How to Invest for the Rest of 2017: Our Mid-Year 2017 Outlook



Heading into the second half of 2017, we believe the elongated U.S. credit and business cycle – currently eight years old and counting – will continue through the end of the year. Yet for the first time in almost a decade, the risks to the global economy are centered in the U.S. and not in other major world economies.

Growth in much of the rest of the world is stable or accelerating. In Europe, a much-anticipated credit and earnings cycle is underway, while most emerging markets are recovering from their 2015-2016 slowdowns and recessions. In our view, the biggest threat to the global economy is the prospect of the U.S. Federal Reserve (Fed) further tightening U.S. monetary policy.

Against this backdrop, we believe:

  • Equities remain the asset class of choice. International equities are more attractively valued than, and likely to outperform, U.S. stocks.

  • Within the U.S., we favor growth companies in an environment where macro growth will continue to be scarce.

  • Long-term Treasury rates will remain low for the foreseeable future and send a message to the Fed to proceed with caution.

  • Emerging market sovereign and corporate bonds offer the most attractive value in fixed income for global bond investors seeking potential total returns.


Market cycles ultimately end with tighter monetary policy and the yield curve inverting. We believe this time will be no different.

Mutual funds are subject to market risk and volatility. Shares may gain or lose value. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks.

These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.

Carefully consider fund investment objectives, risks, charges, and expenses. Visit oppenheimerfunds.com or call your advisor for a prospectus with this and other fund information. Read it carefully before investing.

tag : Southbourne Group Singapore, Tokyo Japan

Here’s how to invest in real estate — think Warren Buffett-style, not shopping malls



It’s beginning to feel like a summer lull out there for markets.

But a herd of Fed speakers — including Janet Yellen — could break the pre-holiday spell and deliver a last-minute shake-up as this year’s first half wraps up today.

Stocks don’t necessarily deserve a boost, with the Dow and S&P on track for their best first half in four years. And the NASDAQ is flirting with its biggest gain since 2003 (though techs don’t look too frisky in the early going).

So, where to invest for the second half? Well, there’s lots of chatter about real estate investment trusts, aka REITs, after yesterday’s news that Warren Buffett has taken a big stake in Store Capital STOR, +0.71%.

REITs can yield big profits — but only if you know which ones to buy, say Bespoke Investment Group analysts for our call of the day.

“While the shopping mall REITs have been tanking, the REITs that lease out warehouses to tech companies that need space to house all of their servers and cloud data have been surging,” Bespoke’s team says.

“The ten best-performing REITs in 2017 are all in strong uptrends, with the exception of GEO and QCP. If you’re a trend investor, you’ll like these charts,” the analysts add. (They’re referring to Geo Group GEO, -0.65% and Quality Care Properties QCP, +2.77 %.)



In other words, tech-exposed and health-care real-estate stocks have had a stellar start to the year and are likely to keep going up. Traditional retail real estate such as malls, however, faces “Death by Amazon” as shoppers shift online. That means investors should avoid that type of building, according to Bespoke.

“While there has been lots of brainstorming about what to do with malls that often look like ghost towns these days, we haven’t seen any convincing ideas yet (except maybe turning them into tech data centers!),” the analysts say.

One of Bespoke’s picks also gets praise from Forbes and Seeking Alpha scribe Brad Thomas, who singles out CareTrust CTRE, +0.57% as a “REIT gem” set for relatively speedy earnings growth.

As for Buffett’s REIT pick, that’s along the lines of what Bespoke is backing — less than 20% of Store’s portfolio is in traditional retail.

Key market gauges

Dow ESU7, -0.34%   and S&P futures ESU7, -0.34% are slightly lower, while Nasdaq-100 ESU7, -0.34% futures YMU7, -0.26% are showing a bigger loss.

The dollar index DXY, -0.02% is suffering, largely because a jump in the euro. The shared currency EURUSD, +0.0000% surged to a two-week high after hawkish noises from ECB boss Mario Draghi. That drove European stocks SXXP, +0.60% lower.

Crude US: CLU7 continues to recover and is taking a stab at reclaiming the $44 level, while gold US: GCQ7 is recovering from its “flash crash” yesterday.

The chart

The sun is shining again on shares of solar-panel makers, which have been through a rough patch. Now they’re rallying, after President Donald Trump said last week he wanted to clad the long-promised border wall with solar panels, to help pay for it by generating power.

That helped send the Guggenheim Solar ETF TAN, +1.01% up 8% last week — the best weekly gain since December 2015 — and it continued to rise on Monday. That means it’s now trading at an eight-month high, as this chart shows.

Analysts don’t necessarily believe the wall-plus-panels will see the light of day. But it’s a positive development that Trump’s making a pro-solar statement, they noted, according to The Wall Street Journal.



The buzz

Alphabet GOOG, -0.21% GOOGL, -0.34% is getting squeezed today after the EU’s antitrust body slapped the Google parent with a record €2.42 billion fine.

Sprint S, +0.24%  , Charter Communications CHTR, -1.52%  and Comcast CMCSA, +1.11%   are said to be in talks to bolster their wireless services.

Pandora Media shares P, -1.66% is halted this morning and the rumor mill is going nuts.

GM GM, +2.24% are waving another red flag for the car industry, warning its U.S. auto sales will fall short of forecasts.

China’s Premier Li is touting the country’s “unimaginable job growth” at the annual June meeting of the World Economic Forum, which started Tuesday.

All sorts of investing views have been getting shared at the Evidence-Based Investing Conference (West)

The economy

The flurry of Fed talk continues today, with Philly Fed’s Patrick Harker and Minneapolis Fed’s Neel Kashkari on tap. The highlight though is Chairwoman Yellen’s speech in London around lunchtime.

On the economic docket this morning are the Case-Shiller U.S. home price index and the consumer-confidence index. See MarketWatch’s Economic Calendar.

The quote

“If, however, Mr. Assad conducts another mass murder attack using chemical weapons, he and his military will pay a heavy price.” — The White House accuses the Syrian government of preparing to use chemical weapons on civilians, including children.

The stat

710% — that’s where Venezuela’s annual inflation rate stands, as the country battles with an ever deepening economic crisis. Professor Steve Hanke from Johns Hopkins University points out that it’s the first time inflation has spiked above 700% in the country since June 2015.

How to Invest in Oil without Taking a Risk

Bob Ravnaas raised a paddle in a Houston auction house to secure his first block of mineral rights 19 years ago, when oil prices were swooning below $20 a barrel.

A generation later, that same West Texas oilfield is still spinning off royalties, part of a mineral-rights empire amassed by Ravnaas that stretches across 20 states and delivers millions of dollars in cash payments. Kimbell Royalty Partners LP, where the former petroleum engineer is now chief executive officer has stakes in 48,000 oil and natural-gas wells in some of the hottest U.S. shale patches. These days, it’s not alone.

America’s drilling boom is making a hot commodity out of one of the stodgiest of oilfield assets, the monthly royalty check. Lured by the promise of steady returns without the cost of actually operating wells, companies like Kimbell are racing to acquire rights around the U.S. Private-equity giants including EnCap Investments LP and Blackstone Group LP are getting into the game as well, pouring billions into the market.

“It’s become a very attractive investment," said Ravnaas, whose Fort Worth, Texas, company went public in February with a $90 million offering. “Oil and gas production has increased dramatically in the last ten years, and the size of the royalty market is increasing exponentially along with it."

Drillers have negotiated with landowners for decades to tap the reserves below their acreage. But mineral rights have taken on new value as advanced drilling techniques sparked a renaissance in oilfields across the U.S. The rights guarantee holders an upfront bonus when an operator decides to drill and a cut of revenues for each barrel sold thereafter.

Generational Turnover

The growth in interest has been fueled by generational turnover. As time has passed, mineral rights have been passed down and diluted among successive generations. Descendants now see better value in packaging and selling off those rights for an upfront payment or equity in the new minerals companies, Ravnaas said.

In what was once a mom-and-pop business, $20 million deals with Texas cattle ranches or other major landowners have become more common, according to the CEO. Speculators are knocking on doors and blanketing mailboxes in hot shale plays, hoping to amass mineral rights for cheap before the drilling companies arrive.

Royalties typically range from an eighth of the per-barrel price to as high as a quarter in coveted areas like the Permian shale basin in Texas and New Mexico. Rights-holders aren’t on the hook for operating or financing costs to run the wells, although their income does depend on a driller’s willingness to keep pumping. Crude futures have fallen 14 percent in New York this year and were at $46.53 a barrel as of 10:06 a.m. on Friday.

“It’s effectively a zero-cost exposure to the minerals" said Brian Brungardt, a Stifel Nicolaus & Co. analyst in St. Louis. He tracks Kimbell and two other royalty-chasing partnerships, Black Stone Minerals LP (no relation to the equity firm) and Viper Energy Partners LP.

20 Million Acres

Collectively, the companies have spent more than $120 million to acquire new rights this year and now hold a claim on oil and gas royalties from more than 20 million acres in the Permian, Bakken, Marcellus and other shale fields, according to corporate filings.

Private equity firms have jumped in as well, seeing mineral rights as a more affordable entree into the U.S. shale boom.

In the Permian, drilling rights have reached $40,000 an acre and higher in the past year. The top price for mineral rights in the area is closer to $20,000 an acre, although competition has been pushing the tab up, said Rich Aube, co-president of New York-based Pine Brook Partners. The firm has devoted more than $100 million to royalty investments, including Brigham Minerals LLC.

“It’s a new way to invest in the same resources in a way that’s less capital-intensive," Aube said in a telephone interview. “You have a lot of folks who want exposure to these resources with a different risk profile and have found this more attractively priced."

Encap, Blackstone

Houston-based EnCap, among the biggest energy-focused buyout firms, has devoted $1 billion to mineral investments, while New York-based Blackstone has invested more than a half-billion dollars. Aube said he knew of at least a dozen other equity firms that have assembled their own minerals teams.

Representatives at EnCap and Blackstone declined to comment.

The firms are pitching mineral rights as a new asset class for investors seeking better returns in a world of ultra-low interest rates.

Viper Energy and Black Stone Minerals pay quarterly distributions that yielded more than 7.2 percent apiece as of this week, while Kimbell’s yield was projected at 5.6 percent, according to data compiled by Bloomberg. Each beats the average investment-grade energy bond yield of about 3.5 percent, according to Bloomberg Barclays index data.

“You’ve got hundreds and hundreds of landmen that are constantly putting together an acre here and an acre there and then selling," said R. Davis Ravnaas, Kimbell’s chief financial officer and the CEO’s son. “We meet a new team almost every week."

The risk for royalty collectors is that they’re at the mercy of a third party -- oil companies -- to keep the petroleum pumping. Kimbell reported a net loss in each of the last three years, after more than $40 million in writedowns related to slumping oil and gas prices.

Despite those paper losses, cash flow and production continued to grow, the company said in an emailed statement. Kimbell credited “a highly tuned acquisition strategy which focuses on only buying high quality properties with ongoing development and upside potential."

The market’s volatility puts a premium on having the right executive team, said Brungardt, the Stifel analyst.

“You need a team in place that has got the experience in not only analyzing reserves and well economics but also the acquisition side," he said. “You may be sitting on a lot of acreage, but if nobody’s interested in it, you are out of luck."

“It’s critically important to purchase not only the right rocks but the right rocks operated by the right operators," added Aube, of Pine Brook Partners. “You don’t control the pace of drilling, but that’s a judgement that affects the value of your asset and what your cash flow is going to look like over time.”

tag : Southbourne Group Singapore, Tokyo Japan

Investment tip: How long should you run an SIP?

mutual-funds-bccl

It's a question that vexes many mutual fund investors once they buy into the concept of investing through a Systematic Investment Plan (SIP): When you have a lump sum to invest, then over what period should you spread the SIP? Of course, for most SIP investments, the question does not arise. The most common type of SIP investment is a monthly one that goes out of a monthly income. This sort of SIP continues and is useful in a way to keep investing without bothering to actually take the time out and do it.

However, occasionally, the SIP investor gets a large sum of money at one go. It could be a bonus from a workplace, or it could be proceeds from the sale of some asset like real estate, or it could even be your retirement kitty which you need to spread and make it last for the rest of your life. Investing in an equity-backed mutual fund is the best way to get great returns over a long period like 5-7 years or more. However, over shorter periods, equity funds are dangerous. And when you invest at a large sum at one shot, then the risk is the highest. If the markets turn turtle, you could lose 10, 20 or even higher percentage of your invested amount very quickly. Since the beginning of the Sensex in April 1979, of the almost 13,900 possible six month periods, as many as 2,269 yielded a loss worse than 20%. If you just happened to catch a period like that at the beginning, then you would lose a large chunk of your capital right before it even starts growing. In theory, you could eventually recover, but in practice you would probably panic and pull out your money, making your loss permanent.

The antidote to this is a Systematic Investment Plan. Spread your investment at a monthly periodicity over a certain period. Your entry price will be averaged out and you will be saved from the risk of a sudden decline. Moreover, you will end up buying more units of the fund when the markets are lower, which will enhance the returns you will get. That is of course, the standard set of advantages that a SIP has. However, the vexing question is what is this 'certain period'? Is it six months? One year? Two years? Or even longer? There are arguments for and against.

Last week, I wrote about the research project on historic SIP returns that Value Research has carried out and we saw how SIP was truly safe for about four years and above. In this study, we found that on an average, if you invest in a SIP over four years, then your risk of a loss is negligible. It's also interesting that the risk of loss and the chance of an outside gain are both higher over short periods. Over longer periods, the good times and the bad get averaged out minima and the maxima converge. Consider this, for a typical fund with a multi-decade history, over all possible one year periods; the maximum returns are 160% and the minimum - 57%. Over two years, this becomes 82% and -34%. Over three, 63% and -18%. Over five, 54% and 4%, meaning never any loss. Over ten years, maximum is 30% and minimum 13% .These is all annualized figures. The trade-off is crystal clear--the shorter the period, the higher the potential gain but the worse the possible risk.

The answer from this data appears to be that SIPs must last more than three years. If you seek zero risk of loss, then that is the correct answer. However, for many investments, this is too long. If you are getting an annual bonus from your employer, it would be ridiculous to spread it over 3-4 years.

If you have sold some ancestral property and the sum realized will be the core of your old age income, then you need to be cautious about the risk you take. In a case like this, you would do well to forego some potential income to ensure that you don't make a loss. A rule of thumb is that you could invest the money over half the period that it has taken you to earn it, subject to the maximum of 4-5 years. So annual bonus could be invested in six months, while ancestral property could take five years. It's basically a way of linking risk to how significant that sum of money is for you.

tag : Southbourne Group Singapore, Tokyo Japan

5 Essential Tips for Investing in Stocks

5 Essential Tips for Investing in Stocks

Buying stock is easy. The challenging part is choosing companies that consistently beat the market.

That’s something most people can’t do, which is why investing in a diversified mix of low-cost index funds and exchange-traded funds is a smart long-term strategy for the average investor. So smart that even diehard stock jocks swear by indexing for the money they’re not using to buy individual equities.

But you’re reading this to get better at investing in stocks. We’ll assume you’ve got a yen for research, time to let your investments ride through many market cycles and have set parameters for the amount of money you’ll put on the line. (We recommend no more than 10% of your overall holdings be invested in individual stocks.) And let’s not forget this vitally important investing PSA: “Money you need in the next five years should not be invested in stocks.”

Here are five investing habits essential for success in the stock market:

  • Check your emotions at the door.

  • Pick companies, not ticker symbols.

  • Plan ahead for panicky times.

  • Build up your positions with a minimum of risk.

  • Avoid trading overactivity.



  1. Check your emotions at the door


“Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.” That’s wisdom from Warren Buffett, chairman of Berkshire Hathaway, oft-quoted investing sage and role model for investors seeking long-term, market-beating, wealth-building returns.

Buffett is referring to investors who let their heads, not their guts, drive their investing decisions. In fact, trading overactivity triggered by emotions is one of the most common ways investors hurt their own portfolio returns.

All the investing tips that follow can help investors cultivate the temperament required for long-term success.

  1. Pick companies, not ticker symbols


It’s easy to forget that behind the alphabet soup of stock quotes crawling along the bottom of every CNBC broadcast is an actual business. But don’t let stock picking become an abstract concept. Remember: Buying a share of a company’s stock makes you a part owner of that business.

You’ll come across an overwhelming amount of information as you screen potential business partners. But it’s easier to home in on the right stuff when wearing a “business buyer” hat. You want to know how this company operates, its place in the overall industry, its competitors, its long-term prospects and whether it brings something new to the portfolio of businesses you already own.

  1. Plan ahead for panicky times


All investors are sometimes tempted to change their relationship statuses with their stocks. But making heat-of-the-moment decisions can lead to the classic investing gaffe: buying high and selling low.

Here’s where journaling helps. (That’s right, investor: journaling. Chamomile tea is a nice touch, but it’s completely optional.)

Write down what makes every stock in your portfolio worthy of a commitment and, while your head is clear, the circumstances that would justify a breakup. For example:

Why I’m buying: Spell out what you find attractive about the company and the opportunity you see for the future. What are your expectations? What metrics matter most and what milestones will you use to judge the company’s progress? Catalog the potential pitfalls and mark which ones would be game-changers and which would be signs of a temporary setback.

What would make me sell: Sometimes there are good reasons to split up. For this part of your journal, compose an investing prenup that spells out what would drive you to sell the stock. We’re not talking about stock price movement, especially not short term, but fundamental changes to the business that affect its ability to grow over the long term. Some examples: The company loses a major customer, the CEO’s successor starts taking the business in a different direction, a major viable competitor emerges, or your investing thesis doesn’t pan out after a reasonable period of time.

  1. Build up positions gradually


Time, not timing, is an investor’s superpower. The most successful investors buy businesses because they expect to be rewarded — via share price appreciation, dividends, etc. — over years or even decades. That means you can take your time in buying, too. Here are three buying strategies that reduce your exposure to price volatility:

Dollar-cost average: This sounds complicated, but it’s not. Dollar-cost averaging means investing a set amount of money at regular intervals, such as once per week or month. That set amount buys more shares when the stock price goes down and fewer shares when it rises, but overall, it evens out the average price you pay. Some online brokerage firms let investors set up an automated investing schedule.

Buy in thirds: Like dollar-cost averaging, “buying in thirds” helps you avoid the morale-crushing experience of bumpy results right out of the gate. Divide the amount you want to invest by three and then, as the name implies, pick three separate points to buy shares. These can be at regular intervals (e.g., monthly or quarterly) or based on performance or company events. For example, you might buy shares before a product is released and put the next third of your money into play if it’s a hit — or divert the remaining money elsewhere if it’s not.

Buy “the basket”: Can’t decide which of the companies in a particular industry will be the long-term winner? Buy ’em all! Buying a basket of stocks takes the pressure off picking “the one.” Having a stake in all the players that pass muster in your analysis means you won’t miss out if one takes off, and you can use gains from that winner to offset any losses. This strategy will also help you identify which company is “the one” so you can double down on your position if desired.

  1. Avoid trading overactivity


Checking in on your stocks once per quarter — such as when you receive quarterly reports — is plenty. But it’s hard not to keep a constant eye on the scoreboard. This can lead to overreacting to short-term events, focusing on share price instead of company value, and feeling like you need to do something when no action is warranted.

When one of your stocks experiences a sharp price movement find out what triggered the event. Is your stock the victim of collateral damage from the market responding to an unrelated event? Has something changed in the underlying business of the company? Is it something that meaningfully affects your long-term outlook?

Rarely is short-term noise (blaring headlines, temporary price fluctuations) relevant to how a well-chosen company performs over the long term. It’s how investors react to the noise that really matters. Here’s where that rational voice from calmer times — your investing journal — can serve as a guide to sticking it out during the inevitable ups and downs that come with investing in stocks.

tag : Southbourne Group Singapore, Tokyo Japan

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