December 2008 was a very quiet month in terms of corporate activity as none of my companies announced any corporate developments or updates. Of course, the quiet was balanced by the continued turmoil in the financial markets and economy, which has threatened to blow up into the biggest financial crisis since the Great Depression. Japan, Germany, USA, Hong Kong and Singapore are now officially in recession, and many countries may be set to follow. Even giants like India and China are likely to report muted growth for 2009, way below originally projected targets, as the global financial maelstrom blows all over the world.
In terms of bailouts, the latest is by way of a capital injection of about US$5 billion into GMAC to ensure the auto-maker has enough liquidity to operate at least for the next 3 months. The term “bailout” is probably the most popular word for 2008 and has become almost synonymous with the current recession and economic malaise. Rumours are rife that the next wave of companies to ask for bailouts may be real estate companies, as sales of homes fall to new lows amidst the worst housing crisis USA has experienced since the 1930’s.
Amazingly, we have not even started talking about potential collapses of even more banks, as the global financial landscape is irreversibly changed. With more writedowns expected for credit card and student loans in the coming months, perhaps the crisis is still far from over ? With massive liquidity injections from the Fed and other central banks around the world, this has helped to prop up ailing sections of the economy for now. Whether these measures are sufficient to provide a fiscal boost remain to be seen. In Singapore, the Government has plans to boost infrastructure and construction spending by bringing forward deferred projects so as to ensure constant demand, and to ensure unemployment does not surge too high.
It’s been one piece of bad news after another, to add to the almost endless barrage of about 10 consecutive months of terrible, pessimistic news. Just flip open the nearest newspaper and be greeted by more doom and gloom, with doomsayers predicting anything from a total collapse in the economy to dire predictions of a Second Great Depression. So it’s no wonder that my general mood is that of extreme pessimism as I too have been affected by all this doom and gloom. Of course, this is the perfect environment to be purchasing shares of solid companies and part of my brain knows this, therefore I am trying to detach my objective brain from my emotional one. It’s not easy but in order to prosper in 4 to 5 years time, it has to be done. Read more…