MANY PEOPLE were euphorically buying back into equities in the last 2-3 weeks, lured by an illusion that Europe and U.S could resolve their deep-seated economic malaise overnight.
The Singapore benchmark index rose from 2528.71 points on 6 Oct to 2905.72 points on Oct 28 last Friday for a total of 377 points.
However, after years of robust growth, the world economy is in total disarray. No amount of QE (quantitative easing) will resolve the imbalances in major economies.
Enormous collective political will power from the U.S. Europe, China and Japan is needed to avert the looming crisis which challenges the form of capitalism that has survived the 1929 Great Depression.
The developed economies today are mired in huge debt and the unemployment rate is stuck at the 9-10% level. Most Governments are running out of policies, fiscal, monetary or otherwise, to keep the economy going.
QE2 was a clear failure, creating high inflation in China and the rest of Asia. I think the world will enter into a prolonged period of stagflation as experienced by Japan in the last 20 years, often referred to as the 'lost decade'.
On a personal level, I have pulled out entirely from the equity market some 2 months ago and have no regrets.
I purchased properties aggressively in 2007 when real estate investment in Singapore was quiet and prices were much lower than they are today.
In anticipation of a property glut in 2-3 year's time, I am now contemplating selling one of my properties.
Today, people are crazy chasing their dream homes or buying properties for investment.
But please note that in 2007, prices of Capitaland and City Developments reached a high of $7.13 and $17.90, respectively, and prices of these two respectable property counters are considerably depressed today.
I also wish to highlight the wild swing in gold price - it fell more than 10% from the peak in Sept 2011.
This tells us that a in a crisis, investors may still prefer to put their monies in US Treasury Bills as a safe haven as an alternative to GOLD.
SGS 10-year notes hit a bottom with a yield 1.5% p.a. not long ago. I think the financial market can get worse before it gets better.
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Comments
growth worldwide will last for a long time.
Thanks for sharing.
I prefer these 3 Reits for their large capitalisation, asset quality liquidity.
Very insightful and clear.
Just one question on REITS, noticed u prefer Ariet, CMT, Suntec,etc, why not Industrial REITS like AMP, Sabana, Cache? They offer 8-9% returns?
Currently I am staying in a landed property which I bought for 900k and is worth about 2.5m now. It is fully paid up.
I have also about 1m in the CPF which I can withdraw anytime I want as I am above 55. I feel that the interest at 2.5% is too low and I do not know whether I should take it out and invest.
I also have about 200k cash sitting in the bank earning pittance in interest.I have a share portfolio of 200k in Singapore and 700k RM invested in Malaysian equities.
What is your advice regarding my portfolio as I think I may have been too conservative.
Europe is doomed, in my humble opinion. We are going to have a few years of winter. Money can of course be made in winter. But it will be hard-earned money.