Thursday, September 10, 2009

Market happiness theory

There is a disparity between what I see and what the people in power are saying to us. It seems like we're in the midst of a major recession not seen since the great depression. The major economies are in trouble, banks had collapsed, inflation and worse - stagflation is looming, GDP is contracting, unemployment is rising, wage freeze wage cut...these are headlines of what I read in the newspaper. However, the reality seems to be far from the picture.

I see people queuing up for property so as not to miss the opportunity to invest during 'recessionary' times. I see many people buying cars. I see penny stocks occupying the top volume of sgx charts and those ultra pennies are in fashion once again. I see people who are not interested in stocks suddenly becoming interested in it and scolding others for being 'old-fashioned' by putting money in savings accounts.

What do I make of this? I don't know.

As usual, I'm skeptical of the whole cheery outlook. It's just a few months ago that we seem to be at the brink of global recession and all of a sudden, the clouds had cleared and the sun shines again. If I'm sure of anything, it's just that humans in general have extremely short term memory. I think it's a good thing that we are wired this way, otherwise life might be too unbearable to live through.

I think in uncertain times, it is best that we have a plan in mind. Basically, there are two opposing realities playing out right now - one is that we're out of the gloom and the other is that we're heading from the top to another one. So, I think it's reasonable to think of two scenarios:

1. What if the market rises high, then sinks deeper

I'll be happy because there are certain counters that I need to buy and haven't got enough or any yet. It'll be a good opportunity to scoup up some more bargains when and if that happens. I'm afraid if the bad times do not come earlier, the temptation might be too strong to just join the crowd and raise my buying price.

It's one thing not to make money. It's totally another when one do not make money yet sees others making money. It'll wreck havoc on one's pysche.

2. What if the market moves up further, punctuated by shallow corrections

I'll be happy because I'm already invested along the way. It's actually less stressful because thinking about how much profit to take is better than to think about whether to cut loss or ride it out. Bullish times is good to sit back and relax because everyone is happy.

Happiness is nothing more than good health and a bad memory - Albert Schweitzer


Anonymous said...

Hi LP,

I agree, i think what is happening is an asset bubble, due to the abundant liquidity.

The only fear is that when the liquidity dries up, the party can stop quite suddenly, and we would have exhausted our bullets.

I foresee that as an issue, but that is more 2010 issue than 2009.


la papillion said...

Hi V,

Hmm, I'm not too sure if it's a 2010 problem or 2009 problem. Either way, I'm prepared when it happens :)

PanzerGrenadier said...

Me thinks the low interest rates does make people punt on the stock market.

That's exactly what I'm doing, punting on movements within day(s)/week(s).

I still think the market is due for a very sharp correction as the macro picture is still gloomy.

But in the meantime, punt within my means for pocket money and wait for property assets to be more realistic. Japan went through property and stock market asset bubble burst in late 80s/early 90s and hasn't recovered since then.

In the meantime, cash is king (with occasional speculative punts) :-)

la papillion said...

PG, you putting your property search on hold now?

PanzerGrenadier said...


I am still open as I'm overweight in cash now but I'm not rushing to buy. Still selective as I'm seeing some of the expats moving back to their home countries in my estate.

So I think short-term/medium term rental market could be soft.

Eyeing resale private with rental income for yield, not interested in the speculative activity that is the hallmark of recent new launches.

How's your own financial plans coming along? :-)

Be well and prosper.

Noob-trader said...

Hmm you mentioned people are queueing to buy properties but it might not be signaporeans per se,

The indians foreigners in singapore or at least my company~ mentioned that buangkok condo 720k is cheap and pay lump sum one shot...

guess those properties are not meant for an average singaporean.

KEKE STI up we enjoy, down we buy. both ways are great with good money management~~

PanzerGrenadier said...

Here’s wishing you a happy hari Raya Puasa holiday and a good long weekend catching up with loved ones, family and for some (sleep!).

Be well and prosper on your journey towards financial freedom.