any important developments (in my opinion), I will comment on the site.

Fresh research into potential market phenomena, which earlier in the year I said I would address this coming winter, is postponed due to the trip. However, I am currently working on a series of posts in which I lay out more detailed and more in-depth forecast and analysis looking out to 2013, and intend to publish those in the coming days, so watch this space.

I have updated all models this morning. Here is the updated US inflation and solar cycles chart incorporating Shadowstats data.