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Wed, 02/13/2008 - 21:22
2008, the year of the Rat, seems to be a rather wretched year.
Pessimistic? Not quite. Let's see what we have.
- Fall out from the subprime crisis...
- Credit crunch and negative GDP growth in the US...
- Downtrending stock market globally (time to short!)...
- Rising oil prices and inflation...
...all point to a impending recession!
Doom and gloom? Or false alarm?
What do you all think?
The fact is nobody knows... And normally when the figures are out to confirm it, the recession is probably on its way to recovery.
But one recent news has grabbed investors/traders attention:
Warren Buffet is the one who warned multiple times of a recession imminent this year... But few days ago he was willing to aid the market by reinsuring $800 billion of municipal bonds. Does it mean that the bottom is near? Well it sure got the markets attention for 2 days...
Down trend is still obvious. Singapore market has been on a bull market since 2003. All technical indicators point to a bear - for the time being.
So be real careful.
Some people said that, with the US presidency election round the corner, the institutional boys and fed reserve will not want to let the market fall.
The new president will need to sell hope to the people... So there could be some interesting developments ahead... We will see...
Recession? Anyway is a cycle for the global market with a time frame 4-6 years. So we have to invest wisely and make good money during the right time.
Recessions have their degree of magnitude, there's probably not much we can do to prevent the economy from crashing or another great depression ...
This thread is sounding all too gloomy, like the weather here these days... haha
with some of the largest banks looking pale, it's probably wise to look at the right banks and accounts to park your lifetime savings
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Hindsight is always 20/20 - Dilbert
Hi dclas0827
You are right. Market moves in cycle. Truth is one can profit from all periods - whether in bear or bull market.
Timing is everything here. In bearish times, shorting can be a good option. It can also be an opportunity for value investor to pick up beaten down but fundamentally good stocks on the cheap. But beware of the falling knife though. Do consult the chart. Mr Market suffer no fools!
In any case, the gold, silver, platinum, oil and the commodities are all rising. A large part of this trend is due to scared stock investors moving to other "greener" pastures to hedge their risk from the falling stock market.
It seems like a pretty good time to take advantage of the rising momentum. Opportunities are aplenty!
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"The point is, ladies and gentleman, that greed - for lack of a better word - is good..."
Seems like the recession is already here!
Alan Greenspan remarks that market crisis is the worst since World War II !
http://www.channelnewsasia.com/stories/afp_world_business/view/335596/1/.html
The Age of Turbulence indeed...
Mike
Recession is definitely coming to United States and spreading from there. We in asia will not be feeling much of pinch as theres not much direct impact from US sub prime market. However with sub prime market collapsing even some of the biggest hedge funds and banks, it will encourage the caveman behaviour to manifest.
With reduced spending, as US has one of largest market around, it means less imports from other countries in turn affecting the export of other countries. More or less, we will be affected.
However generally what we see now is the herd behaviour. Following the crowd will get you no where, you are basically just a follower. However for Warren Buffet, he sees opportunity in times like this as blue chips are at one of the lowest prices. How long can a recession last? 5 to 10 years? with his foresight and wealth, theres no way for him not to last this period.
After this period, what happens. He gets even richer when those companies he bought prosper. Now is the time to buy and hold. However do not panic and sell when things turn bad. its only temporary.
Just went to a talk recently. The speaker said it depends on how recession is defined.
Hi Laiwf82
Care to elaborate more about what the speaker says ... ie the definition of recession in his context?
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.
She said that a recession is a decline in a country's GDP for two or more successive quarters of a year.
Yep. That is correct.
In the US, this is already happening. Add on the inflation rate and huge trade deficit (no thanks to the war in Iraq), there is no doubt that the US *IS* already in recession.
Jag
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"The point is, ladies and gentleman, that greed - for lack of a better word - is good..."
Gordon Gecko, "Wall Street", 1987
The saying goes, " if USA sneezes the whole world catches a cold." Being the world largest consumer economy buying over two thirds of the world's produce, the sub prime issue will inadvertently hit Asia, not to mention Singapore. There should be no debate if the recession is coming, the debate should be how hard and how long will the recession hit Singapore.
Recession is coming. We should move to ask questions like "what should we do to ride out this recession?"
We should look at our bottomline, making sure we do not over commit on liabilities now like taking on additional loans.
we should look at our cashflow, for the employed it means that paycut and retrenchment maybe round the corner so savings to ride out this recession is important. Rule of the thumb, you need 3 to 6 mths of expenses some prefer 3 to 6 months of income. This rule of thumb is only a "rule of thumb" so one should plan what is appropriate for themselves, i.e. the self employed may need 12 mths of expenses instead.
We should look at our investments; is the investment portfolio that you have resilient to the market down turn? what can be done now to prevent or "soften" the impact of the recession on your investments?
These are important issues to consider when we are faced with the threat of recession.
However there silver linings for Singaporeans, although our stock markets have a rather high correlation coefficient (some know this as R square) with the US stock markets, our economy is being "pulled up" by several major events that is coming our way. The F1 race, the Iskandar project, the itegrated resort, new shopping complexes, the youth olympics, the development of the new national stadium etc all these spells exciting times for singapore, and it has been awhile since singapore experienced such rapid developments. All these will help counter the recessionary pressures from the US.
But again will it be enough so that we remain unscath? It remains as an answer only to be revealed as we go along.
Excellent question.
How can we survive and even profit in the declining economy and stagflation (period of both inflation and flat growth)?
On the government side, they can look to
With lesser money supply and restricting of credit, we can reduce inflation and drive prices back down.
Lowered taxes helped to encourage productivity and economical growth.
For us consumers, we can look to:
Viable investments to consider:
Jag
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"The point is, ladies and gentleman, that greed - for lack of a better word - is good..."
Gordon Gecko, "Wall Street", 1987
someone once told me that buying bond funds is a good investment during or likely recession, is it still a valid recommendation in the current situation?
Generally, in a recession, the stock market takes a hit.
Alternative investments like Bonds which are debt instruments, traditionally gives higher return, during this period.
Especially junk bonds. But there is a higher risk for junk bond though as company may default on payment.
Jag
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"The point is, ladies and gentleman, that greed - for lack of a better word - is good..."
Gordon Gecko, "Wall Street", 1987
Jag is right, in recession times, bonds gives a better return as they have lower risk as compared to equities.
Looking on the far side and long terms, equities earn more as compared to bonds but you have to put for quite a while to see the returns.
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Contest theory: More entries = More chances - Concept of Probability.
Time & Tide waits for no Man.