Month: July 2010

Term Insurance

I came across this comment on a forum: “I’ve not seen a single insurance agent recommending term insurance.” I realised that’s true. So far the term insurance policies that I purchased are based on personal requests to a friend whom I know in the industry. Otherwise, all other agents I have dealt with NEVER EVER offered term insurance to me although it would have been the best and most cost-effective option considering my financial profile.

I have always been a strong advocate of term insurance to my friends because it is a cheap and effective way to get coverage for death and critical illnesses. However, they will need to understand more of what term insurance is about because it does have some risk involved. Chiefly, there is no value stored in the policy, so any failure to pay can cause the policy to lapse; unlike life insurance policies where premiums can be drawn from the underlying value after some time. Another thing to note is that discipline will also be required to make good use of the cost savings between life insurance and term insurance. Either utilise it for essential expenditure, or invest it wisely.

Temasek bullish on resources

After I just mentioned it in my earlier post, there was an article in the Business Times on how Temasek may be shifting their portfolio weightage towards resources. In relation to what I mentioned about Chesapeake, here is an extract:

‘Temasek’s move to resources is consistent with its goal of catering to Asia’s emerging middle class,’ said Melvyn Teo, director of the BNP Paribas Hedge Fund Centre at Singapore Management University.

‘Demand for resources will go up because of emerging economies like China but there is only so much supply, so prices will go up over time.’

The fund’s recent investments include convertible preferred stock in US natural gas firm Chesapeake Energy and India’s GMR Energy, and shares in Canadian platinum producer Platmin.

Some potential Energy plays (pun intended)

The energy sector is in the doldrums recently. Natural gas prices are at a multi-year low while BP has generally led the listed oil majors down a slippery slope. Nevertheless, some analysts feel that the energy sector is oversold and there are bargains for the picking.

Exxon Mobil (XOM) and Natural Gas (GAZ) are at trading bands last seen nearly 5 years ago. Also, United States Oil (USO) is trading at near historical lows.

Of the counters named above, you will probably need to pay more attention if you’re thinking of buying GAZ or USO. GAZ comes up as a “restricted trade” if you try to use POEMS to make a purchase (I’m not sure if the same problem crops up with other brokers), so a proxy you can use for GAZ will be the Chesapeake Energy Corporation (CHK) — incidentally a recent addition to the Temasek portfolio. As for USO, the ETF managers do not physically purchase and store crude oil, so they purchase Crude Oil Futures instead. While this works well in theory, USO has been pummelled recently by contango and the correlation between USO prices and crude oil prices have been drifting apart for some time. Just something for you to note.