Wolf Money(Portfolio update end Sept 2026)part 2 long post
Turn back the clock
After the 2008 GFC Subprime debacle, the U.S. senate introduces the Dodd-Frank's retention rule. The rule states the originator of a deal, like a financial firm needs to keep 5% equity of the investment. The Security Exchange Commission has recently ruled that the originators of data centres securitisation are excluded from the Dodd- Frank’s ruling.
Data centres are essential to the growth of AI. Many companies have poured money, trillions on it, to build the backbone of AI infrastructure. Data centres, especially those dealing with AI may get obsolete as fast as they are been build due to the gigantic amount of electricity required to power those data centres. As AI chips get more powerful, data centre’s power generation capacity will be underwhelmed very quickly. Many data centres built just 3 years ago can’t keep up with the higher power requirements. The stress on local grid also limits the power capacity. Essentially, a data centre with lower power capacity will be obsolete within 5 years. That is incredibly short for an infrastructure project. Based on available information, it costs anywhere from US$400m to US$600m to build a mid-size tier 1 data centre with the shell and computing power in the states. AI companies’ path to profitability remains a mystery. With trillions invested and low billions in revenue to show for. It remains to be seen how AI companies could generate enough money to pay back those loans when they are due.
Data centre loans are bundled into CDOs as yield instruments and sold mostly to insurance companies and pension funds remain a time bomb. What are the chances of those loans being fully paid on time? As the useful life of those data centres is typically shorter. Without the need for an originator to keep equity in those investments, underwriting standards will dropped. Those insurance companies and pension funds will be left holding the babies. Ultimately, men on the street will have to bail them out of their reckless mistakes with a spike in insurance premiums and a reduction in pension benefits.
If the market was to “Turn Back The Clock” of 1987, the upcoming market crash wouldn’t sound as good as Johnny Hates Jazz’s classic. With bond yields shooting for the moon, aspirations will become “Shattered Dreams”. Will the market be able to “Turn The Tide”? To be honest. I don’t know and “I Don’t Want To Be A Hero”. Profit is the only reason why anyone continues to hold on to the shares of a company. Don’t fall in love with the stock, “Don’t Say It’s Love” is the correct approach.
Portfolio as at end of Sept 2026
1.) Cash
2.) Delfi Ltd
*Stocks are not rank in accordance to capital invested.
Commentary
Lone Wolf Fund ytd returns stay at 1.5% with no major movement in the portfolio with the exception of a small purchase at Delfi. I have decided to stay out of the market for most part to observe a new situation in my investing journey. I have never seen bond yields increase substantially across all of the G7 and the big rise in oil prices without the equity market going through a bigger correction. This is new to me. The current condition is similar to those in 1987, and we know what happens after that.
MCD just hit 2-year low recently as they warned of a tough trading conditions in the fast food industry. Walmart also warned of a slowdown in sales as consumers cut back on essential purchase to pay for gas. The bottom half of the US economy is in a rut. I suspect the sales’ numbers of new IPhone 18 pro is running under internal projections, or else why the advertisement bombardment on YouTube.
EQDP
The STI and Nasdaq index, in particular, are holding well. Overall, the banks and the mag 7 are holding up their respective markets. The stocks trading outside the STI index 30 and the rest of S&P 493 are clearly uninspiring. Locally, the EQDP fund after the initial optimism, is starting to wane. Some small caps are doing worse than before. I am appreciative of what MAS and SGX are trying to accomplish. As an investor in mid and small cap stocks, I am interested to know if the fund managers are subject to certain KPI? Is the fund deployment strictly on mid and small caps or the FMs free to choose? To me, the EQDP represents a kind of SME enterprise fund to help our local SME companies. The aim is to create liquidity for those unloved stocks outside the STI index. It will runs in contradiction if the FMs under EDQP funds are allowed to hide in the safety of the blue chips. MAS can do more to educate the public on those funds and share a simple statistics in dollar value on those fund deployments in categories of funds invested in companies above $5b, $1b to $5b and below $1b. It will be greatly appreciated by me and the public to know how the EQDP programme can benefit us.
The small floats is another problem relating to buying small and mid-cap companies. Singaporean companies are mostly held by founding families. A fund with millions to invest, faced difficulty buying and selling those companies. The dismal IPOs market won’t change unless SGX mandates a minimum float of at least 40%-45% for new listings. This will create more interest in the new IPOs. How many times does an IPO fail to keep the interest of the investors after the first week of trading? Currently, most listings float 25% of their shares during IPO. This is something for the stock exchange to ponder. I said no more.
Delfi Ltd
I had a recent look at Delfi, how surprising 5 months could impact the share price. In mid-April this year, the company’s shares was flying high, reaching a high of $1.25. Fast-forward to today, the stock is languishing near its 52-week low of 70c. If I may bring you back to just a year ago, the company was suffering from the record cocoa price of US $12,400. Presently, cocoa has fallen more than half. Shouldn’t the investors be cheering the better outlook? I had a read in the minutes for the last agm. It did mention the drop in the cocoa price is helpful to the Delfi’s business, but there will also be a lag effect on those lower cocoa prices as the company needs to expense off those high-price hedges made during 24/25. I suspect the expectation for an immediate boost to the bottom line didn’t materialise during 1H 26, therefore the heavy sell down in the company stock. The market participants, in this case, has jumped the gun. I will be observing the next quarter update to see the improvement. If I may predict, the company’s results might have a better showing over the next 6 to 12 months as the company works through the high-cost inventory.
The drop in Indonesian Rupiah against the USD is not a surprising phenomenon. Businesses operating in Indonesia with huge revenue in rupiah always hedge their local currency exposure. I don’t think much has changed, but that doesn’t mean we should be less concerned with a fast depreciating currency. The company huge USD cash reserve, in a way, act as a hedge against the weakening IDR.
The growth of their local branded chocolate is encouraging. It remains a great alternative to the higher-priced imported chocolate for the locals in Indonesia and the Philippines. The ditching of some agency contracts has provided Delfi the room to grow their presence. The distribution network is one of many advantages of Delfi’s business. In the distribution business, the principal needs them, more than the company needing the principal. Given they are able to replace lost revenue from the lost agency business with it own products within 2 quarters. That is impressive in my opinion.
Besides the strong distribution network, having their chocolate made locally with local cocoa beans and ingredients helps strengthen margins, and improve turnover from factory to market. To some degree it helps lower the risk of overseas supply chain disruption.
Delfi is not free from problems. The single market risk where Indonesia contributes 90% of earning and reduced in ROE over the last few years are major concern for investors. The stock is a chocolate bar down from where I bought. I am at the probing stage. I kept the position small. It allows LWF to reverse course if the situation in the market or the company’s prospects turn for the worse.
Some banks have sparked a fixed deposit war by offering attractive rates. A typical FD of 3 to 6 months offered by some banks attracts a rate from 1.68% to 1.88%. The rates are more attractive than SSBs that has a starting 1st year yield of 1.65% in the latest issue.
Summary
The financial conditions have tightened since last month, with many central banks increasing interest rate to fight inflation. We are talking not just one, but many central banks increasing rates at the same time. The increase in oil prices tightens the financial conditions further. The problem has shifted from interest rate risk to credit risk amid the hike in interest rates. As Warren Buffett’s words of wisdom remind us “Only when the tide goes out do you discover who’s been swimming naked.” The US housing market is in a dire situation. With mortgage interest reaching above 7%. The slowdown has some way to go, unless interest rates can come down quickly. The trade war with Canada has pushed up prices of timber and other building materials, making new builds extremely expensive.
Mortgages across the world will be experiencing higher interest rates. In Singapore, the sora rates had climbed from 0.8% to 1.2%. That is a 50% increase. Those on flexible rates of 1 or 3 months pegged to sora will see their monthly payments increase more regularly. There will be a fall in local discretionary spending as borrowers spent more on interest costs. More businesses relying on local consumers will be facing closure due to consumers trading down their consumption locally or across the causeway. In Singapore, our weakening employment numbers speak differently from the good GDP numbers. It is worth taking a conservative view on financial matters. Any big ticket purchase should be made with serious consideration. If possible, keep your current employment for the next 12 to 24 months. I wish you all the best.
I don’t think the market will be heading any higher until the bond’s yield and oil start coming down in a significant way. The geopolitical situation in Iran still takes precedence over other matters. Cash and Cashare(share with high cash value) are the ways to go forward. Stay safe, till we meet again. God Bless.
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