Martin Lee @ Sg
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IPO Fever

You know that IPO fever is on when IPOs becomes one of the common dinner conversation topics with different groups of people.

GLP, MIT and China related companies. Everything seems to be hot – even SIA bonds and DBS preference shares.

We are in a period of low interest rates. This encourages borrowing and puts a damper on savings as extreme low interest rates are forcing people to look for alternative investments.

High interest rates, on the other hand, discourages borrowing and makes people more willing to leave their money in the banks.

Despite the huge amount of capital raising in the financial markets, there has been sufficient liquidity to meet all the demand.

How long will this party last? Property prices that increase at a rate faster than income will one day have to close the gap.

When the clock strike twelve, the carry trade reversal might come fast and furious.

Watch this interview by legendary investor Jeremy Grantham. There are times when sitting on some cash might just be useful.

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1 comment
misesian says 8 years ago

Indeed Lion…

IPO scene is heating up again and greed is spawning for that extra 1 or 2%… brings back memories and scenes of retirees and savers devastated by the Lehman Brothers collapse when they grabbed for that extra 1 or 2% without fully understanding the associated risks.

Cash seems to be the “safest” asset class but however, sitting on your savings in full cash is also another pending disaster waiting to happen because our cash is presently eroding everyday by way of reduction in purchasing power (just compare the price of a McDonald’s “Value Meal” today and ten years ago). As the older generations used to say… 钱越来越小 (Money had become smaller and smaller).

With the US printing 600 billion out of thin air in the latest QE2 and now the EU doing covert QE for bailing out Ireland (the latest EU domino to drop), our SGD is bound for further devaluation to support our export dependent economy (just refer to last week’s USDSGD chart to see how SGD was intervened back towards the 1.3000 level). In fact, the whole world is trying to devalue their own currencies and its a race to the bottom.

Cash (fiat currencies) is fast losing its role as a “Store of value”.

No doubt it still works relatively well for its other two function as money, namely “Unit of account” and “Medium of exchange”, fiat currencies now fail extremely as a “Store of value” which is of utmost importance as money, especially for savers.

In holding the majority of our wealth in cash (fiat currencies), we the savers will ultimately see our wealth erode to zero as the current fiat currency mechanism disintegrates. We are in the midst of a monetary train crash in hyper slow motion.

As savers, we need a stable medium to store our wealth. We need to protect our hard earned wealth from this brutal erosion. The answer? Physical gold.

Why is owning physical gold now better than sitting on cash? The following article by Alasdair Macleod (former broker, banker and now economist) “Why gold is better than cash” serves to answer this. Source: http://www.financeandeconomics.org/Articles%20archive/2010.11.22%20gold%20and%20cash.htm#_edn2

When gold is suggested as a wealth protector, many jumped and exclaimed “But gold price is already so high now!!” That is precisely the problem… many failed to see that it is actually the value of our fiat currencies that had dropped so much in relation to gold.

In other words, try seeing it in terms of purchasing power and we will see that our fiat currencies are losing so much in purchasing power when compared to gold. Gold has kept its purchasing power very well these years and it is this property that makes gold a good “Store of value”… had always been and always will be. Gold is money. Source: http://fofoa.blogspot.com/2009/10/gold-is-money.html

Do give it some thought and research. Its your wealth… do take good care of it.

Cheers 🙂

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