Tan Kin Lian's Blog: A serious recession in the months ahead

Friday, October 24, 2008

A serious recession in the months ahead

We have to prepare for a serious recession in the months ahead. Here are the likely trend of events:

a) Banks reduce their credit
b) Businesses do not have the operating capital
c) Consumers reduce their spending
d) Businesses cannot meet their operating expenses
e) They reduce the size of their offices, shops and factories and retrench employees
f) They cannot pay their rentals - so the landlords have to evict them (but they cannot find new tenants)

This will be a downward spiral.

What can be done?

25 comments:

ym said...: i know alot of ppl will want to start a pissing match with me on this,.. but i have to say it - the best is to do nothing.. the economy must function on its own..

the reason for the problem is the central banks control of interest rates and forex rates..
gahmen also allow private banks to print money using fractional reserve lending..

in a truely free economy, banks using fractional reserve lending would not even last 1 day...

and interest rates, the price of money/debt is controlled by some phd theory bookworm..

all this meddling, controlling, trying to stabilise markets, bailout of bankrupt banks has given us the great depression of the 1930s and its sequel!..

dont do anything.. let nature and market and economy run its course..; October 24, 2008 5:09 PM
Anonymous said...: If the outlook for the future is so bleak and 100% guaranteed, than it is possible to short the market and earn money. It is still possible to short market legally despite trading rules prohibiting naked shorts. Some research is required.

I've been profiting well for the past few weeks in my short positions.; October 24, 2008 5:37 PM
Anonymous said...: You are planting extremely pessimistic view.

I firmly believe that excesses created in the system will be nullified with the turmoil and make the world a better place for all it's inhabitants to get their stake.

I can't bet on how stock markets turn, but I bet that world is going to be a better and competent place in the next decade, that alone gives me enough confidence in the system, and life gets on despite scares.

World survived spanish flu, SARS, let alone the great depression, and let's take the time to introspect ourselves and love what we have.; October 24, 2008 5:50 PM
Anonymous said...: i thot hard about what i should say on harsha comment

u may be somewhat right, but why i cant shake off the feeling u are also somewhat naive; October 24, 2008 6:52 PM
Anonymous said...: If you have some spare cash to put aside for the next couple of years, then I think one safe bet is to buy ST index fund, nimble a bit at a time and follow it down to the bottom say at 1000 or even 600, if the situation is really that bad. I think the worst should be over in 2 or 3 years time when you can start to reap what you sow now. I am not talking about the ETF ST index whick lacks liquidity, but the ST index fund, a unit trust available from UOB or OCBC that you can redeem anytime. For those who canno invest now, the best thing is to tighten the belt and save as much as possible. Be careful not to lose your job. Do not fall sick, which means take good care of yourself. Sickness will stress you mentally, physically and financially.; October 24, 2008 8:13 PM
Anonymous said...: It would be nice to get back our minibond money to weather the storm.; October 24, 2008 8:42 PM
Everlearning said...: We must come down-to-earth and be realistic about the way we live.

Life still continues whether there is a recession ahead of us or not. We must minimise wastage and be prudence in our spendings.

Nothing beat a happy and healthy mind and body. It is time to seek a holistic lifestyle.; October 24, 2008 8:58 PM
Anonymous said...: We the poor victims hv lost so much money.
Now how to survive? Any help?; October 24, 2008 9:45 PM
nhyone said...: We are witnessing history in the making... S&P futures limit down... wow.; October 24, 2008 10:06 PM
Anonymous said...: William Engdahl has written a rather interesting piece on what is really at stake in this current financial tsunami.

http://www.engdahl.oilgeopolitics.net/Financial_Tsunami/Warfare_Behind_Panic/warfare_behind_panic.html; October 25, 2008 12:03 AM
Anonymous said...: The best thing people can do is to learn from their mistakes, and endure this gruelling trial. Nothing can be done about the liquidity contract spiral. The various government and financial bodies will simply have to wait for or find new ways for expectations and public trust to be improved. That said, people have to be made aware that they are all invidually as responsible as the other for their own finances and the economy as a whole. They need to learn that sometimes, they have to take a hit and roll with the punch, and not seek compensation, relief, or accountance from governments or states, for the consequences of their own choice of actions.; October 25, 2008 12:07 AM
Raymond T said...: Tough times never last, but tough people do.; October 25, 2008 1:49 AM
Anonymous said...: i agreed.
Scrap iron had dropped, even old newspaper price may drop soon. You think work hard and pickup recycle things can earn easy and xtra for many old folks, forget it. China quangtong fair is bad. less buyer and many tradershold stock are discounting heavily to any buyers. Many order-finished products destine for USA were on-hold, LC rejected or buyer just closed down companies and disappeared, leaving manufacturers stucked. This is a BIG problems.
I had planned when i sold all my portfolios months back, and now executive plan 2 with all the money.... But many investors holding shares and all in shock mode.
I had survive 1997, now I move on stronger and smarter.; October 25, 2008 5:44 AM
bsd said...: the root cause of this problem is overleveraging. but for the current moment, it is a solvency issue for the US, but largely a liquidity issue for the rest of the world esepcially EM. the Fed has currency swaps lines with ECB etc, but why done with the Asian countries, e..g Korea. the money they pump in is not getting anywhere to places that need them most. i am surprised that the Fed is obilvious to the situation in Asia. a more coordinated global response is definitely needed before the market will turn around; October 25, 2008 9:50 AM
Anonymous said...: Dnt worry sporean, Just be prepare for the worst scenario,goes up, Just be patience, If the market go further down people with deep pocket will make lots of money in 3 to 5 yrs time.; October 25, 2008 11:08 AM
Anonymous said...: The law of gravity applies. Good times don't last forever so are bad times. Life goes on. We just have to seek newer opportunities all the time. We live on an island and have gone through various crises, so we have to bite the bullet and move on. The government can help to relief people of the burden.

Don't despair as good times will be back. Be optimistic. Have faith!; October 25, 2008 12:03 PM
Parka said...: I also believe that the market should be just be left alone to run its course.

Those businesses who don't have good business foundation should be weeded out. If not now, in the future, they will go through similar situation again. So it's better they learn something and be better the next time.

I'm a big fan of Paul Graham's essay. The recent one states that starting a business is the way to go during the recession. Everything is cheaper, especially the cost of starting a business. So if the business can provide good value to the society, it will be very profitable.

But one thing though, entrepreneurial spirit is not really in Singaporeans.; October 25, 2008 12:06 PM
freeier said...: I have learnt from the mistakes in 1998/2003. I have saved up money in the last 2-3 years expecting a hard hit economy and financial market. I don't know if now is the best time, but I will start buying. 10% increase in equity holding in my portfolio every 10% drop in the market!

At this market, why even bother with funds?! Just buy the blue chips. UOB/OCBC/Singtel. Singtel is only 2000$ one lot, OCBC 5000$. But one lot every 3 month. The reward will come.

In a person's life, every 7-10 years there will be a bad patch. This is how this asset and liquidity driven market of asia behave. This round US is the head so we have a full perfect storm. Not sure how it will end but pick the good conservative companies and you will make money at the end. Even if 1 of the 3 companies you invest in go bankrupt, I am sure the other 2 will make you sufficient to cover for all losses.; October 25, 2008 1:07 PM
Anonymous said...: Trust our million dollar leaders. More good years. Swiss standard of living. Will be worried if there is no recession. GST to help the poor. Golden Period. Period!; October 25, 2008 2:11 PM
Anonymous said...: Banks repay all investors to regain confidence, so economy can recover soon.; October 25, 2008 4:10 PM
Anonymous said...: Banks should re-imburse all investors, to regain confidence. And stop con ....ning the people.; October 25, 2008 4:14 PM
Unknown said...: Indeed I regretted not to sell off shares in good time. But who knows when the bad time will come. Like one said, there is bad patch in 7-10 years, so this is no different except it is a longer haul.
People survive through years of drought, famine, war and depression; we can go through this one too.; October 25, 2008 4:23 PM
Anonymous said...: Our government (with all high paid talents there) should react immediately such as to activate all multi millons infrastructure / utilities works,etc now before jobless rate increase in 1-2 years later.... If the government is demand the extremely high pay (compared to other countires) from taxer payer, they should also act extremely faster for tax payer...; October 26, 2008 6:54 PM
Anonymous said...: Feeler- when you look up the Godfather so highup and now their trillion hedge funds across the world that support the global equities, which in many sense, no one knows how money were tune in and out of each country, Not back by Gold but by papers, How can any good stock grows in price.? from 3000 to 1600, the peak had passed and gone.
Learn not to trust any angmo anymore! for the next 100 years; October 27, 2008 7:04 AM
Anonymous said...: FOr those who owe shares, sell down and left 100 shares. Every cash u hold could buy back cheaper or double your qty in time ahead. During recession, best is to attend AGMs , EGMs and enjoy coffee and if the companies are generous to offer you their unsold items in the warehouse. At least a cup of local brewed coffee and sometimes to fill your stomach.
ANother opiton in dull days ahead for many retiree, jobless and hopeless....
God Bless AMerica!; October 27, 2008 4:35 PM