It's all about the "feel good" factor

Did you remember what transpired since the 2nd half of 2006 and for 3 quarters last year? Stock markets around the world rallied like there is no tomorrow, with pundits all agreeing that the benchmark would go higher and higher. In countries like China (including Hong Kong) and even the whole of South East Asia, places like Singapore and Malaysia, investors (mere speculators perhaps?) have sky high confidence. You hear many people getting into the 'hot' jobs in the financial sector or real estate. There is money to be made all around, and nothing can seem to go wrong as the tide of big investment funds poured in.

Fast forward to now, as I write this entry, there is pessimism everywhere. It all started with the housing credit problem in the US, and suddenly it seems that all the banks or big financial institutions in the US made the wrong bet at the same time! As one company announced its huge losses, it started off a domino effect that seems to get the ball rolling, revealing more and heavier losses. Perhaps that is what the whole idea of the free market system is about. When confidence is high and no one is looking or asking questions, do whatever it takes to make money out of money. Banks lend each other money, and they lend to any consumers that would walk into a bank, even those without good credit rating. And perhaps the going is so good that, there isn't a need to hedge their bets in something else. Or maybe they are even putting most eggs in one basket (ok this last point doesn't seem possible). But did you see what happened to Bear Stearns? How can a big financial company, worth 20 plus dollars per share on the stock market, turn into a $2 per share company overnight? There is no other explanation besides making a bet larger than they can bear, and making that bet all in the same direction.

So the Fed Reserve is doing all that seems possible, even with some new creative ideas, to try to shore up confidence and stop the slide. But it seems like when confidence is low, whatever ideas and however good they may be, comes to naught.

Take a look now at the local Singapore market. I have been looking at the HK and Singapore market for a couple of years now, and can make the conclusion that investors in these 2 countries are highly sensitive to new information. At a glimpse of any bad or remotely bad sounding news, the people scramble for cover and sends the market tumbling. So right now, both markets, due to the bad news coming out of US are many times oversold. Whatever valuations companies have, doesn't matter anymore. It is funny, because you would think that due to globalization, economies would try to divest and not rely too much on the US as their main dependant economy. I would think that Singapore, and other countries in south east asia can now depend on the rising dragon of China and India. But what happen is that, people in these countries still get cold feet when the big brother sneezes.

And so now you see, the property market in Singapore is starting to slow down. Just a few months back, people are queuing up at every new property launch, and most units are sold within the first day itself. I am not sure if so many people actually have the money to own (the more expensive) condos compared to public housing apartments. Perhaps they are taking big loans in view of the ever ascending stock market (at that time). So would there be a credit crunch here in Singapore too? If it does happen, I would just turn on the loud speaker and laugh at all the financially unsavvy people out there who tends to follow the crowd. Ha ha!