Global markets plunge

The headline “Global markets plunge” appears in almost all newspapers around the world.

Fear of a US recession behind plunge. World waiting for the Fed to do an emergency rate cut. Analysts looking for a catalyst to turn markets around. Another black Monday. Has the world lost confidence? Is the panic mainly in the Asia market? Is this mass behaviour?

What do you think this mean to all of us? Share what you think?

Terence Seah

Author: Terence Seah

Founder

48 thoughts on “Global markets plunge”

  1. Hi Terence

    The signs were on the walls for the last six months.

    It is fear and greed. Most do not know and understand essential fundamentals, merely follow momentum, rumours and speculative talks. Assets impairments are not over yet.

    Cash is king to pick low cost assets for the next 12 months and more.

  2. The essential fundamentals are always not grasped deeply and forgotten during momentum and bull moments of rumours and speculation.

    Most (are speculators) do not have working knowledge and understanding.

    One classic example: why is the impairment down-offs carried out……what is the magnitude(s)….why BOC is now (late Jan08) writing off while others in US/ROW started 7 months…..and are still doing so……

  3. Hahaha, Andrew was quite right there but the writing was actually on the walls much earlier; alas, folks chose to look at graffittis and nudes, missing the signs to their grief.

    The US cut rates? As if their rate starts at 100% before the first cut?

    Honestly, how many basis points hv they left to cut?

    After that, they’ll hv to cut jobs, cut heads, cut their shirts into halves to wear twice…………..it’s a domino.

    Toong Fang Hoong. Toong Fang Hoong, Toong Fang zhu liao ke MST…………a very telling song, very prophetic too.

    The 3 Wisemen are looking East.

  4. I have been watching the markets in recent months, and it was only in the last few days, that I think this is the time to buy.

    Perhaps, the markets will take 12 months, 2 years or 3 years to recover. I believe interest rates today cannot get any lower. I also believe that to get 20-25% margin, one has to enter the market when everybody else seem to be getting out.

    On this theory, I have started to pick up a number of bluechips and Asian country funds. I hope I am right, when I come back and review my investments in 2 or 3 years time.

    Terence Seah

  5. Terence @ #5

    Hee hee. You should have waited. On Thurs, if members remember to ask, we will opined the trend and opined the turns.

    If you are in, you can only watch as thhe drama unfolds. Its too early to call Thu now. With the current volatility, the market is twisting and turning like a tornado on heat.

  6. Andrew @ #1 and #3

    Asset values have dropped substantially. Obviously, what goes down must eventually resurface. This is a truism. Think about it. If it doesn’t come back up, it will be the end of our way of life and modern civilisation will cease to exist.

    Up, then we should buy. Question is WHEN. Time it wrongly and the ground beneath your feet will still open up and swallow you.

    All will be hopefully be revealed on Thu.

  7. Terence #5 refer

    If you invest, I agree with what Terence said, it time to buy, may be in the year end of 2008 you can already see the profit.

    As some analyser said the support will be on 27xx/25xx, so may be you can still wait to see whether these support work before you buy (you spend a little bit more, but saver).

    But if you are a trader (want to make quick money), what I consider is now is not the time and you better keep your money in this moment. The best thing to do now is to attend the class by June Chin of how to make the fans with “Ang Pows” and make many, many of them to decorate your house.

  8. Dear SHC Financial Gurus,
    This topic comes in very timly. I’m no expert in this area and would like to learn more. Unfortunately, I’m not able to attend the Thurs talk cos I’m physically in HK. Perhaps you could enlighten me here on an USD investment strategy. My question is: If we are holding USD, do you think it is wise to buy USD govt bonds in this market scenario, while interest rate trending southwards? Thanks.

    Ivy

  9. Ivy @ #14

    Please don’t address us as financial gurus. It make us sound so old. Just address us by name. It is so much friendlier. Each of us have different areas of interest and experience.

    There are no safe bonds anymore. Some sovereign bonds like US bonds are the butt of jokes.

    Let’s get back to the basics. First thing about trading is that you need a view to start . If you don’t have a view then learning how to generate a view on demand is the subject of a whole field of study. This is something we hope to start on this coming Thurs.

    Let’s say you have a view (something which we call a vector view ie with range, direction and time) that the interest is going down then one of the things that you can do is of course buy interest rate instruments like US bonds. But given this view there are many other things you can do, many of which are much more attractive than US bonds.

  10. Thanks, KT. Besides buying equities at bottoming out prices and hold for the long term, I could not think of anything else that we could do. Looks like Thurs discussion is a good start for amateur investors. I think all SHCians should not miss this opportunity. Can I make a special request for a summary on the outcome of the talk?

  11. Hi Ivy

    The best is into opportunity, get into property instead of bond, be it building or otherwise, not sure, keep your funds till we have our session on Thursday.

    For those who already get in, bless you!

    About property, even the singapore GIC get into it to! So you would be wrong too far if it wrong!

    Nevertheless you’re in safe hand with SHC..ha..ha.

    Talk to you more when you’re in Singapore,

    For further discussion info, can direct to my email.

    tan.gibson@gmail.com

    Gibson Tan
    Hp:(65)90271398

  12. Hi Gibson,
    Thanks for your advice. Honestly, I’m not sure about the real estate market going forward since US is already into recession. The 0.75% rate cut only help to stabilise the global share markets. They have yet to resolve the SIV/CDO/CDS problems. The picture is still not clear – could be worse than we thought. Let’s keep fingers crossed. Sg govt must be very happy to know you are a great supporter of GIC…oops! say no more otherwise cannot enter Sg again. Joke only lah…:))

  13. Dear Friends

    Very interesting discussions.

    Each group of money managers has different characteristics. Here focus on three: speculators, traders and investors.

    Each of them behaves and preforms differently depending on scope, capacity and psychology make-up.

    A savvy investor differs from a trader, so with a speculator. He/she has patience besides other key attributes. He/she won’t invest when no good/reasonable assets to buy; buys income-generating/value assets

    Cheers,

    Andrew
    PS: Managed to lock-in from a remote(beautiful and developed) part of China: Weifang, Shantong after welcome banquet.

  14. Ivy @ #18

    I agree with your sceptical view on property. The local property prices seem to be over-valued. If you recall, property prices had been in the doldrum the past 7 years and it took only 7 months in 2007 to break new highs. Does that look real? If one is bullish on property, going long on property stocks may be an option vs holding phyiscal assets.

    As for the global economic outlook, it looks gloomy and uncertain. My fear is that the US economcy may go into stagflation – stagnant growth with run-away prices. What the Fed did 2 nights ago, ie. implementing monetary policy is only a temporary measure to stop the bleeding in the equity market. The market is driven by so much fear and uncertainty that even if the Fed were to cut another 0.5% at next week’s FOMC meeting in addition to Bush’s stimulus package (fiscal policy at work here), it may be unfruitful. Tehnically, we are already in a bear market now. So be very careful if you want to start picking bottom in equity. It’s like catching falling knives.

    Having said all that, I feel the opportunity to pick up USD may not be too faraway. The greenback has been falling the past 3 years and inspite of the recent wave of subprime mortgagae mess and credit meltdown crisis, the USD has been holding up well. (The dollar index has not touched its previous low and technicals seem to be turning up.) Of course, that does not mean the USD will not fall further but I think the bottom is near.

    Well, I could be wrong but let’s see.

  15. Hi Eleanor,
    Thanks for sharing. You do sound professional and I’m glad that my views are supported. Must admit that we can never get the bottom prices all the time, buying on average low is good enough…never be too greedy…lesson learnt before. Agree we have to be extremely careful here…don’t play-play with hard earned money. Umm…USD, never thought about it. Let me do some thinking now.

  16. Dear Eleanor and Ivy

    Real estate in Spore is on the high esp the “prime” new projects/districts …….elsewhere selective.

    Consider the five key fundamentals when investing in real estate…… the first is location, location, location….nature of development…. .

    There are 7 key sectors for “buying assets”. I refer to investor, not speculator/trader mindset.

  17. Life is funny…when people start chasing mo peng Ah Lian, she becomes a beauty. When people start chasing realty, it’s bcos the asset is grossly under-valued.

    Conversely in a sell-out, everything is over-valued.

    So people are rushing in to buy gold bcos the potential of further gain is high against a weakening greenback.

    For me, I think I can do more with viagra than gold; the former gives you the extra lifet, the latter weights you down literally.

    Funny why people are not pushing viagra price up?

    Btw, anyone knows why “bull” and “bear” are used to describe a hot raging market, and a depressed belly-up one, respectivelY?

  18. Tim @ #23

    90 % of the people lose money in the market. The minority’s mindset, views and actions are quite different, often, equal and opposite. Maybe that is why in the winners win and losers lose consistently in the market.

    Much can be said to be the same in gambling. (when I say gambling I mean a game of chance played against a house or system as in sports pool, bingo, toto or jackpot; not including competitive skill games played against other people eg mahjong, cards etc. The latter is more like investment trading.)

    Taking your points
    “—When people start chasing realty, it’s bcos the asset is grossly under-valued.—-”
    Majority do not under-value assets as winners should. In fact, the majority buy over-valued assets and sell when under-valued to the minority. They are locked into cycles of greed and despair.

    “Conversely in a sell-out, everything is over-valued.”
    In a market sell-down, everything is under-valued. This is the time when the winning minority would be bargain hunting what the majority is throwing out the window.

    “people are rushing in to buy gold bcos the potential of further gain is high against a weakening greenback.”
    The minority would be looking to sell out what they bought before now at the next buying spree by the majority. Winners are usually locked out-of step with the losers. Its like tango. Winners lead where losers follow.

    “do more with viagra than gold… why people are not pushing viagra price up?”
    Pfizer (viagra manyfacturer) can supply as much viagra as demand warrants at the price they ask. There is no trading at extreme ends of price elasticity in a demand/supply curve. Viagra’s stand straight up – inelastic supply. In life, as in theory, the problem is how to get viagra to come down. It is a standing, inelastic problem.

    Hee-hee.

  19. #24

    I took liberties with Viagra. The last section is a joke.

    Actually the price curve for Viagra is pretty elastic and flat. At the price they set, Pfizer can satisfy all demand by simply ramping up production. This is true for most mass manufactured products.

  20. Gibson @ #17

    Agree.

    There isn’t a better time in recent history than now to buy into US properties. With sub-prime meltdown, Americans can’t wait to throw their real estate out of the window. Except now they can’t even afford the window to throw the junk out.

    Everything again starts with a view. If investing into US is your thing whether for lifestyle, migration or investment then property does feature very high on your shopping list.

    Bear in mind however there are many super ways to do so now. If you want properties think about bank foreclosures. It is one bargain basement level down from a flea market. You can get it literally for free provided you take on the debt and cashflow.

    Any interest?

  21. Elanour @ #20 + Ivy @ #18

    You are applying the correct trading logic and normal cycles to the local property market. But I take an exception this time. I have to break the rules. We live in abnormal times.

    IR opening is a once-in-history event. It is also now the mainstay for the Singapore economy. IR’s success is tied to a highly inflated economy with focus on real estate. So there is no down elevator for the next five years. The only way down is out of the window. If IR fails it is domino theory for us.

    This can be disconcerting to many. Trading, as in strategy and in life, is both flexible and fluid. We must start with a view. But the Art of Trading is not about being always right on a given view. The Art is about making money, right or wrong.

    You juggle with knives. Catch money, not knives.

  22. KT @ #27

    As far as I know, Gibson is the tall, young and handsome one. Didn’t know there’s another goodlooking guy in SHC…hmmmm…interesting. Shall find out.

    KT @ 28

    In Sg, I’m comfortable living in a 3-rm HDB flat for retirement.

  23. John Howe asked me a question on email. I thought that my answer would be insightful to others. So here it is in part.

    “I generated the tables minutes on the display PC before the presentation on a ad-hoc basis. This was just to illustrate the hedging model for the audience. I don’t have it with me anymore.

    But the results are exactly what one would expect. At $1.50, the hedge position loses about $1K. The equivalent loss on a long position alone on the underlying would be $7K when price is $0.30.

    The argument is why suffer the loss even if you consider it as a long hold on a book loss. Utilize the opportunity to short on CFD and make the money down.

    And this is only the theoretical loss. In real trading, one would put in a trailing loss. I suggested $0.10 stop loss which suggests that even in the unlikely situation that the market reverses against you precisely at the moment you short hedge, the loss is about $400 on stop out. You are more likely to make money on the short side with trailing stops all the way down in a weak market.

    Look at this another way. The profits that you earn through shorting CFDs and dividend earned on the equity will lower your effective cost of owning that stock. With every bearish cycle the effective cost of your portfolio reduces. You will become increasingly profitable each time you move onto the next bullish phase. Soon you will have a huge, worry-free, long-term portfolio.

    Isn’t this what any retirement should be?”

  24. Dr. Tony Tan says at World Economic Forum (WEF) in Davos to much media fanfare. GIC is open to greater disclosures.

    The newspaper report concludes,
    ” … no specific announcements to make …”

    Hee hee. These western media must be really easy to please and excite.

  25. KT, we make our points and so long as they’re valid, opened to scrutiny, we need make no apologies, however oblique.

    So, first, “gambling”, which is a game of chance, is not a dirty word. Every investment, every crossing of the road dices on chance.

    Second, Pfizer wd only be proud of what you hv vouched for them and shd reward you with a year’s supply of the booster (and then we go geylang to laylong & split the $).

    In whichever form, gambling is a game of confidence. If you sit on a $ pile, whatever shape is the market, you buy & you cant lose, maybe win less. You hv the confidence to hold, wait & sit it out.

    But if one’s worldly all is only $100, he worries all & at everything. Say, if he uses up $20 in a 4-D bet (with that kind of money, he can forget abt wealth managers dating him), if he doesnt hit it big, his balance $80 wont buy him a wk’s groceries ($95, according to a ST survey).

    The more he ponders & worries, the more he’s confused.

    The Chinese say its well with “if heart has a rhinocerous, 1 touch it’s thru”. He is more likely to hit the wall.

    Wealth favours the wealthy…………….

  26. Tim @ # 32

    Oblique? No way.

    It is just that we have “no specific announcements to make …”

    You are right. But reality is harsher than you paint.

    The rich looks after their own and expects the poor to look after them. The poor looks up to the rich so much, they have little time for each other.

    When you have only $100, you won’t bet $20. You’ll bet $200 with $100 from Ah Long if you can. Skip the meal, so what? Die, die also must win. Otherwise also must die. At least die with hope.

  27. Hi Ivy, Elenor, & all,

    Thank you for your hind sight of me..ha..ha Sorry KT! But I know you’re bets in your era!!!

    US Property:
    I hope the economy figure that was shared about US is something for us to digest, chew and live with, although it may mean nothing to most of us who are only interested in only S’pore, be it property or stock.

    But one of the things we must remember, US GDP is the biggest, 4 time of that Japan, trailing second place. So as the saying goes, when US has a cough, Asian taking medicine..ha..ha.

    Some good news coming our way this Friday, DD: 1st Feb 2008 in Singapore!

    There is a talk taking place this Friday, 1st Dec 2008 at 7.00pm at Le’Meridian Hotel, Orchard Road, 3rd Level, Ballroom,

    Entitle: Market is down, this is one of the opportunity – It’s Free but seats are limited via invitation only.

    I’m invited and I can register anyone of you who are interest to attend under my name, what you have to do for those who are interested, give me your name, contact no and be there by 6.45pm, look out for me when you’re there or check it out with the receiptionist.

    Title: “MARKET IS DOWN, THIS IS ONE OF THE OPTION TO PICK UP SOME ASSET TO MAKE SOME MONEY…”

    Note: I was promise that whosoever attended, there is no obligtaion to participate in their programme and can just leave after the sharing..

    So wait no longer for, shift your engagement to other days and get registered and let’s find out together…

    Regards
    Gibson Tan, (Hp: 90271398)

  28. Hi all :

    Just a word about real estate class for investments.

    There are many varieties and classes, from residential, office, business space, business buildings, REIT, land banks and combination of developments.

    The discovery of sub-prime issues should give care regarding due diligence and deep knowledge in realty investing…be careful of speculative purchases.

  29. Andrew @ # 35

    There is a silver lining in every dark cloud.

    Sub prime and related woes is keeping interest rates low. In countries where properties are holding up or expected to grow real estate assets are very attractive investment options.

    Singapore is such a market but it is an exception. They have many unique local factors making for strong property prices. In South East Asia, the next best place is Thailand.

    It is too long to delve into details but bear in mind some general guidelines about properties
    (a) Underlying real estate is far superior to derivatives
    (b) In big countries, demand for any locality can be very situational. The Olympic village today can turn into real estate desert tomorrow.
    (c) Put an en-bloc dimension into the resale and rental of yur property and add up to seven streams of income to a single property.
    (d) With standard 70% loan, you have 2 times leverage on real estate.
    (e) You can create your own equivalent derivative with the objective to better (d). Eg buying on plan is equivalent to an option. Taking over a purchase on plan is equivalent to buying a call option.
    (f) The current market is a disaster to some. It is the best time to bargain hunt from speculators and weak holders. Hunting with a derivative arsenal, is as easy as shooting chickens with a M16 on full automatic.

    There is no guesswork if you study your investments and plan your strategy carefully. You have trading views which can still be wrong. Right or wrong, the art of trading is to make money any which way.

  30. Andrew @ #37

    It is strange sense of mass denial when people say that they are not into derivatives. Actually everyone is literally betting their home and everything on it.

    The only question is whether you are betting or someone else is betting your money for you. And is that someone else a better ball player than you if you bother to learn to DIY?

    United Bank of Singapore is only the tip of the iceberg. When the titanic goes down don’t bet on the other guy giving you his float. Grab your own float and learn to swim.

  31. Hi KT

    From very young age, I learned that and started life-long learning. Be your own expert in financial management while humbly learned from others and great gurus, and teach. So have the privileges to lecture at three varsities, and others.

    I have moved away from the usual “mainstream textbooks mentality” and focus on what professional passions and best in real education/life as early as in the 1970s

    Also I have my bronze medallion (life saving) many moons ago so that I can save myself and others when time needs.

  32. Hi Terence,

    #5, Interest rate can’t go any lower!
    They’ve just cut another 50 bases point last evening… Can it go lower, your guess is as good as mine..even the expert don’t expect that, so you are not wrong..you never know!

    AS Andrew mention
    #35 Many out there, stick to the basic.

    If you are not holding any – stay out, let your value of dollars go, inflation going up to 5.5% from current 4.2%, one other thing you can do, spend it now – Lunar New Year is next week!!

    For those holding, stick to KT’s suggestion – CFD is na alternative..

    For those die die must get make your money worker harder for you, try this option..

    Join me tomorrow at Le’Meridian hotel, Orchard Road, 3rd level ballroom..and if you are coming, give me a call to register for a seat..and look out for me when you are there!

    Gibson Tan
    Hp: (65) 90271398

  33. Dear Gibson

    Principalities will do what are necessary to remain in office ……..look at Japan 0% for many years….increase slightly only a couple years ago.

    A couple of years ago…Fed was below 1% after many series of cuts.

    Nothing remains static. Be nimble, stay simple, lean but not mean, and alert for opportunities. Have deep current/relevant knowledge and understanding of fundamentals the rules of the game. Respect risks and manage them.

  34. Hi Ivy & Elenor,

    #18 & 20 – Real Estate,
    Me and my company is very sure about this good oppoetunity and we’re investing big, veyr big.

    We’ve been doing this since April 2007 and is still doing – into only one component of the Real estate – That is the begining of real eastate – Raw!!!

    We’ve beening opening this opportunity to many people, piggy bag on our expertise, and they are veyr happy of our performance.

    On the other hand, we know there are other by the fends many don’t see it but play safe by giving other the safe side with negative comments becasue they themself is not 100% sure on this subject.

    I just hope you give your self an opportunity to find out with me. It’s an awareness knowledge gathering for your self.

    Our company is and has been generation very good returns – 15 to 20% per year safely & more..Is this what you’re looking for, making your money work hard without getting oneself involve directly!

    To know more, have to go over the drawing board. let meet up next Wed, DD: 13th Feb at 7.30pm, my office at One fullerton, #02-01.

    There are ten over thousands Singaporean currently particpiating with us and are very happy, Unless you hear for your self, I’m not sure it can meet your individual needs.

    Note: You can invite other to join you as well. let me know the name and no of people joining you.

    Regards
    Gibson Tan
    Hp: (65) 90271398

  35. Hi Ivy & Elenor,

    #18 & 20 – Real Estate,
    My company & me is very sure about this good opportunity and we’re investing big, very big.

    We’ve been doing this since early 2007 and is still doing – but only one component of the Real estate – That is the begining of real eastate – Raw!!!

    We’ve been opening this opportunity to many people, let them piggy bag on our expertise, and they are very happy with our returns & performance.

    On the other hand, we know there are others standing by the fends but to play safe.

    First, only know briefly about the subject, but in order to play the good guy, by sharing all the if, but and not why?

    Second, helping other by encouraging them to stand by the fends as well – play safe but looses the opportunity.

    I just hope each one of us, take up the courage that is in you, give your self an opportunity to find out more.

    I’ve an awareness knowledge gathering sharing this next Wednesday at One Fullerton building, #02-01, which is next to the Merlion statue at the mouth of Singapore River, you can’t miss it.

    Our company is and has been generation very good returns – 15 to 20% per year safely & more..Is this what you’re looking for, making your money work hard without getting oneself involve directly!

    There are ten over thousands Singaporean currently particpiating with us and are very happy, Unless you hear for your self, I’m not sure it can meet your individual needs.

    Note: You can also invite others especially your friends, love ones and colleagues who like you, wanting to make their money to work hard for them, to generate good returns and face this year’s inflation rate of 5.5% as spell in the local news paper to join you as well.

    Just let me know the name and no of people joining you by Monday, DD: 11th Feb 2008 to secure a seat – f.o.c.

    Regards
    Gibson Tan
    Hp: (65) 90271398

  36. Dear Gibson @ #43,

    Plse refer to your comment: “Our company is and has been generation very good returns – 15 to 20% per year safely & more..Is this what you’re looking for, making your money work hard without getting oneself involve directly!”

    While I respect your business activity, and that this claim may be true for your company, it is not acceptable to SHC. Please keep these comments to your seminars, or if you like, you may use 2GreenDots.com.

    Terence Seah

  37. Hi Gibson

    Thank you for the invitation to your real-estate investment talk next Wednesday. I gather you are into land banking from the way you present your investment opportunity.

    Since I am a novice in land banking, please correct me if I’m wrong here on their short-comings:

    1) Land banking requires a long-term committment. If one were to liquidate the investment early due to changing circumstances, the loss can be quite substantial as most of the land investment are in places unheard of (illiquid market).

    2) If the valuation of the investment were to increase and investors wish to sell, it has to be done by majority vote.

    Appreciate your comment.

  38. Hi Terence,

    Have a prosperous New year!
    Thank you for your reminder, will keep it in mind. The news was publish in St sometime last year..

    Elenor #45
    Continue to be healthy and beautiful for this year!

    Thank you, it seem that you know in depth about LB, Regret that this forum is only for view and if not Terence will stop me from sharing & contributing..ha..ha.

    Well for your two sttaements, will please to share with you in detail off forum, Can reach me via emial: tan.gibson@gail.com

    As for others who are looking for the answer, can email to me likewise.

    Regrards
    Gibson Tan
    Hp: (65) 90271398

  39. Hi Gibson,

    To clarify, we treat Landbanking as another investment option. You are welcome to invite members to join your talks. Ideally, be specific it is a Land Banking talk, and not promote it as a Get Rich program.

    The SilverHairsClub website has not been planned as an advertising media. But, if you need to advertise, you may use 2GreenDots.com.

    Terence Seah

  40. Perhaps, I cd clarify a little what Terence has said in his #47, particularly “….we treat Landbanking as another investment option….. and (but?) not promote it as a Get Rich program” which might appear somewhat contradictory.

    Obviously, any investment option – land banking is no exception – must necessarily hv “get rich” as its ultimate objective otherwise why risk into that investment at all?

    Thus, if it’s a general & objective discussion on land banking – its strengths, pitfalls etc, the SHC Administrator shd hv no objection.

    However, if it goes beyond that into selling it as a product of a company in which the writer has a vested interest, that write-up will be deemed an advertisement, suitably be placed under Green-dot.

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