On the eve of the public holiday – Deepavali, I took leave today. It feels good to be relaxing on a Monday. I decided to continue where I left behind. In my earlier post, I discussed about the current situation of Singapore economy based on an informal survey, gathered from my own experience as well as collected during chit chat sessions with friends, relatives, business associates across various industries in this country. Since the
world is getting “smaller” today, it is inevitable that Singapore’s fate is
also largely tied to global economy today. Therefore it is important for us to know what is going on in the world today. In particular, the economic outlook in both the world’s number one power (USA) and world’s number one emerging power (China), is of great importance to Singapore.
world is getting “smaller” today, it is inevitable that Singapore’s fate is
also largely tied to global economy today. Therefore it is important for us to know what is going on in the world today. In particular, the economic outlook in both the world’s number one power (USA) and world’s number one emerging power (China), is of great importance to Singapore.
Just like Professor Kishore Mahbubani, Dean of LKY school of public policy,
splendidly put it during a lecture in Harvard Kennedy School this year, when he
mentioned that the world is no longer 7 billion of people living in 193 different ships
with different captains, just like in the past. Today, it is 7 billion of
people living in 193 cabins in one ship. And with no captain. That is why you have
global financial crisis, global epidemic crisis etc.
splendidly put it during a lecture in Harvard Kennedy School this year, when he
mentioned that the world is no longer 7 billion of people living in 193 different ships
with different captains, just like in the past. Today, it is 7 billion of
people living in 193 cabins in one ship. And with no captain. That is why you have
global financial crisis, global epidemic crisis etc.
USA
US has
reported a set of relatively strong economic data lately, with low unemployment
rate (5.1%) and strong consumer spending in the country, despite manufacturing
data weakness persists. Last week, Janet Yellen has hinted on a rate raise
within this year if the data is strong enough to support the hike in December. And note that post rate hike, USD will
likely to devalue, and vice versa!
reported a set of relatively strong economic data lately, with low unemployment
rate (5.1%) and strong consumer spending in the country, despite manufacturing
data weakness persists. Last week, Janet Yellen has hinted on a rate raise
within this year if the data is strong enough to support the hike in December. And note that post rate hike, USD will
likely to devalue, and vice versa!
Is the US
economy really doing well now? Some argue that the data is misleading. The official
unemployment figure only takes into account people who are actively looking for
a job. It does not include people who have lost hopes searching for a job after
months of hapless job seeking. The quality of jobs has also declined, with more
part time jobs replacing the full time professional positions, meaning while employments rise, it does not mean the standard of living is better off.
economy really doing well now? Some argue that the data is misleading. The official
unemployment figure only takes into account people who are actively looking for
a job. It does not include people who have lost hopes searching for a job after
months of hapless job seeking. The quality of jobs has also declined, with more
part time jobs replacing the full time professional positions, meaning while employments rise, it does not mean the standard of living is better off.
Notwithstanding economic data as importance indicator to the US’s economy, in my opinion, the most
important question really is how long can debt continues to fuel US economic
growth? US public debt is >$18 trillion today compared to 7.3 trillion in
2004, where about 1/3 is foreign and 2/3 is domestic. As of Aug 2015, the largest foreign holders of
U.S. debt were Mainland China ($1.27t) and Japan ($1.19t). As of Aug 2015, Singapore is the 12th ranked
holder of US federal debt at approx. $116 billion.
important question really is how long can debt continues to fuel US economic
growth? US public debt is >$18 trillion today compared to 7.3 trillion in
2004, where about 1/3 is foreign and 2/3 is domestic. As of Aug 2015, the largest foreign holders of
U.S. debt were Mainland China ($1.27t) and Japan ($1.19t). As of Aug 2015, Singapore is the 12th ranked
holder of US federal debt at approx. $116 billion.
This means that any mishaps that USA might face,
the tiny red dot will not be spared lightly either.
the tiny red dot will not be spared lightly either.
China
Do you really believe in China 6.9% GDP growth published in the last quarter compared to a
year ago?
year ago?
China is a big country and the figures that make up its GDP are very
complex. It is undoubtedly that some service and consumer sectors are rising,
but the driver of an emerging economy is really the industrial production and
its exports, which are both falling. The one thing that is rising, which is
bad, is inventory level and debts! Six cuts of interest rate in a year tells a lot about the current state of economy China is in, and it will not be surprising if the next rate cut is coming soon.
complex. It is undoubtedly that some service and consumer sectors are rising,
but the driver of an emerging economy is really the industrial production and
its exports, which are both falling. The one thing that is rising, which is
bad, is inventory level and debts! Six cuts of interest rate in a year tells a lot about the current state of economy China is in, and it will not be surprising if the next rate cut is coming soon.
Another potentially
huge problem China faced is shadow banking. In the last decade or so, China has
injected ample of funds into their state-owned-enterprise (SOE) to facilitate
investment-led growth. As the country slows down, many SOEs are heavily in
debts. The same problem of government sponsored enterprises (GSE) took place in
US when the federal government sponsored Fannie Mae and Freddie Mac to stimulate
the home ownerships growth. This created the sub-prime crisis, which will
eventually lead to the GFC in 2008.
huge problem China faced is shadow banking. In the last decade or so, China has
injected ample of funds into their state-owned-enterprise (SOE) to facilitate
investment-led growth. As the country slows down, many SOEs are heavily in
debts. The same problem of government sponsored enterprises (GSE) took place in
US when the federal government sponsored Fannie Mae and Freddie Mac to stimulate
the home ownerships growth. This created the sub-prime crisis, which will
eventually lead to the GFC in 2008.
Marc Faber,
publisher of Gloom, Doom & Boom report during a recent interview with
Bloomberg, said that China is expanding at a real rate of 3-4% and warned investors
of a bubble of “epic proportions” as well as the “very heavy
capital flight” from Chinese investments.
publisher of Gloom, Doom & Boom report during a recent interview with
Bloomberg, said that China is expanding at a real rate of 3-4% and warned investors
of a bubble of “epic proportions” as well as the “very heavy
capital flight” from Chinese investments.
I believe
that China is undergoing the transformation from an export-led to a
consumer-led economy, and during this transition, economy is bound to slow
down, while the longer term future still remain positive as China becomes the world number power! For now, the short
term headwind in China is destined to affect Singapore, since we are the single
largest foreign investor in China.
that China is undergoing the transformation from an export-led to a
consumer-led economy, and during this transition, economy is bound to slow
down, while the longer term future still remain positive as China becomes the world number power! For now, the short
term headwind in China is destined to affect Singapore, since we are the single
largest foreign investor in China.
Europe & Japan
ECB
President Mario Draghi has hinted more QE to come towards the end last month. Perhaps it
has come to a point that if there are no loans, there will be no growth in
Europe? If there is more QE, it also means that Euros is expected to decline?
President Mario Draghi has hinted more QE to come towards the end last month. Perhaps it
has come to a point that if there are no loans, there will be no growth in
Europe? If there is more QE, it also means that Euros is expected to decline?
In Japan,
Abenomics three arrows of 1) massive monetary stimulus, 2)
increased government spending and 3) significant economic reforms fail to hit
their targets. Wage growth is sluggish and Inflation is below central bank
target of 2%. Aside from the failed policy, one of the biggest problems Japan is facing today is demographic
problems. The population is rapidly aging and people are moving out of the
country.
Abenomics three arrows of 1) massive monetary stimulus, 2)
increased government spending and 3) significant economic reforms fail to hit
their targets. Wage growth is sluggish and Inflation is below central bank
target of 2%. Aside from the failed policy, one of the biggest problems Japan is facing today is demographic
problems. The population is rapidly aging and people are moving out of the
country.
Brazil, Russia, India
Both Brazil and Russia are greatly hurt by the falling commodity prices.
Their currencies had fell off the roof with looming inflation problems. As a result there is a great deal of emerging market risks developing. Having said that and on a positive note, with the falling commodity price index, the consumer story in these countries
is still a good one.
Their currencies had fell off the roof with looming inflation problems. As a result there is a great deal of emerging market risks developing. Having said that and on a positive note, with the falling commodity price index, the consumer story in these countries
is still a good one.
With China’s slowdown, India will probably take a share of the limelight
in global growth. Given Indian’s large population and it’s resilience to
adverse economic conditions, it is likely that India will steer its way out of
any potential headwinds ahead, albeit still be affected if any drastic global crisis take place. As of Apr15, Singapore is the single
largest foreign investor in India.
in global growth. Given Indian’s large population and it’s resilience to
adverse economic conditions, it is likely that India will steer its way out of
any potential headwinds ahead, albeit still be affected if any drastic global crisis take place. As of Apr15, Singapore is the single
largest foreign investor in India.
Rolf’s
Thoughts
Thoughts
Without any doubts, the global economic outlook today is definitely not
as rosy as compared to one year ago. I am not going to predict if there will be
a crisis in the next one or two years, because nobody will know. Whether there
is a crisis or not in the roads ahead, we still need to face it. Hence the
whole idea is not about worrying what will happen, but instead the greater
importance is for us to understand, anticipate and then take appropriate measures now.
as rosy as compared to one year ago. I am not going to predict if there will be
a crisis in the next one or two years, because nobody will know. Whether there
is a crisis or not in the roads ahead, we still need to face it. Hence the
whole idea is not about worrying what will happen, but instead the greater
importance is for us to understand, anticipate and then take appropriate measures now.
UNDERSTAND
- How the
world is smaller today and the significance of countries inter-dependency? - What is truly
happening in the world today and how Singapore will be affected?
With the understanding, we will be able to:
ANTICIPATE
- Which events
have a higher chance of happening? - What will
happen to interest rates, currencies, stocks, commodity pricing etc?
And then, we can:
TAKE APPRORIATE MEASURES
- Whether to increase
or decrease expenses/debts and how to plan our financials now? - Where to
invest our money now and in the future, when the anticipated events happen? - How to prepare
and plan for our/or our Children’s future in anticipation of what the world is becoming
to?
BE A CONFIDENT
PARANOID!
PARANOID!
Prime Minister Lee Hsien Loong said this year that he admitted that
Singapore is “paranoid” and constantly worried that it could lose all
of its accomplishments, saying that such concerns are “necessary”.
Singapore is “paranoid” and constantly worried that it could lose all
of its accomplishments, saying that such concerns are “necessary”.
“You
don’t expect to go back to where you were in the 1960s, and yet it is not
natural that you stay at this place. Is it to be expected that the
population of three-and-a-half million citizens and maybe a million foreign
workers will have the best airline in the world; the best airport in the world;
one of the busiest ports in the world; a financial centre which is one of three
or four key financial centres in the world; and an education and healthcare and
housing system which gives us a per capita GDP which is – at least by World Bank
calculations, if you look at PPP (purchasing power parity) – higher than
America or Australia or Japan?
don’t expect to go back to where you were in the 1960s, and yet it is not
natural that you stay at this place. Is it to be expected that the
population of three-and-a-half million citizens and maybe a million foreign
workers will have the best airline in the world; the best airport in the world;
one of the busiest ports in the world; a financial centre which is one of three
or four key financial centres in the world; and an education and healthcare and
housing system which gives us a per capita GDP which is – at least by World Bank
calculations, if you look at PPP (purchasing power parity) – higher than
America or Australia or Japan?
“It is
an entirely unnatural state of affairs, and one which we should count our
blessings for – if not every day, at least (at) every election,”
an entirely unnatural state of affairs, and one which we should count our
blessings for – if not every day, at least (at) every election,”
– PM Lee in
July this year while at a SG50 conference organised by the Institute of Policy
Studies (IPS) and the Lee Kuan Yew School of Public Policy (LKYSPP).
July this year while at a SG50 conference organised by the Institute of Policy
Studies (IPS) and the Lee Kuan Yew School of Public Policy (LKYSPP).
“It is
the Government’s responsibility to be paranoid about the future of Singapore.
But I think that the paranoia is not shared by the population. As the odds are
against the longevity of a small state like Singapore, “you’ve really got
to work extra hard to survive; you’ve always got to be paranoid”.
the Government’s responsibility to be paranoid about the future of Singapore.
But I think that the paranoia is not shared by the population. As the odds are
against the longevity of a small state like Singapore, “you’ve really got
to work extra hard to survive; you’ve always got to be paranoid”.
– Professor
Kishore Mahbubani, Dean of Lee Kuan Yew
School of Public Policy
Kishore Mahbubani, Dean of Lee Kuan Yew
School of Public Policy
Hi Rolf,
You have made perfect use of your day off by alerting us to another frank perspective on the global economy.
I believe we might enter uncharted territory soon with our captain-less ship. We have to be prepared for rough seas ahead. But still not rough enough to stop the occasional Black Swans from paddling across our path.
Conscious awareness of the risks plus a prepared contingency plan might make all the difference to our financials in the near future.
Hi Andy,
Thanks. A ship without a captain is not good, a ship with many captains sometimes can be even worst! haha..
Maybe I should selfishly say, it has nothing to do with alerting others, but just reinforcing my own thoughts via writing.
I can see u r all prepared to sail into the unchartered waters!
Rolf,
Macro top down 😉
May not appeal to those who prefer bottom-up stock specifics; but jolly good stuffs!
Hi Jared,
Macro top down is much simpler compared to bottom up – which like "some uncle" said it's like finding needle in the haystack!
I prefer the easier way out! Lol. Maybe also depends of situation. When the sea is calm, it makes more sense to bottom up, when the sea is gg to be rough (?), maybe top down is better?
How about u? Top down or bottom up?
Rolf,
I am top down; at least judging by the way I check girls out 😉
Haha… how about inside out?
We need Singapore's Water Taps solutions in view of bad times ahead.
Hi CW,
You have so many taps of water! Can lent some? lol
Need to get ready the taps during the good time so that bad time taps r working. If bad times then prepare taps, too late liao…
My earlier blog sg 4 national taps!
https://rolfsuey.com/2014/05/-early-to-achieve-your-own-4.html?m=1
Hi..what should we do in such cases?
Where should we put our money? Where to invest? Stock properties or bonds?
Hi..what should we do in such cases?
Where should we put our money? Where to invest? Stock properties or bonds?
Hi..what should we do in such cases?
Where should we put our money? Where to invest? Stock properties or bonds?
Hi..what should we do in such cases?
Where should we put our money? Where to invest? Stock properties or bonds?
Hi Babe,
U gonna be disappointed w my answer! I am really not in a position to give any advice to anyone except myself. However it really depends on ur approach "top down" or "bottom up".
Anyway, both strategies work if employ correctly. Once u did ur homework, you need to be a strong believer of ur strategy n DO NOT deviate!
For top down, understand how to create a portfolio that is mixture of stocks, bonds, precious metals, cash, n properties that can weather all situation! Understand the word "Patience & Pounce!"
For bottom up, carry on investing on a regular basis irregardless of how the world is. Just find the best company at the right price that will perform over time.
The solution : Be a confident paranoid! Prepare for the worst and yet, knows what to do if the worst arrive!