Life and Investing In the Midst of A Recession

News of what was to come came in early January 2020. Working in healthcare, I first heard of the then Wuhan virus in early Jan. Infectious disease experts in Singapore were already starting to monitor the developments in China very early on and preparing for what was to come. We didn't have the mood to celebrate Chinese New Year and the worrying part is when people around the world travel to different parts of the world during the CNY holidays causing the virus to spread.

In the midst of CNY, I was busy preparing slides for manpower planning for COVID-19 support. I had to work till midnight for several days. The CNY holidays were totally disrupted for me. The preparation work continued for the rest of the 15 days of CNY and DORSCON was raised to orange in Singapore even before the 15 days CNY was over. I remembered some of my colleagues had arranged reunion dinner with their family on that faithful night but all plans were disrupted. 

The virus was officially named 2019-nCOV in February and then changed to COVID-19 thereafter. The events happened very quickly and caught many by surprise. It sent shock waves to the stock market and every stock went into free fall mode. Many people, including me started to deploy our warchest to buy some stocks at good bargain thinking this virus will pass by in just a few months. The only comparison we had was the SARS virus back in 2003 and the world got out of it in just a few months. 

Little did I know that COVID-19 would cause such massive damage to the economy as compared to SARS. Fast forward 7 months into COVID-19, we are still far from over from this crisis. Retrenchments are intensifying and pay cuts become a common occurence. Our borders are still mostly closed even though there's some good news now that our borders are starting to reopen to revive the tourism, hospitality and aviation sector. This sector contributes about 5% to Singapore's GDP which is somewhat significant. Furthermore, there are repercussions if there are no tourists in Singapore. Tourists contributes significantly when they spend in our country. Without them, many businesses suffer a drop in income and many had to close down as what we have seen. Singapore's domestic market is still too small to sustain our economy for the long run. 

Is this still the best time for investing?

Nevertheless, I still think this is the best time for investing. Many investors in the past have said that they will take advantage and find opportunity to invest when a crisis happens. I too was looking forward to a crisis so that I can invest more. When the crisis really comes, it was easy deploying cash into stocks at the start but as the crisis drags on and your portfolio continues to see losses, we also start to doubt our investment thesis whether is it correct or should we even be investing now. I had self doubts too investing in this crisis. Almost all companies have cut dividends. The more than 10% dividend yield we see for some companies when the stock price drop becomes less than 5% now after they cut dividends. Its almost like everything is going against you.  

The good thing now is the companies I invested in, so far non have collapsed in the midst of the crisis. This is especially important as some companies will surely not make it and file for bankruptcy. Big names like Muji, GNC, Hertz have filed for bankruptcy in the US. Recently, Genting HK which owns Dream Cruise and Zouk Singapore also defaulted on its loans. Car sharing firm Smove in Singapore also collapsed. In times like this, it is really important to invest in strong companies with good balance sheet to ensure they can ride out the storm. 

This storm may take some time to pass. Perhaps another 6 months to 1 year from what I read so far. For Singapore, we should be looking at a vaccine nearer to the end of 2021 which is still quite some time from now. For now, we still have to get use to living this different life we have since the start of 2020. I am still accumulating stocks which are at depressed prices now. I still believe in REITs which I had accumulated more of Frasers Centrepoint Trust, Capitaland Mall Trust and Lendlease REIT to larger positions. I have also invested more on hospitality REITs such as CDL Htrust even though the hospitality sector may still take some time to recover. However, the REITs that own hotels are still surviving with profits as they cater for visitors on SHN and foreign workers. I believe once COVID-19 is under control, people will start travelling again. There is definitely pent up demand for travel again.

I also bought more Netlink Trust as they continue to generate dividends and appear unscathed from the crisis. For recovery plays, I bought in Comfortdelgro at $1.35 as I feel they should be the first to recover and the stock price is really attractive. I also invested in banks such as OCBC and DBS to ride on the banking giants at attractive prices. Lastly, I also made my first investment in US stock in Alphabet Inc which is the Google company we know. 

Nevertheless, my portfolio is still down 15% YTD while the STI is down almost 20%. This is definitely not a good year for investment and who knows how long this will continue on. Reference to the past during the 2008 global financial crisis, the stock market took about 7 months to 1 year to bottom out and recovered furiously thereafter to reach another peak in 1-2 years. I feel the stock market has already bottomed out and bad news are already priced in, not withstanding another shock to the world again. There may still be another slight dip but it should not be as bad as what we have went through thus far. 

Therefore, I do feel this is the best time to accumulate good companies in the next few months. We are so far about 5-6 months from the stock market drop and if history do repeat itself, then it should take another 5-6 months to see recovery. Remember, the stock market is always 6 months to 1 year ahead of the economy. So, the market can be recovering when retrenchments are intensifying and at the peak. This is the nature of investing. 

Life has not been an easy one for many of us this year and it may get worse before it gets better. Nevertheless, when we get out of this crisis, we will become better and life will be back as normal again. As with all other crisis, nothing will be permanent. Those who look for opportunities during a crisis will become better and emerge stronger. Its up to us to take action now in all aspects of our life. 

Forget About Investments - Look At The Looming Economic Crisis

2020 has became the toughest year to live in human history. Virtually everything has changed from the way we work, to the way we shop and the way we could travel. Investing will become the toughest as we brace for a longer depression happening in the economy which means stock prices could take very long to recover. 

I was looking at Singapore's GDP forecast by MTI and things don't look rosy at all. Many of you may have lost your job or have your pay cut and bonuses cut too. Those working in hospitality related sectors such as hotels, attractions and those doing events or in the entertainment industry will be affected the most. Singapore's unemployment numbers have not moved up much due to the many temporarily jobs created by the government. This has enabled people to continue earning some money even though their salary may not be as high as what they would have got before they were retrenched. 

In times like this, if you're working in an industry which is at risk of retrenchment now, its better to prepare your emergency fund for the possibility of a retrenchment later. This will definitely help you to tide thorough when it really happens. We do not want to make the mistake of investing all our savings in the stock market and end up having to sell at a loss when we lose our jobs. I believe the worse is yet to come and companies have not felt the full impact of the crisis yet due to government supporting wages through the jobs support scheme. This is unsustainable and it will be unwise for the government to keep using taxpayers money to fund wages for the long term. We have already drawn $52 Billion from our past reserves and used a total of $92.9 Billion for all the 4 budgets combined. This is at about 20% of our GDP in 2019. 

Breakdown of Singapore's GDP

If we breakdown Singapore's GDP, we will know which are the areas affected and why MTI forecasted a contraction of -7% to -4% for 2020. 

A contraction in GDP means the aggregate value of the goods and services produced within the economic territory of Singapore is decreasing. This means lesser revenue for the businesses which may lead to retrenchments as companies tighten their belts to protect their bottom line. 

Statistics of Singapore has a very good info-graphics as shown below showing the breakdown of GDP. 70% of Singapore's GDP comes from services producing industries such as wholesale & retail trade, finance & insurance and business services etc. 

Adapted from: https://www.singstat.gov.sg/modules/infographics/-/media/Files/visualising_data/infographics/Economy/singapore-economy25062020.pdf

According to MTI report here, the worst contraction in 1Q 2020 came from the accomodation & food services sector with a 23.8% year on year and 69.9% quarter on quarter contraction. Luckily, this sector only makes up 2.1% of our GDP. This sector includes hotels and also food services providers such as caterers and restaurants. 

The next sector which contracted the most is the transportation and storage sector. It contracted 8.1% year on year and 29.9% quarter on quarter. This sector includes air, land and sea transportation. Air travel shrunk drastically due to the closed borders and restrictions on international visitors. Sea and land transport also contracted due to lesser demand for sea cargo handled and reduced domestic demand for public transportation. 

Wholesale and retail trade also contracted by 5.8% year on year and 18.1% quarter on quarter. This sector includes motor vehicle sales, watches and jewelry and also apparel and footwear etc. Amidst all the contraction, we still see some expansion in some sectors such as manufacturing, finance & insurance and information & communication. 

Which sector will have more retrenchments?

By looking at the breakdown of the GDP above, we might be able to get some hints on which sector will have more retrenchments moving forward. The accommodation and food services sector made up only 2.1% of GDP while tourism contributes about 4.2% of Singapore's GDP. If borders continue to be closed to tourists, Singapore's economy will still survive. Thus, this sector may see more retrenchments if tourists are still not allowed to come to Singapore. It is difficult for the hotels to survive if they continue to keep their staff with them. 

Wholesale and retail trade may also continue to face some headwinds due to reduced domestic demand as most people work from home during the weekdays and also reduced tourism spending in areas such as Orchard road. Businesses in the CBD area will definitely be more affected as compared to shops in the heartlands. 

We have not touched on the "other services industries" which also is the most affected in this COVID-19 crisis. This includes the arts, entertainment & recreation segment such as concerts, events etc. Events are still not allowed in Singapore but good news is entertainment is slowly allowed to reopen such as cinemas and attractions. For corporate events, it will definitely take some time before it is allowed again so those businesses which provide event services to corporations will surely retrench many of its staff.     

It is election week for the whole of next week and we await to see the election results if Singaporeans will lean more to the government side or the opposition side. Nevertheless, life still goes on and we should always be prepared for such a crisis like this by having an emergency fund for rainy days. This is what I have always been advocating for and maybe through this crisis, the importance of financial planning will emerge out at the top again. 

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Video Sharing - Panic: The Untold Story of the 2008 Financial Crisis

Due to COVID-19, a financial crisis seem to be looming and it got me interested to look back at past financial crisis again. Recently watched a documentary on the 2008 financial crisis which described what really happened back then. Financial crisis is scary indeed. Now I know why those who had invested back then said it was a scary experience. But on hindsight, the world recovered from the crisis nevertheless and made more people rich for those who had invested in the right companies.

Here's the video for sharing:

Investing during crisis - Making sure the company survives

We are undoubtedly seeing a financial crisis unfolding before our eyes due to the COVID-19. Because of the lockdown of many countries around the world, governments have effectively created bigger problems to solve moving forward. Many investors have been preparing to take the opportunity of a lifetime to invest during a crisis. There was excitement at first when stock prices drop drastically and many investors started to buy stocks. The only past similar pandemic which we thought we have seen before is the SARS crisis back in 2003. No one would have imagined that the COVID-19 turned out much worse than the SARS crisis and now we are preparing for an even unpredictable future ahead.

There is no doubt many stocks are at attractive valuations now including blue chips and REITS. The problem now is many valuation methods are forward looking but there is no way we can analyse how the future will be and how a company will perform in the future. If we use macroeconomic factors to analyse sectors and industries to buy stocks, it is also very difficult now because many economists will not even know how the future will be. In the end, how the financial future will look like will depend on government policies and regulations.

Welcome to investing in a crisis

Many of us have been preparing for a crisis to happen so we can buy stocks at great prices. This has happen over and over again in the past such as the GFC, AFC and other crisis. The stocks market always goes back up isn't it?

Yes, indeed the stock market always goes back up after a crisis. However, what was not told to us is many companies also don't survive a crisis. It is therefore of utmost importance that we focus on whether a company can survive when investing during a crisis. 

I myself am investing during this crisis and it has been a roller coaster ride. I know that losing money is part of investing during a crisis but the psychologically effects of losing money is still hard to stomach. My greatest worry nowadays is whether the companies I invest in will survive this downturn. It is really hard to predict but we definitely can use some financial knowledge to reduce the risk of losing our money entirely. I shall explain some of the things I look into for my investments now.


Focus on the balance sheet and cashflow statement

During a crisis, most companies earnings will take a hit. Many companies will report drop in revenue and profits. Without the revenue to pay their staff salaries, rental, loans and other business expenses, many companies will have to dig into their pockets. If they have no cash in their pockets, they may have to close down entirely and file for bankruptcy. This is how a company will not survive a crisis. We must remember cashflow is the life of a business especially during a crisis.

With lockdown in Singapore, many companies are suffering. Tourism is the worse hit as there are no more tourists in Singapore and places such as hotels, tourists attractions and other businesses which depend on tourists for revenue will be greatly impacted. Let's look at a company Genting Singapore which is no doubt the worse hit company during this COVID-19 pandemic. The resorts world Sentosa is totally closed down during the circuit breaker period in Singapore. In the near future, tourists arrivals to Singapore will probably still be low so their revenue will definitely be affected. Can this company survive?

Genting Singapore has initiated cost cutting measures and cut their staff pay by 9-18%. The good thing is the Singapore government is also paying 75% of staff salaries for Genting Singapore employees. Staff cost came up to about 448M in FY2019 for them. Looking at their balance sheet, they have 3.9 Billion in cash which can pay for about 8 years of staff salaries even if they don't make any money. This is really a huge sum of cash they have. Their current liabilities which includes borrowings is at 703M. With their cash, they can also pay of their current liabilities if needed. If you're confused on current assets and current liabilities at this point in time, you might want to read my post on the balance sheet to understand more. 

Genting Singapore Balance Sheet for FY2019

We can use the current ratio to determine if a company is in good financial standing. A current ratio of more than 1 generally means they are able to meet short term obligations if they were to be due all at once. For Genting Singapore, their current ratio is a healthy 5.87. On the other hand, if we look at another company, Singapore Airlines (SIA), their current ratio is a low 0.44. This means they are not able to meet its short term obligations such as repayment of loans in the next 1 year. This is the greatest red flag but nevertheless, the Singapore government has pledged to make SIA survive at all cost. However, this will definitely not be good for shareholders as their share value get diluted. At the time of writing, SIA shares have fallen to below $4 from a high of $9 at the beginning of the year.


How to analyse REITs and Trusts during a crisis

Another ratio we can look at is the interest coverage ratio. It is used to determine how easily a company can pay their interest expenses on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) or Net Property Income (NPI) by the company's interest expenses for the same period. This ratio is often used for REITs. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable. The ability the pay interest expense is important for REITs as majority of them are financed by debt. If they are unable to meet their debt obligations, the REIT will just collapse as what we have seen recently for one company, Eagle Hospitality Trust.

Let's look at a company in the hospitality industry, CDL Htrust. Its interest coverage ratio was 4.7x as at 31 Dec 2019. Of course this would have changed now and also in future as CDL Htrust income would have reduced and thus the interest coverage ratio will be lower. They had provided an operational update as of 31st March 2020 and indeed their interest coverage ratio dropped to 4.3x. This is after factoring the first 3 months of COVID-19 impact only. I suppose the next quarter will be worse.

Another important ratio to look at is the gearing ratio. This is the debt of a company relative to its equity or other financial metrics. For REITs, the gearing limit is 45% but now MAS has increased it to 50% to allow REITs to have more flexibility to get more borrowings if they need to survive. MAS has also relaxed the rule that mandates REITs to pay out 90% of their income to shareholders. This means REITs can now retain more of their income to strengthen their financial position.


Emerging out stronger from the crisis

If we invest in the right companies and they survive this crisis, we will definitely emerge out stronger from this crisis. Many have made their money through past financial crisis where at that time many people feared the markets. It is therefore not easy to invest during a crisis as most people would succumb to the psychological effects of losing money before the crisis is over.

Many of us have prepared for many years waiting for a crisis to happen before investing and now a crisis has happened. However, I suppose many of the same people who were waiting all their lives have trouble putting their money into the markets now out of fear of losing money. I would think this crisis will be a long drawn one and it will take time for the markets to recover. It won't be easy investing during these times as anytime the companies can go bankrupt and we will then surely lose money.

I have diversified all my investments to invest in different sectors and industries and I'm cautious not to put too much money into a single company. Focusing on whether a company will survive is of utmost importance during times like this. If a company has strong financial standing, they are able to take advantage of opportunities during a crisis and emerge out stronger. This is like us who have savings and we are able to look for opportunities to put our money in the right investments and emerge out stronger after this crisis. Without savings, we can't do anything in the first place and may lose our jobs (revenue) and end up worse. This goes the same for companies in the corporate world.

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Investing During A Crisis - Are you ready for this ride?

By now, most of us should have experienced both excitement and fear in one way or another. Fear due to the virus and the economic recession, excitement due to having the opportunity to invest at low prices but at the same time still having the fear that stock prices can go lower. This is what I have been preparing for all these years but still when this hits, its hard to stomach the situation at one go.

To be honest, since I started investing about 10 years ago, I've not seen such a wild ride in the stock market before. This is worse than the European debt crisis when many European countries faced the possibility of bankruptcy which I've experienced in 2015. There were -100 points drop back then but it didn't occur so many times in a week as what we experienced just recently.

Is this worse than the last Global Financial Crisis in 2008?

During the last global financial crisis back in 2008 which is known to us as GFC, I was still in army and didn't have the money to invest. In a way, I was sheltered from what was going on and the only news source which I had was from the Straits Times newspaper which was delivered to the army camp everyday. Back then, smart phones were not so common and were not allowed in army camps also. However, I later on learned about the GFC from my university economics course and know that it was essentially a collapse of the financial system due to high leverage debt of corporations and individuals and most importantly junk debt. Many banks such as Bank of America and Citibank and even insurance company AIC almost collapsed. Eventually, one famous bank, Lehman Brothers did collapsed and the rest is history.

Now, the crisis we are facing now was started due to the COVID-19 virus. This is different from what we experienced before such as SARS which was not so infectious. This time, the virus caused many cities to go into lock down such as China's Hubei province, some cities in South Korea and even Italy lock down their whole country. Singapore also restricted access for foreigners coming from China, South Korea, Iran and many other European countries. This affected tourism quite a lot at an unprecedented scale. Then, Russia and Saudi Arabia didn't manage to agreed on oil prices and this sent the oil price nose diving rapidly. Oil prices is important to countries whose economy depend on its export and many countries will go into recession because of this also. Singapore too will not be spared. Singapore's Prime Minister Lee also mentioned that this crisis may affect Singapore worse than the GFC in 2008. This was reported in Bloomberg news here.


Are you ready for this ride?

Those who have been preparing for this crisis and saving up money for investment will benefit from it. I have started buying some stocks last week as valuations reached attractive levels. Many of the REITS also fell sharply which presents an opportunity to buy some of them such as CDL Htrust, Suntec and also bank stocks such as OCBC. These stocks are all trading below book value now with dividend yield of more than 5-6%.

Do I think the stocks will drop more? Honestly nobody will know the answer and if we're just waiting to catch the lowest price, then we might just miss out when stocks begin to recover. Over the many years of investing, I learnt that it is never easy to catch the lowest and when price starts to go up, we will be hoping or thinking that it might go down again then we do not dare to invest at all until the bull market begins again. This is psychology at play which is quite common for all investors.


Keep calm and invest in companies with attractive valuations and strong balance sheet

I am now 60% invested with 40% war chest left to accumulate slowly. There are just too many stocks to buy with attractive valuations of trading below book value and low PE ratio but now its also about the companies having a strong balance sheet to ride out this crisis. We do not want to invest in a company with weak balance sheet and they end up collapsing. It can happen and it will happen.

Diversification is also important which I always believe in. Sometimes no matter how good we are in reading financial statements, things can still turn drastically bad for a company in a short time which we won't even have time to react. When a company we invested in collapses, we should still be doing well because we have diversified our portfolio into different stocks. Then again, its about managing risks so we can invest more into stable companies and allocate less to more risky companies in our portfolio.

STI has dropped almost to a 5 year low at 2634 now. This is near to the 2015-2016 prices which I bought some stocks during the European debt crisis at attractive valuations. This is part of the reason why I've started accumulating some stocks again.

If we extend the chart to 2002, we can see the drop during the GFC in 2008 was about 50% from the high. STI drop now is about 25% from the high. Will we see another 50% drop this time? Its anybody's guess now. The question we should ask ourselves is if it drops another 25%, are we still prepared for it?

My own thoughts is the drop may not be the end for now. If it drops more, I'll be happy to accumulate again. Psychologically, we all need to be prepared for more drops and stocks prices may stay depressed for a few months and maybe even more than a year. Nevertheless, if we have invested in good companies at great valuations, we will mostly be assured to ride this out and have good returns from the stock market. Are you ready for this ride?

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COVID-19 and the opportunity to invest

It has been almost 2 months since I wrote something on my blog. Due to the COVID-19, I was so busy with work that I forgot about time totally. Regular readers would remember that I joined the healthcare industry in end 2018 and now due to this disease outbreak, I had to work extra hours with lots of extra work too. The business as usual work mostly had to be put down to cater time for this outbreak.

Honestly, this is the first time as an adult I've encountered such crisis before. During SARS back in 2003, I was still in secondary school then so I wouldn't know what is happening in the economy. This time, this COVID-19 has caused fears in people where we have seen people rushing to buy stuff at supermarket, face masks and hand sanitisers being sold out in most retail shops etc. The greater impact which I see is on the broader economy due to the travel ban where tourism will be severely impacted. We have seen companies such as Temasek, Capitaland, SMRT, SIA and SATS announcing pay cuts, pay freeze and reduced bonuses etc. Some of the companies even ask their workers to go on voluntary no pay leave. I believe retrenchment will come later as companies struggle with their bottom line so there is genuine concern on everyone's rice bowl here.

Singapore just announced more travel ban for visitors from South Korea, northern Italy and Iran. This is on top of the travel ban for visitors from Mainland China. With every crisis, there is always opportunities especially in the stock market. Stocks should go down further if situation continues to get worse. The impact will be greater as each day passes with the travel ban and lesser tourists in Singapore and around the world.

Stocks which I'm monitoring to buy and have bought some includes CDL Htrust, SATS, Far East Htrust, Dairy Farm and Comfort Delgro. These are the companies which are impacted by the COVID-19 in one way or another. I'm also looking to accumulate more REITS such as Suntec, Capitaland Mall trust and Ascott Residence Trust if it goes lower. I've been researching and monitoring some of these stocks for years and do have some stake in some of the companies. This is the opportunity to accumulate as the stocks drop. I believe by the end of the year, the virus situation should be a non event already and stocks would have already recovered.

Investing during crisis is not that easy at all. It involves seeing losses in your portfolio and still believing in your conviction that the stocks you invest in are correct. It may take months for us to see our portfolio back to profits again. Those who buy the right companies and hold on throughout will be the winners at the end.

On a side note, being in the healthcare industry lets me see the good in people in times of crisis. There are many individuals and companies who have reached out to donate stuff to support healthcare workers fighting this virus at the front line. It is heartwarming to see such acts of kindness. To be honest, all these kind gestures do help to put a smile in the healthcare workers faces and keep them going as I've seen it myself. Some of them have to work long hours and even on weekends and sacrifice family time. Thanks to all who have supported!

I'll keep this post short and back to my busy life again. Stay safe everyone!

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How The Weaker Singapore Dollar Affects Our Life?

By now, most of us would have realised that the Singapore dollar is weakening especially against the US dollar. 2 years ago, the exchange rate for USD/SGD is $1 US dollar to $1.22 Singapore dollar. Today, it is close to S$1.40 per US dollar. In laymen terms, this means we who are in Singapore, would require more money to buy the same US goods 2 years ago.

It was reported last week in the news that the Singapore dollar outlook is worst since the Asian Financial Crisis. The Asian financial crisis in 1997 was one which many people in Asia would remember. Stock markets plunged, currencies devalued to extremely low levels and jobs were lost. So how will the weaker Singapore dollar affect us this time? Will we see another Asian financial crisis?

When I was in University taking my degree in Economics, I had to research and write on how MAS conducts its monetary policy in Singapore. Currency movements certainly have impacts in our economy and it will surely affect our lives as we use money every single say. The depreciating of the Singapore dollar definitely signifies that something is happening. How bad and how long is still unknown.


An Asian Financial Crisis all over again?

The Asian financial crisis was triggered by the depreciation of the Thai Bhat and it quickly affected other major currencies in Asia including Korea, Indonesia, Malaysia and also Singapore. In the chart below, it shows the USD to SGD exchange rate. As we can see, the Singapore dollar depreciates against the US dollar during all major financial crisis. The 1997 Asian financial crisis was the worst as seen by the spike followed by the 2008 global financial crisis and also the recently sovereign debt crisis which saw the European region having trouble.

Chart of USD/SGD from tradingeconomics.com

Fast forward to now, it seems like the Singapore dollar is depreciating at a much faster rate than the 2012 sovereign debt crisis and almost similar to the 2008 global financial crisis now. The depreciating of the Singapore dollar just means that more people are selling the currency than buying it. This was partly driven by the data showing the slowdown in China, Singapore's largest trading partner. Investors confidence in the Asian region is shaken.


Why the Singapore dollar is depreciating?

The Singapore dollar has been strong for the past few years in an effort to combat inflation. Singapore adopts an exchange rate policy instead of an interest rate policy. This has been the case since 1981. The primarily objective of this policy is to maintain price stability and sustainable economic growth. The appreciation of the S$ dollar in the past has made it more expensive for foreigners to buy Singapore’s assets and at the same time increase export prices thus slowing down the economy and bringing down inflation.

Inflation has slowed down significantly and MAS said in January that it will slow down the appreciation of the Singapore dollar too. This has led to the Singapore dollar depreciating to what we see now. However, we have to note that our neighbours currencies are depreciating at a faster rate than us. Malaysia and Indonesia both have their currencies weakening for the past few months. If our currency stays strong, we'll lose our export competitiveness as goods in neighbouring becomes cheaper for international buyers.


How the depreciating of the Singapore dollar affects us? 

A strong local currency indicates a strong economy with high productivity growth and high savings rate. A weaker local currency indicates the opposite. The US economy is recovering and money is definitely flowing back into the US now. Apart from all the economic theory, let us take a look at how a weaker Singapore dollar will affect us directly?

Higher prices of import goods

With a weaker currency, importing goods from other countries especially the US would become more expensive. Singapore's top few largest trading partners includes China, Malaysia and United States. While our currency has depreciated against the Yuan and the US dollar, Malaysian Ringgit has depreciated at a much faster rate than the Singapore dollar.

A lot of us in Singapore also like to go online to buy stuff and some are businesses based overseas. A lot of these online shopping websites which are based overseas use the US dollar as their base currency. It'll be more expensive for us to do online shopping now.


Property Price Drop

Property prices in most Asian countries have been rising over the past few years. Singapore too was one of the hot property market places. When the market was bullish on Asia and bearish the U.S. dollar, the Singapore dollar did exceptionally well. Now, its the opposite. 

Property prices will drop mainly due to the increase in interest rates. The spike in interest rates is attributed to expectations of further currency weakness. Think of it this way, when Singapore's currency is expected to weaken, it reduces the attractiveness for people to buy Singapore government bonds. Interest rates need to be pushed higher since investors need more incentive to hold onto the local currency. 

During the Asian financial crisis in 1998, property prices dropped about 40% over a one year period. The government of Singapore also took drastic measures to cool the property market in May 1996. If those cooling measures were not implemented prior to the crisis, it could have been worse. Currently, the Singapore government has also implemented cooling measures to cool the hot property market. I would be expecting property prices to drop further as its only the beginning now. 

Interest rates have been rising but still at a low currently. As seen below, the increase in interest rates has always been accompanied by a drop in prices of properties. Interest rates (3 month SIBOR) have risen above 1% as at 24th March 2015.

No matter what happens, we can always be prepared for any situation which is to come. Being prudent in our finances, having emergency funds set aside and not taking on too much debt would ensure that we do not get into serious financial problems. 

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Related Posts:

1. How MAS conducts its monetary policy in Singapore?

2. How the economy works? - A must watch video

Interview with Singapore's finance minister on Singapore's economy during the 2008 global financial crisis

The 2008 global financial crisis was one of the worst crisis after the great depression. Singapore's economy was also hit with a contraction of -6% to -9% in 2009. Resident unemployment rate was at 4.3% in 2009.

Economic policies have changed over the years from the pre great depression era to the post 2008 global financial crisis era. In my current year 3 economics module in university, I'll be learning all the different economics school of thoughts from pre 1900s to post 2008. This is rather interesting to me as I can learn what caused the various crisis some to be more severe than the others and what was done to bring the economy out of the recession.

The great depression was so great that it was said to be one of the causes of world war 1 and 2. It was debated that had the governments back then implemented the right policies to bring the economy out of depression, the two world wars would not have happened. After the two world wars, we experienced one of the greatest economic booms in history. The new economic school of thought, which was known as the Keynesian economics, brought the world out of crisis and into economic prosperity.

It was until in 1979 where the oil crisis took place that brought the economy down again. This crisis was caused by shocks to the supply of oil and was different from all the past crisis. Governments used the old economic policies to try and bring the economy back to recovery again but this time it caused other problems. Inflation was born out of the oil crisis causing prices worldwide to accelerate. Hyperinflation was seen in some countries This was partly caused by the wrong policies that was implemented after the 1979 oil crisis.

The 2008 global financial crisis is something new again. This time it is global and the crisis is seen in almost every part of the world. There is already new research on going currently, which is known as the post Keynesian economic school of thought. This is still rather new and it'll be interesting to watch the developments of that theory. Having said all these, one have to realise that economic policies are one of the most important factors to a country. Without stable policies, the country will always be in trouble with high inflation and also high unemployment.

There's this video which was broadcast shortly after the 2008 financial crisis. The video consist of interviews with people who were affected by the crisis and also an interview with Singapore's finance minister. The interview talks about the various policies the government will embark on and how to bring Singapore out of the crisis itself. It is definitely not by chance that we could still be here today after the crisis.

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Related Posts:
1. The fall of Lehman Brothers
2. How the economy works? - A must watch video

The fall of Lehman Brothers

Lehman Brothers was one of the oldest investment bank on Wall St. Now, we know that this big bank has become a history. How did the bankruptcy of one bank lead to one of the greatest financial crisis in the world? If you did not know, the 2008 global financial crisis was said to be the 2nd worst financial crisis in the world just after the famous great depression. The crisis was so bad that US had to embark on QE from then till now. Billions of dollars have already been injected into the economy to stabilise it.

One of the main reason for the crisis is greed and the love of money. Watch the following documentary on the fall of Lehman Brothers to find out more:

How the economy works? - A must watch video

I just watched this awesome video on how the economy works. As an economics student, i find this video very good in explaining the concepts of economics. Guaranteed that after you watch this, you'll understand why some events like rising prices, recessions have to happen. The video also explained what is credit and debt and why increasing productivity is important. After watching this, you'll understand the purpose of some of the policies that the Singapore government has made and why they do it. Understanding this will also help you in your investment decisions.

Enjoy the short 30 mins video!!

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Recession Heroes Ep 4 - Got retrenched at a young age of 23 but still full of passion in life

This episode really encourages and motivates me. The guy in this story is Ken Chee. I've saw his name somewhere before and i thought his face looks really familiar. The i realised he's the one who started a company called 8 investment. His company runs the millionaire investor program in Singapore and it teaches value investing. I've never attended the program so i'm in no way related to it and this is not an advertisement for the program.

Back to this person. I thought he looked and sounded really humble and i felt he's someone who's willing to help others. He grew up in a poor family as his father lost a lot of money in the stock market. His grandma had to come out from a semi retirement state and go back to work just to support the family. He started working at a very young age as his dad could not give him much allowance. When he graduated, he got a job in an IT company but during the Dot Com bubble crash, he was fired at a young age of 23. This woke him up to the reality of life. You can watch this episode here. The story is really heartening.

What caught me was this is another story of someone losing lots of money in the stock market. The financial loss not only impacted one person but the whole family. Its really saddening to hear that. People would say that stocks are dangerous and do not dabble in stocks because you can burn your fingers and lose a lot of money. This is true. I've heard many cases of it and even have friends who experienced it. They are as young as me. Many are much older than me with family to support.

On the other extreme, there are people who know that stocks are risky and never invest in stocks at all. The problem is they are also struggling in their finances. I realised many people have poor financial management and poor saving habits. Indeed, without knowledge and good habits, people struggle in life.

The purpose of setting up my blog is to educate readers on how to properly manage their money and also learn the proper way to invest. I hope i can do my part in this society and make it a better place. It is saddening to keep hearing stories of how people suffer in life just because they were taught the wrong financial habits or because of the lack of knowledge in investment. Many times its due to greed where people wants to get rich quick. Getting rich quick has nothing to do with financial freedom. Financial freedom is not about money. It is about the ability to choose what we want to do in life without having to worry about money.

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Recession Heroes Ep 2 - Trader with 17 years of trading experience still lose money

I missed episode 2 of recession heroes so i watched it online on catch up TV xinmsn. This episode is even more interesting and we can learn a few points from this female trader who shared her experience. I have also wrote about episode 1 here.

Here is the summary of episode 2:

This lady was retrenched during the 2007/08 financial crisis. She was a futures broker in a financial institution for 17 years. She worked mostly from 6pm in the evening to 5am in the morning trading futures market.

Why still lose money in trading?
After being retrenched, she thought she would be able to trade at home and have time to look after her son. But, within 10 months into trading at home, she lost quite a lot of money and stopped. Why did she lose money? She said trading in a financial institution allowed her to have tips and instant news to make decisions fast. Trading at home is different as most of the time the news is delayed. The second reason is trading an institution money's is different from trading your own money. The emotional and psychological aspect is completely different. Even with the experience and knowledge of trading, it is still highly possible to lose money.

My views on trading
After watching this episode, it confirms my view on trading. Firstly, I've heard that most people lose money in trading and it is said that only 5% of the traders in the world can make money consistently. I didn't believe it at first but now i believe in it. Secondly, i've heard that trading is a psychological and emotional game. If you can't control your emotions, you can't be successful in trading. This point is also confirmed.

So is it still possible to make money through trading? I think it is still possible to make money from trading but it will not be a lot of money. In actual fact, very few people are full time traders. Most trade on the sideline occasionally. You may not agree with me but i've traded before and know what it is like to lose money. It is really an emotional game. Want to make a lot of money through trading? Think again.

My views on investing
On the other hand, investing is different. Most people can make money through investing. The more knowledge and experience you have in investing, the more successful you can be. The longer time you have in the market, the higher the chance of having better returns. That is why i advocate investing more in my blog. The benefits of investing at a young age is great. You can read more on how to invest here and here.
Knowing the difference between investing and trading is important. Know which one you're more suitable for and learn as much as you can.

The story ends with this lady becoming a housewife and does some baking at home. She sells some of the cakes and pastry she bakes at home to friends and relatives. She has more time for her family and her son especially. As family income reduced greatly, she had to sacrificed yearly expensive and long overseas trips, dining out in fine restaurants at hotels and reduce spending on buying branded stuff. She is more happy now and lives a more carefree life.

You can watch this episode 2 of recession heroes on xinmsn here.

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Preparing and experiencing a disaster. How we can prepare ourselves for a financial crisis?

I've not been posting in my blog for the past few days. I'm actually in Taiwan currently. If you've watched the news, Taiwan is preparing for a typhoon that is forecasted to come in today. The name of the typhoon is typhoon trami. I'm preparing for this disaster and experiencing it for the first time. I'll share with you on how we can prepare for a financial crisis too in this post. So read on to find out more.

As a Singaporean, we do not have any disasters in our home country. In a sense, we're really fortunate to live in a safe environment. Let me share with you how Taiwan is preparing for this typhoon.

The news channel here is reporting on the typhoon and keeping residents updated on the crisis. Many shops are pilling up sand bags. Fishermen are securing their boats to prevent their boats from being blown away by the typhoon. Currently, many states in Taiwan has declared the sea and land typhoon alert. Schools and offices are closed and declared typhoon holiday. Domestic and some international flights are canceled.

I'm at central Taiwan now. The strength of the typhoon is strongest at the north of taiwan at taipei. From where I am currently, it has been raining very heavily since morning and winds are very strong.

The bad thing for me is i'll be stuck in my hotel for the whole day today. Hopefully tomorrow when the typhoon passes, I can continue travelling.

Preparation for any crisis is very important. It is the same with our finances. During a financial crisis, we may lose our jobs, our investment portfolio will suffer loses and those with high debts will be affected the most.

How do we prepare ourselves for a financial crisis?

1) Set aside at least 6-9months of your monthly expenses as emergency fund

Having an emergency fund will prepare you in case you lose your job during a crisis. It helps you to have a piece of mind to continue living your life and provide for your family while you find another job.

2) Do not be overleveraged on debt

How much debt is a healthy level? Many financial advisors will recommend you borrow not more than 60% of your monthly income. This includes your housing loan. Debts require you to pay interest also. Generally, debts with high interest rates will increase the impact caused to you.

3) Have a compresensive insurance and hospitalisation plan

Having insurance will ensure your family have a sum of money in case something happens to you and hospitalisation plans will cover you for your medical bills. We should have ourselves covered by insurance and hospitalisation plans regardless of a financial crisis or not. Seek a professional financial advisor on what you need. A point to note is do not buy too many insurance plans. Some are not really needed. So do research throughly before buying one.

4) Do not invest money you cannot afford to lose

During a crisis, stock market will crash and most of your investments will be negatively impacted. If you invest money you cannot afford to lose, you'll be emotionally unstable during a crisis and will not be able to make sound decisions. That is what happen to many people who over invest. They got their fingers burnt because they were forced to sell their investment during a crisis. Those who have capital to invest more during a crisis will emerge out better off. Learn how to invest wisely before you even start investing.

5) Upgrade your skills and seek to have more than one source of income

Upgrading our skills or learning more skills will enhance our competitiveness. In case we lose our jobs, we can find another one more easily if we have more skills. Investing in yourself and getting more certifications will definitely help you. Having more than one source of income is definitely even better. We can learn to create passive income. Other sources of income can come from rental from properties, dividends from stocks, part time business, royalties from intellectual properties like books and music albums etc. Learning to create multiple sources of income can increase our income greatly and let us reach financial freedom faster also. During a crisis when you lose your job, you do not have to worry too much too.

These are some of the points that can help us in preparing for a financial crisis. I can write so much today because I'm really stuck at the hotel as the winds and rain gets heavier and heavier. I can see the trees swaying agressively and the winds howling strongly even though the windows are tightly closed. I'm experiencing a nationwide crisis.

Start preparing today. Preparation starts before a crisis happens.

I'll end of with a famous quote:  "If you fail to plan, you plan to fail."

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2) How to pick stocks (Part 1) - Economic Moats
3) Rising household debts in Singapore worrying

How 27-year-ol​d S'pore woman lands herself in $100k debt

I chanced upon this article when one of my friend shared it on Facebook. The title caught my attention. I guess if you're reading now, you were also attracted by the title itself.

It goes to show that there are people who do not know how to manage their finances and regret it later in life. This woman was a real estate agent and i guess her income was really high from selling properties during the property boom.

Some points to summarise:

She was $100k in debt at just 27 years old.

Spent $10,000 a month just on entertainment.
I wondered how she manage to spend so much? $10k/mth is a big amount to just be entertained.

Bought a car for $70,000

Splurges on designer clothes and bags, and dining at exclusive restaurants.

Invested $30,000 in a dubious scheme which her friend promised a 20% return. Was conned and the friend ran away with the money.
Never invest in something you're not familiar with

Max out 4 credit cards with debts mounting

Place bets on illegal online football websites, thinking that gambling was the only way to recover her money.

Read the full story here: How 27-year-ol​d S'pore woman lands herself in $100k debt


The fact is it doesn't matter how much you earn but its how much you manage to save that matters. Most people spend money to impress people. It is always the pride and ego which destroys a person's life.

I'll end off with this quote:

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”

― Will Rogers

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Related Posts:
1. Why people lose their money during crisis?
2. Channel 5 new TV series - Recession Heroes
3. The curious case of GOLD - A Gold bubble?
4. How the rich manage their money that the poor and middle class do not - Part 1

Recession Heroes Ep 1 - Why people lose their money during crisis?

Just watched the first episode of recession heros on channel 5. This first true story is quite inspiration and I would like to summarise the story here.

The guy in the story lost all his money during the september 11 stock market crash.

Here's a summary of his story:

Father was a businessman in Malaysia.  Business was doing well until his father got cheated by a business partner and lost everything. His family was in debt for a few million dollars. They later moved to Singapore. To supplement his family income, he came out to work at a young age of 14. Work as a cleaner in the morning, gas station pump attendant in the afternoon from 1pm-10pm then wash taxi at night all the way to 1am. He worked this for 1 and a half years.

After that, he went to serve National Service in the singapore police force. Read many books on computers and developed an interest in it. Went on to secure a job as a computer trainer and quickly climbed up the corporate ladder to earn $12000 at the age of 25.

He got really arrogant and his ego became very big. He said his ego was more than 10 times his head. He would scold and despise his staff and colleagues. Started investing in stocks and turn a $50k portfolio to $500k. He became even more proud and think that he was a genius.

During the september 11 terrorist attack on the twin towers, the stock market tumbled and he realised his stocks portfolio was only left with $7000. He had invested all his money into stocks.

After that incident, he wanted to build up a business and started a company with another guy. The partnership turned sour and he was caught up in a 3 year long law suit. He lost everything at that point.

After all these failures, he finally understood what it means to be humble. 

He went on to pursue his dream again to own a business and start up a company with his wife called commsgate which provides IT infrastructure for SMEs. His business flourished until now.

2 things he learnt from the crisis:

1) Do not dabble in stocks with money you cannot afford to lose. Must know the rule of the game.

2) Wealth is a habit. Must build the habit to save and invest regularly for a leriod of time.

I do feel that the stock market is a place that will reward the humble and punish the rich. If a person is proud and looks down on others, it is easy for him to lose everything and be destroyed by his own ego. Invest with a humble attitude and learn the rule of the game to succeed. Risk management is important in investing.

Hope you're inspired by this story. 

This is a true story as shown on mediacorp channel 5. Watch the next episode every monday at 9pm.

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Related Posts:
1. How 27-year-ol​d S'pore woman lands herself in $100k debt
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