Tuesday, December 2, 2008

Recovery In Sight II - 2009 - The EAST shall rise and shine

Introduction

Is the worst behind us and is recovery in sight? Probably yes. Recovery is in sight but freak weather conditions, health scares and diseases, social unrest and lack of political will may scuttle hopes of finding universally acceptable solutions to one and all. The road is long and the slopes steep!

All Sovereign chiefs at the G20 meeting make it abandonly clear that any extension of help will be within their country first then outside; this is not a case of selfishness but survival.

When Iceland approached USA and EU for help, she was given a cold shoulder. In desperation, she approached Russia, an unlikely 'ally', and found aid.

China commits to spend S$800bil, with S$25bil to be spent this quarter and to use up the rest by 2010. China has to create jobs and spin the multiplier within to offset job losses and create demand, hopefully neutralizing social disequilibrium and disquietness, from her export-oriented economy.

Guardians or Ali Baba

The West, as leaders in finance, must learn that there is zero tolerance for gamesmanship and that the financial system must be jealously guarded against greed, hollow ideas, senseless securitisation and derivatives. Financial system cannot be completely deregulated as it is easy and never painful to toy with 'other people's money'.

The recent rebound in Wall Street is base on hope, not confidence. It is hope that President-elect Obama will listen and attend to one, and all industries, and to dish out aids and grants to stall those that are 'too big to be allowed to collapse'. Omigosh! this simply goes against the Law of Comparative/Competitive Advantage. If Mr Obama does go ahead to give handouts to all, he is sparing the rod and spoil the child.

As the Bible tells us: "He who spareth the rod hateth his son: but he that loveth him correcteth him betimes" (Proverbs 13:24)

I read somewhere that said "in dense jungles, when old, hugh trees die and fall, they allow sunlight to shine through thereby allowing new plants and saplings to grow thereby replacing deadwood."

It is not failures that make us a fool, it is when we don't learn the lessons and repeat the same (at a larger degree) that will decimate us...just to name a few - the US Savings & Loans, LTCM, Parmalat, Enron, US housing bubble ...

The World

The limping West is seeking help from richer countries and the better off but they have yet to organise their thoughts and offer constructive solutions except to ask for contributions.

The affected East is adamant of turning inwards, to fill the stomachs so as to relieve tensions - a hungry man is an angry man. Spendings on infrastructures, roads, ports, schools, hospitals, power plants ... to spin the multiplier/accelerator in order to create self-sustaining demand to replace what was once an export dependent economy. Smaller economies and nations will have to reposition and realign themselves to the new economic power/engine/region to ride the recovery. If successful, the East shall shine!
The Oil rich nations and Russia will have a whirl of a time to engage and influence geopolitical and ideological imbalances.

The world is not going to get any better until the underlying sickness [of companies, funds, countries, political gamesmanship] is treated or ringfenced. At best, there may be some semblance of stability and plateauing in 3rd Quarter 2009.

Man In The Street

Cash is King!

Not that you are not encourage to spend but spending is a flow; you spend if you know that income and earnings are forthcoming. With a dramatic economic contraction, the next meal may be uncertain let alone income and earnings.

With the arrival of New Year 2009 and after the installation of President-elect Obama and Chinese New Year, reality replaces hope. The recession had been here long before being recognised. Slowdown, layoffs, unemployment, underemployment and debts will be a norm. Soup lines may surface if the recession deepens or, worse still, depression kicks in.

Of course its not all doom and gloom. But being prepared, like being forewarned, is forearmed.

The Stockmarket

Recent Indicative High/Low (1/12/08)

Indices LOW HIGH CURRENT

HSI 10,676 32,000 14,108
Nikkei 225 7,000 18,300 8,397
JKT CI 1,100 2,800 1,223
KLCI 800 1,500 848
Shanghai A 1,700 6,400 1,894
SET 400 900 390
STI 1,500 3,900 1,690
Dow 30 7,552 14,164 8,829
S&P 500 840 1,540 893

The real economy has to lead the recovery. Besides, the redemption from the Hedge funds and the realisation into cash of portfolios held in institutions that collapsed, or near collapse, are far from over.

Recovery takes time but the lower costs of factors of production has made the road to recovery less onerous.

For the moment, this is a page to skip. For the brave, its still a trade in the bear. For those who have cash, it is also time to bargain hunt - put some into companies whose price are 'bombed-out' and is a fraction from their peak. Unfortunately, like all investment, the risks are real; just pray hard that your chosen one is not bankrupted before you cash out. If you are prepared to get into the market, be prepared to ride long haul or at worst case, your money bites the dusts!

Eclipses

Solar Eclipses
  • 2009 January 26 - annular solar eclipse
  • 2009 July 21-22 - total solar eclipse
Lunar Eclipses
  • 2009 February 9 - penumbral lunar eclipse
  • 2009 July 7 - penumbral lunar eclipse
  • 2009 August 5-6 - penumbral lunar eclipse
  • 2009 December 31 - partial lunar eclipse
As previously mentioned, eclipses have an uncanny correlation with market performances with lunar being negative and solar being positive..

2009 will have a wider mix of risks and opportunities.

May I wish everyone a Happy, Healthy New Year 2009 ... Health is Wealth

God bless

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