In order to enhance cognition, it would be good practice for one to consider all the merits of potential weakness in a belief that one holds. Here, I would like to discuss the effects of the second phase of the mortgage crisis which I personally believe will derive from Option-ARMs, Alt-A and commercial real estate. Counter-arguments include:
1. There is an increasing belief that given how low-interest rates have fallen, it would nullify the effects of recasts.
My view on this point is that low rates will mitigate the effects but not so much because the main problems will be coming instead from negative home equity and the repayment of principal. Interest is just one small portion of the whole payment mechanics.
2. The second and more credible argument is that many of Option ARM homeowners will have defaulted long before the recasts. Payments reset occur after 5 years or when the debt grows to a preset amount typically 110 to 120 percent of the original principal. It is believed that almost 40% of these homeowners are already delinquent and many will start missing payments beforehand.
This is valid point and deserves some attention. If 40% of these homeowners are already delinquent, there's still 60% out there which have yet to go. It would also mean that the heavy blow up is sooner than we think it would be. Perhaps more towards a single peak rather than a double wave. Thus the peak would more probably happen in 2010 rather than 2011.
3. Alt-A comprises of people with better credit rating.
These are very much liar loans and just another nicer name for subprime in any case. These loans were made during a time when people are incentivised to lie about their credit score, have houses as proof of social status and when everyone else is doing the same thing. Nothing much you can argue about that.
4. US Government's effort to rework mortgages.
This is not going to have as much impact as many believe it to have. It is slow, inefficient, bureaucratic and mis-incentivised. In other words, you are not going to have a lot of bang for your buck in this programme.
5. These exotic loans are locality specific with a disproportionate amount coming from California
What these means is that not the entire banking industry and not all consumers will be dramatically affected. A dispropotionate few will be dramatically affected much more than others. This is where it gets scary, if the effects were to be spread out and the pain shared throughout an entire industry or country, it is still not so bad. However, if the effects were to be concentrated on one single area then we might actually see some interesting things.
Tuesday, September 29, 2009
Thursday, September 24, 2009
The Great Depression is not that great after all?
The economic sentiment and the job market is indeed picking up. For one of the very few times, bullish estimates by Wall Street analysts had failed to keep up with S&P 500 gains. The prevailing feeling though unstated but apparent is that "Prosperity is just around the corner". Though cautious, several company executives through their actions have demonstrated this belief implicitly.
I must say that because of this, I have been fortunate enough to be able to get a good job in such difficult times. I would recommend friends that are graduating soon to secure a job as soon as possible, if they had not already done so. Though the first job is very important, this is no time to get picky. Then work very hard to prove your worth to the company and maintain your job security.
However, allow me to reiterate my stance that I still remain bearish at a time even when several other pessismists are starting to get bullish. I feel sure that the bear market is a long way from over. That is why I chose the statement given by Herbert Hoover as the country sank into the Great Depression of the 1930s.
My point of view is that what had shifted was the emphasis, not the facts. The fact that earnings remain poor, prices of real estate outside of US remains high, financial institutions have not deleveraged, joblessness continuing to rise and problems arising from Option-ARMs, Alt-A loans.
The investment and political community seems behave as though they are oblivious to the problems that continue to persists.
I must say that my focus lies on the average American consumer who have been the key engine and driver of global growth over the past decade or so. The balance sheet of the average American consumer is now broken, rising debt levels, rising unemployment and declining salaries. These are not exactly conditions required for a vigorous recovery. Furthermore, I also believe that there is going to be a dramatic reversal in spending habits.
It is true that human behavior and cultures are extremely difficult to change in a short span of time. However, I believe that this time, the economic shock that was delivered is powerful enough to embed deeply in the psyche of several people. The pain experienced will serve as a strong somatic marker in the brain reigning in the once spendthrift ways of the average American.
There is also an increasingly popular viewpoint that Asian consumers will pick up the slack and become the future engine of global growth. I must say that though I agree that it this will be the case ten or twenty years from now, I totally disagree with that it will happen anytime soon in the near future. If one were to look at the Asian economies, from China, ASEAN and India. All of them have one thing in common, they are all structurally export driven economies. Domestic consumption is nowhere near the kind of levels that the west provides. Without strong demand coming from the US and Europe, to whom exactly is Asia going to export their goods?
Having just learnt from the "sub-prime" phase of the crisis, one might have thought that the investment community would have taken warning against similar adventures in Wall Street. But a prime characteristic of a speculative mania is its complete insulation from all the lessons of history, whether remote or at hand. Though admittedly, the europhia and delusion is currently in its mere infancy stage and is far from bubblelistic proportions.
If prices were to continue rising with such tremendous pace, then it will be a matter of time that we will have to re-learn the same old lessons again. Probably in less than 2 years time! For now, I am pretty sure that I must be one of the very few minority to hold such a view.
I must say that because of this, I have been fortunate enough to be able to get a good job in such difficult times. I would recommend friends that are graduating soon to secure a job as soon as possible, if they had not already done so. Though the first job is very important, this is no time to get picky. Then work very hard to prove your worth to the company and maintain your job security.
However, allow me to reiterate my stance that I still remain bearish at a time even when several other pessismists are starting to get bullish. I feel sure that the bear market is a long way from over. That is why I chose the statement given by Herbert Hoover as the country sank into the Great Depression of the 1930s.
My point of view is that what had shifted was the emphasis, not the facts. The fact that earnings remain poor, prices of real estate outside of US remains high, financial institutions have not deleveraged, joblessness continuing to rise and problems arising from Option-ARMs, Alt-A loans.
The investment and political community seems behave as though they are oblivious to the problems that continue to persists.
I must say that my focus lies on the average American consumer who have been the key engine and driver of global growth over the past decade or so. The balance sheet of the average American consumer is now broken, rising debt levels, rising unemployment and declining salaries. These are not exactly conditions required for a vigorous recovery. Furthermore, I also believe that there is going to be a dramatic reversal in spending habits.
It is true that human behavior and cultures are extremely difficult to change in a short span of time. However, I believe that this time, the economic shock that was delivered is powerful enough to embed deeply in the psyche of several people. The pain experienced will serve as a strong somatic marker in the brain reigning in the once spendthrift ways of the average American.
There is also an increasingly popular viewpoint that Asian consumers will pick up the slack and become the future engine of global growth. I must say that though I agree that it this will be the case ten or twenty years from now, I totally disagree with that it will happen anytime soon in the near future. If one were to look at the Asian economies, from China, ASEAN and India. All of them have one thing in common, they are all structurally export driven economies. Domestic consumption is nowhere near the kind of levels that the west provides. Without strong demand coming from the US and Europe, to whom exactly is Asia going to export their goods?
Having just learnt from the "sub-prime" phase of the crisis, one might have thought that the investment community would have taken warning against similar adventures in Wall Street. But a prime characteristic of a speculative mania is its complete insulation from all the lessons of history, whether remote or at hand. Though admittedly, the europhia and delusion is currently in its mere infancy stage and is far from bubblelistic proportions.
If prices were to continue rising with such tremendous pace, then it will be a matter of time that we will have to re-learn the same old lessons again. Probably in less than 2 years time! For now, I am pretty sure that I must be one of the very few minority to hold such a view.
Wednesday, September 23, 2009
Poor Charlie's Almanack
Boy, boy, boy never did I expect to find this book in Bedok library. I have searched high and low for it in Kinokuniya, in MPH and even in school library. I had very high expectations of it and I am glad to say it didn't disappoint one bit. Charlie Munger has rightfully confirmed my underlying suspicions that successful investing is simply a by product of a carefully organized and focused approach to life. The process is by no means simple or straightforward and it requires a multi-disciplinary approach. The world we live in is a constant interaction between scientific and mathematical laws of the Earth and perceptional beliefs of people. It requires a certain set of values and beliefs in order to see the corroborations between systems. Definitely a page flipper...
"You must know the big ideas in the big disciplines and use them routinely- all of them not just a few. Most people are trained in one model-economics, for example- and try to solve all problems in one way. You know the old saying, "To the man with a hammer, the world looks like a nail." This is a dumb way of handling things.
Just as multiple factors shape almost every system, multiple models from a variety of disciplines, applied with fluency are needed to understand that system. What you need is a latticework of mental models in your head. And with that system, things gradually get to fit together in a way that enhances cognition.
The most important thing to keep in mind is the idea that especially big forces often come out of these hundred models. When several models combine, you get lollapalooza effects. This is when two, three or four forces are all operating in the same direction. And frequently, you don't get a simple addition. It's often like a critical mass in physics where you get a nuclear explosion if you get to a certian point of mass- and don't get anything much worth seeing if you don't reach the mass. Sometimes the forces just add like ordinary quantities and sometimes they combine on a break-point or critical mass basis.
More commonly, the forces coming out of these one hundred models are conflicting to some extent. And you get huge, miserable tradeoffs. But if you can't think of tradeoffs and recognize tradeoffs in what you're dealing with, you're a horse's patoot. You are clearly a danger to the res of the people when serious thinking is being done. You have to recognize how these things combine. 'Life is just one damn relatedness after another.' So you must have the models and you must see the relatedness and the effects of the relatedness.
I'm afraid that's the way it is. If there are 20 factors and they interact some, you'll just have to learn to handle it- because that's the way the world is. But you won't find it hard if you go at it Darwin-like step by step with curious persistence. You'll be amazed at how good you can get."
Saturday, September 19, 2009
Investment Philosophy III
This post deals with the handling of one of those rare years where speculation is rife and skilled investors can be almost certain of the impending bursting of the bubble that is to come. First of all, it would be important for the investor to identify what are the characteristics of such times and what are not.
Ridiculous as it may seem to us today, when we are in a bubble, the majority of the financial community actually believed that we are in a "new era". Perhaps not in an explicit sense, but for years earnings of most companies had been growing with monotonous regularity. Serious business depressions had become a thing of the past. In such circumstances, it seemed to many that it had become virtually impossible to lose by owning stocks. And many who wanted to cash in as much as possible on this sure thing bought on margin to obtain more shares than they could otherwise afford. Even though many felt strongly that the stock market was too high on those dangerous days, people were nevertheless entrapped by the lure of the market. Many would find themselves looking around to find new stocks that "were still cheap" and were worthwhile investments because "they had not gone up yet".
Nearly all bull markets have a well-defined characteristics in common, such as (1) a historically high price level, (2) low earnings yield versus bond yields, (3) much speculation on margin and most importantly (4) record high offerings of new common stock issues.
Contrast this with the situation where business was good and corporate earnings were rising steadily. Neverthelessm almost the entire investment community were mesmerized by a simple but fallacious comparisons to the past. It was remembered that few years after the Civil War, a period of immediate prosperity was followed by the panic of 1873 and almost 6 years of deep depression. A somewhat similar period of prosperity after World War I was followed by the Crash of 1929 and even deeper recession about the same length. In WWII, the costs of war had run on a per diem basis about ten times that of WWI. When the "war stimulus and rebuilding effects" run out all hell would break loose. "Therefore" reasoned the dominant invstment view of this period "current excellent earnings don't mean anything". They will be followed by a horrendous crash and a period of extreme adversity when all would suffer. The recession did come but were overwhelmingly minor as to what was expected.
In view of the above reasons, the answer that I would produce would be to hold on to existing shares of outstanding companies, cease all buying operations and sell whatever companies that were less than truly outstanding. The underlying reason is that though the investor can be sure about the impending catastrophe, he cannot be sure of the timing and magnitude of the troubles that is to come. Prices of outstanding companies can multiply itself several times during periods of prosperity and the decline in prices is not likely to be as large as those of run-in-the-mill companies. Even at the lowest price in the depths of the recession, one cannot guarantee that it would be lower than the price the investor was so eager to sell.
However, allow me to conclude this post with a practical observation that is based on numerous experience rather than theory. When the general market is high, there are always a number of individual issues that appear definitely undervalued even by objective standards, and consequently even more attractive in contrast to the inflated value of other stocks. The investor may be tempted to think that these are unusual opportunities. But that is a time that calls for especial caution. Not only the "neglected security" continue neglected for the remainder of the bull market, but when the downturn comes, it is likely to decline in price along with the general market and to fully as great an extent. In a word, beware of "bargains" when most stocks seem very high.
Ridiculous as it may seem to us today, when we are in a bubble, the majority of the financial community actually believed that we are in a "new era". Perhaps not in an explicit sense, but for years earnings of most companies had been growing with monotonous regularity. Serious business depressions had become a thing of the past. In such circumstances, it seemed to many that it had become virtually impossible to lose by owning stocks. And many who wanted to cash in as much as possible on this sure thing bought on margin to obtain more shares than they could otherwise afford. Even though many felt strongly that the stock market was too high on those dangerous days, people were nevertheless entrapped by the lure of the market. Many would find themselves looking around to find new stocks that "were still cheap" and were worthwhile investments because "they had not gone up yet".
Nearly all bull markets have a well-defined characteristics in common, such as (1) a historically high price level, (2) low earnings yield versus bond yields, (3) much speculation on margin and most importantly (4) record high offerings of new common stock issues.
Contrast this with the situation where business was good and corporate earnings were rising steadily. Neverthelessm almost the entire investment community were mesmerized by a simple but fallacious comparisons to the past. It was remembered that few years after the Civil War, a period of immediate prosperity was followed by the panic of 1873 and almost 6 years of deep depression. A somewhat similar period of prosperity after World War I was followed by the Crash of 1929 and even deeper recession about the same length. In WWII, the costs of war had run on a per diem basis about ten times that of WWI. When the "war stimulus and rebuilding effects" run out all hell would break loose. "Therefore" reasoned the dominant invstment view of this period "current excellent earnings don't mean anything". They will be followed by a horrendous crash and a period of extreme adversity when all would suffer. The recession did come but were overwhelmingly minor as to what was expected.
In view of the above reasons, the answer that I would produce would be to hold on to existing shares of outstanding companies, cease all buying operations and sell whatever companies that were less than truly outstanding. The underlying reason is that though the investor can be sure about the impending catastrophe, he cannot be sure of the timing and magnitude of the troubles that is to come. Prices of outstanding companies can multiply itself several times during periods of prosperity and the decline in prices is not likely to be as large as those of run-in-the-mill companies. Even at the lowest price in the depths of the recession, one cannot guarantee that it would be lower than the price the investor was so eager to sell.
However, allow me to conclude this post with a practical observation that is based on numerous experience rather than theory. When the general market is high, there are always a number of individual issues that appear definitely undervalued even by objective standards, and consequently even more attractive in contrast to the inflated value of other stocks. The investor may be tempted to think that these are unusual opportunities. But that is a time that calls for especial caution. Not only the "neglected security" continue neglected for the remainder of the bull market, but when the downturn comes, it is likely to decline in price along with the general market and to fully as great an extent. In a word, beware of "bargains" when most stocks seem very high.
Thursday, September 17, 2009
Investment Philosophy II
Should an investor sell a good stock in the face of a potentially bad market? Now more than ever, the actions of the people who invest in stocks appear to reflect the belief that when an investor has achieved a good profit in a stock and fears that the stock might well go down, he should grab his profit and get out.
_
My view is rather different. Even if the stock of a particular company seems at or near a temporary peak and that a sizable decline may strike in the near future, I will not sell a firm's shares provided that I believe that its longer term future is sufficiently attractive. I prefer to hold.
_
My belief stems from some rather fundamental considerations about the nature of the investment process. Companies with truly unusual prospects for appreciation are quite hard to find for there are not too many of them. However, for someone who understands and applies sound fundamentals, I believe that a truly outstanding company can be differentiated from a run-of-the-mill company almost 90% of the time.
_
It is vastly much more difficult to forecast what a particular stock is going to do in the next 6 months. Yet people's forecasting record predicting changes in the business cycle has generally been abysmal. They can seriously misjudge if and when recessions may occur, and are worse in predicting their severity and duration.
_
Furthermore, neither the stock market as a whole nor the course of any particular stock tends to move in close parallel with the business climate. Changes in mass psychology and in how the financial community as a whole decides to appraise the outlook either for businesses in general or for a particular stock can have overriding importance and can vary almost unpredictably.
_
For these reasons, I believe that it is hard to be correct in forecasting the short-term movement of stocks more than 60% of the time no matter how dilligently the skill cultivated. On the face of it, it doesn't make good sense to step out of a position where you have a 90% probability of being correct because of influence about which you might have at best a 60% chance of being right.
_
Moreover, for those seeking major gains through long-term investments, the odds of winning are not the only consideration. If the company is well-run with sufficient financial strength, even the greatest bear market will not erase the value of holding. In contrast, time after time, truly unusual stock have subsequent peaks many hundreds of percent above their previous peaks.
_
So putting it in the simplest mathematical terms, both the odds and the risk/reward considerations favor holding. There is a much greater chance of being wrong in estimating short-term adverse changes for a good stock than in projecting is strong long-term price appreciation potential. If you stay with the right stocks through even major temporary market drops, you are at most going to be temporarily behind the former peak at the very worst point and will ultimately be ahead.
_
However, the underlying presumption is that the investor is able to differentiate a truly outstanding company from a stock market darling. Investors who are not able to differentiate between them will not be suited for this strategy at all. One will truly have to be able to tell a MacDonald's and Coca -Cola from a General Motors and AIG.
_
Whereas if you sell and don't buy back you will have missed long-term profits many times the short-term gains from having sold the stock in anticipation of a short-term reversal. It is so difficult to time correctly the near-term price movements of an attractive stock that the profits made in the few instances when this stock is old and subsequently replaced at significantly lower prices are dwarfed by the profits lost when the timing is wrong. Many will sell too soon and have either never gotten back in or have postponed reinvestment too long to recapture the profits possible.
_
Therefore, in and out, may be out of money. It is important to note that even if the anticipated big drop were to occur it might still be higher than the price that you were so eager to sell.
_
After a sharp advance, a stock nearly always looks too high to the financially untrained. This demonstrated the risk to those who follow the practice of selling shares that still have unusual growth prospects simply because they have realized a good gain and the stock appears temporarily overpriced. These investors seldom buy back at higher prices when they are wrong and lose out on further gains which are of dramatic proportions.
_
At the risk of being repetitious, let me underscore my belief that the short-term price movements are inherently tricky to predict and that I do not believe that it is possible to play the in and out game and still make enormous profits that have accrued again and again to the truly long-term investor in the right stocks.
_
Then what about those rare years when speculative buying is running riot in the stock market and major economic storm signals are virtually screaming their catastrophic warnings? How do we know that we are not being seduced by the excitement of times into paying unrealistic prices? What should the long-term investor do under such circumstances? This will be the main topic for the subsequent post.
Friday, September 11, 2009
Investment Philosophy I
Right down here, my intention is not to point out everyway by which money can be made in the financial markets. Rather it is to point out the best way in my opinion. By the best way meant the greatest total profit for the least risk. It is undeniably true that the really big fortunes from common stocks have been garnered by those who have a substantial commitment in the early years of the company in whose future they have had great confidence in. These people held their original shares unwaveringly whilst they increased 100-fold or more in value.
The big fortunes from these investments are almost always realized by persons who have a close relationship with the particular company- through employment, family connection. etc.- which justifies them in placing a huge part of their resources in one medium and holding on to this commitment through all vicissitudes, despite numerous temptations to sell out at apparently high prices along the way.
An investor without such personal contact will constantly be faced with the question whether too large a portio of his wealth are in one medium. Each decline, however temporary it proves in the sequel will accentuate his problem. Internal and external forces are likely to pressure him to take what seems to be a goodly profit but one far less than the ultimate bonaza.
However, this method made far more money and took far less risk. Finding truly outstanding companies and staying them through all fluctuations of a gyrating market proved far more profitable to far more people than did the more colorful practice of trying to buy them cheap and sell them dear. These opportunities did not require purchasing on a particular day at a bottom of a great panic. The shares of these companies where available for fairly long periods that were to make this kind of profits possible, What was required was the ability to distinguish these relatively few companies with outstanding investment possibilities from the much greater number whose future vary all the way from the remotely successful to the complete failure.
Intellectually, there is nothing wrong with this idea, except that it was almost impossible not to carry them too far. Optimism and price level, each justifies the other. With encouragement from the past and rosy prospect in the future, buyers subscribing to such a policy run an extremely high risk of losing their sense of proportion and to pay excessive prices. For there is no clear-cut arithmetic which sets the limit to the present value of the company.
Therefore, it is of paramount importance to dispel the illusion that outstanding common stocks can be bought at any time and at any price, with the assurance not only of ultimate profit but also that any intervening losses would soon be recouped by a renewed advance of the market to new high levels. This was too good to be true. This method encompasses buying outstanding companies, but not at all times and all prices. It is inevitable that all abnormal growth will revert back to normal just because of competition but outstanding companies would take a longer time to do so than otherwise.
The type of accounting and statistical activity that the general public seems to visualize as the heart of succesful investing will, if enough effort to be given will turn up some real bargains. Some of these bargains may be real. In the case of others, there may be such acute business troubles that are lying ahead, not yet discernable from a purely statistical study, that instead of being bargains are actually selling at prices which in a few years will have proven very high.
Therefore, it is proposed that an investment operation is one that must be justified on both qualitative and quantitative grounds. Operations not meeting both requirements should be deemed as speculative.
The big fortunes from these investments are almost always realized by persons who have a close relationship with the particular company- through employment, family connection. etc.- which justifies them in placing a huge part of their resources in one medium and holding on to this commitment through all vicissitudes, despite numerous temptations to sell out at apparently high prices along the way.
An investor without such personal contact will constantly be faced with the question whether too large a portio of his wealth are in one medium. Each decline, however temporary it proves in the sequel will accentuate his problem. Internal and external forces are likely to pressure him to take what seems to be a goodly profit but one far less than the ultimate bonaza.
However, this method made far more money and took far less risk. Finding truly outstanding companies and staying them through all fluctuations of a gyrating market proved far more profitable to far more people than did the more colorful practice of trying to buy them cheap and sell them dear. These opportunities did not require purchasing on a particular day at a bottom of a great panic. The shares of these companies where available for fairly long periods that were to make this kind of profits possible, What was required was the ability to distinguish these relatively few companies with outstanding investment possibilities from the much greater number whose future vary all the way from the remotely successful to the complete failure.
Intellectually, there is nothing wrong with this idea, except that it was almost impossible not to carry them too far. Optimism and price level, each justifies the other. With encouragement from the past and rosy prospect in the future, buyers subscribing to such a policy run an extremely high risk of losing their sense of proportion and to pay excessive prices. For there is no clear-cut arithmetic which sets the limit to the present value of the company.
Therefore, it is of paramount importance to dispel the illusion that outstanding common stocks can be bought at any time and at any price, with the assurance not only of ultimate profit but also that any intervening losses would soon be recouped by a renewed advance of the market to new high levels. This was too good to be true. This method encompasses buying outstanding companies, but not at all times and all prices. It is inevitable that all abnormal growth will revert back to normal just because of competition but outstanding companies would take a longer time to do so than otherwise.
The type of accounting and statistical activity that the general public seems to visualize as the heart of succesful investing will, if enough effort to be given will turn up some real bargains. Some of these bargains may be real. In the case of others, there may be such acute business troubles that are lying ahead, not yet discernable from a purely statistical study, that instead of being bargains are actually selling at prices which in a few years will have proven very high.
Therefore, it is proposed that an investment operation is one that must be justified on both qualitative and quantitative grounds. Operations not meeting both requirements should be deemed as speculative.
The Anniversary
What a difference a year made! About a year ago, who would have known how the entire financial world would change so dramatically. I remember vividly that I was sitting in NTU's Free Access Lab watching the financial world disintegrating before my eyes. It was between classes and I was checking the headlines on CNBC and Bloomberg, Merrill Lynch merged with Bank of America and Lehman Brothers was allowed to go into bankruptcy.
I still remembered Lehman's exquisite recruitment session where students were required to wear suit and tie, hop on a bus to a luxurious hotel for their recruitment talk. The hall was filled with hundreds of people and when they were only hiring less than 4 people for their Singapore office. Lehman's asian employees were definitely high-fliers, their equity department head was from GIC, others came from very established names as well.
Nonetheless all this came to naught with a tumbling crash that virtually sent the global economy into cardiac arrest. Money market funds broke the buck and froze the entire repo market. Countries after countries were forced to guarantee all deposits of banks. All trade and economic indicators went into a virtual freefall. Undoubtedly, we were facing a meltdown. Many of my classmates were still in a world of their own, oblivious about the rampage that was going on.
Then later AIG got into trouble and people were queueing up outside AIA building wanting to pull out of their investment policies. AIG's CEO for Asia jumped ship the just barely a week after he was being interviewed on Businesstimes for "view from the top". The claim was that he was disillusioned by management in the US.
To be honest, I knew of the magnitude and severity of the problems beforehand but I did not expect it to unfold the way it did. Not a chance at all. I did went into the markets, to buy, but I went in too early. The pain was massive, as the asset values were cut by more than half in less than a week. I was spooked and did not have the emotional capacity, there I stood rooted in fear of what more unimaginable was to come.
Fast forward a year later, having being a participant to witness one of the worst financial bloodbath in history, I have definitely grown. My investment philosophies were being redefined and is now taking clear definite shape. It has now encompassed way more dimensions and understanding that I would ever dreamed of previously. In a way, it felt like growing up. Previously, I was a new kid to the block. Now, I am ready to move on to the next stage.
Sunday, September 6, 2009
Is Humpty Dumpty Back Together Again?
In Singapore, equity and real estate prices are soaring. My parents are constantly being harassed by countless calls of over-eager and irritating real estate agents. "Would you like to sell your apartments?" Which was greeted by the resolute "No, thank you very much."
In a world whereby governments all over the world are engaged in quatitative easing and massive fiscal stimulus, inflation will become the inevitable. Though we think that prices have somewhat gone ahead of themselves, we have no intention to sell whatsoever. The simple reason is this, "If we were to sell, where are we going to put our money then?" Banks are out of the question, for interest rates are meager, commodities are way too speculative, equity and property prices are likely to be overpriced. Finding a safe place to put your money is increasingly difficult.
I have been through the torturous process of trying to find a decent job in an indecent time. Trust me, the job market is still bad as ever. Corporations are not churning out the kind of profits that they used to, sales have collapsed and thus likewise for profits. Companies which are turning out profits have done so only because they have cut costs dramatically, at the expense of countless jobs. The average consumer are not spending the way that they used to. Therefore, not only this is a jobless recovery, it is also a profitless recovery when we are talking about the financial markets. Is this really possible?
I have an uneasy feeling that we are all living in a bubble of false hope. We try hard to convinvce ourselves that with all the king's horses and all the king's men, we still might be able to put humpty dumpty back together again.
In a world whereby governments all over the world are engaged in quatitative easing and massive fiscal stimulus, inflation will become the inevitable. Though we think that prices have somewhat gone ahead of themselves, we have no intention to sell whatsoever. The simple reason is this, "If we were to sell, where are we going to put our money then?" Banks are out of the question, for interest rates are meager, commodities are way too speculative, equity and property prices are likely to be overpriced. Finding a safe place to put your money is increasingly difficult.
I have been through the torturous process of trying to find a decent job in an indecent time. Trust me, the job market is still bad as ever. Corporations are not churning out the kind of profits that they used to, sales have collapsed and thus likewise for profits. Companies which are turning out profits have done so only because they have cut costs dramatically, at the expense of countless jobs. The average consumer are not spending the way that they used to. Therefore, not only this is a jobless recovery, it is also a profitless recovery when we are talking about the financial markets. Is this really possible?
I have an uneasy feeling that we are all living in a bubble of false hope. We try hard to convinvce ourselves that with all the king's horses and all the king's men, we still might be able to put humpty dumpty back together again.
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