S'pore home prices still falling

[specuvestor]

Greenspan once famously say to the extent that nobody can identify a bubble. I disagree. At least both of us here and I'm sure many more don't see an equity bubble, except valuations are stretched due to low interest rate. In a bubble valuations usually doesn't matter

And we all know a bubble when we see it example property bubble in China. The problem with bubble is NOT that they are unidentifiable but that we don't know what is the tipping point of bursting. That creates a even greater hazard to policy makers who can be blamed.

We know there is a bubble in the bond market, where valuations or negative return didn't matter cause everyone chasing yield. Personally I thought it burst last year May. Maybe second time lucky for nov 2016 instead

[chew]

Seller incurs $111,000 loss despite buying near bottom of market

[Properties sold near the bottom of the market are not necessarily a value buy. A 969 sq ft apartment at Icon, a residential project located a short walk from the Tanjong Pagar MRT station, was recently sold at a loss of $111,000. The seller had purchased the unit in November 2009, shortly after the market picked up from the Lehman Brothers crisis].

[The biggest loss in the week of Nov 8 to 15 amounted to $828,000. It accrued to a 1,227 sq ft unit in Marina Bay Residences. The seller had purchased the unit in August 2010 in a sub-sale at $3.83 million, or $3,120 psf.]

Not a value buyer.... there were many other better bargains then.

[corydorus]

Few elements missing would be the rental income and interests expense (less principal down payment).
For 7 years at say $3500 monthly would translate $294,000 income.

[Temperament]

Interesting as market participants, we try to anticipate when the recession is coming/ Historically, the downturn of market indices generally come ~6-12months before the actual recession (which itself is only known after calculating the GDP numbers). As market participants, we (at least me) can't make money in a recession. We might make money in market downturns if we have cash heavy or have overvalued companies to short.

On hindsight, the potential recession at the end of this year seems to be reflected in the market downturn during end 2015-Feb 2016. So, lets say there will be a recession in 2H17. In present terms, this means a market downturn has to happen soon or should have already passed.

There isn't a boom to start with and some astute observers have flagged out that the wave of privatizations simply mean that valuations are poor in this part of the world. I also do notice a lot of market participants are much more cautious since the Aug2015-Feb2016 experience, which is still flesh in most folks' minds - there isn't enough complacency been built up yet although a new generation of people since GFC2009 have risen. All in all, from the market cycle/behavioral textbook case, it simply doesn't indicate any anomalies come 2017 for me.

But as usual, while I have skin in the game for 2017, I have already hedged emotionally for what is the unexpected non-consensus view.

Ha! Ha!

Quite interesting about:-

"I have already hedged emotionally for what is the unexpected non-consensus view."

i think i always do.

Or at least always try to do.

Surprise can sometimes shock and the shock can kill us.

[Big Toe]

It is tricky at the moment.
For the STI, it is nowhere near the peak. Valuations are not stretched.
Comparing it to the 97, 08/09 crisis, even if there is downturn(which in my opinion is happening now, unless it changes its course), it may not be the same magnitude(i.e. >50%).

For the residential property market, I am more bearish, it did peak but price correction is gradual, partly due to cheap money.
The factors that sustained the prices are slowly being eroded. Jobless rate, interest rate, rental yields, population growth, supply...
Something is not right when a property ad read 'Potential gross yield of 3%'. And that is the norm. Who in the right mind would invest in a declining market that potentially only has gross yield of 3%???

[BlueKelah]

It is tricky at the moment.
For the STI, it is nowhere near the peak.
Compared to the 97, 08/09 crisis, even if there is downturn(which in my opinion is happening now, unless it changes its course), it may not be the same magnitude(i.e. >50%).  

For the residential property market, I am more bearish, it did peak but price correction is gradual, partly due to cheap money.
The factors that sustained the prices are slowly being eroded. Jobless rate, interest rate, rental yields, population growth, supply...
Something is not right when a property ad read 'Potential gross yield of 3%'. And that is the norm. Who in the right mind would invest in a declining market that potentially only has gross yield of 3%???

yup, cheap money is the culprit. Once that cheap credit/money disappear when interest rate up and foreign funding dries up tide will go out much faster.

Those who could invest 250k into those low quality bonds during the bond "bubble" last year are probably the same "investors" who are buying with gross yield of 3%


It will probably take a real recession for cheap credit to dry up and for people to wake up and the cycle to complete another round.

[soros]

I think the manufacturing sector is suffering lack of orders and workers' income is down, so not so much spending in shopping Malls and economic growth is declining to 0.6% growth .

http://www.channelnewsasia.com/news/busi...03444.html

[CY09]

Bluekelah: Really? The ministry of Trade and Industry announced yesterday that it is working with SPRING Singapore to give low interest bridging loans (up to 6 years) to offshore & marine companies. Won't that mean slightly more cheap credit and less job losses?

[BlueKelah]

Bluekelah: Really? The ministry of Trade and Industry announced yesterday that it is working with SPRING Singapore to give low interest bridging loans (up to 6 years) to offshore & marine companies. Won't that mean slightly more cheap credit and less job losses?

Haha wasnt aware of that. In any case, our gamen not stupid lah, I am sure even their low interest loans will require strict assessment before granting and those crappy companies with too much debt and no orderbook and losses will probably not qualify. 

Besides if this is the correct link, its only from 5m to 15m one off loan (thats not much cheap credit). Probably only enough to allow those small company with not too much debt to maybe buy time to cut cost and sell off assets rather than going default straight away.

https://www.spring.gov.sg/Growing-Busine...anies.aspx
[Loan Quantum

• Up to S$5 million per company; up to $15 million per group]
  

Swiber had like half a billion debt to pay off I dun think big company which are going belly up will benefit much. 

And for small company like Hai Leck / Penguin / PEC /etc. they have net cash so dun need any gov help lol...

[specuvestor]

Yes global economy is softening but don't see a major shock coming; not even the incoming interest rate increase which will be slow and mild in next few yrs. I think the only one to look out for is BREXIT if the Europeans are stupid enough to go on a feeding frenzy and shoot their own foot.

The obvious potential big external shocks are, IMO

- A hard Brexit opted in UK
- A "Trump" president in US
- A "hard-landing" in China

I agree, the US interest rate hike, will be slow and mild, hardly quality for a "shock".

What do you think? Anyone to add into the list?  

I'll add another black swan event:

War/Terrorism

Between.... I dunno. Seems like everyone has an axe to grind with everyone these days!

It's actually quite eerie that 2 of the unthinkable happened Will China also hard land?

Personally I don't see a sharp US i/r rate increase but at most once a year for next 4 years, and I think USD strength will be reversed but yield curve is probably right on ie I think negative US interest rate will continue next 4 years.

Watch Singapore the canary in the coal mine. I still think 2017 is a recession year

Personally I'm starting to think that US will be going into a stagflation stage. The yield curve will be steeper not because of much higher fed fund rates but much higher inflation, especially with Trump's expansionary policy and higher oil prices. That means I am thinking US will be at at 2-2.5% fed funds rate while inflation will be north of 3% by end of 4 years. The implication for borrowers will be significant

(Bloomberg) -- 
Jeffrey Gundlach, chief investment officer of DoubleLine Capital, said interest rates may climb to 3 percent on 10-year Treasuries by next year as deficits and inflation rise under a Donald Trump presidency, a move that would hurt markets.
Gundlach, who has called the president-elect’s policies bond unfriendly, said the effects would be felt across the U.S. economy. The benchmark Treasuries are currently trading at close to 2.5 percent.

“We’re getting to the point where further rises in Treasuries, certainly above 3 percent, would start to have a real impact on market liquidity in corporate bonds and junk bonds,” Gundlach said Tuesday during a webcast presentation on his DoubleLine Total Return Bond Fund. “Also, a 10-year Treasury above 3 percent in my view starts to bring into question some of the aspects of the stock market and of the housing market in particular.”

--snip--

Greenspan once famously say to the extent that nobody can identify a bubble. I disagree. At least both of us here and I'm sure many more don't see an equity bubble, except valuations are stretched due to low interest rate. In a bubble valuations usually doesn't matter

And we all know a bubble when we see it example property bubble in China. The problem with bubble is NOT that they are unidentifiable but that we don't know what is the tipping point of bursting. That creates a even greater hazard to policy makers who can be blamed.

We know there is a bubble in the bond market, where valuations or negative return didn't matter cause everyone chasing yield. Personally I thought it burst last year May. Maybe second time lucky for nov 2016 instead