Thoughts On Current Environment

It is quite expected of the government to come up with additional property cooling measures as i have said before that property is a public good and any additional meaningful upside in price will be capped. I must say that this recent measure of taxing foreigners the additional 10% stamp duty is a very good and well thought of move by the government. I applaud them and must say they are really responding well to the recent results of the general election. I feel that this move tackles both the issues of foreign competition and also the laments of the young generation of aspiring homeowners. Good Job. So how well will property fare in the coming years?

In my opinion, property will go down in prices and volume but i won't know by how much. Singaporeans have strong holding power from what i observe ( I used to say that property prices may also stagnate but no longer). They have their CPFs, so this is a plus point for property. On the other hand, recent data has shown that foreigners and PRs form a significant proportion of property transactions and since assets are ALWAYS priced at the margins, prices could swing to the south given an expected low transactional volume. All that is needed to really push property to nose dive will be accelerated retrenchments. The holding power of Singaporeans will make sure that property will not go too far south though.The devaluing of fiat currency will also help prop up property. 2013-2015 will be a good time to show-hand in property for investment given the supply and expected interest rate hikes.

Now about the equity markets. In my opinion, money has to flow somewhere. It either flows into stocks or flows into property or flows into Gold or flows into bonds or flows into currencies or flows into savings account. Money now has flowed into safe currencies like USD or Yen and savings account and to some extend flowed out of equity markets and the sing dollar. The reason why equity markets have not corrected massively is just because there is just too much money chasing limited assets. I still have not dipped my toes into the equity market again yet as i feel there is still some downside to go as i feel market confidence is still not yet totally broken.( 60% of my portfolio is currently in equities).  Having said that, some of my stocks in my watchlist has hit or broken their 52weeks low. I have also observed that many of my shares are still being shorted. I just cant wait to squeeze the short sellers, just not yet and im a small fry. haha. Will the harsh property cooling measures result in money flows to the equity market? It would be interesting. Now, i will just sit back and earn my fees from the short sellers and dividends.

Dividends- End of Trading Day 7 Sept 2008

As can be seen, dividend yields are at a very high level during this crisis period, ranging from 4% to 22%!

In very simplified terms, if you invest now, assuming a consistent yearly dividend yield of 22%, it means that, your investment will double in 72 divided by 22 = 3.3 years. ( That's assuming you are able to reinvest your dividends at the same current market price like now and that is unlikely.)

Before you start loading up on dividend yielding stocks, take note..
Dividends might not be consistent as they are paid out from profits. Some companies might also have a mandate to pay out a fixed dividend a year but then again, mandates can be changed during AGMs.

Investing Idea: Load up on REITS as rental prices are normally locked in for some years. Do check on the property leases owned by the REITS to make sure. Also, check the level of their borrowings to make sure they can repay their loans in this liquidity crisis environment!