Today’s the eighth of September, and I want to comment on the market. Normally, I don’t like to do this, but I’ve been getting many questions. People think the market shall crash even more.
The economics and the problems…
Well, we’ve been hearing the recent issues with Russia’s shutting down the pipeline and cutting energy to Germany. There is margin calls that are triggered when oil price escalate. There’s going to be liquidity problem that means not enough money in the system. This is happening simultaneously when the United States government; the Federal Reserve and Jerome Powell is trying to increase interest rate to fight against high inflation and reducing liquidity in the market even further. This increases the fear of a looming recession.
We have these major forces at play with the war and its effect in and out of Ukraine. Central bankers are trying to fight inflation everywhere. The question seems likely with all the pundits, talking heads, experts, and gurus are saying to sell your stocks and cryptos. Some of my friends are also advocating selling properties.
Even more problems…
In addition, the second biggest economy in the world, China, what’s happening there is also scary. Internal problems, it’s ambition to reconnect Taiwan under the control of CCP. The now-forgotten Belt and Road Initiatives, about funding infrastructures across Asia, I thought it was a positive move, but the implementation could have been better.
China could have lifted the local economies wherever they went instead it tramples on the locals and put them in debt, while exporting labor out to China and sending the wages back to China. This could have been done differently. They didn’t really use the local talents. Not much went into boosting the local economy so they can afford the infrastructure. So I think China’s cleverness came back to haunt them.
Of course, when you’re a command economy, you will not be able to control everything. I don’t know whether the design was like that. The implementation; it does look really bad. Now with the escalating crisis in China’s property market where 60 to 70 percent of the investing dollar from people inside China goes into property and it is crashing. This is going to be an issue.
Yes, we have a lot of issues…
Yet things are changing for the better
The mother of all issues was Covid pandemic, right and that is now behind us, mostly.
In times of doom and groom, we have to understand that these were issues that happened when we shut down the economy for a year or two years, right? This is just part of the recovery. Well, we spent and the bill came due. You know, when you get sick, you go to the doctor and then you don’t do anything, there’s no productivity. Then when you get well, they send you the bill and right now we’re trying to pay it off. It’s going to be some economic pain.
The bright side of inflation
With the inflation, it’s good for central bankers because you know you pay the bill off with very cheaper money. It’s a good thing now. If it gets out of hand and people lose faith in the dollar, then there’s going to be another issue. So far it doesn’t look like that’s going to happen.
We’re going to be in that state now… It’s all about perspectives. Where do you want to look? Forward to the future or backward?
It’s going to be even better still
I am trying to pitch to a friend about a prospect of setting up a Berkshire mini in Singapore because I feel that there are many issues, but Covid is behind us, and so these insurmountable issues are temporary, at best. It’s not going to be easy. It will take a year or two of pain, but right now it’s a huge opportunity. So many companies are selling at a bargain.
Back in March 2020, the one that I regret not buying was Berkshire Hathaway when it went down to 269K per share. Buffett said in one of his letters that there were three times when their price drop 50 percent from it’s high. He didn’t say what is considered a low price for Berkshire, but mentioned that if Berkshire’s price is two times its tangible net asset; that would be considered high. The current market cap is 600B, and the book value is about 400B, so what we’re seeing is it’s still higher than it’s book value but not two times.
Second chances
At the moment, you cannot say things are expensive, in some cases you can say it is fair but if you look, there are so many cheap bargains…
I am very bullish on the prospect, while many are very fearful now. It’s not time to be fearful, but it’s time for action. Figure out what you’re going to do. The cryptos are cheap right now as well. I woke up this morning thinking about Bitcoin. I thought Bitcoin is in a very good state where for the longest time the market in Bitcoin was dominated by people using it for real world speculation. Now that Wall Street has a hand in it and derivatives are providing liquidity to short Bitcoin, this pushes down the price.
Cryptos is even brighter
Hence, we have a new, very strange Bitcoin that’s the price is quite stable around, 18 to 19K and the transaction fees are low, so it makes for a very good payment system and a stored value system, finally. So I’m very hopeful that this is going to continue. However, if you want to see crypto rebound, then no better way then to have Bitcoin skyrocketing again, but, if it stabilizes around this price, it’s really good for overall and I’m hopeful.
In conclusion, everything seems to be bad today but if you take stock and realise that Covid is behind us… Perhaps things will be brighter tomorrow.