Musicwhiz Portfolio

Musicwhiz Portfolio

February 2009 can be summarized as a month in which the entire world’s economy deteriorated further, and one can read juice bad news in the papers on an almost daily basis (hourly, if you subscribe to “Breaking News” service by Straits Times). So for those with a morbid fascination for pessimism and depressing news, just tune in every hour to either Bloomberg, CNN or CNBC for the latest bad news. It’s almost a guarantee that this is simply the tip of the iceberg, as the economic situation is expected to go downhill a lot for quite some time yet. Call it gravity’s pull if you wish.

Events are happening at almost lightning speed in President Obama’s office, as he unveils a US$787 billion spending plan and a US$250 billion mortgage loan plan to prop up the economy and to inject liquidity into the system. I won’t go into details as every major financial website probably has more than enough information and commentary on the details and the supposed effectiveness of such methods. The shocking headline news is the US$1.75 trillion Budget Deficit which was announced by the President just yesterday, and this is set to grow to an even more alarming US$3.55 Trillion spending plan for FY 2010, amounting to a total of 12.3% of USA’s GDP. Is spending going to be the solution to an economic crisis of such magnitude ? No one really knows the answer and yours truly (not being an economist) will reserve comments. However, readers are always welcome to share their views via the comments box.

As for Singapore, we seem to be bearing the full brunt of the economic downturn due to our status as an export-oriented economy. Countries with huge domestic demand such as Indonesia and China are able to ride out the crisis relatively unscathed, though of course some negative effects of the credit crunch and recession will still trickle in. Singapore’s GDP is expected to contract between 2% to 5% and all the big shots are warning of rising unemployment (99,000 jobs to be lost this year, unemployment rate to hit 5% by mid-2010) and more retrenchments to come. The huge fiscal stimulus measure unveiled during the recent budget (termed “Resilience Package”) is supposed to pump-prime the economy and ensure money continues to flow, and the effects should be visible from FY 2010 onwards. In the meantime, my advice would be to reduce spending and save for a rainy day as these are uncertain times and one should protect their source of active income. It is also prudent not to rely on just one source of income but to have some form of passive income such as rental or dividend income to prepare for the worst.

In terms of the Singapore stock market, I would describe it as “bleeding slowly but surely”. Volume is dwindling and share prices are making a steady but constant descent. S-Shares took a major hit in terms of confidence when Fibrechem (a former market darling) reported irregularities in its Trade Receivables and Cash Balances and called for a trading suspension. Rumours are now rife of other corporate scandals involving Singapore-listed China companies after this most recent fiasco, as well as the lingering bad memories of China Printing and Dyeing. Read more…