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SINGAPORE PROPERTY WEEKLY Issue 357
Investing is taking a roller coaster ride But it also increases the uncertainties.
blindfolded
We know the roller coaster cannot stay at the
The investment world is no different from an top or at the bottom forever. But we have no
amusement park. You pay the entrance fee, idea how high or how low it will continue to
step inside and have fun. There are shows to go, and how long it will remain in the same
watch, games to play and prizes to be won. position.
The most popular attraction that no one want But one thing is sure: When we feel it has
to miss is the giant roller coaster. The ride already gone up for a long time, we know it is
has ups and downs, upslope climbs and almost time to come down soon.
steep falls, sharp turns and unexpected twists
No bull market can go on forever. Wall Street
– all the drama and thrills that we lack in our
has reached its record of nine consecutive
monotonous daily life.
years of a bull run. We are now going through
Every time we invest in an asset, we are on one of the most expensive bull markets in
board a roller coaster. The difference is that history.
we are going for the investment ride with our
Look at the PE ratio of the best-performing
eyes blindfolded.
stocks. Look at the net return of real estate.
It doubles the fun, the excitement and the Look at the risk level of bonds. Where is the
fear. It helps to relieve our phobia of heights. intrinsic value?
We often hear people say that it is not the theme park and open fire. We never know
possible to time the market. But in our heart, whether we are still stuck at the scene or are
if we are not too overwhelmed by greed or lucky to leave in time.
fear, we can still see whether the market roller
Amused? That‟s why it‟s called an
coaster has been at the top or the bottom for
amusement park.
a long time.
What may trigger the next market crash
We often hear people say that the market will
always recover to go up higher,so it doesn‟t According to Harvard‟s Joint Center for
matter when we buy. Housing Studies, household debt in the US is
now at all-time high. With a total population of
A roller coaster ride may take three minutes
326 million, 39 million Americans cannot
to go up and down three times. How many
afford their homes and 19 million spend more
market cycles can we ride through in our
than half of their income on housing.
whole lifetime? How can we guarantee that
Nationwide mortgages already stand at $8.8
the market we invest in is up when we need
trillion as of Q4 2017.
money the most?
The spike in interest rates is going to make it
Because life is unpredictable. There are black
increasingly difficult for highly-leveraged
swans. There are accidents.
individuals and companies to service their
All of a sudden, some gunmen can storm into loans.
After the Fed raises interest rates four times injected huge capital into these assets to
this year and the trend continues again next spike up their prices. Institutional investors
year, defaults on personal and corporate followed suit.
debts are going to spread fast.
The stimulus efforts of global central banks
A near full employment economy and created a fabricated demand for stocks,
euphoric stock prices are covering two big bonds, and real estate, ever since the credit
bubbles: an asset bubble and a debt bubble. crisis, but as of April 2018 those combined
The former‟s prices are inflated by money efforts are now a drain on liquidity. As recently
printing while the latter has escalated to an as last September the combined effort of the
astronomical figure. Since the last financial ECB (European Central Bank) and the FOMC
crisis, worldwide debts have ballooned to (Federal Open Market Committee) was
$164 trillion. Still, no one has any intention to infusing $60 billion per month into these asset
address the global issue. classes, like they had almost every month
since the credit crisis — but now they are
What makes stocks, bonds and properties so
effectively selling $30 billion of assets per
expensive today? It has nothing to do with
month. That is a $90 billion decline in the
better economies or higher spending power. It
monthly demand for assets in seven short
is the result of “fabricated demand” from
months.– Thomas H. Kee Jr., President and
central banks around the world. Since the last
CEO, Stock Traders Daily
financial crisis, global central banks have
The budget deficit of Fed will be close to $1 people who may be wiped out.– Robert
trillion next year. The Fed has no choice but Kiyosaki, Why the Rich Are Getting Richer
to start unwinding its sizable bond portfolio
Protecting ourselves from the next market
estimated to be $4.5 trillion. With cash-rich
crash
countries all slowing down in debt
acquisitions, who else in the market will take Why do we continue to be caught off guard in
over the junk? every market crash, despite its frequent
occurrence in history?
When the Fed starts selling, institutional
investors start panicking. When institutional It is a human instinct to have „status quo bias‟
investors start panicking, the market starts and prefer things to stay the same by doing
crashing. nothing. We would like to believe that this
time it is going to be different.
When somebody makes a mistake, someone
else is going to pay for it. When the central "You can‟t end a problem like that with no
bank makes a bad decision, the retail pain. Somebody‟s got to suffer.
investors are going to suffer. When the downturn takes hold the world is
They are people who saved money, bought a going to be in worse shape because the world
house, got out of debt, and invested for the has shot all its bullets.– Jim Rogers
long term in the stock market. Those are the
To hedge against the next market crash, Hold only assets that can guarantee
below are three things you can do right now. protection of your principal in any
circumstances. Hold only properties which
1. Go back and check the value of your
can still provide a positive passive income
assets
after a market crash.
I am not asking you to sell off your assets.
2. Minimize exposure to any risky
You can still stick to your buy-and-hold
investment
strategy.
In case of a market crash, minimize your risk
But take a step back to look at the true value
by avoiding holding assets that are heavily
of your assets using the fundamentals of
leveraged.
value investing. Check whether any of your
assets are overvalued. Are you tempted to chase the price of any
investment which has too much hype? You‟d
It doesn‟t matter what the asking price is or
better be safe than sorry.
how much it last sold. Value it with the set of
perimeters that matter to you as a value Are you being drawn by cheap money to buy
investor. Find out what you think it is really overpriced properties? In view of irrational
worth and how much you are willing to pay. land bidding and acquisition, it‟s time we
Add in your comfortable margin of safety. looked for a sensible margin of safety and a
reasonable positive return.
Are you flooded and blinded with liquidity and Property prices always go up in the long-
lots of spare cash (who isn‟t these days?)? term? That is the line of property agents. As
Stay in sane and hold your cash until the real an investor, always make sure that you have
opportunities come. enough capital to see another day.
3. Hold your horses and be patient After a market crash, everything is on sale,
and good deals are aplenty. The market
You may be frustrated and restless that your
always rewards those who are patient.
cash is not working hard enough for you. But
remind yourself that not making enough profit By guest contributor Property Soul, a
is far better than losing money, despite the successful property investor, blogger, and
fact that we often act the other way around. author of the No B.S. Guide to Property
Investment.
Remember, no property owner wants to end
up with a depreciating liability on a cash-
stretched day, or a negative equity asset at
retirement age.
Non-Landed Residential Resale Property Transactions for the Week of Apr 23 – Apr 27