Money Talks

Date:  Feb 17, 2012

Today, I went to the Luncheon talk by Dr. Tan Kee Wee organized by HKSA (Hong Kong Singapore Association).  Who is Tan Kee Wee again?  You can find most of the info here...

http://www.tankeewee.com/index.html

Every year, Dr. Tan Kee Wee give Investment Outlook talks to a lot of organizations.  And HKSA luncheon is always the first one.   I did a google search, and I think he has some reputations.

Here I would like to share what he has shared with us today...

===== Disclaimer =====

1.  Whatever he said is purely his opinions on the economics today.  It is purely for education purpose.  There is definitely no 100% sure guarantee thingy here.

2.  Whatever I said is purely what I understand from his luncheon talk.  There is no guarantee that I will be correctly interpreted every thing he said correctly.  I try my best to remember what he said.

===== End of Disclaimer =====

1.  With the EU crisis.  He explained the anology of policy makers of these countries Vs. those when it is in World War I.  Exactly the same.  They do not know what to do, but ask their soldiers to charge, charge and charge up the hill.  And hope to win the war.  He mentioned about three people, i.e. Alan Greenspan, Ben Bernake, and Mario Draghi.  He said these people provides quantitative easing by printing more money.

2.  He looked at his Money Talks in 2010.  He advised to stay low for the first 170 days.  And the market really went down in July and climb its way back high.  That is when people make money.  The only thing which is wrong is his prediction about the bonds yield.

3.  He talks about inflations.  He talks about the Asian housing bubbles.  He mentioned that the houses is simply way too high for people to afford.  The ratio of the earnings Vs. house price is 6.4-6.5 for HDB houses for Singaporean.  i.e. if you earn 100K, the HDB 5 rooms flat is 650K.  He compares it to the ratio of Beijing, which is 18.5 and for New York is 5.9.  So, his conclusion points out that Beijing housing projects are mostly bubbles.  Not only Beijing, through out the China, are bubbles.  There are a lot of "Ghost Town" in China, such as Thames Town, etc.  Lots of houses but no one stay there.  And it is waiting to be burst.  China now has 70 million vacant apartments.  Their own people cannot afford to buy.  So, China is facing a lot of problem.  A typical problem is... in China, 50% of people take morgage to own a house.  And the bank lend money based on the high valuation of the property.  And this bubble is busting soon.  He predicts.

4.  He also mentioned Uncle Sam is broke.  i.e. US is broke.  The government balance sheet is very bad.  Not only for US, but most of the Europe.  He points out that every country have high debts.  And the policies maker are trying to cover up these.  They do not know what to do.  But keep printing money.  Esp. USA.  The GDP of US is inflated.  The US Job employment rates is also bad.  The real number should be 22% instead of the many formulas to try to cover it up.

5.  He explains the EU problem.  Especially Greece.  Why Greece make it to EU without meeting the requirements to join EU.  He also explains the PIGS, the rest of the countries that are in trouble.  So, again, the policies maker are using the Vicios Cycle to fix problem which create more problem.  People are fear, and Sell more bonds.  Bonds yield increase, and it make it very hard to pay the debt.  And then, it creates more fear.

6.  The policies maker refuse to have a hair cut.  Means to cut lost.  So, basically, if you want to get out of debt, you must have growth greater than your debt.  But every country GDP sucks.  So, the policies maker keeps bail out the country.  Up to the point where the money is not enough to bail out the EU trouble countries.  EU is in a mess.  Italy and Spain is also has huge problem.  Expecially, they have much much larger populations.  So to the policies maker, Greece is much easier to save then Italy or Spain.

7.  People will closely watch the up coming elections in Greece.  The EU has negotiated with the two bigger political party who is fighting to be in control.  So, Market will be OK for now and expect some correction within the next few weeks.  And until April, we will have to watch closely the greece election.  If one of the 6 smaller party win, then, there may be problem.  As you do not know what is their reaction to the EU treaty.  So, EU will eventually have to make a decision to throw or not throw Greece out.  Or Greece will have to see if they want to leave EU or not.  This is worst where a lot of greek move their money out of greece by putting it in Swiss bank, etc.

8.  Bernake says a lot of thing.  But he is scheduled to retired by 2014.  So, his resurrection theory may not work.  As he does not care what will happen after 2014 after he retired.  i.e. what he says about interest rates, etc.

9.  By then, bank will already lose a lot of money, and they most likely will take gamble and risk more.

10.  DONT BUY LONG-TERM BONDS.

11.  Also, Currencies are not that stable.  But when bad times come, usually it is good for US dollars.  He foresee AUD is stable too.

12.  He does not think EURO will fall.  Yes.  Greece will default, and a lot of people think EURO will fall.  He thinks otherwise.  EURO WILL SHOOT UP (when Greece default).

13.  Commodities.  BUY AND KEEP GOLDS. The world have too much paper money.  Debt crisis is not over yet.  Fiat Money systems will not work.  Fiat money will always collapse.  If you look at the history of GOLD PRICE.  The peak is 7.9K at 1980.  Today, the price is about 3.6K.  Is not even half of the PEAK.  So, can buy gold and keep.  Also, he shared who keep golds inb the world.  1) US, 2) Germany, 3) Italy, 4) France & 5) China.

14.  Stocks.  There will be correct soon. Stay with Blue Chops.  Also, buy based on rumors for countries such as Malaysia as their elections coming in June July.  i.e. look at Yoma, look at Harvest Courts, etc.  All these stocks based on rumors has shoot up high.

15.  Properties in Singapore.  He mentioned minister pay cut.  And civil servant will follow soon.  Buying power will be much lesser.  Foreign talent policies, etc.  Now got 31% of properties owned by foreigner.  So, Foreigners will support Singapore properties.  They treated Singapore properties as safe haven.  The low end properties will remain low.  So, no point buying.  ONLY BUY AFTER 2013.  And invest only in high end properties.

16.  In general, especially stocks... Sell by October. There will be corrections soon.  Followed by a run.

OK... I think I learned a lot of new things today.  And thru his historical data and real history analogy, Dr. Tan Kee Wee give his opinions on why and how EU crisis being managed and why it created yet another bubble, etc.

So, remember, this are only his opinion and it is for education purpose.  And of course, I may not be 100% fully correct to remember what he said.  But I think the general ideas are there.

GOOD LUCK!  HUAT AH!