Thursday, March 5, 2009

How Low is Low? How Cheap is Cheap?

Somebody admitted that they 'bottom fish' too early, too greedy. Now they are left with a substantial paper loss. Ok, they are the 'experts'. The experts are wrong this time. Not only those experts are wrong, but many many experts are wrong, even Warren Buffet is wrong this time. He made some dumb mistakes, as he admitted in his letter to the shareholders.

How low is low? How cheap is cheap? What do you think the current financial crisis compared to the Asian Financial Crisis in 1997/98? Which one do you think is more severe?

Back in 1997/98, US was still enjoying a boom in tech sector. If you walked around Singapore, the shopping centres were jam packed, food courts were jam packed. Very hard to believe there was actually a crisis going on. Then prime minister, Mr Goh, commented on the use of Singapore's reserve as totally unnecessary. Did you remember anyone saying Singapore's economy may contract by 8%, 10%?

This time round, drawing from the reserve is like a 1st resort, not the last resort. Now Senior Minister Mr Goh said if now is not the rainy day, then he doesn't know when is a rainy day. Do you see jam packed shopping centres? Do you see jam packed food courts?

Then you look at the STI, what was the STI during 1997/98? In the range of 800 plus. What is the STI now? Still 1500 plus. It is really not too difficult to figure out there is still plenty of room for STI to fall, the first target should be in the range of 1200~1300. After that, nobody knows, maybe the 97/98 low of 800 plus is a good indication.

How low is low? How cheap is cheap? Mmmmh.....

Disclaimer: For personal entertainment only, no liability in whatsoever form is assumed or born by the authoer.

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