Recent Views on Investment Environment (As of 07 Dec 2015)

It's been a while since I did a write up on the investment environment.

So far...I only have 1 word for it - BAD.

This conclusion is formed due to 1 reason - The Oil Price Is Still Falling.

This is mainly due to supply and demand factors:

1. Oversupply due to USA increasing its shale oil output and other oil production. Thus, the usual suppliers like Saudi Arabia start to sell to Asian powerhouse instead. 

2. Instead of cutting supplies like usual, OPEC is trying to defend the market share instead oil price. Further increasing the supply of oil.

3. Increase of the use of alternative energy sources. So lesser countries will use oil as a source of energy.

4. With the increase in supply, demand remains the same. So the price keep falling.

So how has that affected the world?

1. With the oil export dependent countries having deficit, their sovereign wealth funds have withdrawn money from asset managers. (Read news) 

2. With this withdrawal of funds, shares have not been very volatile. 

3. Oil services companies have been having lesser jobs. Many of them have a poor 3rd quarter results.

4. Delays in oil rigs. The spat between Sembcorp Marine and Marco Polo is out in the world for everyone to see.

The world has been very unstable from the ripple effect from this falling oil prices.

Couple by the other factors such as falling property prices, falling commodity prices  and falling freight price, the world is really in a mess.

To emphasis this point, recently I heard rumors that there are many 2nd hand Oil Rigs around the world that are selling much cheaper than a new oil rig. A new oil rig is about $200 million. A used one is only about $50 million. In this market, why will people want to pay more for an oil rig? I even heard someone said Gulf zone is a graveyard for oil rigs.

Anyway the above are just hearsays without facts. However, rumors must always start somewhere and there maybe some facts in it.

Furthermore, many offshore services are going into bankruptcy. (Read news here)

There are no "only losers" in an industry. The Asian Refinery seem to be the winners here. User of oil  are also the winner as the price goes lower. (Read news here).

On the other hand, with the money supply increasing (Euro-zone is still doing QE), there must be a place where the money is parked - Do remember money is a flowing commodities, unless people started to save them in banks.

The losses in the oil and gas market seem to have shifted to the IT Industry.

It seems like there maybe a bubble growing within the IT Industry as stated by value edge.

A discussion with my friends concluded that IT companies actually has "Nothing". They do not have fixed assets to sustain the share price. Furthermore, many IT Companies are dependent on their employees. If the employee leaves, the IT company may just lose its edge.

In Short

The downfall of the oil and gas industries has created a bad investment environment currently. You will most probably be sitting on some paper losses within your portfolio if you are an long term investor (If you are a trader, hopefully you had actual gains). Therefore, I suggest that if you should continue to invest, do pick those companies that has a good viable business model and a strong balance sheet to ensure that they can endure the tough times.

Oh... and the next Feb meeting is on the 15 / 16 Dec... Be prepared.

To assist you to find good companies, I have come up with the Triple S Scorecard.

If you are interested in my "Triple S" scorecard, contact me through my blog or message me on my T.U.B Investing Facebook Page.

Oh and we will have a online course in the works... contact us for more details if you are interested.

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