Sunday, September 21, 2008

Anecdotal Evidence of a very sharp slowdown.....

19 May 2007 : Anecdotal Evidence of Inflation

The anecdotal evidence always show up before govt data. Anecdotal evidence for inflation showed up many months before it showed up in our CPI figure this year.

Yesterday I went for a movie and a walk around Tampines. Mama Mia , the movie based on the highly successful musical of the same name is outstanding. Critics call it the ultimate "feel good" movie. I agree that the movie is excellent especially for people in my age group who grew up listening to ABBA. The problem is there were less than 30 people in the cinema for that late afternoon Saturday show. Not that there were people watching other shows, there was no queue when I bought my tickets. The Billy Bomber restaurant next door was almost empty at dinner time. The Bee Chuan Heng shop where I usually buy my weekly supply of pork floss and bak kwa was empty. I was the only customer for a full 15 minutes at about 7pm. I've never seen traffic so low on a Saturday. The psychological switch for many people must have been flipped sometime in the past 2 weeks.

"You don't go slowly into recession. You leap into it!" - Greenspan in a CNBC interview

The usual Saturday afternoon crowd is missing. I can't find any reason for it besides people cutting back. People cut back when they don't feel job security - perhaps they see the orders at their companies falling. We will get some confirmation when listed companies report their quarterly results in the coming weeks.

It is almost unbelievable how the quickly "Golden Years" have turned to the "lean years". Investment bankers who were so hot last year with one SMU graduate's starting pay hitting $10K a month reminded me of the height of the dot.com bubble when Java programmers were snapped for $10K a month. I always wonder why they need so many "financial engineers" to create products that people shouldn't buy. It is estimated that Singapore finance companies launched several hundred structured products in the past 2 years. Most of them, you should just take the brochure and dump them into the waste paper basket. This website has a good explanation of why you shouldn't buy these products : Link. They have only one purpose - that is to help banks make as much profits as possible. The recession that started on Wall Street has spread to the real economy. Friends in London tell me that it is more like "depression" right now over there in the financial sector. The financial sector resembles the dot.com (aka dot.con) companies of 2000. They produced products that were not needed purely out of greed for money. The whole "wealth management" industry will have far less wealth to manage. I believe it is a redundant industry.

Going forward the best thing to do is be prepared for it:

  1. Work out your debts obligations - example housing loan. How to meet these payments in the worse case scenario. If your job is not secure, you might want to have this loan restructured to lower the monthly payment and conserve cash. Even if these are fully paid with CPF money, you might want to build up a buffer in your CPF OA especially of your savings level is low. For example if you're paying $1000 a month from CPF, you might want to get it cut to $500. Every month that you work, you build up one month of reserve in your CPF should things go wrong. Should you lose your job, your housing loan can be serviced by the money in your OA.
  2. Many people try to reposition themselves to more secure jobs like in the govt or defence sector before the recession hits.
  3. Avoid new commitments like a car for now.
  4. Cash is king during the firesale. Especially for those looking for property recession offers the best bargain. However, this recession may be quite nasty so wait out, hold out and get the best prices.
  5. Try not to rely on others. Friends and relatives. They may end up needing your help rather than giving you help.
  6. If you're running a business that is making losses, consider cutting your losses. Over the years, a number of my relatives got into deep trouble keeping bad businesses that got worse during a recession by borrowing to keep the business going. You really have to firewall your home to make sure that "no matter what", your home is not lost to the banks. It is especially painful if it is seized and sold during the recession. The comeback is hard.
  7. Should things go really bad, be prepared to ask for help. Don't end up with electricity and water cut off. Friends who had that happen to them tell me it is an extremely depressing and demoralising situation - its the day they really think whether life is worth living. I always wondered why they can't send a social worker to the person who can't pay and talk to them rather than just cutting off their water.....it might be the last straw that break his back.

Always plan for the worst case and hope for the best. My gut feel tells me this one will be more nasty that all the previous recessions I've seen in my lifetime. Be ready for it and you will survive.

13 comments:

Anonymous said...

great advice. thanks!

yamizi said...

Thank you Lucky. Actually wanted to get your email and discuss a bit of the current situation.

I'm not expect in the finance but is it right for me to say that retail line will be the first 'laymen' to be hit as the repurssion of this upset financial market spread?

Anonymous said...

Sobering thoughts indeed, one lifetime isn't enough to comprehend the true extend of the situation.

Maybe those beguile by the PAP gahmen will not open their eyes that they substituted greed for credits they don't truly deserve.

I look forward to see how this coming festive season will pan out.

Anonymous said...

if everyone cut back, the economy will spiral downwards even more. some will die with more money we should keep and many will die with barely enough.

when in the night, you will see white clothed people with the man and the sickle in hand.

listen to your mommy, never go out in the dark.

Anonymous said...

thanks for the advice....

Anonymous said...

No no no.. you guys must read the right anecdotal evidence, found in abundance from our States Times. Retail sales are up, people are still shopping like never before! Jobs are still aplenty. Singaporean workers need to upgrade themselves with the right skillsets, in the mean time more foreign workers will help the economy grow and help Singaporean workers save their jobs!

Anonymous said...

U should be in parliament. Ooops! maybe u r already in parliament...

Sunset Stream said...

I agree with your observation. I too believe that this one will be nastier than any we have seen in our lifetime. However, world financial slowdown will have serious impact on our economy though. I don't see just a recession. It will be a depression.

Anonymous said...

Lucky,

Are you sure? I read that our MM had said that Singapore will be immuned to recession because we have China and India to back us up.

I also heard that Singapore's investments in the american banks are for the LONG TERM.

In the long term, we will be fine lah. Just like Merill Lynch and Lehman. I am sure they will still be around in another 5 years?

In the meantime, Singaporeans just need to go for some skills training to kill the boredom of unemployment.

With our Div One gahment working for us, it will be another golden period before you even know it.

Trust our PAP ministers.

Anonymous said...

In the long term, we are all dead.

Onlooker said...

And CPF is still lock in useless places.....

Anonymous said...

heard the PAP ministers are well-buffered against the coming recession (or depression!?).........
from their recent salary hike in 2006-2008.

The rich PAP ministers want to match the 100x salary of Dick Fuld (Lehman Bros CEO)'s market rate salary.

I have a feeling that Singaporeans will feel as lost as those Lehman employees carrying boxes filing out of the New York City HQ building at 7th Avenue one fine day.

21st dec 2012 said...

Lucky, why hang out in Tampines? Come to jurong point lah. The "always big" crowd there will make you feel better.