Sign Of The Times

The signs have been there for a while but they are now starting to show themselves slowly but surely. This is not the time to indulge and definitely the time to be prudent. With Hong Kong, Italy and Germany now in recession and global retail sales falling sharply, I definitely think it is time to re-asses our finances.

Several Gatherings ago and during several Previews in July and August, I mentioned that a friend of a friend who is a head-hunter, noticed a spike in his list of senior executives, especially amongst bankers.  In recessions past, this was always a precursor of worse things to come and true to form, DBS starts cutting jobs 5 months later. Now it is only going to get gloomier.

Job losses are the first sign of things to come. Especially when companies kick out the older teams and keep the younger ones. I feel for those who’ve lost out. I cannot imagine what it must be like to have worked all your life for this company and more than the job loss, it must be so emotionally painful to get lopped off like an unwanted and unappreciated … thing. And more will lose their jobs in the weeks to come. This is inevitable. What are these older workers expected to do?

Still, many are still living in the denial that “It won’t happen to me.”

The problem of unemployment amongst the older workers is not helped by the fact that a lot of the older generation are about to lose all their hard earned life’s savings as they realize the total liability on their investment products. It’s got to hurt but I can’t sympathize because greed and ignorance don’t marry well and will always come at a cost.

Certain observations are revealing more signs of worse things to come.

Rentals have been falling over the last few weeks. This is a sign that home prices will start falling about three to four weeks later and today’s ST confirmed that higher end HDB flats are going to fall. With that, expect a domino effect in the property market. As prices dip, those who have been hanging on to high speculative prices will be forced to sell at lower prices as personal liquidity takes a toll on them, the longer this recession drags on. Owners of hopeful en-bloc projects will start to question the wisdom of holding on to a stubbornly high bid while the developers hold back for bargain prices. It will be a drastic dip, have no illusions about it. As people lose their jobs and liquidity worsens, they will be forced to sell and downgrade. Flat owners of  3 and 4 room HDB flats will have a boom while larger units dip further. Already, property agents are banging on my 3 room HDB flat with “ready” buyers … very much like how my agent was banging 3 room doors when I was bankrupt and looking for a smaller place.

The slow and optimistic turn around for the property sector will be the increasing demand for rentals but this will be hampered by the departure of many foreign workers as the economy weakens further and employers start cutting back on manpower. These foreigners may just pack up and leave as things get more and more miserable for them.

Pray that they can go home because I would hate to think what desperate and stranded foreign workers will resort to doing in order to survive. In fact, I reckon we’ll have more than enough problems from the desperate locals without needing the extra “help” from foreigners.

Lower home prices and rentals won’t translate into lower business rentals. Landlords, wise to ailing economies, will hold on to their rental rates in anticipation of a return to normal business operations in a matter of time. Being deep pocketed, they won’t see the need to lower rentals and will continue to hold out on current rates. This will surely see many smaller companies fold and add to the unemployment statistics. There is an increasing demand for debt collectors and the stark rising statistic is the claims against smaller companies. Watch for more activity around the Small Claims Courts, Ministry of Manpower and the CPF board. This will get uglier in the coming weeks.

Car owners amoungst the younger workforce are going to face a real delimna …  many of them have flashy new cars that are financed 100% by an institution. It may not mean anything now but when the crunch hits, those that are not able to carry on ownership of these vehicles, will not be able to sell them unless they top up their payments first. This is going to be a major problem  because they won’t be able to afford the top up … they wouldn’t have to sell the car if they could afford the top up. Thus, they can’t carry on paying for it and they can’t sell it. Watch out for a rise in “car thefts” and “accidental fires” and a rise in insurance premiums.

The other common practice that is going to get a lot of people into a crunch is the Credit Card and “easy” finance schemes. Banks have successfully gotten a fair amount of the population into the American culture of “spend first, worry later”. Well, the time to worry is dawning and already, the debt collectors are busy running around recouping outstanding monies from people who are overseas on vacations they can’t afford.

Am I imagining things or are homocides and irrational deaths on the rise? I can’t explain how terrible one must feel if one thinks that literally throwing himself to the tigers must seem like a better alternative than continuing a life of misery. Suicides, robberies and misdemeanors seem to be common fodder for the press lately. Almost everyday, shit happens. This was also the case in 1987, 1997 and 2001; Just a reminder, I will always remember those dates for as long as I live even though I wasn’t even trading then.

Another pattern to look out for if you are looking for hope, is when the press starts reporting record numbers of bankruptcy filings. This report usually marks the economic bottom but it never always translates into a recovery period. It just means that we’re as low as we can go. So in about a year from now, start hanging out at the Supreme Court and count the number of people with blue papers and see if the numbers are decreasing on a daily basis. An easier way is to watch the classified ads and keep an eye for Writs of Seizures, Sheriff’s or Bailiff’s Sales, Notices of Insolvency and Bankruptcy filings. I am sure the number of pages will increase.

People I meet always ask me the same tired question … how long will it last and how bad will it be?

Honestly, who knows? I am preparing for the worst and will not be hopeful of any recovery for the next 2 years at the least. I also don’t expect a real return to a bullish market before 2012. Yup … I am pessimistic, and for good reason. If you’ve been bankrupt, you’ll know to always expect the worse and that it can happen to you … regardless of who you are and how rich you are. Bankruptcy is unbiased and deserving for those who get it.

One other pattern I’ve noticed is in the malls … less middle aged shoppers and a continued strength in younger shoppers. This is easy to translate – the younger generation don’t or haven’t grasped the severity of the current economic climate because they will get to keep their jobs while the older workers worry like hell. How sweet it is to be young and ignorant. Enjoy it while it lasts, kids.

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