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Oil at 21 Yrs Low || SARS vs COVID-19

Thank You


This secret project of mine (EngineerInvest.com) has been going on since year 2018, with the 1st article “Stock Analysis in 2mins (Ping An Insurance 2318.hk)” dated 27th June 2018. The typical average viewership per article was less than 100.


It was not until Dr Wealth shared my story “From N-Level to Masters, From $20k at 19 to over $1m at 33” that my subsequent articles had more than 1000 views in a few days’ time. It was a real milestone to me. Deeply appreciate all the readers out there. Hope the sharing has helped in your investment learning journey.


Sincere thanks to Dr Wealth again.


Feel free to comment at the end of this post or email me (at engineerinvest.biz@gmail.com) any burning questions / feedback you have. I will answer as many as I can in my next post!


Initially, my plan was to work for another few years before quitting my job. However, I thought why not now (Jan 2020). This might slow down my next goal by 3 to 5 years but that’s ok. With family time being the core reason as to why I have decided to quit my job, I will stick to it. While balancing family time, I will try my best to update my blog as frequently as possible. I apologize in advance if my updates or replies are slow. I will continue to write on my buy / sell movements, the reasons behind it and investment insights.


Portfolio Updates


So far, I’ve activated my first tranche buying on 6th April 2020. As I’m more of an investor than a trader, there won’t be frequent stock purchases. Hopefully to only buy during the best deal or when I feel it’s of the best time to do so (or at least try to).


"An investor should act as though he had a lifetime decision card with just twenty punches on it.” - Warren Buffett


You can visit “EngineerInvest.com’s go-to Charts to Determine Market Bottom” to view some of my purchases. An update on the recent performance:

The big headline on 17th April 2020 reads “Dow futures rally 700 points after report says Gilead drug showing effectiveness against coronavirus” [1]. However, we have been cautioned by several bodies to avoid being overly optimistic. Details can be found in [2].

Prior to the crash in Feb 2020, S&P was trading at 19 forward PE (Price-Earnings). The March crash brought S&P down to 13 forward PE. However, in just a few weeks, the S&P is back to near 19 forward PE. It is as expensive the previous peak. [3]. My first tranche consists of Singapore and China stocks only. Currently, I have 0 position in US stock.


Moreover, a chart from the SentimenTrader substantiates this point. Their $SPY Optimism Index is at the highest level in almost a decade. It was observed that whenever there was a sudden burst in optimism, S&P usually retreats in the short term [4].


"If everyone is going left, look right." - Sam Zell



Oil at 21 years low


Oil is another topic that is constantly snatching recent headlines. It grabbed my attention now that oil prices have broken below the recent $20 low. This is after a deal for the largest output cut by major oil producers in the month of May and June [5]. The subsequent OPEC meeting will be on June 2020 [6]. That being said, they can also call for emergency tele conference at any time to discuss on further cuts.



Let’s take a look at oil contango. An explanation for contango can be found here. [8]. Oil's 12m contango is at -43%; It has not reached such extreme levels since 1986 and 2008 [9]. The interpretation is that there could be a huge recovery soon. I can’t predict the future but my guess is we are close to the bottoming out of oil price. However, risks are present. Due to COVID-19, about a third of humanity is in some form of a lockdown [10]. We commute much lesser, meaning to say there is less demand for petrol. This is likewise for jet fuel.



[11]


A Case Study on SARS – Hong Kong


During the 2002 – 2003 SARS outbreak, Hong Kong is one of the countries that was significantly hit by SARS.

Let’s take a look at the daily cases (Hong Kong) during the SARS outbreak. It was observed that the numbers lessened during the period of May 2003 [12].


In addition, hotel average daily rate, revenue and occupancy rates bottomed out in May 2003 and picked up in June 2003 [13].



However, HSI had bottomed on April 2020.


Some conclusion we can draw here is that the stock market is a leading indicator of the economy. HSI bottomed on April 2003, ahead of recovery signs such as an increase in hotel occupancy (June 2003) and the greatly reduced number of SARS daily cases (May 2003). Subsequently on 23rd June 2003, WHO declared Hong Kong to be free of local SARS transmission [15]. By then, the market had already gone up by 20%.


Can this case study be applied to Singapore, China or other major stock markets? P.s. The daily new COVID-19 cases have reduced significantly in Hong Kong [16]. Did history repeat itself? A difference in risks present is the possibility of protests re-emerging in Hong Kong.



Disclaimer: Just sharing from experience as I have put my own money into the stock market over the period of 17 years. I am not a Chartered Financial Analyst (CFA) Charterholder and do not have any finance-related qualifications.


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My Story “From N-Level to Masters, From $20k at 19 to over $1m at 33” (Also shared by Dr Wealth / theFinance.sg etc) >> About me Check out >> my Portfolio Visit >> The Engineer's Mall Reach out to me at engineerinvest.biz@gmail.com

References links:

1. https://www.cnbc.com/2020/04/16/sp-500-etf-jumps-2percent-after-hours-on-report-gilead-drug-showing-effectiveness-treating-coronavirus.html 2. https://www.cnbc.com/2020/04/17/gilead-drug-remdesivir-investors-should-be-cautious-analysts-says.html 3. https://twitter.com/TihoBrkan/status/1251449457914322944/photo/1 4. https://twitter.com/sentimentrader/status/1250384015560978434/photo/1 5. https://www.ft.com/content/01dd5ae4-16b9-4c20-becc-6a08c6289a67 6. https://www.cnbc.com/2020/04/12/opec-and-allies-finalize-record-oil-production-cut-after-days-of-discussion.html 7. https://tradingeconomics.com/commodity/crude-oil 8. https://www.investopedia.com/terms/c/contango.asp 9. https://twitter.com/MacroCharts/status/1245304905256120321/photo/1 10. https://www.msn.com/en-us/news/world/one-third-of-humanity-under-virus-lockdown/ar-BB11Fk7V 11. https://www.reddit.com/r/funny/comments/g3n182/that_is_real_tears/ 12. https://www.researchgate.net/figure/Severe-acute-respiratory-syndrome-epidemic-curve-in-Hong-Kong-2003-by-infection-cluster_fig1_8200905 13. https://www.scmp.com/business/companies/article/3051390/covid-19-vs-sars-singapores-hotel-sector-shake-epidemic-quickly 14. https://sg.finance.yahoo.com/quote/%5EHSI?p=%5EHSI 15. https://www.cidrap.umn.edu/news-perspective/2003/06/hong-kong-declared-free-local-sars-tran 16. https://www.worldometers.info/coronavirus/country/china-hong-kong-sar/

"An investor should act as though he had a lifetime decision card with just twenty punches on it"  - Warren Buffett

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