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There is a very interesting article in the weekend edition of The Business Times. It is by Cai Haoxiang and he asks the question "What asset do you flee to when the world collapses?"
We have heard people saying that bonds are now a bad idea and that equities are preferred. So, many are invested and even fully invested in the stock market. No emergency fund? No war chest?
Singaporeans, of course, have a never ending love affair with real estate with many thinking that real estate prices on our tiny island will only see prices going higher.
Someone told me that there is never a bad time to buy a property. Well, never say never. Those who bought a property here before the Asian Financial Crisis in the late 90s just broke even recently.
Then, there are the bears who believe that a correction is overdue and that the longer the bulls continue charging, the bigger the correction is going to be.
There are people who do not believe in the rally. What are they doing? Staying 100% or close to 100% in cash and waiting to buy assets on the cheap.
However, in a situation where the world economy really collapses like in 1929, who wins?
"... how long can Singapore survive if there is a sustained global economic crisis? With zero natural resources and an economy heavily dependent on global trade flows, Singapore's economy is especially vulnerable when nobody wants to trade and people worry about clean water and edible plants, not chemicals and electronics.
"In rich, sophisticated Singapore populated with financiers, lawyers and plenty of middle managers, skills actually useful to survive an economic collapse might be startlingly in short supply...
"Build up a set of skills and contacts that people will want in good times and bad and you will never go hungry for as long as you live."
We could have tons of money, even gold and silver coins. Could they be worth more than food and clean water if these should suffer from scarcity? If Singapore's economy should go into a tailspin, would the FTs still want to come here? Who would rent all the spanking new condominiums which have been built? Could we see vacancy rate in the double digits?
"... gold can't be eaten... try convincing the chicken rice seller to take your Bitcoins as you fend off squatters from your multiple properties."
A sobering read with a dash of humour. Get a copy of this weekend's edition of The Business Times. The article is on page 5.
Disclosure:
AK71 is a shareholder of SPH. Every copy of The Business Times sold could contribute to AK71's financial well-being.
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1. How to tell if you are rich?
2. Jim Rogers: Why I won't sell gold?
3. Never lose money in real estate?
4. Change to become richer.
5. The Millionaire Next Door.
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13 comments:
Rich or survival?
Hi Ah John,
"Rich" is open to interpretation. ;)
When nobody wants to trade chemical and electronic, and is concerned about water and food only?
That sound like a situation when capitalism break down worldwide. We are properly near the end of the world, dun worry about skills, nothing is worth anything except that of weaponry and commodities.
If we look back at history, trading is not a luxury, it is a necessity and a alternative to war to gain resources.
When trading system break down completely, the world that we know would be coming to an end soon. Dun worry about bit coins and chicken rice stalls, they will long be gone before that happens.
IMHO, a prolonged economic crisis will lead to mispricement in trading, not end of trading.
Hi Mike,
I think your guess is as good as Cai Haoxiang's. :)
Although he exaggerated in some parts, he based his musings on what happened in the years from 1929 to 1945. So, if it has happened before, could it not happen again?
I am disinclined to believe that gold and silver will be useless. During times of war, they are about the only store of value that is accepted. Of course, I could be bias since I keep some physical gold and silver as insurance.
In this case, would you share what's your investment portfolio?
I remember there's one investment guru who recommends to keep 25% each in equity, property, gold and cash.
What's your view on this?
Hi Caprio,
That suggestion of having our assets equally divided into property, equities, cash and gold does not seem practicable unless we are the super rich.
For regular folks like us, cash is the most important asset. Once we have cash, we want to put some of it to work. So, equities is a natural second. Then, having a crisis mentality would mean holding 5% to 10% of our total wealth in precious metals.
Having said this, I am not a guru. The guru you referred to might have a good reason for saying the things he says.
You have to find a formula that works for you. :)
AK,
Your disclosure owns! LOL!
Hi Steven,
Your comment got me scratching my head. What does it mean? O_o
AK,
Just that word "financial well being", it sounds so elegant lol.
Hi Steven,
Oh, you like that? Haha... :)
I can only hope to age elegantly. ;p
I certainly wished that the REITs had the same upwards run as the property.
Something I eyed on 2-3 years back for $750-800k is now almost $1m. Rental is about $3-3.5k/pm then. Had I the cash for DP at that time, i will be a very very happy man today. Instead of KLKK, I will ZLZK (zao lai zao ki)
Hi SnOOpy168,
Well, it wasn't so long ago that AIMS AMP Capital Industrial REIT was trading at under $1.00 a unit. Late 2011?
50% appreciation in 2 years isn't too mean. Of course, there is that 10% to 11% distribution yield on cost to boot. ;)
I know it is hardly comparable since we would leverage when buying a piece of property. However, I would also argue that there is concentration risk when we buy a single property instead of investing in a well run REIT. :)
Reader:
what's ur take on Bitcoin? Would you consider getting some cryptocurrencies?
AK:
Nope. Don't understand it and don't need it. ;p
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