Recession could hit Singapore. Do what Buffett and AK say?

Warren Buffett famously said to investors the following.

"Don't worry about economic predictions."

In his opinion, 

"... it really doesn't make any difference in what I do today in terms of buying stocks or buying businesses what those numbers tell me. 

"They're interesting, but they're not guides to me. 

"If we buy a business, we're going to hold it forever. 

"So we're going to have good years, bad years, in between years, maybe a disastrous year some year."

Now, this perspective is very interesting and also instructive.

It should be interesting to all investors.

However, it is only instructive to certain investors.

Who are these certain investors?

Investors whose circumstances are similar to Warren Buffett's, of course.

Not everyone has money gushing in regularly and, definitely, not everyone has more money than they would ever need.

We do not have the resources that Warren Buffett and Charlie Munger have.

When we read such opinions, therefore, we have to think of our own circumstances.

For most of us, paying attention to the early signs of where the economy might be headed is not a bad idea.

In a YouTube video I recently produced, I said that the Monetary Authority of Singapore is worried about the economy and if they are worried, we should be worried too.

Singapore's economy is slowing down fast and it is likely to get worse as many major economies seem to be heading for a recession.

So, the Monetary Authority of Singapore has decided to put fighting inflation on the back burner and not to tighten in a move that is expected to help support the economy.

Most people still need their earned income and they should worry about possible retrenchment.

Indeed, massive layoffs started in the tech sector and if a recession hits, other sectors would most likely also be impacted.

Only iron rice bowls will be safe.

What to do?

If we do not have an emergency fund, we should really start one.

If we have an emergency fund already, do a review and see if it is still adequate.

Even if we have passive income, we should have an emergency fund because passive income could dry up.

Whenever I recall how my interest income and dividends reduced during the COVID 19 pandemic, I get PTSD.

If we are fully invested in equities, we might want to start building a war chest.

If we already have a war chest but it is somewhat empty like mine, try to fill it up.

There are so many things that could go wrong in the next few months.

Geopolitics in many places could worsen.

The banking crisis really isn't over yet and, in a recent interview, Warren Buffett said so too.

Depositors will not lose money but investors will lose money because they made bad investments.

I am very "kiasu" but, given the uncertainties, I am more "kiasi."

I tell myself that I want to do a better job of preserving capital and having more cash really isn't a bad thing.

This is especially when the front end of the yield curve stays elevated.

A risk free return of 3.65% to 3.85% p.a. with zero volatility is very decent.

It isn't a bad idea to be more defensive, especially if it gives me peace of mind.

I said this to a reader in the comments section recently:

"Being substantially invested in equities already, I am more likely to regret not having resources in a bear market than not having invested more to benefit from a bull market, if it should happen."

At this point, it is important to remind anyone who is eavesdropping on me that all of us have different circumstances.

So, just like how we shouldn't accept what Warren Buffett says as being instructive for everybody, we should not accept what AK says unquestioningly as well.

We are also wired differently and will have our own beliefs.

Do the right things and the right things will happen for us.

If AK can do it, so can you!

Recently published:
T-bill ladder completing.
References:
1. Fixed income strategy.
2. Survivability and opportunity.

Final T-bill using fresh funds. Ladder completing soon.

3.75% p.a.

That's the cut-off yield for the latest 6 months T-bill auction.

I said in an earlier blog that a cut-off yield of between 3.65% to 3.85% p.a. would still be relatively attractive.

Plus the fact that the "interest" is paid at the beginning of the tenure, if we are able to hold till maturity, 6 months T-bills offer better returns than 6 months fixed deposits placed with DBS, OCBC or UOB now.

I will go ahead with the plan to apply for the next 6 months T-bill which will have its auction on 26 April when it is available.

That will be the final T-bill I will apply for using fresh funds.

Why?

My T-bill ladder would be completed by then.

This is because the first 6 months T-bill I applied for in October last year will be maturing on the 24th this month.

I will use the returning funds from that maturing T-bill to apply for the first T-bill in May.

Every two weeks from the 24th of this month, I would be recycling returning funds from maturing T-bills.

Therefore, no fresh funds would be required for T-bill applications from then on.

Well, at least that is the plan for now.

As long as the front end of the yield curve stays elevated, this should generate some pocket money for me.

Always nice to have more pocket money.

Since I would not be injecting fresh funds into T-bills, the passive income generated by my investments for the rest of the year will go into my war chest after deductions are made for expenses.

I am in no hurry to increase exposure to equities.

This is largely because I am already substantially invested.

I also don't want to be caught in a situation where Mr. Market goes into a depression and I lack the resources to buy stocks from him on the cheap.

So, do I feel like this because I can see a recession is on the horizon?

Alamak!

If you think like this, you need help.

OK, at least I am not the only one who is mental here.

No, I am simply doing what I have always done.

What might that be?

"Eat crusty bread with ink slowly."

Constructing a T-bill ladder helps to fulfill the "I" in "ink" which stands for "income."

Buying Singapore Savings Bond when the 10 year average yield is above 3% p.a. really helps to fulfill the "c" in "crusty" which stands for "CPF."

The "w" in "with" stands for "war chest" and I need to fill up mine.

If you are new to my blog and feel a little lost with my taste in food, I will hyperlink the relevant blog post below.

I think it is quite tasty.

If AK can do it, so can you!

Updated on 14 April 23 with a new video on the latest from MAS:

Recently published:
Lean F.I.R.E. since 2014!

Reference:
Eat crusty bread with ink slowly.

Related post:
Saving for income.