I really think people are in trouble. Previously, it’s just people losing money in stock markets. analysts claims stocks to be undervalued, and people have a glint of hope that this crash in the money markets is temporary.
these week’s commodity market totally shut all these hopes up. completely washed away. with such margins, companies’ value will not just be eaten up. i really think people are in trouble. this week crude is down, soybean is down like mad, palm, corn, gas, everything down.
look at the supply of these energies. corn, palm, soybean comes from plantations. they constantly supply. when demand goes down like this, producers are in trouble. world crude supplier from middle east. when we look at how much middle east economy has boomed due to the increase in crude, i can expect a crash, i mean a real crash in their property markets. scary.
the ‘trouble virus’ seemed to start spreading to europe. the real estate lending firm in germany that needed the govt’s 50B euros to bail? i mean, germany?? we heard about subprime in the US and UK, but nothing in germany so far. without subprime, if the real estate firm is going down, then many other european countries will also be in trouble. and germany is supposedly strong. with it down, spain, which experienced one of the highest growth in the property market will also be in trouble. and we havn’t even gone to the smaller economies like Poland, Czech.
after europe it will definitely go to middle east. dubai just released a plan to inject 95B to build a new town in dubai. i guess they’re trying the china way — spend spend spend to increase consumption in the economy. it definitely worked for china in 1998, where we literally buildings being built without marketing them to the market. funny thing is, those buildings were eventually being used in china. in dubai, who’s going to live in those towns? hahahaha!
after middle east the natural thing is asia. if it comes to asia, i dont know how we’re going to take it man. the people here can hardly breathe even without the so called hit. markets down almost 60% for so many counters. how are we going to cope!
industry wise, i think 2 we cannot touch: property and financial markets. with the german real estate lender down(similar to fannie and freddie), we see that there is a real, REAL liquidity problem in the world today. if i’m a bank, the first industry i will squeeze is real estate developers. if interest goes to 8%, and property markets down by 50%, i see how they can not make losses next year.
liquidity problem also will kill all the banks. simply look at the 2 investment banks granted commercial licenses. haha. gold-stanley. their core biz model, for one, is gone. they’ve been making money mainly on leverage. with their conversion, they are now subjected to regulations that govern banks, including things like capital asset ratio. to keep their car, they either have to raise capital, or sell their assets. i believe both will happen. goldman has already raised capital in the open market at 123, lowering to about 20. they have to do more. maybe sell their assets. just watch.
in this market, the funny thing is that people really panicked. they stopped looking at valuations. they simply don’t hold anymore! for u warren buffet fans out there, maybe u’ll say things like ‘in 3 year time, valuations still hold’. but look, how can we guarantee there is a-3-year?? anyone, i mean anyone, can go bust tmr. we’ll nvr know. balance sheets are like trash, because assets are super overvalued, and noone really go do their mark to markets right?
one way to look at this: in 1997, Indonesia owed the world about 7-8B. the whole country was turned upside down. almost went bankrupt. look at the scale of bankruptcies today. wayy more than that. are we sayign that the value of these companies more than that of indo 10 years ago? this point, again, deserve another laugh. hahahahaha!
if u ask me, i think it’s better to stay out of the market. and watch for the real gems in between all these companies. who are the ones who can still make money in this markets. results will show, and we’ll know. for now, noone knows what’s ‘value’, and noone knows how many people know ‘value’. if u’re a warren fan u may not agree with me, but even if u believe in fundamental valuations u have to agree the crazy market is not following that. for one, goldman shares is trading at warren’s warrant (no pun intended) price — 115.
