Beware another recession - all look very familiar

[Ben5266]

  On 4/19/2011 at 3:16 AM, Throttle2 said:

actually many folks including myself, can easily challenge the way, your single dimension calculation is done.

 

but my question is , have you done it / are doing it?

On the day, when I am jobless for extended period, I will move my family to my 4rm hdb flat.

I need not sell my condo as it generates positive cash flow for me every month.

After another 16 years, the condo is fully paid and I can pass it to my children.

[Ben5266]

  On 4/19/2011 at 3:06 AM, Throttle2 said:

Recession, nothing to be scared of, .....if you are a "cash based" person...

 

but if you are a "loan based" person, wish you beri good luck.

True. But cash based person's risk is Hyper-inflation.

Hedging is key. Not not many knows, including some so call financial consultant.

[Throttle2]

OK....

[Chucky2007]

  On 4/19/2011 at 3:17 AM, Throttle2 said:

good for you so sell loh, waiting for what.

until realised, profits are little different from losses except adding a smile on your face

Of course selling.. seller st amp duty is over for my case next month. Starting to meet agents already

[Altivo]

why would anyone buy Hougang Green? That's one of the worst looking and badly designed condo.

[Ben5266]

  On 4/19/2011 at 3:30 AM, Sabretan said:

Raised Bank Interest Rates to 5 % n c how many jokers start losing money on their "investment yield instrument". These jokers will not have e capital to hold on to their property investment (at least majority of them) n have no choice but to dispose of them asap else they will be having a negative yield or cash flow. Those who act fast will be able to cash out of their prop w some profits...the slower ones will realize that many of their counterparts who r playing e same ball game due to attending most likely the same property talk seminars by some gurus (on how to earn millions thru property investments) will be burnt....

 

 

But don't worry....a few years or so down e road, the cycle repeats itself...that's why we have property boom n bust. LOL. Some will go bankrupt, some may commit suicide, some will gain, some will become filthy rich...Welcome to the School of Hard knocks.

It sounds easy to raise interest rate.

But interest rate is directly link to risk. High risk, high interest rate.

Current low interest "strategy" is meant to pro-business. To attract business investment and to encourage consumption.

But.. in Singapore, the side effect is, the money goes into property.

Housing loan is one of the lowest risk for a commercial bank. And commercial bank needs to maintain a risk level that is required by MAS.

MAS cannot go after bank for allocating too much fund into property segment.

 

Any banker, feel free to correct me if I am wrong here.

[Good-Carbuyer]

  On 4/19/2011 at 1:13 AM, Park88 said:

Unit at Hougang Green hits $809 psf

11 April 2011

ChannelNewsAsia

Homes in suburbs such as Simei and Buangkok are enjoying a resurgence of interest owing to their affordability and accessibility as new malls and MRT lines are built. The appreciation in the prices of such property is prompting some homeowners to cash out at a profit.

 

In Buangkok, prices at the 99-year leasehold Hougang Green recently hit a peak of $837 psf in February when a 764 sq ft unit on the 10th floor was sold for $640,000. This comes after the launch of a new executive condominium development a few streets away

[Old-driver]

  On 4/19/2011 at 3:16 AM, Throttle2 said:

actually many folks including myself, can easily challenge the way, your single dimension calculation is done.

 

but my question is , have you done it / are doing it?

Always easy to say on paper, but in reality how many really do it?

[Enye]

  On 4/19/2011 at 3:26 AM, Throttle2 said:

yes and no.

 

but I dont make my decisions base on another person's decision.

 

thats my take

 

I don't mean you. I mean this type of single dimension mathematics mentality is so prevalent in the property market right now.

 

Nobody wants to believe that rental market will drop once more supply comes on stream.

 

Nobody wants to believe that interest rate will most certainly go up. Only matter of time.

 

Everyone wants to believe that their positive cash flow now will last for the next 30 years and they will own multiple properties when they retire.

[Park88]

  On 4/19/2011 at 1:34 AM, SimonTan said:

Just look atht he properties prices in HK and China.

Singapore is still very cheap.

There is a huge group of china businessman....that will dump their money on singapore properties. If the situation goes bad in Chinda due to recession, these businessman will divert all their money to SIngapore properties.

Properties wont die one!

 

If scared...then vote for Marlborol...he will die die sustain the property for another 5 years term.

The foreigners who buy here are usually those who have a primary property back home

so here is an investment

 

just like the sail

there is a group of investors who have bought a number of units

the sell to each other at a higher price

thus raising the base price of the flat

they have already done it and

made so much profit

it is the silly people like myself

if not careful

will go it

because itchy cannot tahan see other people making easy money

 

 

one to bet property wont die

 

it goes in cycle

of course property will not die

but you (buyer) die

 

[Avant_stealth]

  On 4/19/2011 at 5:23 PM, Park88 said:

of course property will not die

but you (buyer) die

 

i like this sttment

[Zangetsu77]

Singapore won't enter recession independent from the rest of the world, unless something happens locally which derails growth, like a major viral outbreak of SARS/bird flu, or some terrorist detonating a nuclear device or blowing off Shenton Way or Orchard Road or Sentosa. Even if incumbents lose the upcoming GE, there will at worst be a short term sentiment dip with some knee jerk dumping of assets and equities in Singapore by foreign investors, but rest assured that systems and processes set in place over the years will carry on running (that's the fundamental concept of a system or process, no matter who operates it, it runs).

 

However, on a macro level, the key risk is the complex of Western debt with loose monetary policy.

 

For the last decades, US in particular had been the unanimous "Big Brother" of the world, deploying troops to every part of the world that had unrest or disaster, establishing military bases overseas, spending more than their means, issuing US debt to finance their expenditure, and allowing systems to become excessively leveraged. Of course, this eventually resulted in Lehman's, when the mortgage market went berserk after several years of ultra-low interest rate policy and excessively loose liquidity (imagine retirees flipping properties to raise cash for bypass surgery, or buying properties to receive a rebate to finance a balloon angioplasty). Yet if we retrace the sequence of events, Greenspan loosened the monetary policy and created this bubble as a solution to the bursting of the Tech bubble.

 

Now, the global political paradigm has shifted. We now have economic strength in the BRIC. China in particular is the world's largest owner of US treasuries, and the biggest subscriber to US debt after Japan (China's US treasury holdings at US$880B, Japan at US$700+B). China basically helps to make USA solvent by buying the debt. Yet, all of BRIC depends on Developed Markets (DM) consumption to sustain their export growth. Asian EMs may have high savings and low debt rates, but consumerism culture don't exist in the richer older generation (in general), and hence China + India needs the DMs to buy stuffs (Russia makes oil and Brazil makes commods so the dynamics are quite different).

 

What has Bear Bernake done to resolve Lehman's? No magic formula:

 

1. Bring interest rates to zero or close to it

2. Issue more debt

3. Pump money into the system

 

QE originally served the purpose of injected much needed liquidity into a frozen financial system (whereby banks were scared to lend money to each other, coz nobody knew who was in worse shyt), but QE II's impact is quite doubtful. Did it really help the US economy to recover? Does the liquidity filter into jobs creation, through SME loans creation in US??

 

Personally i think it didn't. What essentially happened was and still is USD carried trades:

 

1. Institutions draw down on USD loans, and convert it into high interest yielding currencies, like AUD, NZD (commodity producing nations), and Asian EM currencies (SGD included)

2. This liquidity consequently may appear directly in the financial systems as liquidity (easy bank loans, over-drafts, credit cards, SME financing etc.etc.)

3. This liquidity fuels economic growth, some jobs creation (in Asia), asset price appreciation (including properties and stocks)

 

I don't believe anyone (including Ben) knows what's the real impact of QEII on Asian EM growth. So when liquidity is withdrawn with the end of QEII (June 2011), what's the real impact on stocks, properties, commodities and fundamentally economic growth on Asian EMs and commodity producing nations? Don't know, but my gut feel is a soft landing.

 

However, do note this - Alan had an ultra-loose monetary policy in the 90s to pull USA out of a recession, and as inflation set in there, he tightened monetary policy and upped rates. USD started to rise, and there was a massive repatriation of USD from Asia, resulting in the Asian Financial Crisis in 1997. Hedge funds exemplified by pple by Soros saw the instability this created, and took the opportunity to further short the Asian currencies. When you whack it down hard enough, property prices collapse, and with it, banking systems. Imagine if all properties were 50% of valuation overnight - all the banks (accounting-wise) will suddenly have a lot of deficit on their balance sheets, they'd by legislation be forced to ask clients to top up, properties get seized and hey, guess what, nobody is around to buy, coz practically the majority of buyers are whacked out. Just that now, the global economy is more balanced with less dependency on USA, and in Asia we are fundamentally a lot stronger.

 

Nevertheless, you can't discount a softening brought about by the cessation of liquidity in Asia coupled with rising interest rates. Which is actually good for Asia when viewed in solidarity.

 

Can US and Europe actually digest the interest rate hikes and liquidity cessation? Partially probably, but the balance is frail. Fundamentally, their recovery is frail. Look at US housing now and compare it with historic data. Basically property prices have crashed there, and people choose not to buy properties, and a lot of employed/re-employed people don't earn enough to buy properties yet. That's both sad as well as a sign of fundamental weakness.

 

This is where issues like MENA unrest, energy price escalation and Japanese supply chain disruption and demand destruction comes in to further exacerbation the problem, although only a true supply disruption in crude (like Saudi or Kuwait gets whacked out) will likely tip the global balance back into recession.

 

Finally we can go back to examine the increasing strength of China in particular, and how this impacts the present state of things. It's quite amusing that S&P decided to downgrade the US outlook on the debt concerns. Now US has to digest austerity as well. Can you loosen monetary policy and embark on austerity concurrently? Fundamentally, if your income growth is slow, can you borrow more and more money (even if rates are low), and try and compensate by spending less? Interesting, and i haven't got an answer myself.

 

But what's clear is China ain't gonna take this lying down. They have been selling US treasuries consistently over the last 8 months. They probably bought in to keep the system solvent globally, when the world needed it. (Japan on the other hand has shown immediate support because we all know US will have to be the biggest buyer of Japanese debt when they do the fund raising to reconstruct Japan). Now that the Americans have down-graded themselves, will China take the opportunity to unload some more US treasuries and opt for safe havens like gold/silver or alternate currencies (e.g. SGD??). Certainly, but real question is how, when and how much. Unlikely for them to dump, but they will certainly continue to sell US treasuries, soften USD, strengthen RMB by default, and life goes on. There's always a small risk of a contagious selling down in US treasuries and bonds, which again fundamentally may have catastrophic consequences (if US cannot raise debt, how???). Anyway, if i were China, i would sell suddenly on the bond market before a long weekend, and then announce it on the weekend catching USA off-guard... Like Good Friday???

 

So on the macro, there are multiple independent reasons for a soft landing, and when coupled together, do we get a hard landing/decoupling??? Geez... Dunno man... But soft or hard, i think it's still a correction until the next reaction from US.

Edited April 19, 2011 by Zangetsu77

[Sabian]

  On 4/19/2011 at 3:49 AM, Ben5266 said:

Housing loan is one of the lowest risk for a commercial bank. And commercial bank needs to maintain a risk level that is required by MAS. MAS cannot go after bank for allocating too much fund into property segment.

 

Really? Wanna run that "lowest risk" theory by the Americans, especially those who up stakes to join Morgan Stanley, Lehman Bro and Goldman Sachs so as to earn market rate?

 

Did Tharman tell you something he did not tell banks?

Edited April 20, 2011 by Sabian

[Ben5266]

  On 4/20/2011 at 4:49 AM, Sabian said:

Really? Wanna run that "lowest risk" theory by the Americans, especially those who up stakes to join Morgan Stanley, Lehman Bro and Goldman Sachs so as to earn market rate?

 

Did Tharman tell you something he did not tell banks?

Could you please explain, why housing loan is only 2% and loan to SME is 6%?

The 4% extra is not Risk? Of purely profit? Please enlighten. Thanks.

[Sabian]

  On 4/20/2011 at 6:51 AM, Ben5266 said:

Could you please explain, why housing loan is only 2% and loan to SME is 6%?

The 4% extra is not Risk? Of purely profit? Please enlighten. Thanks.

Banks have exposure limit they have to adhere to.

 

The interest rate only reflects the difference between a collateral (in this case, property) and another loan without one. Banks cannot go 100% into property loans as you suggested. See how the Spanish banks are paying the price.

 

If the SME can put up an acceptable collateral, the interest rate will also be lowered.

Edited April 20, 2011 by Sabian

[Ben5266]

  On 4/20/2011 at 7:20 AM, Sabian said:

Banks have exposure limit they have to adhere to.

 

The interest rate only reflects the difference between a collateral (in this case, property) and another loan without one. Banks cannot go 100% into property loans as you suggested. See how the Spanish banks are paying the price.

 

If the SME can put up an acceptable collateral, the interest rate will also be lowered.

So, I think, the local bank, has allocated too much fund to housing loan with low risk =>low interest => low margin. They need to up their margin by pushing the 6% loan.

It is not surprising that our MAS has done a better job than the Spanish by setting stricter rules.

DBS also almost xxx right if without the injection of fund from POSB during Asia financial crisis?