As you can see, we are first approaching the levels that we saw in the last crisis. Are we there yet? Yes, we are close but my gut feel is that we are still a short distance away. Let's face it. Greece should be a gone case. The recent events are all pointing to the eventual default of Greece's debts. What the EU is doing now is to ring fence the rest of the EU members and their banks from the fallout of this default. That's my opinion. Let's see whether it will come true in a couple of months' time.
Looking at the USD vs SGD chart, my feel is that it is not a place you want to be in the long run. But, in the near term, USD looks pretty impressive to me. I guess Greece's eventual default could be the reason why USD will trend up in the near future. Nevertheless, please always bear in mind that the USD is scarifiable. It is not even a sacred cow in the first place. If the economy is really bad, I bet QE3 or QE4 will start coming in. Who cares about whether we will experience high inflation in the future when we may not even have a future to talk about in times of severe recession or depression.
Now, I would very much like to bring your attention to a famous quote called the black swan event. A black swan event is something that is really out of the norm and you will only get to know it in hindsight. Is Greece the black swan event for this crisis? Or, is it the only one? During 2008/2009, the subprime crisis was the key black swan event that brought down so many banks and companies. Bad sovereign debt is the root cause of the current crisis. What will it bring down? It is hard to predict what will happen next. Even your risk management department will not be able to give you the answer because most of their risk models are more likely to be based on possible scenarios. People do not give respect to events that they think will never happen. And, yes, you are right. I am saying that you are wasting your time in managing your risk using such models. Black swan events are the ones that will really kill your companies. So, be prepared for it.
Ok, let's look at the current situation in broad perspective. Even though market is really bad, there are still good companies around. Of course, you can buy their shares but the question is at what price. If the company is worth a lot more than what you are going to pay for, then it is a steal. If you have read my blogs, my advice is that you should always invest in companies that you can sleep well with. Give it 2 years or maybe 1 year, all these will be over. Even if the crisis were to drag on for 10 years, so what. These companies will still be around to provide the services and products that you need. Crisis or no crisis, all of us will still need to eat, call our loved ones, drive or take train to work, etc. Life still goes on.
So, stay focus.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
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