Tan Kin Lian's Blog: Fragile global financial system

Sunday, May 09, 2010

Fragile global financial system

Read this excellent article by Lucky Tan.

My comment
I agree with the reference to high property prices in Singapore that is propped up by debt. Investors who believe that property prices in Singapore will continue to move up due to limited land should reconsider their views.

8 comments:

Anonymous said...: A lot of questions on why the DOW fell 1,000 points.

A better question might be why did the DOW then recover 700 points after the initial plunge?

Maybe a lot of value investors are finding a lot of bargains at current prices.; May 09, 2010 10:13 AM
Anonymous said...: To be fair, we should also take note that the govt's recommendation is for owners NOT to sell their flats, to purchase bigger and more expensive ones, thus getting into more debts.

If this is the norm, prices will remain stable, or increase at an accetable rate. People would be able to pay off their housing debts within 10 - 15 years.

Human's, however, are greedy. Thus the speculation comes into play. This is the real danger.

So, can we really blame the govt.?; May 09, 2010 10:21 AM
C H Yak said...: Q : "While we may not have the political means today to bring about changes that will secure our future, we have to be wary of the system we live in and think hard about our future. Minister Mah comes out to say that flats are affordable by whatever metric he uses to measure it...at the end of the day it requires a person to service a debt over 2-3 decades and it is this long exposure to a high level of debt that poses the risk." UQ

To a certain degree, we do have the political means to to bring about changes that will secure our future, if people do realise and see the real implication.

The problem is that MBT refused to re-think the whole issue about affordability and perhaps he thinks it is not his job to ensure Singaporeans can sustain their jobs to pay over the next 20~30 years...maybe MOM or NTUC should do something or what...

The old "enslaving model" worked well for Singapore when it was developing and as Lucky said Singaporeans were able in the old days to be employed on a long term for 10 over years. It was complemented by the MNC Model where foreign firms were willing to be based here.

But things had changed totally with evolving China, etc. and also the volatile world economy. Even firms in China will face pressure of rising costs.

If Singaporeans do realise that the Govt. may not be able to sustain their jobs for the next 20~3o years...they will re-think the whole issue about affordability ... and do have the political means to to bring about changes. There is a problem only if people are lazy to think.

To Anon 10:21am "the govt's recommendation is for owners NOT to sell their flats, to purchase bigger and more expensive ones, thus getting into more debts."; look at PMETs getting retrenched more than ordinary service workers, I don't think it will work anymore. Although employer CPF was raised at lightning speed, it is still not reinstated to its original level and there are still restrains on the middle income earners.

The old model works because the older generation was able to enjoy appreciation of their HDB flats and make money from a more educated younger generation from the baby boomers years....not anymore; even if you bring in more FTs as long as HDB flats are so high.; May 09, 2010 12:51 PM
Anonymous said...: Ha. Of course I blame the Garmen. It is in their interest to inflate the economy, but that increases my cost of living. Until today, I realize all the calls to lower the cost of living will never ever happen. It is something the present Garmen will never succeed in doing. Deflation will be tackled aggressively with more debt and tax-payers money. Japan is good example. Ultimately, deflation will come true through the inherent nature of capitalist society.
High property prices can be avoided when Garmen regulate banks. The banks' profits are due to ultra low interest rates. Depositors are squeezed unfairly by abnormal interest rates. Is it no longer savvy to be a saver? We may be imparting the wrong values to the next generation. No wonder the world is in such a mess.

But they prefer Greenspan's approach to avoid the short term pain. I am moving my money out of banks with substantial exposures to property loans before they turned into Zombie banks like Citi. Ha ha ...; May 09, 2010 1:12 PM
Anonymous said...: yesterday hong kong announced their govt will truly subsidize the poor for owning houses..

truly caring for the masses; May 09, 2010 2:55 PM
Positive outlook said...: Govt around the world will not allow collapse. Look at USA, the Govt is printing more money, lending to banks ( which reports massive profits because of free cash ) Look at Greece, the IMF & EU are lending more money.
Look at China.. to prevent any instability, they have pumped even more money into their economy.

Speculation is rife because money is very, very cheap. Borrow in Japanese Yen, deposit it in A$.. earn the difference in deposit rates and still earn money despite the exchange rates.

There is lots of cash swishing around.. despite the uncertainties, we have the STI moving down less than 20pts. why?
100% confidence that the SIN economy is robust and can perform even better.

The FTSE also did not go down very much either.
Anyway, these are not accurate indicators of any economy.

The abundance of cash is here to stay for a long time.. at least 3 to 5 years. Anaylst are merely historians in different clothes.
They pronounce conclusions after the facts. I could do the same too for 1/5th their salaries.
I dont know why we pay them so much and give them attention just to hear them say: " the STI lost 20 pts.. the US$ gained..."

We already know that.

The world financial system is in good hands.. no matter what, IMF,and their partners will never allow a collapse.. guranteed, with the exception of world war 3.. and its not going to happen tommorow , next week or next 20 years..

I will be elderly and waiting to die by then.; May 09, 2010 3:47 PM
Anonymous said...: You do not have to look far than during 1997-1998 financial crisis. How many people who bought their properties at high price during that time actually went broke? Some never ever recover their money again.

I have a colleague who bought into one of those fateful properties at that time. Luckily her family was rich enough to hold on to it and she only managed to sell off at cost in 2007 after a decade long. That does not take into account of the interest cost she has to cough up during those 10 long agonising years.

When I see people rushing in to buy properties at the ever escalating price now, somehow I fear for them. History always has a tendency to repeat itself. When the time for the market to crash, it will happen so fast and brutal that will catch everyone off guard.

Dubai is a preview. Greece is probably just an appetizer. Coming up next will be the main courses like Ireland, Italy, Spain and maybe even UK serve out. By then, you may be living in a very different world.; May 09, 2010 3:52 PM
Let it Be said...: Jealousy.

Just because the party sounded really fun and you were not able to attend, you now worry that they will get stoned drunk and injure themselves.

Such false emotions. Why would you care if they may face headwinds in paying off their loans? Did anyone worry about YOUR ability to pay when you got your loan?

Let these people do what they feel comfortable. I dont think they are stupid. ( or daft ).Worry about your own financial health and take action appropriately. You and I cannot change the situation anyway.; May 09, 2010 10:49 PM