The Little Red Dot Gets More Expensive
If you thought things were getting or were already expensive here on out little island, that is because of a certain economic indication called “Inflation”. We felt it a while ago but it has taken the authorities a while longer to acknowledge and publish the facts;
Inflation highest in 20 mths
Sept CPI climbs 3.7%; housing and transport are main price driversINFLATION in Singapore rose to its highest level in 20 months last month as housing, transport and food continued to become more expensive.
Last month’s consumer price index (CPI) rose 3.7 per cent from the same month a year earlier. It follows a move earlier this month by the Monetary Authority of Singapore (MAS) to tighten monetary conditions, owing to its concerns over rising costs.
The CPI came in slightly above a 3.6 per cent rise estimated by 13 economists in a survey by Bloomberg News.
Inflation rose 0.2 per cent month-on-month from August, after adjusting for seasonal factors, according to the Department of Statistics yesterday.
DBS economist Irvin Seah said: ‘With overall inflation grinding steadily northward, risks are certainly tilting towards inflation rather than growth.’
Transport and housing were the main factors as higher car prices contributed a 9.1 per cent rise in transportation costs from a year ago, while housing costs rose 4.7 per cent. However, there were signs that car prices are easing, as they fell 0.2 per cent from August.
~ Straits Times, Oct 26, 2010
Critical Thinking Observation: The ST Money Page headline on the back page screamed; “IMF praises S’pore for managing capital inflows” and “Capital controls seen as way to curb hot money” – great news and bullish reading while on the inside with smaller print was; “Inflation hits highest level in 20 months.” … go figure.
So let’s read between the lines … Inflation is at a two year high from 2008 (when the market was supposed to be in recession then), Indonesia’s PE Ratio is at INCREDULOUS%, Malaysia’s property and vehicle prices are soaring … All three countries have monetary policies positioned to fight rising costs but the banks are encouraging spending by lowering their lending rates … Singaporeans, for the most part, still believe that property prices will continue to escalate as Sellers stubbornly hold out for that top bid even as bids don’t get higher … COE prices get higher as bids get greedier …
So while the government takes great effort to curb a bubble with capital controls, “macro-prudential” measures to stem excessive exuberance and increasing the supply of HDB flats and residential land to combat escalating home prices, the ignorant Seller still sees profit in this environment and the ignorant Buyer rushes in for fear of losing out on this “bull-run” and low borrowing rates.
Be fearful when others are greedy; be greedy when others are fearful ~Warren Buffet
Singapore, at least the smart ones, are bracing themselves for a likely Technical Recession by year’s end. Asia is expected to slow its growth to about 6.8% which could see Singapore’s GDP growth fall by as much as 0.4 percentage points. Inflation is expected to rise to 4% by December and stay on the high side for the first half of 2011 before there are any signs of easing. The poor agricultural returns across the world will see a spike in commodity prices as demand outstrips supply going into the end of 2010 and into 2011. Our cost of living is about to take on historical proportions if the residents of the Little Red Dot don’t start getting wise to the facts.
With Malaysia on the brink of going bust and Indonesia on the tip of going “pop”, can and will Singapore be able to live in denial for the second time in three years if another recession hits the island again? We got away last time (2008) because the government was quick, rich and smart enough to avert a major hurt. Do we still have enough to avert a second round in three years if it happens again?
In Malaysia, people are starting to appreciate a good financial management course as my classes have been filling out without much effort. In Singapore, my classes are still filling out well as more and more find the need to be smart about their money. In Indonesia, they can’t be bothered with education because the easy money is still fast and furious. Such is the state of greed and fear amongst these three countries and my classes have always been an accurate indication of the state of financial affairs in these economies. Gurus are also a good indicator – in Malaysia, they are all missing from the scene now indicating that the market has been in some pain since February 2010 … Singapore is slowly seeing a return of Gurus in recent months indicating a return to a market top while Indonesia is flooded with them – a sure sign of a bubble about to pop.
Draw your own conclusions. I have mine and it doesn’t matter if our opinions are in conflict. What really matters is who pays the bigger price of a recessionary penalty if and when it happens and who gains if it doesn’t happen and this bubble turns into a full blown bull run.
Happy Hunting … as long as you are not the hunted.
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