Momentum Won the Day But Becomes Stale in 2018

Sticking With Winners Is What Won in 2017’s Stock Market https://www.bloomberg.com/news/articles/2017-12-29/momentum-stocks-stole-show-in-2017-with-whiff-of-dot-com-mania

There are two types of momentum: stale and fresh momentum.

Momentum in academia is defined as assets that rose or fell in the last 12 months. There is plenty of research that they tend to continue in the same direction in the subsequent 12 months. E.g. stocks that rose in the last 12 months tend to continue to rise in the next 12.

However, one must differentiate between fresh and stale.

Stale momentum is assets that prior to the 12 months, was rising in the last 12 months. That means from t-24 to r-13 assets were already rising.

Fresh momentum means prior to last 12 months, they were falling for previous 12 months. That means t-24 to t-13 they fell, t-12 to t-1 they rose.

Stale momentum assets tend to run out of steam after 4 months, if you count from March 2016 which was the start of the momentum, March 2017 to March 2018 is considered fresh momentum. But from March 2018 onwards, the odds of momentum continuing is poor after 4 months. Hence July 2018, we could see momentum failing. Hence it reinforces my view that we have entered a dangerous period in 2018 and we should see a major correction at least in the second half of 2018.

Stay tuned. Meanwhile, ride the trend.

Working Towards SGD10m Networth

Having counted what I've invested and what I'm worth, I realise that I'm slightly below 5m of networth. Cashflow wise, I'm producing a nice number that's probably less than 500k. But I had to work so hard for it.

In order to move towards the 10m mark I will have to accelerate my pursuits. The more cashflow generating businesses and assets I have, the better I will be. 

3m of net assets should generate roughly 150k of passive cashflow easily by right. If I work it right I should generate close to 250 - 300k of cashflow. 

If I hit around 5m of net assets I should have around 500k of cashflow. 

I have 2 properties that can potentially en bloc and harvest around 1.7m of equity. One of which is in Geylang which will probably happen in the next 5 years. The other one may take another 10 years. 

Nothing block busting is going to occur the next 5 years unless I embark on a wildly successful business.

I realised that my return on equity is only 3.6%. Real estate alone is not generating enough cashflow obviously. Several issues came up:

1. Apartments in Australia were a let down. They were bought off plan and between 15 - 30% more expensive than existing homes. Capital gains were obviously poor because I bought them more expensive.

2. Rental yields were barely higher than interest rates. I forgot that in overseas, mortgage rates were usually much higher than the LIBOR or cost of funds.

3. Body corporate, or service charges were usually double that of Singapore's, thereby wiping out any cashflow.

4. Generally, apartments other than those in London, where capital gains were fabulous, were a let down. Luckily we turned to houses which provided ROE of around 10 - 15%.

From now on, we had to go for projects with higher ROE than 4%. Our development project in London yielded 20%.