Adios 2022, a more prosperous 2023

My simple reflection on my investment performance on the last day of 2022: 2022 is generally a solid year for me as I could catch a multibagger in Excelpoint which I put in substantial amount of money. I have also accumulated few potential multibaggers --- China’s businesses listed on HK Exchange --- at relatively cheap price due to the market crash and I believe they will blossom in 2023.

I put in some cash in T-bills earning an average cut-off yields of close to 4%. Also, I put in a sizable amount of my CPF ordinary account funds in 6-month T-bills issued on 13 Dec 2022. The cut-off yield was 4.4% per annum, beating the breakeven yield of 2.92% for my CPF OA return by 148 basis points. These funds from T-bills will be my war chest in the later part of 2023.

What with the T-bills at above 4+%, and with the Fed likely to raise the Fed Funds rate by at least another 50 basis points in 2023 and thereafter maintain the rate for a protracted period till at least end of 2023, it is getting more and more difficult to find investment targets with an ROI that beats T-bills cut-off yields.

Going forward, it is likely that 4+% fixed deposit rates will be the norm for many years to come and the usual risker investment strategies that once worked well over the past decade may not be the ones that can outperform in coming years.

With their central banks’ resolve to combat the stubborn inflation through high interest rates, the US, the UK, and Europe are almost certain to face a protracted recession at the later part of 2023. Even after these central banks have raised the interest rates to a lofty level, they will still have to maintain it at the level for a protracted period for fear of fighting back of the inflation.

I reckon that recession is the inevitable corollary of the protracted lofty interest rates set by these central banks. The recession is likely to coincide with deterioration of corporate earnings and lower price-earnings ratios --- Davis double-killing effect --- and the stock markets in these countries will bear the brunt.  The likelihood for a black swan event to take place will be higher in 2023. Smart investors will patiently keep their war chests safely locked and be ready to buy the dips when a black swan event arrives.

On the contrary, China’s opening up from their zero-Covid policy will boost its GDP and its stock market performance in the beginning of 2023 and hence the start of my accumulation of some potential multibaggers.

I look forward to a more prosperous 2023.

Prescientsuperphang
http://superphang.blogspot.sg

Risk-free T-bills

From what I have estimated, it is highly likely that the Federal Reserve will hike the interest rate till about at least 5.25% and hold it till end of 2023. The interest rate hikes will inevitably plunge the US economy into a recession with high jobless rates and only then will the Fed be ready to cut rates.  

It is very challenging this time to stop the hikes in wages and the Fed has no choice but to bring in a protracted and deep recession to tame the inflation.

Where can we get some bargains at this time? Invest in T-bills if you still have some spare cash or some idling funds in your CPF ordinary account.

Imagine mortgage interest rates are currently around 4%, and you can get the cut-off yields at 4.4% from the result of the last auction of T-bills closed on 8 Dec 2022, your ROI can match, if not better than, that of the commercial banks. And MAS is the one issues the T-bills, so it is AAA rated and risk-free.

Some important points in using your CPF OA to invest in T-bills:

1. Do leave $20k behind so that you can still enjoy the 5% interest rate for this minimum amount in your CPF OA.

2. Do it in the first auction of the month as the breakeven yield is about 2.92%, about 41 basis points more than that of 3.33% if you are to apply for the T-bills in the second auction of the month.  

3. Go for competitive bid with a low-enough rate (make sure it is higher than the breakeven yield) so that you can be allotted all that you intend to invest in should there be an oversubscription for the T-bills.

4. Remember to get your CDP account number ready for filling in the form at the bank counter.

I invested the bulk of my CPF OA funds in the last auction of T-bills with the cut-off yield at 4.4%. I believe the money that will be returned to my CPF OA in mid-Jun 2023 will be ready to be reinvested at a much higher cut-off yield then.

Prescientsuperphang
http://superphang.blogspot.sg