WARNING!! Is The 2nd Tsunami Wave Here Or Is This Just A Normal Correction?
The 1st Tsunami wave in the stock market happened in 2008. Prior to that, bubbles were observed in February 2007(Singapore stocks dropped by 11.6% because of the 15% decline in China market) and July 2007(further 19.7% slide when MM Lee warned us about the U.S. sub-prime problems and government’s anti-speculative measures to cool the red-hot property market). The final bubble burst in October 2007 and that signalled the start of the 62% decline in STI!!
Since March 2009, we have seen a tremendous bull run, driven more by stimulus plans and bailouts from central governments around the whole world, rather than a solid recovery in the real economy. This year 2010 alone, we have just seen a 9.6% correction in January and till to date a 8.6% decline in STI in 3weeks. I believe the damage has been done, we MAY have just seen the start of the 2nd wave of Tsunami or very strong signals that we are not too far away from it. Several reasons:
1) PIIGS(Portugal, Ireland, Italy, Greece and Spain) debts crisis,
2) U.S. total funded and unfunded debt amounting to about US$130 TRILLION, it may go into double dip recession in 2011
3) China economy maybe over-heating and possible property bubble there
4) Goldman Sach criminal fraud charges imposed by SEC
5) Dramatic increase in Option Adjustable Rate Mortgage(OARM), Agency and Alt-A Monthly Mortgage Resets in U.S. 2nd wave of mortgage resets are around the corner and they are peaking in 2011, thus causing more foreclosures in U.S.
6) Terrorism (a major terrorist activity occur around once every 8-9 years, based on the book “The Great Depression Ahead” by Harry S. Dent, Jr. The last major terrorist attack was on 11 September, 2001.
Fundamentally, Singapore is well prepared for this financial crisis :
1) Opening of 2 Integrated Resorts (IR)
2) Youth Olympic will be held on 14 – 26 August this year
3) Possibility of General Election happening in 2010 (based on history, Singapore stock market has normally performed well prior to the election)
But we have to understand that Singapore is just a little red dot which relies very much on export, we will be badly hit if huge economies like U.S., Europe, Japan, China…etc were to run into crisis again, like what had happened in 2007 and 2008.
Personally, I believe we MAY have just seen the start of the 2nd wave of Tsunami or very strong signals that we are not too far away from it, rather than just any normal correction. I am not saying that the stock market is going to straightaway collapse from here, it may rally along the way and people should be selling into rallies, rather than buying aggressively into the market. If the market slides further, it will be a good time to start doing short-selling to ride the downtrend. Precious metals, like gold and silver are also good instruments for us to protect our wealth and hedge against inflation, which is slowly showing its ugly face.
Above is just my personal view and I have to admit that I may be wrong! I would rather be cautious and defensive now than to be an aggressive buyer into the market. The downside risk is much much higher than the upside potential at this point of the time. Please be careful!
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
“Ring Of Fire” – Bill Gross, No.10 in 25 Most Powerful People In Business And 3 Times “Fixed Income Manager Of The Year”
Bill Gross is the managing director of PIMCO—one of the world’s largest fixed-income asset management companies, with $1,001 billion in assets under management as of the end of 2009. He has being ranked No. 10 in Fortune magazine’s list of the 25 most powerful people in business. In 2007, he was named “fixed-income manager of the year” by Morningstar for the third time in 10 years.
In his February online investment outlook letter, entitled “Ring of Fire”, Gross lumps the U.S. in the “ring of fire” along with vulnerable countries such as Spain, Greece, Italy, Ireland, and the U.K. in terms of investment risk. He said all these countries have government debt approaching 90% of GDP!! And this, says Gross—citing a book by Carmen Reinhart and Kenneth Rogoff called This Time is Different—is bad news, as such high debt levels slow growth by 1% or more, slashing returns on investment and on financial assets.
Gross also cites a McKinsey Global Institute study titled “Debt and deleveraging: The global credit bubble and its economic consequences.” It looks at total debt, public and private, and concludes that countries that enter financial crises with lower initial debt levels can respond far better—explaining why India, Brazil, China, and Canada were relatively shielded from the recent financial downturn.
Gross advises investors to put growth and currency assets in developing economies, especially in Asia. He wrote: “When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come. Look for a savings-oriented economy which should gradually evolve into a consumer-focused economy. China, India, Brazil and more miniature sized examples of each would be excellent examples.”
Similarly, he recommends investing fixed income assets in those same countries if possible, though, since emerging markets have less developed financial markets and lower liquidity, fixed-income investors may need to turn to developed economies. His top choice for now would be Canada, because its “conservative banks never did participate in the housing crisis and it stayed closer to fiscal balance than any other country.” His next choice is Germany. The one to avoid at all costs: the U.K.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Marc Faber Sees ‘No Huge Downside Risk For Gold’, More Sovereign Defaults
Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor said the governments of every developed economy will eventually default on their sovereign debts, so the one thing he will never do in his life is ’sell my gold.’
Potential defaulter include the US, the UK and Western Europe.
Speaking to CNBC in a live interview via telephone, Faber said: “In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due. These unfunded liabilities are so huge that eventually these governments will all have to print money before they default,” he added.
Speaking at Russia’s Troika Dialog Forum in Moscow last week, Faber said: “I’m convinced the US government will go bankrupt, but not tomorrow, and before they do they will print money and you’ll get a depression with very high inflation rates.”
“If you ask me about the correction in the gold market, sure, we already corrected 10% from the peak and it could last somewhat longer. But when I look at Mr.Obama, Mr.Bernanke, Mr. Tim Geithner and Mr. Larry Summers, the one thing I will never do in my life is sell my gold.”
In an interview with Bloomberg Television in Hong Kong on Thursday, Faber reiterated he doesn’t see a “huge downside risk” for gold. “I won’t rule out that gold will go down to US$950 or US$1,000, but I don’t expect more downside.” “I don’t see any scenario where gold will collapse,” he added.
The famed investor told Bloomberg the Euro may rebound to US$1.40 against the US dollar because the currency is currently “oversold” amid concerns over Greece’s deficit, the largest in the European Union. “The region, along with the European Central Bank, will probably “bail out” the country, in turn creating more deficits” he also said.
“When Greece is bailed out, it’s a further indication that paper money is losing its purchasing power because it’s diluted through larger and larger bailouts and more and more deficits,” Faber said. “Now it can rebound to around US$1.40 but more than that, you shouldn’t expect.”
Any other recommendations?
“Other commodities haven’t gone up yet, such as the grains,” he said. “It may take time until they start to go up substantially but if you have time, you should be long wheat, corn, soya beans or own a farm, which is one way to participate in future food price increases.”
The global stock markets, which have mostly fallen about 10%-20% from their peaks, have begun a correction phase that Faber expects to continue. He said he thinks the new resistance level for the S&P 500 will be 1,100, though an oversold market could cause a relief rally over the next ten days.
Faber has said in many interviews that he sees dips in gold as an opportunity to buy some more bullion. But how long can the gold bull market last? “The gold bull market will come to an end when sovereign wealth funds – sick and tired of their investments in financial stocks – will finally purchase gold,” wrote Faber back in January 2008 in his Gloom, Boom & Doom report.
Source: BI-ME (Posted: Thurs, February 11, 2010 6:38 pm)
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
I.O.U.S.A. – One Nation. Under Stress. In DEBT.
U.S. IS IN VERY VERY SERIOUS DEBT PROBLEM!!! It has 4 serious deficits, namely: Budget, Saving, Trade and Leadership Deficits. Take a look at the 30 minute documentary below and you will understand why the days of U.S. been the world’s most powerful economic nation are numbered and we are seeing the giant slowly bleeding to death right in front of our eyes…………
Robert Kiyosaki: Silver is My Number 1 Investment
Robert Kiyosaki, author of the international bestseller “Rich Dad, Poor Dad” and the latest “Rich Dad’s Conspiracy of The Rich” sits down for an exclusive interview with Dan Mangru of Newsmax TV. He tells Mangru why he feels Silver is his Number 1 investment; why socialism will make the middle class poor; why he likes real estate because of debt; effects of inflation and taxes; what he feels about Obama, Federal Reserve, fiat currency…etc.
‘I Expect a Currency Crisis or Semi-Crisis’: Jim Rogers, 1 Year After The Lehman Brothers Collapse
The worst of the economic crisis is not over and a currency crisis can happen this year or the next year, because the problem of too much debt in the system has not been solved, legendary investor Jim Rogers told CNBC, 1 year after the collapse of Lehman Brothers .
The current recovery is just a consequence of the fact that consumption fell so dramatically in 2008 and people have to buy things they need in 2009, Rogers told “Worldwide Exchange.”
“How can the solution for debt and consumption be more debt and more consumption? How can that be the solution to our problems?,” he said. “I would expect there to be a currency crisis or a semi-crisis this fall or next year. It’s crony capitalism, Bernanke and Greenspan have brought crony capitalism to America … but that’s not going to solve the world’s problems,” Rogers added.
There are still “gigantic amounts of horrible, horrible debt that hasn’t been dealt with” in Central Europe, while hopes that China will pull the world out of recession are overblown, according to Rogers. “China saved up a lot of money for a rainy day, it’s raining and it’s spending it,” he said. “But China cannot pull out America or India or Europe from all this. Their economy is a 10th of the US. Hallelujah, let them do good things but they’re not going to save the world.”
“The Federal Reserve has tripled its balance sheet and the US government’s debt skyrocketed, which may cause currency problems next year, while protectionist tendencies have already started,” he warned.
“We’re going to have some serious problems in currency markets, we’re going to have serious problems in the world markets if we see protectionism rising and rising again,” he said.
© 2009 CNBC.com
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