I have a shock today. It was reported in the Straits Times that our authority has raised the inflation forecast upwards due to unexpected higher housing and car prices. Don't get me wrong. I am not surprised by the revision in the inflation outlook at all. In fact, I have been talking about it since last year.
What really shocked me is that our authority should feel anything unexpected of this. Unless you live outside of Singapore all these while, there is no way that you will not notice the runaway COE prices. For the benefit of readers who are not living in Singapore, COE is a piece of paper called Certificate of Entitlement and you need one to drive a motor vehicle in this country. The total car price will include the cost of this piece of paper, import car price and other taxes. COE prices have increased from $18,502 in January 2010 to $56,002 in the latest July's bidding. Since prices have been rising ever since and the number of COE is fully controlled by the government, why are they so surprised about higher car prices? This is really puzzling.
In addition, property prices have been rising since two years back. In Singapore, private property prices have all along been supported by the public housing prices. Since public housing prices have been rising, the private property prices and rental prices will definitely go up in tandem. So, what is so unexpected of this?
Really unbelievable. In fact, I won't be surprised if CPI were to hit 6% soon.
Friday, July 22, 2011
Friday, July 1, 2011
Market Cycle
For the past one to two month, the market has been traumatized by events like Greece debt issue, US debt celling problem, etc. As expected, we are still facing inflationary pressure in Singapore. Income is going up. Property prices still continue to rise. If you have read my earlier blogs, these are not unexpected. Fundamentally, our economy is still doing well, so all these are happening.
But, I think we have to be mindful that all are not so rosy now as compared to last year. In the study of Dow theory, one of the basic tenets is that the stock market averages must confirm each other. Basically, the health of the stock market cannot be confirmed ok if the transport stocks are not doing fine. In the good old days, being a powerful industrial country, factories in US will ship their goods to other places using railway. So, if the railway business is doing fine, it means that there are more goods to be shipped and so factories must be producing more and so for. I am not sure how much of this is still relevant today. Nevertheless, it makes sense to say that the world economy cannot be doing fine if shipping business is not prospering because of the lack of consumer demand.
Since the beginning of this year, the price of shipping stocks like NOL has fallen by close to 30%. Freight rates have been falling since then and the shipping sector is having a very bleak outlook. Part of the reason could be due to over supply of shipping capacity. But, more importantly, the lack of demand is forcing the shippers to lower their rates. The austerity measures in the European countries are discouraging their people to spend less. Similarly, the unemployment problem in US still prevails and so consumer demand is lacking. With factories producing lesser, demand for commodity will drop. Everything is inter-related to one another. In a way, the real economy is not doing well and it will affect the stock market, commodity market and etc.
Stock market is normally a leading indicator of the true economy. When it is falling, it means that a lot of people are expecting the real economy will worsen in near future. I suppose all these are part and parcel of the market cycle.
By the way, for those who are interested in property market, you may want to read the following blog at your leisure. Personally, I feel that it provides very good insights about our local property market. And, of course, when the information comes from our Minister who can decide the fate of the local property market, it makes reading this blog even more important.
http://mndsingapore.wordpress.com/
Just for your reading.
But, I think we have to be mindful that all are not so rosy now as compared to last year. In the study of Dow theory, one of the basic tenets is that the stock market averages must confirm each other. Basically, the health of the stock market cannot be confirmed ok if the transport stocks are not doing fine. In the good old days, being a powerful industrial country, factories in US will ship their goods to other places using railway. So, if the railway business is doing fine, it means that there are more goods to be shipped and so factories must be producing more and so for. I am not sure how much of this is still relevant today. Nevertheless, it makes sense to say that the world economy cannot be doing fine if shipping business is not prospering because of the lack of consumer demand.
Since the beginning of this year, the price of shipping stocks like NOL has fallen by close to 30%. Freight rates have been falling since then and the shipping sector is having a very bleak outlook. Part of the reason could be due to over supply of shipping capacity. But, more importantly, the lack of demand is forcing the shippers to lower their rates. The austerity measures in the European countries are discouraging their people to spend less. Similarly, the unemployment problem in US still prevails and so consumer demand is lacking. With factories producing lesser, demand for commodity will drop. Everything is inter-related to one another. In a way, the real economy is not doing well and it will affect the stock market, commodity market and etc.
Stock market is normally a leading indicator of the true economy. When it is falling, it means that a lot of people are expecting the real economy will worsen in near future. I suppose all these are part and parcel of the market cycle.
By the way, for those who are interested in property market, you may want to read the following blog at your leisure. Personally, I feel that it provides very good insights about our local property market. And, of course, when the information comes from our Minister who can decide the fate of the local property market, it makes reading this blog even more important.
http://mndsingapore.wordpress.com/
Just for your reading.
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