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2008 is about to come to an end and the global economic and financial crisis is still worsening.....I would caution investors about calls that the worse is over and that there are prime pickings to me made now !!!!!
Stock markets seem to have stabilized and rebounded off their Oct/Nov lows by about 15%. The relative firmness has led to an emergence of views that the worse is over and that there are prime pickings out there (but no for the faint hearted). I think stocks have fallen but are likely to fall further as the wave of bad economic, financial and corporate news is not over. We had a prolonged period of cheap money and a misallocation of resources because capital did not reflect its true costs - the net result was a liquidity induced capital market and commodity boom which reversed sharply when it brought the financial sector to its knees. The deleveraging process is continuing....so hedge funds are still liquidating and being wound up - although some have asked for an extension of their redemption period. The next phase is the unwinding of excess capital investments in fixed assets (industry consolidation through corporate failures and mergers. You read almost everyday of companies stopping production because there is no demand and as inventory starts to build up rapidly due to weak demand especially for durable goods. So expect more corporate failures down the road in the electronic and auto industry. Financials are still not out of the woods - expect more bad debts from corporate failures, personal bankruptcies and rising credit card defaults.
I expect that Q1-2009 and into Q2-2009 will see more bad news in the real economy. 2008's problems in Q3 and Q4 were related more to the near collapse of the international financial system wherein banks didn't want to accept letters of credit from each other. The impact on the real economy will be in 2009.
I just pulled out some performance data for 2008 see below:
Index Performance in 2008 (%) Performance in US$ terms (%)
Dow - -35.8% -35.8%
FTSE -34.7% -51.6%
Nikkei225 -43.4% -30.1%
Hang Seng -49.4% -49.0%
Shanghai -65.3% -63.0%
KLCI -39.9% -42.8%
STI Index -49.8% -49.9%
Asia has performed worse than the US despite the fact that the problems originated in the US possibly because liquidity has left or exited the Asian stock markets. The data above also shows the currency volatility that we have seen in 2008. Ironically Japan is the best performer in US$ terms possibly because its interest rates were near zero anyway. I still believe we have more downside and for the Singapore market am sticking to my target of 1200 - I will need to see the Singapore market hold current levels on volume before I believe that the market has bottomed. Read more...[caption id="attachment_1347" align="alignright" width="216" caption="Photo by Petrick2008"][/caption]
2008 is about to come to an end and the global economic and financial crisis is still worsening.....I would caution investors about calls that the worse is over and that there are prime pickings to me made now !!!!!
Stock markets seem to have stabilized and rebounded off their Oct/Nov lows by about 15%. The relative firmness has led to an emergence of views that the worse is over and that there are prime pickings out there (but no for the faint hearted). I think stocks have fallen but are likely to fall further as the wave of bad economic, financial and corporate news is not over. We had a prolonged period of cheap money and a misallocation of resources because capital did not reflect its true costs - the net result was a liquidity induced capital market and commodity boom which reversed sharply when it brought the financial sector to its knees. The deleveraging process is continuing....so hedge funds are still liquidating and being wound up - although some have asked for an extension of their redemption period. The next phase is the unwinding of excess capital investments in fixed assets (industry consolidation through corporate failures and mergers. You read almost everyday of companies stopping production because there is no demand and as inventory starts to build up rapidly due to weak demand especially for durable goods. So expect more corporate failures down the road in the electronic and auto industry. Financials are still not out of the woods - expect more bad debts from corporate failures, personal bankruptcies and rising credit card defaults.
I expect that Q1-2009 and into Q2-2009 will see more bad news in the real economy. 2008's problems in Q3 and Q4 were related more to the near collapse of the international financial system wherein banks didn't want to accept letters of credit from each other. The impact on the real economy will be in 2009.
I just pulled out some performance data for 2008 see below:
Index Performance in 2008 (%) Performance in US$ terms (%)
Dow - -35.8% -35.8%
FTSE -34.7% -51.6%
Nikkei225 -43.4% -30.1%
Hang Seng -49.4% -49.0%
Shanghai -65.3% -63.0%
KLCI -39.9% -42.8%
STI Index -49.8% -49.9%
Asia has performed worse than the US despite the fact that the problems originated in the US possibly because liquidity has left or exited the Asian stock markets. The data above also shows the currency volatility that we have seen in 2008. Ironically Japan is the best performer in US$ terms possibly because its interest rates were near zero anyway. I still believe we have more downside and for the Singapore market am sticking to my target of 1200 - I will need to see the Singapore market hold current levels on volume before I believe that the market has bottomed. Read more...
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2008 is about to come to an end and the global economic and financial crisis is still worsening.....I would caution investors about calls that the worse is over and that there are prime pickings to me made now !!!!!
Stock markets seem to have stabilized and rebounded off their Oct/Nov lows by about 15%. The relative firmness has led to an emergence of views that the worse is over and that there are prime pickings out there (but no for the faint hearted). I think stocks have fallen but are likely to fall further as the wave of bad economic, financial and corporate news is not over. We had a prolonged period of cheap money and a misallocation of resources because capital did not reflect its true costs - the net result was a liquidity induced capital market and commodity boom which reversed sharply when it brought the financial sector to its knees. The deleveraging process is continuing....so hedge funds are still liquidating and being wound up - although some have asked for an extension of their redemption period. The next phase is the unwinding of excess capital investments in fixed assets (industry consolidation through corporate failures and mergers. You read almost everyday of companies stopping production because there is no demand and as inventory starts to build up rapidly due to weak demand especially for durable goods. So expect more corporate failures down the road in the electronic and auto industry. Financials are still not out of the woods - expect more bad debts from corporate failures, personal bankruptcies and rising credit card defaults.
I expect that Q1-2009 and into Q2-2009 will see more bad news in the real economy. 2008's problems in Q3 and Q4 were related more to the near collapse of the international financial system wherein banks didn't want to accept letters of credit from each other. The impact on the real economy will be in 2009.
I just pulled out some performance data for 2008 see below:
Index Performance in 2008 (%) Performance in US$ terms (%)
Dow - -35.8% -35.8%
FTSE -34.7% -51.6%
Nikkei225 -43.4% -30.1%
Hang Seng -49.4% -49.0%
Shanghai -65.3% -63.0%
KLCI -39.9% -42.8%
STI Index -49.8% -49.9%
Asia has performed worse than the US despite the fact that the problems originated in the US possibly because liquidity has left or exited the Asian stock markets. The data above also shows the currency volatility that we have seen in 2008. Ironically Japan is the best performer in US$ terms possibly because its interest rates were near zero anyway. I still believe we have more downside and for the Singapore market am sticking to my target of 1200 - I will need to see the Singapore market hold current levels on volume before I believe that the market has bottomed. Read more...
