Sunday, February 03, 2008

2007 Worries about price hikes...2008....

"Road to Recession.....", Newsweek Cover Feb 2008

Frankly speaking guys things don't look too good. The only good thing is the good years weren't too good anyway with those price hikes so how bad can it get when things turn nasty. At least we're not Americans. Here's what the average American household is facing:

Debt at 138% of household income. What is happening in America is something like the Asian crisis - falling currency, troubled banks, collapsed property market and high debt levels. I was in a Mediterranean city on a job assignment last week- the local handmade candy store which I have visited many times before and happily accepted my US$ as a substitute for the local currency....this time the shop keeper gave me that disappointed look when I presented my US$ and said, "Ah...US$ why is it always falling, you know why?". I don't think he will be keeping those US$ for more than a few days.

"What we are not sure about is whether this will worsen into a depression...",
Newsweek Pg 3, Feb 2008

""Is the Fed trying to devalued the US$ to solve the problems, what will happen to the pensioners" - Senator Ron Paul.

People don't ask too many questions on whether an economic system is equitable until they wake up one day and find themselves destitute and without a job or when their retirement savings isn't enough for basic living. As the profits for corporations rose sharply to record levels, wages remained depressed and the American consumer simply borrowed more and more to keep some of them have decided to make the banks pay by defaulting on their credit cards. It is no fun being an average American these days. Many are asking why they are punished for the 'sins' of subprime lenders - the biggest of whom Countrywide Financial CEO, walked away with millions in compensation. Pensioners are asking why the inflation is escalating and eroding their savings as interest rates are cut to bail out Wall Street and its banks.
Your well being as a Singaporean is not just a matter of how hard you work and save but how much bad paper some faraway American bank issues, how one 35 year old "low level" trader can build up $74B worth of stock index futures causing your unit trust to plunge 10% in 2 days when it was dumped and whether Joe in California decides to pay for his credit card bills or defaults on its payment. Unfortunately the global economy means subprime in US results in a subprime economy in Singapore. Last year was indeed a Golden Period, while your bread price climbed 20% and taxi fare escalated to inaffordability, most of us got some kind of pay hike (albeit not enough) and bonus (also not enough). this may be the year we will be glad to have jobs to go and a pay package to live on every month.


Anonymous said...

All nations in this global economy are interconnected economically. Singapore will be affected by what is happening in the US definitely, especially given the fact that Singapore is a highly export-led economy, more so than China according to this Economist report.

However what is important is that our government do what is within its control to secure our economy against such global trends.

Ironically instead of avoiding US-based investments, our government is plunging headlong into them. All indicators show that the US is in for deep troubles. As any asset management company will tell you this is no a time to go into US equities.

Unfortunately Temasek and GIC believe they possess a wisdom not shared by other investment companies. They see golden opportunities when others see high risks.

However if past records are any guide PAP does not have the stuff to make it in the global marketplace. Just take Suzhou Industrial Park and Shin Corp for examples.

Now I hear from an associate who operates a successful business in China that NTUC Fairprice and Comfort operations in China have shuttered down completely. Ask why could NTUC Comfort (now ComfortDelgro actually) could have failed, he told me that because taxi drivers stole their cars by driving into other provinces and disappearing.

If even experienced businessmen find it very hard to make it in China, I don't think the hardly street-smart pappies are the kind of talents capable of managing such business situations. Hence they fail.

PAP should seriously rethink its global investment out-reach before its various bumbling ventures reach a critical mass as to create a very grave fiscal problem for the country.

Lee Chin Suay said...

Suzhou is when investors fail to understand how local and central governance can diverge.

Shin Corp is a not necessary a bad investment, the main reason is political and the funds being a SWF.

With the way countries now perceive SWF, you should be hopeful that Temasek with its speculative high profile buys, they would be more transparent.

For all its duds, Temasek continue to pay dividend to MAS year after year, it may be comforting to know, some of its investment did perform well, just that we can't fathom it.

onlooker said...

Well Most of this world economy sinking stuff is the work of one bush king who profited extremely for the whole fiasco.One thing though if the american wake up and really listen to kunnich and Ron Paul they will survive through this mess probably.If there is no illegal 3rd term.

Anonymous said...

Indeed Temasek being a SWF - and hence its political overtones - has been a key factor for the failure of Shin Corp and SIP.

But does the PAP govt concede this point? No, it continues to aggressively extend its investments around the world.

It may succeed still with US-based acquisitions given the current economic situation there and also because the political clout of Singapore is insignificant vis-a-vis the US.

However the inherent disadvantage of GIC and Temasek of being SWFs continues to hold true in other countries and is likely to worsen rather than improve over time.

I would even think not only potential investments but even some existing GIC and Temasek interests in other countries will from time to time be harassed and attacked by various parties there - politicians, labour unions, communities and even royalties - in the name of nationalism and what not.

This had already happened in Thailand (Shin Corp), Indonesia (Singtel) and lately China (SIA bid on China Eastern Airlines).

yamizi said...

Come on Lucky!

Some of the MPs had just given out ang pow recently in their constituency. We should be happy about it!

Wonder where did the money come from though.

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