Monday, December 8, 2008

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Recovery from Recession a long, long one

Posted by Concerned Singaporean in the Singapore Property Forum

We can roughly said that there are some events which will likely to derail whatever efforts the world governments have done. The repercussions to the world and small city like Singapore will be very serious:

1) the financial system in the world have been broken so severely that it impairs the US and Europe economy ability to relevage and completely mute the strength of its cyclical recovery. These are major economies and the richest of the richest in the past. THis is very bad for Singapore who is totally dependent on the two sinful casinos and constructional activities to spur economic growth and jobs. Singapore do not have a motherland like HK or Sydney to fall back and we are just compliant citizens and not entreprenuers. We need the government to hold our hands.

2) as more jobs are lost (soon in millions) in major economies, it is a liquidity trap and any fiscal or interest cuts have no effects resulting in fear and people not spending or hoarding cash. More layoffs is coming to Singapore as Singaoreans will be hard hit. Worst in Singapore, people are heavy in assets and as they age and easily "kiasu" they become more conservative, lonely and withdraw, not willing to spend. They will save for fear of ill health (high hospital bills) thanks to our non-welfare state.

3) the US is now a debtor nation and owes the rest of the world more than US$2trillions. the US$ can crash and there is a real risk of a major currency crisis as investors shun dollar based assets resulting in more deflation of assets denominated in US$. Another crisis is now looming as the rise in US$ is too steep like another bubble in the making.

4) Look at China, yes mighty and GDP of 7 to 9 % growth even at this time. But they have to generate 24m jobs every year. It is a very difficult country to manage (nothing compare to managing Singapore) and how you expect a slowdown will bring jobless youth and workers there with no social problems in a billion population country? Factories after factories are closing and some places are ghost towns and white elephants. Dont forget the Chinese are smarter and sophisticated than compliant Singaporeans and their talent is unlimited. We have so much investments privately and publicly there. The repercussion is unimaginable and our country could be swamped by them and rich and educated FTs.

5) we have invested so heavily in ailing overseas banks and corporates overseas at a "rock bottom" prices for the "long term" and left with the choice of selling Power Seraya and SFI (which are jewels in Singapore) to raise cash or improve our finance. THis is a very sad state as i cant imagine that we have to tap our foreign reserves sooner or later.

6) We have not discounted the political and social or even terrorists lurking around at our door steps. Where is MAS SELAMAT? You think he just relax under a coconut tree> Such dangerous man who can outwit our world class security system, could possibly be inspired by the Mumbai attack and planning for a return in an more organised and intricate manner? We cannot rule this out. It can be a serious threat!

Our government can introduce a string of fiscal and monetary policies to stimulate property demand to help the cash rich developers preserve their cash and capital gains but we have to set priority on helping the people, the aged, sick, the national servicemen and true Singaporeans instead of investing, investing, property, property, Casinos and Casinos, F1 and F1 or FT or FT, and always wants to be the best in the world. We dont really need all these. We just hope that there is no nasty surprise to derail everything otherwise the bottom could really be unreachable in the coming years. Not trying to be pessimistic but really we dont know and it looks like a recovery will be a long long long one.

May also want to read:
Fire Sale: Owners Dump Condos
The days of Cheap, Easy Credits chasing after property is OVER!
When the bubble of greed and fear burst, guess who suffer?
Property Investment Tip: Don't put all your eggs in one basket
HDB Resales: West Sees Highest Price Increase


Anonymous said...

Fall-offs from US$50billions fraud. This is one of the major frauds sweeping the financial system. Where is the bottom?

NEW York broker Bernard Madoff's alleged giant pyramid scheme duped some of the world's smartest investors, reports suggested, adding to questions about why the scam wasn't uncovered earlier.
Evidence emerged that Madoff's alleged multibillion-dollar fraud stretched from Tokyo to Europe to top US investors, all of them apparently unaware they were being conned until the broker's arrest on Thursday.

Prosecutors allege Madoff, a decades-long veteran of Wall Street and pillar of the US financial community, confessed to losing at least $US50 billion in the so-called Ponzi scheme or pyramid fraud.

US newspapers detailed how Madoff, 70, traded on his impeccable reputation and access to exclusive country clubs to cultivate A-list investment clients, including big banks, hedge funds and individuals.

The US Securities and Exchange Commission alleges he delivered consistently strong returns by secretly using the principal from new investors to pay out to other investors. As long as he could attract new investors the alleged scheme worked.

The plot appears to have unraveled when clients asked to withdraw their principal - as they have been doing from hedge funds worldwide - only to discover Madoff's seemingly brimming coffers were empty.

According to The Wall Street Journal, investors facing losses include French bank BNP Paribas, Tokyo-based Nomura Holdings and Zurich's Neue Privat Bank.

Spanish newspapers said a fund run by leading bank Santander was heavily exposed and investors in Spain risk losing about $US3 billion .

Swiss bankers face losses of up to $US5 billion, Geneva's Le Temps newspaper said.

The report said Union Bancaire Privee, a major asset management institution specialising in hedge funds, could be exposed to the tune of $US1 billion .

UBP refused to comment on the report, which said 90 per cent of fund management companies operating in Geneva invested in Madoff products.

Top-drawer US investors who were taken in included the former owner of the Philadelphia Eagles American football team Norman Braman, according to news reports.

Hedge funds are likely to take an especially big hit because Madoff was handling money for several companies raising money for such funds, the Journal said.

"I'm wiped out," the Journal quoted Sandra Manzke, chairman of one such company, Maxam Capital Management, as saying after reporting $US280 million in losses.
The New York Times reported hedge fund advisory firm Fairfield Greenwich Group had invested $US7.5 billion ($11.17 billion).

As federal investigators poured over the books at Bernard L Madoff Investment Securities LLC, the Times highlighted the apparent lack of oversight through the years of what appears set to be Wall Street's record-sized fraud.

Despite Madoff's amazingly high and consistent returns and the fact that a relatively unknown accounting firm was doing his audits, the Securities and Exchange Commission "appears to have been completely surprised," the Times wrote.

"Despite these and other red flags, hedge fund companies kept promoting Mr Madoff's funds to other funds and individuals," the Times wrote.

The debacle has "swept up some of the most prominent and wealthy Americans, along with many people who thought they were embarking on a comfortable retirement and have now been left destitute," the Journal quoted a lawyer for another victim, Milberg LLP, as saying.

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