Another difficult working week, another difficult stock market to navigate. My portfolio have been taking a fair bit of the blunt lately and so far it has bled 15% in all.
Quite a small figure compare to the broad market carnage but its understandable consider i am 50% vested right now.
The bailout package have been passed and numerous economist have commented that its bad. But i gotta remind folks here that without that bailout, it can be much much worse! the entire credit market has freeze up! Even interbank lending in Singapore is jumping to an all time high.
There is only bid, there is no offer. Even if there is, the cost to lend is much much higher. A good gauge of how difficult is to find funds is the deal that Berkshire Hathaway did to lend to Goldman Sachs and GE was done for them to receive 10% interest per year. In developing markets here (Asia), we are used to seeing it but these kind of rate emphasis how desperate financial institutions have become desperate for money.
The possible next shoe to drop, could very well be a silent run of the banks. No, this does not start with your normal mom’s and pop’s queuing in front of the banks but firms pulling out funds from each bank. Over the last 2 weeks, Ireland and Germany have come out to guarantee that deposits of any size in country banks would be guaranteed. What this does is that, if US banks do not offer that, what will the risk averse money do? Most likely it will fled to european or other banks that guarantees the deposit and this can be more problems for the problem US banks.
How far down are we?
Well, it is safe to say that we had quite a fair bit of stock market shit up till now. S&p 500 and world stock markets suffered near 10% fall last week and S&P 500 is down 30%. That is the average carnage for a normal bear market.
The developing countries fair even worse. China is down like 60% and in most its like down 40%.
If you ask me if its safe to buy indexes and Singapore stocks right now, i would tell you that i am not sure. Based on what i say previously about the next shoe to drop, as well as the coming quarter results, i am not incline to start dipping in, even though its at a level we should start systematic buying in. If you foresee this shocks coming , why subject to your funds to this kind of high probability downside?
It will be interesting to see which are the resilent companies when they release the results in November.can’t wait for it to come.
Some of the dividend yields that i see in REITs and dividend yielders at my Dividend Stock Tracker is getting ridiculous. Average REIT yields is 10%. Thats basically saying all REITs and dividend yielders are near junk bond status. I definately see value there. I wish they could come up with a SGX listed ETF on all REITs. I definately see value there. I will talk about this more in my upcoming articles.