COE prices and stock market prices both measure the bubble in the real economy.
Recently, COE prices for 1.6 L cars hit a new high at $90,000. Stock market volume yesterday hit a high of 5 billion and only $900 Million in value. (Usually, they are of similar figures like e.g. 5 billion in volume and $4.5 Billion in value). This implies that market is about to turn south soon in the COE market and stock market.
A recent time both COE prices and stock market prices both hit a low is in year 2009 February. COE prices for small car are about $5,000. Stock market high a new low too. At that time, stock market index was only 1,500 compared to today 2,900.
We shall check further if this theory is right.
Tuesday, April 24, 2012
Tuesday, April 17, 2012
A trip and analogy
A trip and analogy
A trip with my mother to the bank recently really proved a theory- An experience on a trip will tell you what your partners really are in character.
During this trip, my mother who is unsure of the route (unsure of her purpose in life), walk faster (loves to win) than me and is about 30-50m ahead of me (her ego is big). She does not ask me which way (does not take instructions) and I have to shout to her to tell her that it is another way, before she turned away. By walking alone in front me, she is focused on herself and neglect the group with her. During the trip, she offers her help to carry baby, and I rejected because it is very tiring for a 71-year old lady.
Upon reflections, I realized that my mum is unsure of her purpose in life and she does not take instruction from anyone. She must win and hate to lose. Her ego is so big that she focused on herself and forgot about her group with her. She does things herself and neglect the team. She loves to help others. I learnt that I m considerate because I spared a thought for my mum and reject her help not because she is unable to help but it is very tiring to carry a 10 kg baby over a long distance.
A trip with my mother to the bank recently really proved a theory- An experience on a trip will tell you what your partners really are in character.
During this trip, my mother who is unsure of the route (unsure of her purpose in life), walk faster (loves to win) than me and is about 30-50m ahead of me (her ego is big). She does not ask me which way (does not take instructions) and I have to shout to her to tell her that it is another way, before she turned away. By walking alone in front me, she is focused on herself and neglect the group with her. During the trip, she offers her help to carry baby, and I rejected because it is very tiring for a 71-year old lady.
Upon reflections, I realized that my mum is unsure of her purpose in life and she does not take instruction from anyone. She must win and hate to lose. Her ego is so big that she focused on herself and forgot about her group with her. She does things herself and neglect the team. She loves to help others. I learnt that I m considerate because I spared a thought for my mum and reject her help not because she is unable to help but it is very tiring to carry a 10 kg baby over a long distance.
A clearer vision
The picture of what is coming in the next 2 years is getting clearer.
In the next 6 months, three key issues will force the central banks in Europe and USA to print more money to stimulate the economy.
1) Baby boomer generation folks in Europe and USA begin to withdraw their funds from their retirement accounts. However, as they spend prudently, the economy is not boosted.
2) Record youth unemployment rate which result in more social unrest.
3) To weaken their currency and strengthen their exports
This stokes inflation and worsen the economy. Large companies face collapse and funds will leave USA and Europe for safe heaven in Asia. US$ to S$ weaken to 1:1
To arrest inflation and USA and Europe hike interest rate. This stemmed the outflow of funds to Asia. US$ to S$ rise 1: 1.6. Asia increase rate but not as high as USA.
The rise in interest rate in US and Asia, caused massive deleveraging. Companies and government downsized to cope with the reduction in demand. Many Jobs were restructured and lost. Many homes, cars, investments were force sold as consumers could not afford to pay the monthly installments. 5 years passed and things got better. Stock and property market rebounded.
The strongest of the US banks and Europe banks survived the financial crisis and thousands of weakest banks closed.
In the next 6 months, three key issues will force the central banks in Europe and USA to print more money to stimulate the economy.
1) Baby boomer generation folks in Europe and USA begin to withdraw their funds from their retirement accounts. However, as they spend prudently, the economy is not boosted.
2) Record youth unemployment rate which result in more social unrest.
3) To weaken their currency and strengthen their exports
This stokes inflation and worsen the economy. Large companies face collapse and funds will leave USA and Europe for safe heaven in Asia. US$ to S$ weaken to 1:1
To arrest inflation and USA and Europe hike interest rate. This stemmed the outflow of funds to Asia. US$ to S$ rise 1: 1.6. Asia increase rate but not as high as USA.
The rise in interest rate in US and Asia, caused massive deleveraging. Companies and government downsized to cope with the reduction in demand. Many Jobs were restructured and lost. Many homes, cars, investments were force sold as consumers could not afford to pay the monthly installments. 5 years passed and things got better. Stock and property market rebounded.
The strongest of the US banks and Europe banks survived the financial crisis and thousands of weakest banks closed.
Tuesday, March 6, 2012
A stark contrast of outlook
At this point in time, senior management of established companies like Boustead, Lee Metal, Hoe Leong are being cautious in the outlook for the next 2 years. In stark contrast, people are very optimistic about their future. Their optimism has spilled over to the housing and car market. So much so that the HDB flat cash over valuation has even hit $50,000. This $50,000 is the cash forked out by buyers, which does not include agent fees, lawyer fees. Car COE (certificate of Entitlement) has reached $57,000. This piece of paper to buy a car has probably exceeded the cost of manufacturing the car.
Only one party is right. I choose to stick with the senior management of established companies because of their experience and knowledge of their business. Every decade has excesses which will eventually be cleaned up. This decade is no exception.
Will the buyers of HDB flats, condominiums and cars suffer buyer’s remorse in later years? Time will tell us.
Only one party is right. I choose to stick with the senior management of established companies because of their experience and knowledge of their business. Every decade has excesses which will eventually be cleaned up. This decade is no exception.
Will the buyers of HDB flats, condominiums and cars suffer buyer’s remorse in later years? Time will tell us.
Thursday, March 1, 2012
An example of deleveraging
I would like to use my neighbor example to illustrate an example of deleveraging.
My neighbor used to own only a Mercedes. When his children started working, each of them owns a luxury car. I saw a BMW, Sports car, a Toyota Camry, a sports utility vehicle, a 7-seater 2-litre car etc. After the financial crisis in year 2008, many luxury cars disappeared in the blink of an eye and are replaced by a 2nd hand vehicle. A year later, even the house was sold.
This is an example of deleveraging.
I suspect the past 6 years of excesses in cars, houses, will go through this process of deleveraging.
My neighbor used to own only a Mercedes. When his children started working, each of them owns a luxury car. I saw a BMW, Sports car, a Toyota Camry, a sports utility vehicle, a 7-seater 2-litre car etc. After the financial crisis in year 2008, many luxury cars disappeared in the blink of an eye and are replaced by a 2nd hand vehicle. A year later, even the house was sold.
This is an example of deleveraging.
I suspect the past 6 years of excesses in cars, houses, will go through this process of deleveraging.
A suggestion to help our people
My sixth sense flashed an idea to help the people here. Every block of flat has about 100 families. Each block can elect 5 village chief or assistants or ( block chief) to assist needy families with unemployment issue, family conflicts, financial difficulties, marriage problems or addiction issues. If these volunteers are busy to help, the needy families can seek help from adjacent block chiefs.
Our flat void decks has plenty of spaces for us to build business centers to help small business to grow into future Google, Apple, Microsoft.
We have plenty of elderly and teenagers who can help to paint motivational slogans, beautiful paintings or anything that interest them on our void deck walls.
Our flat void decks has plenty of spaces for us to build business centers to help small business to grow into future Google, Apple, Microsoft.
We have plenty of elderly and teenagers who can help to paint motivational slogans, beautiful paintings or anything that interest them on our void deck walls.
The collapse of Europe
What does the collapse of Euro means to the rest of the world?
A cascading effect that will flood the USA, Asia and the rest of the world with bad news, interest rate hike, company restructuring, retrenchment followed by a collapse of the car resale market, stock market, housing market and bond market. Usually, the stock market will react followed by real economy like car resale market, bond market and housing market. This is similar to a household deleveraging. What are the items to be sold first? First in line is stock, bonds, cars, boats and lastly houses.
I hope that the process will be quick and painless for many people though I doubt so. God bless us.
A cascading effect that will flood the USA, Asia and the rest of the world with bad news, interest rate hike, company restructuring, retrenchment followed by a collapse of the car resale market, stock market, housing market and bond market. Usually, the stock market will react followed by real economy like car resale market, bond market and housing market. This is similar to a household deleveraging. What are the items to be sold first? First in line is stock, bonds, cars, boats and lastly houses.
I hope that the process will be quick and painless for many people though I doubt so. God bless us.
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