<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Nov 23, 2008
small change
</TR><!-- headline one : start --><TR>Count your blessings, if not assets
</TR><!-- headline one : end --><TR>Also don't get scared and stop spending on essentials </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Goh Eng Yeow, Markets Correspondent
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
</TD><TD vAlign=bottom>
-- PHOTO: ISTOCKPHOTO
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->
There are many ways to view the seismic shift in our financial system.
There has been a lot of anger because through no perceived fault of ours, the sins of now-vilified investment bankers have been visited upon us.
Hard-earned life savings of retirees and others have been destroyed after their investments in instruments such as Lehman Minibonds and DBS High Notes 5 went up in smoke.
Now, the wider economy is under fire. Fear abounds as people worry about whether they will still have a job waiting for them, in the wake of job cuts at major business entities such as DBS Bank, Citibank and Neptune Orient Lines.
But there is also a sense of anticipation - a belief that those investors who stay the course will eventually be rewarded.
As sure as the sun rises every morning, this crisis will burn itself out, and a phoenix will arise from the scorched financial landscape that now scars the economy.
Many have described the current upheaval as the worst financial crisis since the Great Depression 80 years ago.
Let's put things in perspective. The few people who still remember those bleak times have observed that such talk is quite exaggerated.
One 86-year-old businessman here recalled that during the Great Depression which occurred during his childhood, many people went hungry in the streets as the rubber trade in Singapore crashed. Yet, the British colonial authorities did not lift a finger to help them.
In contrast, the Government is already rushing to put together a series of measures to combat the current downturn.
Even in the United States where the present financial turmoil originated, no one is expecting the jobless rate to hit the post-Depression peak of 10.7 per cent reached in the downturn of 1982.
So, while some may be finding it painful to have to forgo buying new bling-bling for Christmas, let's be thankful that no one here is going hungry.
How, then, should we view the current financial crisis?
Well, it is a dreadful mess for the poor investor unable to tell the difference between a credit derivative and a dividend.
But the vast destruction of wealth now under way in global financial markets is not something that happened overnight. It may actually be the result of many years of risk-taking gone awry.
The problem has been simmering beneath a surface calm during the last couple of boom years, but no one paid any attention to it, given the obsession with instant gratification.
It is easy to get carried away and pin all the blame on the mortgage crisis in the United States. But look around us. Didn't we suffer from similar excesses as well?
Until recently, some banks literally made it a virtue to approve risky unsecured personal loans within 24 hours - never mind the credit checks they are supposed to do on the borrower.
Even while the super-bull run was hitting its peak early last year, there were already warning signs that the stock market might come crashing down. These signals were mostly ignored.
Companies bled dry by years of losses, such as Rowsley, Equation and Ban Joo, were valued at more than $200 million each even though they were literally shell firms with few viable assets left in them.
In May last year, one audacious China solar start-up even wanted to inject its fledgling operations into Rowsley at a hefty price tag of $2.7 billion.
While it offered investors a $300 million profit guarantee for each of the financial years ending June 30, 2008, 2009 and 2010, it gave precious few details on how it intended to fulfil its side of the mega-size bargain.
Small wonder, then, as the US sub-prime crisis started to bite, these counters tumbled like tenpins as the sexy stories surrounding them turned sour. They have since fallen to about one-tenth of the prices reached during the feverish penny stock price run-up in July last year.
It is now quite possible that we will have a few lean years ahead of us - as the excesses are being drained out of the system - but that is nothing to fear, really.
Something good will come from these bad times.
It is worth noting that during the Great Depression, formidable businesses were being established in the United States, such as Walt Disney, IBM and Hewlett-Packard. These turned into the global household names they are today.
People will have to start living within their means, learn how to preserve capital and reduce debt.
For many, it will mean saying goodbye to flashy, big-ticket items such as luxury cars, country club memberships and expensive overseas holidays - proudly worn badges to show to all that they had 'arrived'.
What they should not do is to scare themselves into stopping their spending on essentials. That would trigger a truly terrifying economic depression which we would have difficulty crawling out of.
As painful as the road ahead may be, every step along it will take us one step closer to recovery.
Look at it this way. Even if the current travails turn out to be on par with the worst financial crisis in history in terms of duration, this still means that the stock market should bottom out some time next year - with the worst-case scenario.
In the meantime, if it is troubling to count your financial assets, then use this challenging interlude to count your blessings: loved ones, good health if you possess it, and fond memories.
[email protected]
<HR width="50%" SIZE=1>
Tighten belt
People will have to start living within their means, to learn how to preserve capital and to reduce debt. For many, it will mean saying goodbye to flashy, big-ticket items such as luxury cars, country club memberships and expensive overseas holidays - proudly worn badges to show to all that they had 'arrived'.
small change
</TR><!-- headline one : start --><TR>Count your blessings, if not assets
</TR><!-- headline one : end --><TR>Also don't get scared and stop spending on essentials </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Goh Eng Yeow, Markets Correspondent
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
-- PHOTO: ISTOCKPHOTO
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->
There are many ways to view the seismic shift in our financial system.
There has been a lot of anger because through no perceived fault of ours, the sins of now-vilified investment bankers have been visited upon us.
Hard-earned life savings of retirees and others have been destroyed after their investments in instruments such as Lehman Minibonds and DBS High Notes 5 went up in smoke.
Now, the wider economy is under fire. Fear abounds as people worry about whether they will still have a job waiting for them, in the wake of job cuts at major business entities such as DBS Bank, Citibank and Neptune Orient Lines.
But there is also a sense of anticipation - a belief that those investors who stay the course will eventually be rewarded.
As sure as the sun rises every morning, this crisis will burn itself out, and a phoenix will arise from the scorched financial landscape that now scars the economy.
Many have described the current upheaval as the worst financial crisis since the Great Depression 80 years ago.
Let's put things in perspective. The few people who still remember those bleak times have observed that such talk is quite exaggerated.
One 86-year-old businessman here recalled that during the Great Depression which occurred during his childhood, many people went hungry in the streets as the rubber trade in Singapore crashed. Yet, the British colonial authorities did not lift a finger to help them.
In contrast, the Government is already rushing to put together a series of measures to combat the current downturn.
Even in the United States where the present financial turmoil originated, no one is expecting the jobless rate to hit the post-Depression peak of 10.7 per cent reached in the downturn of 1982.
So, while some may be finding it painful to have to forgo buying new bling-bling for Christmas, let's be thankful that no one here is going hungry.
How, then, should we view the current financial crisis?
Well, it is a dreadful mess for the poor investor unable to tell the difference between a credit derivative and a dividend.
But the vast destruction of wealth now under way in global financial markets is not something that happened overnight. It may actually be the result of many years of risk-taking gone awry.
The problem has been simmering beneath a surface calm during the last couple of boom years, but no one paid any attention to it, given the obsession with instant gratification.
It is easy to get carried away and pin all the blame on the mortgage crisis in the United States. But look around us. Didn't we suffer from similar excesses as well?
Until recently, some banks literally made it a virtue to approve risky unsecured personal loans within 24 hours - never mind the credit checks they are supposed to do on the borrower.
Even while the super-bull run was hitting its peak early last year, there were already warning signs that the stock market might come crashing down. These signals were mostly ignored.
Companies bled dry by years of losses, such as Rowsley, Equation and Ban Joo, were valued at more than $200 million each even though they were literally shell firms with few viable assets left in them.
In May last year, one audacious China solar start-up even wanted to inject its fledgling operations into Rowsley at a hefty price tag of $2.7 billion.
While it offered investors a $300 million profit guarantee for each of the financial years ending June 30, 2008, 2009 and 2010, it gave precious few details on how it intended to fulfil its side of the mega-size bargain.
Small wonder, then, as the US sub-prime crisis started to bite, these counters tumbled like tenpins as the sexy stories surrounding them turned sour. They have since fallen to about one-tenth of the prices reached during the feverish penny stock price run-up in July last year.
It is now quite possible that we will have a few lean years ahead of us - as the excesses are being drained out of the system - but that is nothing to fear, really.
Something good will come from these bad times.
It is worth noting that during the Great Depression, formidable businesses were being established in the United States, such as Walt Disney, IBM and Hewlett-Packard. These turned into the global household names they are today.
People will have to start living within their means, learn how to preserve capital and reduce debt.
For many, it will mean saying goodbye to flashy, big-ticket items such as luxury cars, country club memberships and expensive overseas holidays - proudly worn badges to show to all that they had 'arrived'.
What they should not do is to scare themselves into stopping their spending on essentials. That would trigger a truly terrifying economic depression which we would have difficulty crawling out of.
As painful as the road ahead may be, every step along it will take us one step closer to recovery.
Look at it this way. Even if the current travails turn out to be on par with the worst financial crisis in history in terms of duration, this still means that the stock market should bottom out some time next year - with the worst-case scenario.
In the meantime, if it is troubling to count your financial assets, then use this challenging interlude to count your blessings: loved ones, good health if you possess it, and fond memories.
[email protected]
<HR width="50%" SIZE=1>
Tighten belt
People will have to start living within their means, to learn how to preserve capital and to reduce debt. For many, it will mean saying goodbye to flashy, big-ticket items such as luxury cars, country club memberships and expensive overseas holidays - proudly worn badges to show to all that they had 'arrived'.
