Balloon, Not A Bubble.

Looks like the shit will get worse before it gets better; The American debt talks are going nowhere and talk of compromise is now on the table … China’s manufacturing PMI in officially in contraction as it slips below 50 to 48.9 versus 50.1 in June … Greece continues to live in denial as they get downgraded one notch above shark-shit … Britain’s GDP contracts to 0.2% in Q2 from 0.5% in Q1 … China’s growth slows while their inflation soars … Japan stays firmly entrenched in recession and deflation … Australia dropped 2% on its GDP in Q1 and we’re still waiting for Q2’s result … Malaysia too, although they’ve been known to drop in all their Q1s anyway …

Singapore’s economy shrank by 7.8%

Singapore’s inflation hit a 5.2% high as we continue to live in denial that this is “normal” and expected. This is the highest in a little more than two years, plus the authorities have has raised its inflation forecast for this year to 3%-4%, up from a previous estimate of 2%-3%.

What happened to the 2011 budget that was supposed to curb inflation? What happened to higher monetary policy to stem the tide of spending? Why are the cooling measures only slowing home sales and not stabilizing prices?

That’s just nuts … Housing has gone up about 30% in the last two years and cars have risen by as much as 90% in the same period. I am damn sure your salaries have not picked up by 10% in the last two years and neither have your savings. Let’s not even talk about your stock investments because the markets have been largely flat for the last two years.

The hike in prices wouldn’t be so bad if what we earn also went up by the same margins. But salaries are still more or less the same as it was two years ago, albeit with some minor increments if you never got a promotion.

Most of the common stocks in Singapore haven’t moved up in the last two years either …

DBS is as flat as Changi Airport in two years …

… talking about Changi Airport, SIA is not taking off …

… and SMRT … at least they’re not falling off their tracks from lightning strikes.

If no one noticed, we’re getting peanuts … leftover peanuts on our saving accounts …

So if incomes, investments and savings rates haven’t risen significantly, how are Singaporeans able to cope with rising prices to afford flashy new continental cars and exorbitantly expensive shoe-box sized condominium apartments and still have a life of clubbing, branded goods and good food?

I was in Siglap last night having drinks with an old friend at an al fresco joint. I was facing the road and for two hours between 9pm and 11pm, I watched some of the most expensive cars this country has to offer drive past at a rate of one every two minutes. 30-somethings were driving German marquees with the top down while younger drivers whizzed by in sports coupes that cost twice as much as my $68,500 Vitara.

There were several gentlemanly elders in very large Japanese saloons and SUVs. There were also some Aunties driving MPVs and smaller Honda Fit sized cars which I thought was typical. You would think that the older generation would be able to afford big flashy German marquees but instead, you see them driving conservative vehicles that are practical to their needs. Let’s not forget this is Siglap I am sitting in … you can safely assume that the senior Siglap-ians are rather wealthy and should be able to afford a German Marquee or two.

So where is all this young “wealth” coming from?

It’s a tired matter and one that has been repeated once too often on this site – low interest rates and easy credit … and the young ones know how to make it stretch.

Not that I am blaming the younger generation for the price hikes, mind you … no, not at all … I blame the banks … still. More so, I am starting to point an accusing finger at the government for allowing the banks to influence young minds into careless and almost reckless financial practices. It is still so easy to get credit. In fact, you don’t have to look for it – they come to you via your mail, email and phone. It is that convenient. And it is that reckless.

In many of my public talks, I get young people coming up to me after the session admitting to me (after having read this blog) that they were over-leveraged on credit and are now over-whelmed with debt. Then banks, it would seem, are very nice in helping them settle their debts with extended credit lines and more time (which means more interest) to pay up.

I am glad the banks were ruthless during my time as a thirty-something – they simply bankrupted me and put an end to my pains. Today, they just extend the pain for more gain.

Am I going nuts? Because it feels like I am the only one who smells trouble everywhere but people continue to buy? Do I stick with my fundamentals and continue to be prudent and frugal? Or do I join the crowd just in case I am nuts and miss out on all these great buying opportunities?

If the older generation are testaments of keeping your wealth when the shit hits the fan, I’d rather be an old and wealthy fuddy-duddy than a young and broke wannabe.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NOTICE TO SPAMMERS: Don’t bother. Comments are moderated and spams are deleted automatically. Go spam someone else or get a real life.

Share

If you enjoyed this post, please consider to visit Pattern Trader Tools, leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Comments

Totally right, dude … I’m not leaving SG because it’s going to crash, but I think it is going to happen …

Now what happens ONCE that happens, I honestly don’t know …

I’m not clear on the long-term strategic plan, if there is one …

But if China hits the brakes hard to deal with inflation –

or can’t solve the electricity problem that stops factories from operating 2 days out of the 5 day work week –

then it’s not going to be easy for SG, because the US aint doin’ so great either …

As for the generational thing, I’ll leave that to you guys to figure out … ;-) … in the US, it’s a mess …

Excellent piece, bro … looking forward to seeing you when I won’t be so obsessed with organizing for a move … :-P …

thanks for summarizing! something is brewing but not one knows when will we reach the boiling point…

Your analysis is spot on Conrad. I can almost say the same thing for here ( Malaysia ) on the ‘easy credit’ thing.

Sorry, the comment form is closed at this time.