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Arsenal_fan
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Forbes article on singapore

Postby Arsenal_fan » Wed, 15 Jan 2014 4:43 pm

Just read this article on http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/.

Time to start thinking of plan B and C (if you haven't yet).

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Postby Beeroclock » Wed, 15 Jan 2014 6:05 pm

Opportunistic article... this guy making lots of bold predictions of various crashes, hoping one of them might actually happen and he will be a hero. Managed to draw a rebuttal by MAS in today's papers, so actually was successful in his publicity seeking but I wouldn't take this seriously.

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Postby trashmaker » Wed, 15 Jan 2014 6:35 pm

Yeah, I was just reading this as well. He makes some good points, but that's bound to happen when you make so many predictions. Some of the ratings agencies changed outlook of the local banks to negative a while back, so the signs aren't really that great. I'm not sure if there will be catastrophe like the writer predicts, but things don't look great for the residential property sector here with the 80% drop in new-home sales and stuff.

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Postby Wd40 » Wed, 15 Jan 2014 7:17 pm

Iceland's bubble and Singapore's cannot be compared at all. Singapore has very high ratio of home ownership compared to other countries in the world, which makes the household debt ratio for the country as a whole look huge. But at an individual level if you compare with home owners in other countries, Singapore should be far better.

When interest rates do rise, you need to keep an eye on how the economy handles it, the unemployment rate and wage growth. Typically interest rates rise means economy is good and growth rate is good. If US economy grows faster it will also have knock on affect on Singapore's growth rate. It should mean good jobs growth and wage growth here as well. So I don't see it being so dire as the author puts it.

The biggest risk is there is a big recession of 2008 style, then everyone is doomed, not just Singapore.

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None of you have made any logical rebuttals

Postby moksh » Wed, 15 Jan 2014 8:52 pm

All of you who have pooh poohed him, I doubt if you managed to read till end. He has made it very clear he is not drawing an identical comparison between Iceland and Singapore. His points about 70% mortgages being floating are quite shocking for those who have seen the story playout in US in 2008. Would love to hear if anyone has a contrary opinion with solid facts behind it rather than just rejecting it as publicity stunt. I didn't see the MAS article, does it have solid points?
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Re: None of you have made any logical rebuttals

Postby zzm9980 » Wed, 15 Jan 2014 9:49 pm

moksh wrote:All of you who have pooh poohed him, I doubt if you managed to read till end. He has made it very clear he is not drawing an identical comparison between Iceland and Singapore. His points about 70% mortgages being floating are quite shocking for those who have seen the story playout in US in 2008. Would love to hear if anyone has a contrary opinion with solid facts behind it rather than just rejecting it as publicity stunt. I didn't see the MAS article, does it have solid points?


I'm on your side here. So many people are over leveraged with super-low (~1%) interest rates... if they're all floating (which I never realized) there will be huge problems when those rates go up. I don't know if it will be Iceland bad, but it will be very painful for lots involved IMO.

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Postby Wd40 » Wed, 15 Jan 2014 10:17 pm

Yes, I believe all loans are floating. There are some loans that have a fixed interest rate for like 3 years, beyond that floating.

First of all interest rates wont go up until start or middle of 2015 and like I said in my previous post, interest rate will go up in the US, only if the growth rate really picks up. Right now Fed has only started tapering and last weeks US job report wasn't great and the markets went up expecting that tapering wont be too fast.

If US growth really picks up and interest rates go up in the US, they go up in Singapore as well. But how much will they go up by? The maximum interest rates in Singapore were like 4%. Its unlikely it will go that high. It may go up by maximum another 2%. Wont salaries increase in Singapore, in such a scenario? What makes you think people wont be able to make their payments? Banks also have the option of not increasing the payments but extending the tenure instead.

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Re: None of you have made any logical rebuttals

Postby JR8 » Wed, 15 Jan 2014 10:17 pm

zzm9980 wrote:
moksh wrote:All of you who have pooh poohed him, I doubt if you managed to read till end. He has made it very clear he is not drawing an identical comparison between Iceland and Singapore. His points about 70% mortgages being floating are quite shocking for those who have seen the story playout in US in 2008. Would love to hear if anyone has a contrary opinion with solid facts behind it rather than just rejecting it as publicity stunt. I didn't see the MAS article, does it have solid points?


I'm on your side here. So many people are over leveraged with super-low (~1%) interest rates... if they're all floating (which I never realized) there will be huge problems when those rates go up. I don't know if it will be Iceland bad, but it will be very painful for lots involved IMO.


No it won't as the government owns the property market's arse, and won't ever let it get 'vote-losing' bad....


Simples...

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Postby Wd40 » Wed, 15 Jan 2014 10:22 pm

The author says that Singapore properties have the worst rental yields. This is bullshit. Singapore properties have the best rental yields in the world. I know people in Australia, US, UK etc who sit on cash and earn interest and not invest in property because renting makes much more sense there. My cousin in Sydney rents a 1 bedroom apt in Chatswood for $1500. He tells me its better to rent. Buying a house, apart from the interest, they also need to pay additional council taxes or something that makes its completely not worth it.

In Singapore, its opposite. Anyone who has $200K in the bank thinks its better to go into the downpayment of a condo.
Last edited by Wd40 on Wed, 15 Jan 2014 10:25 pm, edited 1 time in total.

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Govt can only control so much

Postby moksh » Wed, 15 Jan 2014 10:23 pm

JR8, as the article states SIBOR is tied to US rates to keep FX constant. This is what has given rise to the crazy interest rates which the article points out are not needed in Singapore's vibrant economy. The govt can slow down the growth as it has rightly done through controls on who can purchase and with what restrictions. However, if vacancies rise as the article is predicting and I have anecdotally observed, economic reality will point to lower prices and a domino problem for consumers, banks etc. A govt that cannot print dollars at will like US (unless willing to tolerate inflation), will have its hands tied
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Re: None of you have made any logical rebuttals

Postby Beeroclock » Wed, 15 Jan 2014 10:42 pm

moksh wrote:All of you who have pooh poohed him, I doubt if you managed to read till end. He has made it very clear he is not drawing an identical comparison between Iceland and Singapore. His points about 70% mortgages being floating are quite shocking for those who have seen the story playout in US in 2008. Would love to hear if anyone has a contrary opinion with solid facts behind it rather than just rejecting it as publicity stunt. I didn't see the MAS article, does it have solid points?
well if he didn't want to highlight the Iceland comparison perhaps he might've chosen a different title? Why don't you check today's press, but the Monetary AUTHORITY of Singapore, well I somehow doubt their points will be flimsy.

I don't mean to entirely dismiss it. No doubt if there's another global hiccup Singapore will take a hit. And when interest rates eventually rise the property market will get a bit if a shake. But IMO the govt cooling measures have been well timed and give a decent buffer if there is an external shock or rates hike the measures will likely be wound back to limit the downside. Not to mention investors with spare cash waiting for another buying opportunity like 1997, 2002, 2008. There are some decent points but for me they got lost in his sensationalist style.

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Postby Beeroclock » Wed, 15 Jan 2014 10:57 pm

[quote]“Property asset values are significantly higher than debts incurred,”

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Postby Beeroclock » Wed, 15 Jan 2014 11:05 pm

Wd40 wrote:The biggest risk is there is a big recession of 2008 style, then everyone is doomed, not just Singapore.
yes indeed, but actually even in this scenario Singapore might get supported and foreign inflows due to flight to quality effect and people urgently putting their money in more safe/reliable places which Singapore is generally considered to be in this part of the world, mr Colombo excluded.

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Re: Govt can only control so much

Postby JR8 » Wed, 15 Jan 2014 11:20 pm

moksh wrote:JR8, as the article states SIBOR is tied to US rates to keep FX constant.


F*** me. Is that the in-depth analysis? :)



p.s. a generation ago I was the FX Controller of a major Wall Street bank in SG. [Ah what whimsical times, how do you control, what on the fringes is unknowable to most people. How do you audit people, and have them accept they don't understand what their jobs actually are? Rank bravado vs Profit]

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govt debt data is wrong

Postby moksh » Thu, 16 Jan 2014 12:06 am

I learnt about a grossly inaccurate fact about govt debt claims he has made which hinges on gross debt not the net debt. So defeats his main points on SG govt completely. Though the consumer data is still interesting for someone new here

http://www.gov.sg/government/web/conten ... evelofdebt
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