Thursday, April 14, 2016

MAS Policy Summary: We're Fucked

The MAS just came out with their policy statement today, so it's probably being reported on official news outlets and being analysed by "economists" and what not. I'm sure that they will be spinning it positively and focusing on stuff like "still positive future outlook", how low inflation is great and whatever other stories they like to come up with. But I'll just summarize what it says to me.

First off, the SGD is not longer gradually appreciating. MAS has decided to scrap our currency appreciation policy and instead target zero appreciation. Honestly, this isn't a bad policy, since all other major currencies are competitively devaluing. In this crazy world, zero appreciation is relative appreciation already. However, in other words, if you view this relatively, we're basically devaluing to remain competitive. Fuck the Euro, fuck the USD and fuck the JPY. If everyone else can devalue, why can't we too? CHIONG TO BE WORTHLESS, CHIONG AH!

Second, the local economy is shit. QoQ growth is 0%. Taking into account seasonality, things are getting shittier. The only sectors that should be okay are areas propped up by government spending, such as healthcare, education and public transportation. Basically, they are spending on whatever they can, since no one else is doing so.

Thirdly, the global economy is shit too. They recognize global easing and stimulus policy by other central banks, but concede that cyclical headwinds (ie market cycles) is going to equate to shit demand and growth for everybody. While it might not be negative, it would definitely be slowing.

Fourth, inflation is still as shit as ever. While core inflation is 0.4%, CPI all items is an eye-popping -0.7%. Which should be pretty fucking obvious since core inflation excludes housing and private transport, both of which are obviously trending lower. They are further lowering their inflation expectations. Why wouldn't they? They just admitted that car prices are expected to be lower, along with housing rentals (bye bye landlords expecting 3% yields).

Summary: we are fucked.

I don't know about you and your industry and sector, but the industry that I am in is clearly suffering a lot (don't ask, I won't tell). I would not be surprised if many of the businesses shutter over the next 1-2 years. Among friends, almost everyone that I talk to are telling me that their industry or even their own company is cutting headcount and freezing hiring. Even the usual job hoppers are telling me that they are gonna bunk in until this "recession passes" and then they will start their hopping again.

Deflation is obviously here. Just check out the MAS core inflation chart data. Or even better yet, read the monthly inflation statistics which shows CPI all items. Basically, all previous times that outright deflation were here were during crisis periods. 1998, 2002 and 2009. And we are very very close into slipping into official negative core inflation, which basically just confirms that the backdrop of the economy is same as in all those periods.

Personally, I don't really worry too much about what is going to happen in the future. My investments are actually positioned for a global shitstorm and I have my beautiful emergency fund, as well as a huge warchest ready to help and offer relief to distressed people who desperately need to offload their rapidly depreciating assets at firesale prices.

The last few times our economy was in a rut, it was a proven good time to buy properties on the cheap. I am fairly certain and confident that housing prices will be cratering in the next few quarters, along with our local economy and the global economy.

Am I an asshole? Yes, I am an asshole. But I am a prepared asshole, and that is probably actually even worse than your average asshole on the street.

5 comments:

  1. The shits hitting the fan is overdue?

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  2. Loved every bit of this article!

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  3. Hi GMGH,

    Wah, so refreshing...ur honest opinions sound so refreshing among all the spin the official talking heads are giving haha!

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  4. All hail .....
    But STI still going up.
    Have to be patient to wait for it to come back down again.
    Or just continue biting a bit a bit at value buys.

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  5. I'm with you, let the games begin :)

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