Thursday, September 9, 2010

Double Dip Fears

I guess we have been hearing this for the longest time but it seems that fears of a double dip recession is still there. Just recently, President Obama announced plans to pump in another $50b into the economy through infrastructure works, hoping to ease unemployment rates and boost recovery.

Interest rates have also fallen sharply and it seems that the double dip fears are indeed real.

On the other hand, the economy has been supported by increased corporate spending and strong profit growth and healthy cash flows indicate a certain legitimacy to the overall recovery. Nevertheless, it seems that US GDP forecasts will continue to slide in the near term.

At the same time, it is worrying that policymakers in the EU are already focusing on austerity measures to cut budget deficits. Historical evidence has often shown that increased state spending has a correlation in helping economies emerge from recession. Joseph Stiglitz has warned that such austerity measures could have systemic consequences for Europe and the rest of the world.


  1. Actually i'm more worried bout the property bubble in China and Asia. While the US economy may slow down further, I think most people were never very optimistic to begin with. But i think property prices in Asia and especially China are at pretty alarming levels.

  2. Hi,

    Crash crash crash..I think it's more impt to know what to do when it happens and how to prevent yourself from getting hurt too badly if it happens.

    Leave the rest to fate :)

  3. Cheap could get cheaper. Dear could get dearer. Markets could be quite perverse. :)

  4. Hi Royston,
    Yes, it does seem that a property bubble is building up and that is why many policies and measures seemed to be aimed at cooling down this bubble. Hopefully it will all turn out well.

    So what should we do when it happens? Liquidate all our shares to buy lower?

    Markets are unpredictable. Ha..I would not use the word perverse

  5. Hi FF,

    What should we do? Depends on you and your life stage. For me, I intend to and will be holding more cash. As the market goes up more I'll be selling more but not all. If the market goes down, I'll buy in batches and not dump all. If the market goes sideway, well, I'm already having and will be adding on to my dividend/income producing stocks to get some returns.

    I'm not a doomsday prophet, so I would probably never liquidate everything. As the market goes higher, I'll liquidate more and hopefully get rid of those counters that are stuck.

    People always say that cash gives bad returns - it's true. Nobody likes sub 1% pa returns in the bank. But I think sub par returns is still better than losing money. If there's nothing to do, just do nothing instead of putting it somewhere.

    I'll be very careful about putting my cash into any instruments at this pt in time.


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