Why I think MAS cannot increase interest rate within these 2 yrs?

[koh_52]

US are printing ton of USD (econ term called quantitative easing), this forced China to print more Yuan too to keep up and maintain the currency rate. Otherwise, the USD drops too much and China exports suffer as a result. Hence currency war is inescapable.

That is partly why you see severe inflation in China now or even in India & SG. The inflow of hot money into developing countries and Asia is repeatly causing asset inflation in this part of the region, whereas back home they are sitting on a low inflation environment domestically but no used their unemployment rate is still high. Usually they print USD to buy up Treasury bond, pushing down interest rate

Just observe the effects on china property market, when Chinese govt tighten property rules, cash from China will inflow over to SG to seek better return.

Look at Japan, they are having low interest rate for decade, but they are filthy rich so the fall at a higher height take longer times ¦ will the coming inflation on foods and transportation force interest rate hike? my take unlikely...

Is it now a good time to buy properties and gold?
   

[Musicwhiz]

I've always felt GOLD is extremely over-rated, since its an asset which generates ZERO cash flows and one can only hope that speculators chase up the price for capital gains. Also, when the investing public is stampeding in one direction, it's best to just let them and watch safely by the side....

As for properties, common sense tells me that interest rates are at historic lows; so obviously properties are "cheap" now because one can get leverage at very attractive rates. However, this low interest rate environment will not persist forever......

[koh_52]

Indeed agreed gold is not a good investment at current high price, oil can drop from $140 per barrel to current $80 per barrel, Similarly, I think gold price will retreat by 20% when there a recession, anyway I not a expert in this area.

However, in Singapore LAND is Gold.

Property price move in tandem with Land cost, to forecast the future property selling price you may track the land cost, whereas construction cost, financing cost and profit margin are quite constant.
Take for example:

Land cost is $500 psf, this project the selling price is roughly $1200 psf (each level up prices different by $4k), see estimation below:

land cost $500 psf
construction cost $350 psf
financing cost $100 psf
break-even price $950 psf
20% profit, selling price $1140 psf

Moving forward I foresee good prospect in property investment and property stocks. Please take note that I dun claimed I am able to predict the future. Yes interest rate bounces to go up one day and somewhere at one part of the globe there bounce to have crisis dat go within saying, but nobody knows when?

Yesterday, I just exercised my option for a FH property at Dist 15, its a new launch project expected TOP in 2013, it a 2 bedders, I paid close to $900k, aro $1,080 PSF, good luck to me, hehe.

The projects at River Valley and the up coming UOL project at Spottiswood park, near Tanjong Pagar both are good buy, do your own homework folks.

Anyway, a Investment cycle attached below for those who are interested, I got it from a seminar last year.


  Investment Cycle -2009.xlsx (Size: 11.17 KB / Downloads: 43)

[kazukirai]

Slightly off-topic here but since we can't talk about SG's interest rates without considering the bigger global picture, here's Caixin economist, Andy Xie on QE, currency wars, its impact on asset inflation and of course what this will all ultimately lead to. I personally like reading Xie's articles because he writes in a very accessible way. Oh, and he takes a dig at Paul Krugman too.

QE: The Numberless Oblivion

[koh_52]

Since we are on QE topic, this article should be a good read.

http://www.investmentu.com/2010/October/...s-job.html

[kazukirai]

I agree with Skousen. Interestingly, he belongs to the Austrian school. The thing he left out is the geo-political and social consequences of QE.

[koh_52]

Recap Good article written by Dr Steve few months ago on, Record-Low Rates Here to Stay? What to Do Now ?

By Dr. Steve Sjuggerud ; Friday, August 13, 2010

As I write, interest rates are at record lows.

Mortgage rates (at 4.5%) are the lowest in a quarter century (as far back as I have data).

Here in the United States, companies and the government can borrow at the lowest interest rates since we went off the gold standard. It's great for borrowers, but terrible for retirees earning interest.

Could interest rates go lower? Yes! Could they stay low for a long time? Yes!

So what should you do? I'll show you.

You might think rates couldn't go lower than they are today. After all, we've never seen them this low in our lifetimes. And you might not imagine rates will stay this low for a long time, with all the government stimulus and "money printing."

But the Japanese faced the same thing in the early 1990s. Here's how it played out:

In 1995, the Bank of Japan did the unthinkable, and cut interest rates below 1%. Today, 16 years later, Japanese interest rates are STILL below 1%.

In the early 1990s, Japan was struggling to recover from an extraordinary real estate bubble (like we are today). Residential real estate prices there peaked in 1991.

The Japanese government threw everything it could at the problem , it cut interest rates to zero and it went crazy borrowing and spending to try to keep the economy afloat.

We are doing those same things today in the U.S.

You could easily argue these things didn't work in Japan. Today , two decades later , Japanese real estate prices and stock prices are still well below their peak.

Meanwhile, with interest rates below 1% for all this time, retirees in Japan earn next-to-no money on their savings. And the massive government debt is still there , it still has to be paid back, somehow.

Japan's government debt is now at a crushing level , near 200% of the economy (GDP). That's the highest in the world, except for basket case Zimbabwe.

The U.S. isn't nearly in Japan's kind of trouble , yet. But the U.S. is heading down the same road. The Congressional Budget Office forecasts government debt will hit 180% of GDP by 2035.

So could interest rates in the U.S. stay below 1% for 16 years? Absolutely.

In the U.S., rates went below 1% back in 2008. It is now 2010. And there is nothing on the horizon that suggests rates will be going up.

The economy is not recovering as much as hoped. Interest rates will stay at record low levels until the economy shows signs of coming back to life and inflation starts to appear. We're not seeing those signs yet.

What can you do? How can you earn income in a zero-percent world? Even on a million dollars, zero percent interest is still zero dollars in income.