Tuesday, July 16, 2013

Dark Clouds Ahead

Omigosh, the proverbial fecal matter has hit the rotating cooling device. Rating agency Moody's Investors Service has downgraded the outlook on Singapore's banking system from "stable" to "negative".

The anticipated rise in interest rates coupled with the high level of household debt - most of it tied down to mortgages - will present a perfect storm to the local lenders' credit profile. CFO Chng said a rise in short-term interest rates will lift DBS's net interest income and mitigate higher credit costs. That may be good news for the bank, but not the house owners.

The latest round of cooling measures introduced last month were meant to make sure outstanding debt obligations do not exceed 60 percent of monthly income, which is another way of saying many have already committed more than 60 percent to service housing loans. The numbers tell us that since 2009, household debt has risen 40.4 percent while monthly incomes rose only 26.3 percent.

Why are the lemmings still leaping off the cliff?

One reason could be the Minister's lack of resolve to burst the festering housing bubble. He may think he's helping the asset enhancement devotees to realise a fat profit for retirement, but by hoping to offload $400,000 public housing flats at $1,000,000 price levels, that's downright ripping off the younger generation coming into the market. The expression that comes to mind is "kicking the can down the road". Not every young person has a godfather with a million dollars paycheck to help with the mortgage payments.

So has the sub-prime crisis made its way across the globe to the little red dot? Moody's noted that Singapore banks have sufficient buffers to withstand losses under stress test scenarios - without spelling out what those stress scenarios are.  If they are so confident, why has DBS's outlook been rated "negative" since last August?
John Cusack panicking in the movie "2012"


  1. Even China's loan growth has slowed to 12% latest quarter, yet the red dot's has been going at 20% p.a. for 3 years running, which is 3 times faster than the nominal gdp was growing. And the source of this "growth"? Why real estate mortgages and developpers' loans of course. But the garmen won't be panicking. None of the folks in MAS has any memory of 1998 so they don't know about financial crisis. And two, kojak has a plan to adopt the EU "template" of depositor-bail-in (ie bank losses to be swallowed by depositors) when non performing loans surge. The reserves (which may or may not be there anymore) would not be touched because it belongs to the familee. And there won't be another POSB, OUB or Tat Lee Bank to "acquire" to bail out the rich, the cronies and Temasek. Don't say the ratings agencies did not warn you.

  2. The experts say there will be 20-30% correction in property prices. What say u?

    1. and we been hearing these bullshit of PAP-supported experts for decades. Since when these experts's words typical of PAP's feel good ever happen ? As long as PAP governing, price of things can only come up not down, it will up a lot and down a bit as wayang.

  3. There is no stopping the train... it goes on to infinity.

    This is proven by USA's money policy: loose and easy
    It is also emulated by UK, EU, China and the latest... Japan.
    The market will continue to rise.. China tried to tighten credit, but you know what happened right?.. the market reacted badly and that scared the shit out of everyone, including the Chinese themselves.

    So, its back to full steam ahead!! the train continues.. with nary a stop anywhere.
    You and I have no choice.. we cannot disembark.. stick our heads out of the window and enjoy the breeze... wheee!!! ain't this just fun??

  4. Better if it is 50% correction.

  5. maybe professor balding"s message is fnally getting through to the experts ? But dont bet on it that PMlee will accept his request to come to sgp. They dont want him to open the pandora box.

  6. I agree to your 'kicking the can down the road' expression. They must have know the negative rating coming so they implemented the last round of cooling measures. They are always without foresignt, few steps behind...

  7. I think property prices wont correct by 50%. At most 30%.

    1. HDB by 30%, private prop by 50% ? that will be good !
      And even more wonderful if all existing and future properties declared as 99 yrs .
      This will enable the state to recycle land more efficiently to provide housing for 6.9 M people.

    2. Likely to be 30%. Unlikely by 50%.

  8. I think it will be 50%. Vietnam is already experiencing the pain as the property bubble burst and foreigners leaving in droves. Singapore will be next.

  9. COE is man made and it keeps going up or at least will never drop to sane levels such as '0'

    Property values are man made too and everything bench marked to HDB and Good Class Bunglows. It keeps going up or at least will never drop to same levels as HDB.

    Since its all man made, the market will remain high till man adjusts the policies etc. The trick here is adjustments will always be to keep things "stable"..

    "stable".. thats code for 'as you were'.. and that means everything stays put.
    There is no such thing as 'market forces' here in Singapore.

    1. Frankly speaking if the taxi driver is going to earn an average $3000 in take home pay, he is technically an employee or slave of their respective taxi companies but minus employee benefits, aren't they?

      Then is it not cruel of our Pap leaders that they are made to pay for the taxi COEs that is built into the monthly rentals that they are paying for the lease of their taxis?

      Ditto for new HDB flat buyers paying near to market prices for that enviable flat location? Just food for thought ?

    2. In other words our Pap leaders are ripping S$Millions of dollars in taxi COEs from the hard work & sweat of our taxi drivers to pay for their millions in minister salaries?

  10. That Moody's headline in ST was a welcome surprise, I tell you.
    The inevitable has finally creep up upon us and this coverment must surely knew about it months if not years ago. The music must stop or ........

    1. Moody and the other rating agencies typically give governments heads up on downgrades...

  11. As far back as ancient times, whenever civilizations fell into great crisis, people in desperation have almost invariably turned to a single individual who promised them better times.

    Both the Greeks and Romans often conveyed dictatorial powers to someone in whom they entrusted people’s security and livelihood. Typically this was a battle-hardened general who could lead a city’s defenses and beat off an invading horde.

    Of course, history is full of examples of men who did not give up power willingly once the crisis passed.

    The ancient historian Herodotus lists as many as fifty ‘tyrants’ in his writings, a word that has its origins in ancient Greek despotic rulers.

    For thousands of years, ambitious men have always taken advantage of crisis, social turmoil, and economic downturns to solidify their positions and take control… often creating even more destruction in their wake.

    As an example, the 1920s economic crisis in the Weimar Republic had a huge impact in the rise of Adolf Hitler’s National Socialism.

    One of Hitler’s key tenets was to abrogate the Treaty of Versailles, and in particular section 231– the ‘war guilt’ clause that stuck Germany with debilitating war reparation payments.

    His message resonated with millions of Germans who had seen their entire lives turned upside down by economic stagnation and one of the worst episodes of hyperinflation in history.

    The rest is, as they say, history.

    I’ve been thinking about these stories quite a bit during my current travels across Europe’s most bankrupt nations.

    One thing is painfully obvious– the situation on the ground is worse than ever.

    The unemployment rate in Portugal hit a record high of 18% in May. The rate eased slightly by late June to 17.6%… but only because (you guessed it) the government simply stopped counting people.


    1. Singapore is safe!

      Look at the new property launch in sengkang, oversubscribed!.......

      Look at coe, people still very willing to buy cars....

      Ha Ha Ha ........

    2. Each COE exercise releases only 2000+ certificates for cars.. excluding bikes,trucks and vans.

      That means 2000+ people have the money lah.
      More than 2000+ people make money from trading shares,casinos,selling properties, per month.

      This does not include monthly salaries of our civil servants, ministers ( WP or PAP )CEO of Singtel, KepCorp,SIA, SPH, UOB,OCBC, Great Eastern, Pophiah King, BreadTalk king, and the lot.

      You and I are the smart ones not buying.
      So let these fools who have too much money spend and grease the wheels for us.

    3. I think he rich will get richer! The average will become poorer!

  12. the top 10 economic myths having a negative impact:

    • Myth 1: Economics is a science.
    • Myth 2: The goal of economic policy is maximizing efficiency.
    • Myth 3: The economy is a market.
    • Myth 4: Prices reflect value.
    • Myth 5: All profitable activities are good for the economy.
    • Myth 6: Monopolies and oligopolies are always bad because they distort prices.
    • Myth 7: Low wages are good for the economy.
    • Myth 8: “Industrial policy” is bad.
    • Myth 9: The best tax code is one that doesn’t pick winners.
    • Myth 10: Trade is always win-win.


  13. Singaporeans Are The Fastest In The World To Become Millionaires - Forbes


    GE 2016.
    More PAPigs will get chance to become Millionaire Ministers.

  14. ... and their friends, ball lickers and those talented at cunninglingus