RED ALERT!! It Looks MORE Like 2nd Tsunami Wave Rather Than Just A Normal Correction!
Since my last post on WARNING!! Is The 2nd Tsunami Wave Here Or Is This Just A Normal Correction, it seems that the stock markets, especially the European and U.S. stock markets, are acting like a toy balloon in a room full of razor blades. Even China SSE is not spared, it is already down 31% since August 2009. Worst case scenario is that U.S. maybe set for a rare double-dip recession that will send its unemployment soaring, home values crushing and may trigger another new round of banking and credit crisis.
7 reasons for my pessimism:
1. Sovereign debt crisis leaving investors worried: More and more investors are viewing Europe’s sovereign debt crisis as a sneak preview of the future in U.S. After all – U.S. debts is far greater than the PIIGS (Portugal, Ireland, Italy, Greece, Spain)!
2. High U.S. unemployment rate: Despite everything Washington has tried to do, nearly 1 in 4 American workers is still struggling to get by without a paycheck. Worse: The job growth of recent months has now dwindled to nearly nothing. After 431,000 new jobs were created in May, only 83,000 appeared in June.
3. 70% of the U.S. economy is beginning to shut down: Domestic consumption is responsible for 70% of all economic activity in U.S. – and consumer confidence is cratering. Worse: U.S. retail sales are already plunging!
4. The housing slump in U.S. has returned with a vengeance: New home sales just cratered by 33%, the biggest decline on record. Foreclosures are increasing again, creating new nightmares for U.S. largest banks. Worse: ARM(Adjustable Rate Mortgage) resets just started in May this year and more foreclosures is expected, as explained in my post U.S. Housing Crisis Over? Re-think Again! 2nd Wave Maybe Coming!
5. Most U.S. states drowning in debt, eg. New York, California and others going down for the 3rd time: The 50 U.S. states now have a cumulative deficit of US$127.5 billion. Plus, states have more than US$1 trillion in pension obligations they can’t pay. They must make massive spending cuts to survive - cuts that are sure to impact corporate earnings and stock prices from coast to coast.
6. U.S. economy is quickly running out of gas: The recovery that followed the bear market was bought and paid for with US$2 trillion in government stimulus money. Now, that money is running out! U.S. economy and stock market are running out of steam. And with no new stimulus on the horizon, there’s nothing left to keep stocks from declining. If U.S. goes down, rest assured that the rest of the world will be pulled down as well, including our little red-dot called Singapore.
7. China’s economy maybe slowing down: With Europe as one of its largest exporter, the Europe’s debt crisis is going to hit the demand for Chineses goods.
In my humble opinion, I feel that we have NOT seen the low of the global stock markets and I expect to see further decline from here. Short-selling is the way to ride this current market weakness. In fact, people should consider liquidating their long positions into any rallies, rather than buying aggressively into the market right now. In view of the possibility of high inflation, precious metals, like gold, silver, commodities, natural resources and hard assets are also good instruments for us to protect our precious wealth.
I really hope that I am wrong and I have to admit that I always am! Please be prepared for the worst as we will see more bumpy road ahead!! I want to stress again that the downside risk is much higher than the upside potential at this point of the time. So please be extremely 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.
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.
Christmas Carol for 2008! Merry Christmas! :)
You’d better watch out
You’d better not cry
You’d better keep cash
I’m telling you why:
RECESSION is coming to town!
It’s hitting you once,
It’s hitting you twice
It doesn’t care if you’ve been careful and wise
RECESSION is coming to town!
It’s worthless if you’ve got shares
It’s worthless if you’ve got bonds
It’s safe when you’ve got cash in hand
So keep cash for goodness sake, HEY!
You’d better watch out
You’d better not cry
You’d better keep cash
I’m telling you why:
RECESSION is coming to town!
Finance products are confusing
Finance products are so vague
The banks make you bear the cost of risk
So keep out for goodness sake, OH!
You’d better watch out
You’d better not cry
You’d better keep cash
I’m telling you why:
RECESSION is coming to town!
HO! HO! HO! Merry Christmas! 
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