Howard Marks – Which way now?

https://www.oaktreecapital.com/docs/default-source/memos/which-way-now.pdf

Go read it, pure common sense, will he be this generations investment god replacing buffet? If so does that lead to a generation of worriers vs dreamers?

What should I do?

That’s a question I’ve asked myself and been asked several times over the past 4 weeks. 

Investment wise I’d say:

  • Buy what you know, at prices you think are attractive and be willing to hold for a timeframe that you can afford. 

Outside of that:

  • Pay your motorbike guys/ladies 2x the usual price.Tip your taxi driver generously, even if it is isn’t the best ride
  • Buy your basics from the local shops not a 7-11. 
  • Buy your security guard for the office/condo (if you are in either of these) food/drinks
  • Buy your coffee from a local shop and not Starbucks
  • Tip your food delivery people generously.
  • If you’re reading this you do not need the money as much as they do. 
  • I think you get the point by now. 

Bull vs the Bear

And the answer is somewhere in the middle…

Bull

  • Wu-flu/Chinese Virus/Covid-19 becomes contained 
  • The cure works
  • Global fiscal stimulus kicks in by June/July 
  • Commodities go through the roof
  • Economies open up
  • Life returns to “Normal”
  • Markets recover +20-40% but remain below the Jan 2020 levels. 

Bear

  • Current uncertainty environment continues
  • Lockdown globally doesn’t dissipate and economic figures continue to worsen
  • Internet shutdowns -> Riots occur , as a friend said the internet is “an opiate for the masses” Markets can drop -20%-50% from here
  • US dollar spikes highly on a USD shortage => all emerging market currencies collapse => those with USD debt struggle (I’m looking at you CP and THBEV)

PTTOR still going public 

https://www.bangkokpost.com/business/1892090/ptt-files-pttor-offering#cxrecs_s

“PTT president and chief executive Chansin Treenuchagron said PTTOR will offer up to 2.7 billion newly issued ordinary shares, excluding any additional shares that could be offered for an over-allotment option.

PTTOR will also allocate up to 300 million newly issued ordinary shares exclusively to existing shareholders of PTT. Newly issued ordinary shares of PTTOR will dilute PTT’s ownership to no less than 75%.

PTTOR operates 1,894 oil pumps, 1,700 of which are in Thailand, with the remainder in Cambodia, Laos, Myanmar and the Philippines, as well as 2,750 Cafe Amazon outlets.

In January, PTTOR announced a plan to invest 77.4 billion baht over the next five years (2020-2024), mostly in new oil pumps and non-oil chain expansion.”

Here’s the Thai filing link:

https://market.sec.or.th/public/ipos/IPOSEQ01.aspx?TransID=293650

Random Thoughts…

  • I’ve said for a while that I think a bear market rally will take place, it seems to be in progress at the moment, and the volatility has died down (i.e. -5%/+5% are no longer the norm) now its in the -/+2% ranges.
  • Oil movements help, but looks like the world is awash with oil – no storage – buy oil tankers (none listed in Thailand methinks…)
  • The media is dominated by what is going on the US….remember they are 1-2 months behind Asia in this…Asia is waking up with news coming out of China (if you believe them) that things are returning to normal, i.e. Apple/Starbucks stores are open, BMW says manufacturing is back etcetc, so even if the US hasn’t hit peak #’s, wouldn’t Asian markets recover first?
  • I’m hearing a lot of people domestically say that they are all thinking that the market has another leg down – if everyone is thinking this then will it happen?  
  • Oil – Wow +40% in a minute during US markets for Brent at one time – capital markets functioning normally? Similar to the SET – everyone is thinking a drop is coming given the amount of supply. 
  • Domestic mutual funds went to ~20% cash at the end of Feb (look through the mutual fund holdings you’ll see this ~THB 1 trn in AUM so ~200 bn in cash), if you look at the buying done in March its maybe at ~10% today assuming no withdrawals/additional new capital. So there’s still the “cash on the sidelines”, this helps to explain the market movements, local FMs see the market move up they have to chase, same applies on the way down. 
  • Think you’re going to see a spike in covid babies and covid divorces. Swings both ways when you are stuck together. 
  • The worst industries/companies/stocks (i.e. highly levered b/s, $hit outlook) may be the best performing names on the bounceback? I.e. I don’t see AIS (ADVANC) doing +50% to +100% , but Thai Airways (THAI)? Certainly a possibility…
  • Governments that don’t trust themselves are enforcing stricter rules on the population, look at Sweden/SK/Japan/Taiwan then look at Thailand….
  • The 152 people that arrived the other day in the airport, they met the rules required to be fit-to-fly and then when they arrived were faced with quarantine rules which is just another example of incompetence shown by this government… 
  • Shouldn’t life be traffic free?
  1. sell in may go away is coming on top of this
    also all the world is shelling out huge money and so where will the return be?
    will rates go up, not sure as 1000’s lose their jobs and walk away ie NPL’s drastically up

    banks interest rates – better keep the money under the mattress?

    invest in market roulette wheel when the table is not even?

    interesting times indeed as the virus takes another turn and crosses from bat to human and human to tiger = sure to make markets more uncertain

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