What is a bailout?

Bailout in short is a good name for cover-up.

I used to work for an association. The name will remain anonymous due to sensitive reason. As the management of the association is ineffective, a restructuring specialist was called in to assess the situation and advise on the executive committee. The advice was given in good faith and a change of the senior management is proposed. Due to emotional or resistance to change reasons, the change was opposed by the committee. This is sweeping the mess under the carpet or refusal to face the reality. In such situations, things do not get better. An organization that is resistance to change for the better will drift along instead of sprint ahead.

Have you ever seen a mother scolding a stranger (or kid) when her own child is in the wrong? This is a bailout. The mother (or the larger entity like the US government) does not punish her child (or US banks like Citicorp) when he or she is in the wrong. The mother (US government) chooses to say “let me protect you” and cover up your mistakes (US banks management mistakes). In this case, the government covers up the mistake by giving funds to the banks.

The US banks have preferred bailouts than restructuring their organizations. I wondered how far they can go if the old management is still in charge of the organizations. Jim Rogers overtly feel that the banks should be allowed to go bankrupt. He felt that bailouts delayed the inevitable change that is imperative. Time will tell if Jim Rogers is right.

What will be the state of the economy in 6 months time?

Forecasting is not my strength and i may be wrong. Public car park at Bishan and Toa Payoh shown that 60-70% of vehicles are not utilized at 8.30 in the morning. The percentage of unused vehicles have increased from 30-40% to 60-70% if my eyesight did not fail me. What this means is that more people are choosing to take bus and mrt to work, rather than drive. It also means that people can hardly afford to pay for the ERP gantry charges and parking fees. If another wave of retrenchment comes, reality bites and they will begin to dump their cars in masses. Even if there is no retrenchment, people will find paying road tax and insurance a waste of money and still sell their cars as they hardly use it. Sometimes the rational decision will take longer as the ego and face-saving still prevail in the average Singaporean. But it will come.

Anecdotal evidence shown that established businesses are closing down as the consumer spending wanes. Nearby Miss Clarity Café (2 years operating ) and Middle Curtains (more than 10 years operating) have both closed. All the best to the new businesses that have taken over the space. More and more shops are now “for Rent”. My gut feel is that business conditions are worsening as the weaker players get weeded out.

The sudden slew of large IPOs like GLP and MIT proved that the storm may arrive in 6-9months. As these large players knew that the window of opportunity to sell high is short, they rushed for the listings.

I suspect Mr. Anthony Robbins economic warning could be right. (Pls google “Anthony robbins economic warning”). Please continue to build your ark and stay tough. All the best buddy.