Singapore's Macro Economy

Singapore's Macro Economy

Singapore economy is coming from a low base since the recession but still showed high GDP growth. The real strength of the economy is still uncertain. The GDP of Singapore would be pretty much the same. However, the increasing expatriates and immigrants needing housing, schools, food, services, etc, their massive immigration, has been affecting the growth of the overall nominal GDP values.

The condition implies that we would be expecting a slow rate ascent of the real property prices towards the end of 2010. However, the risks of the property buyers will continue to increase. A property buyer planning to purchase a property still needs to make a good decision based on research and other information.

A Singapore property investor looking for real estate property to invest should wait a few more years to experience a market flooded with properties developed by the government of Singapore. The government has been trying to develop properties in relation to their present massive land sales program. There is no speculation of a market crash since the Singapore government could always resort to bring in more foreigners to boost demand for housing, which will support high land prices.

Invest in Singapore: Risks of Dollar Cost Averaging

Singapore investment: Risks of Dollar-cost-averaging
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What is dollar-cost-averaging?

Many people mistake investing in Singapore as naturally given them safety. In fact, no

matter where you invest in, you will still need to do your home work.


In shares, dollar-cost-averaging is used to lower the average cost of your

purchase.
Just as an illustration using shares: -

Jan 2009 - 1000 shares at $5.00

Feb 2009 - 1000 shares at $4.00

Mar 2009 - 1000 shares at $2.00

The average cost of the above share = ($5.00 + $4.00 + $2.00 )/ 3 = $3.67

The aim of dollar-cost-averaging is to mitigate a wrong timing of purchase. If

you purchased something at $5.00, the prices have now fallen, in order to

lower your overall average cost of purchase, you will have to buy more at

the lowered prices.


RISKS of dollar-cost-averaging

When the shares have fallen, people who blindly believe in dollar-

cost-averaging will put more money into the company whose shares have

fallen.


Then the shares fall further, he/she buys more, it falls further, he/she buys

even more. So much so that the cost of the shares is very cheap. If the

share price rebounds, the person can become very rich.


INFORMATION ASSYMMETRY

However, in many cases, there is a reason why the share prices have fallen.

We almost always have to assume that the insiders know better than we do.

It can mean that the company is seriously in trouble.

Despite years of making the market more transparent, efficient and with

timely dissemination of information, it is still the insiders and their inner circle

that knows what is going on in a company best.

Buying the shares when insiders are dumping is the easiest way for a

person to loose an entire fortune.


SO WHAT SHOULD WE DO?

The best way to do is to re-assess the company's financial fundamentals,

macro and micro economic fundamentals to establish a NEW fair value for

the company's shares and it's potential.


Once you have established that, you can then decide whether to throw more

money into the company.


If you have thrown in money in the past and it is lost, you must be able to let

go. So the key thing to do is: -

When markets rise, do not greed. (Do not rush to buy more without proper homework)

When markets fall, do not fear. (But do not become a "rambo" either)

In both cases, do your homework, then act on it. And when we say ACT on

it, we don't just mean, BUY or SELL. It could also mean do Nothing.


Some people emphasize and quote Warren Buffet, "When others are greedy, be fearful,

when others are fearful, be greedy" this is simply a contrarian style of investing. Do

not go into it blindly. Because what you didn't know is, Warren Buffet's been watching

and observing certain shares for YEARS waiting for the right moment. These shares may

have been consistently over-priced, but are nonetheless good companies. When these

shares suddenly and without reason are being dumped because people are fearful of the

general market, that is when Warren Buffet acts.


Do not use Warren Buffet's maxim when you only know half the story and didn't do your

homework. You will BET YOUR FARM and LOSE IT.


The key thing is, never take one or two simple concepts and treat it as

universal truth and apply it indiscriminately to all situations. There is no free

lunch!


Luckily physical properties have less the the problems associated with shares when

applying Dollar cost averaging.


www.PropertyBuyer.com.sg

is a Researched Focused Mortgage Advisory that helps individuals

refinance or obtain the best fit home loans. We do not simply emphasize

cheap rates, but rather focus on a risk versus savings approach.

You can approach us to evaluate refinancing of your home loan. The service

is free to you as banks pay us separately. You can click on "About us" to

know more about us.

You have nothing to lose and everything to gain.

www.PropertyBuyer.com.sg

also focuses on helping property buyers get the right property investment by checking

checking and ensuring a fair valuation so that they do not overpay or get excited when

an agent tells them the property is hotly in demand.

Find the right home loan package that fits the needs of the home property buyer,

process the loan till approval.


When the loan is finally approved, www.PropertyBUYER.com.sg helps you to check the

letter of offer to make sure the terms are exactly as agreed prior to the offer and

spot major mistakes and omissions.

(Some home owners were promised some terms and pricing, but when the offer came, there were some mismatch. One of the home owners signed on it and only to realize months later that instead of a No-lock in period, he was locked-in for 3 years, with a penalty of 1.5% on FULL redemption. His property was 700k and his loan was only 400k. In case he were to get an offer to sell his property within 3 years, he would incur a $6,000 loss)


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Read More articles

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Understand Property Investing and Sub-prime

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Refinance and Mortgages DIY steps

http://www.squidoo.com/Singapore-homeloan

Singapore Economy: How does Derivatives work?

Watch CBS Videos Online

The world is becoming an interconnected place. Problems in 1 country quickly spread to other parts of the world especially so when international trade creates so much interlinked investments that allows problems to be passed onto other countries in an unfettered way. This is the scary part.

It is time the US resumes leadership in this area.

Singapore Economy: Martin Soong Interviews PM Lee Hsien Loong

Singapore Economy: Martin Soong of CNBC interviews PM Lee Hsien Loong on his views on the Economy

Watch Video
http://www.propertybuyer.com.sg/viewnews.php?article=85

BIG Stimulus packages included tax cuts and things such as Jobs credit.

First, we think Tax cuts are not really good, because it depletes Tax revenues. Only profitable companies pay taxes, as a result it is tantamount to giving away money to companies that do not yet need it. The benefit is not immediate and of direct benefit to the economy.

Second, we think that the Jobs credit scheme in which it gives a subsidy to the companies with Local and PR employees.
http://www.iras.gov.sg/irashome/jobscredit.aspx
However when faced with a demand slump, the choice of firing an employee or using Jobs credit is clear. The company will fire the employee as jobs credit only probably delay the retrenchments by a while at best. While the jobs credit scheme gives money to companies that are profitable.

MOST WORRYING

Heng Chee Howe said, Jobs credit scheme created employment as Sheng Siong Supermarket expanded 1 more outlet and employed more staff. He seems to imply that Jobs Credit creates employment.

This is the MOST worrying in our opinion. It simply shows that he does not understand the underlying economic issues!!! Job credit does not create employment as employers will go ahead to expand if they think there is demand. If there is no demand, that won't stop them for retrenching workers unless they see the demand fall off as temporary.

We would have bought his argument if he argued that Jobs Credit will give strong companies cash for them to tide over the coming recessions and uncertainty while there are other plans and schemes for helping those companies in trouble.

The fact that he didn't understand that worries us to bits as these are going to be the people that lead us out of recession. Oh god help us.

What have these MPs been up to? Can they even spell the word "Economy"?

Global Economy: Money as Debt Part 1

This is an excellent video explaining how Money came about.

Money is initially used as a Token in exchange of actual goods and services to be delivered either immediately or in the near future. Money is also used as a "Promise" to deliver something.

Global Economy: Fiscal Stimulus no longer works the same way

As the world is increasingly connected through trade, there are many jobs that depended on trade. For example, if you build a house today, you would need to buy wood from Brazi, iron from China and Europe (which got it's sources from India and australia), and paint from US, plaster from US (whose chemical is produced in South America), roofing and tiles from Africa and aircon from China, labour from US and south America, etc.

So fiscal stimulus in ONE country, does not necessarily flow all towards stimulating that one country's economy. As there are a lot of leakages.

Therefore the whole world's leaders should come together and get their act together.

Free market is best when operating within an operating range, once you allow it to swing outside the "boundary", the market does not heal by itself. We are of the opinion that Keynesian economy where the world and each of the governments set some regulatory oversights while allowing businesses and banks to run on it's own. Banks being the bedrock of any economy, there should not be any incentive for these banks to take excessive risks.

For the more risk taking ones, they should be funded by investor's money.

Singapore Refinance: Commentaries on PM Lee's call to Foreign bank to take long term view

SINGAPORE REFINANCE: PM Called on Foreign banks to take a long-term view

This week, reported in the straits times on the 20th Feb 2009 and Channel

News Asia, Prime Ministers Lee Hsien Loong spoke at a dinner held by

Standard Chartered. PM Lee called on foreign banks to take a long term

view and to consider the merits of borrowers who need financing to do

business, and continue to nurture clients.


We view this as a pre-emptive notice or plea to banks to stand behind

borrowers in times of hardship.

Just a few weeks ago, DBS chairman, Mr. Koh Boon Hwee re-iterated that

DBS will "stand behind it's loyal customers."


These are confidence boosting measures which we hope carry some weight

as Home Owners whose property's valuation has fallen a lot are in real

danger of the bank asking them for topping up CASH.


As we discussed in our previous article, where we highlighted the risks of banks

turning on your backs during tough times. One of the ways they can do that is not to

lend you money. Another even more drastic measure is to ask you to top up your equity

in your home loan in cases where your Property value has fallen.


An example of how a bank ask you for money when you need it most.

For example (The figures are just illustrative), your Home loan was $800,000

and your property value was $1,000,000. Banks usually have a provision

that states that they may require equity top up if valuation falls below

$900,000. If the bank valued your property and the valuers come up with a

value of $800,000, the bank, in order to maintain a Loan to Valuation Ratio

of 80%, that means the bank can only lend you $640,000.


The Bank asks you to TOP UP CASH of $800,000 - $640,000 = $160,000!!!

If valuations of properties could fall so quickly, it signifies severe distress and

many people are out of cash.

If you do not have the cash, you can refinance your loan with another bank

(which most likely will reject your application) or you can SELL you house at

a FIRE-SALE price to pay back the loan.

You very likely will lose Hundreds of thousands of dollars and perhaps go

bankrupt.


What we think

PM Lee's call to Foreign bank is an open call for them to NOT to do anything

so drastic and add to the market woes.

We hope the "Call to take a long term view" is also followed up with some

Carrot and Stick to greater effect. The fact is, borrowing money, despite your

credit rating has become very hard. This is making the already bad

economic situation even worse.


In fact, the banks in Singapore should have not lent too freely during the

economic boom times which created this problem in the first place, this also

applies to banks in Singapore.


They were lending money to the tune of 90%, creating an asset price

bubble.


Banks Make the BOOM and BUST even worse

So in order words, banks made the BOOM and BUST cycle worse! It may be

time to have a back to basics bank. And a bank that is an "efficient

thermostat", to turn on the heat when it's cold and turn on the Cool air when

it's hot. Not the other way round, giving you ice when you are freezing and

pouring hot water on you when you are already scalded.