“These are the end days, the world is almost over and this may spell the end of the financial markets, mainly the stock markets for the world, investors who have lost money will not return ever! It’s a hopeless scenario! I am getting out!.”
Scanning through various web forums, media channels and even the classifieds sections for real estate in traditional media are yelling, help me out here!, take my position!, I am losing money and I want you to lose some too.! But Caveat emptor! (Buyer beware)
Hello there! Hold on just yet. Haven’t we seen this move before!
In our book ”Technopreneurship – The Successful Entrepreneur in the New Economy”, Pearson Ed ISBN 0-13-046545-3, we had labeled, the first three chapters, The Greed, The (False) Hope and The Fear. The fourth chapter is called, The Opportunity, the start of a new dawn.
Fearful times just as this are actually the greatest opportunity for investors and it’s often referred to the changing of the guards. This collapse that we are currently witnessing had to happen and it has to be vengeful enough to liquidate the one’s on the Edge and trust me there are many; prices have to fall back to equilibrium to make it attractive enough for the new guards to venture in. These cycles are the greatest innovation of a market driven economy.
The book entails the three chapters and correctly labeled the cycles. The greed phrase was important and it just didn’t happen in Asia but the world over. To prove a point, here are the stats of the world’s tallest buildings and how they coincided with recessions there after.
This chart depicts of the tallest buildings in the world and has often coincided with major economic collapses and recessions. Its interesting to note;
1931 – Empire state building (The Great Depression)
1972-1973 World trade centre 1974 Sears Tower. (The 70’s Oil crisis)
1998-1999, Malaysia’s Twins/Shanghai’s JM Tower. (Asian Financial Crisis)
2003-2004 – HK – Two International Financial Centre / Taipei 101 (SARS)
2007-2008-2009– Under Construction. Shanghai WFC, Burj Dubai and Freedom Tower NY City.
All appeared in a timely fashion, where planning began just before the start of the crisis and completion occurring when the crisis is midway or near completion. For example the tallest building in Hong Kong, coincided with Hong Kong suffering the most during the ASIAN SARS crisis. Another interesting note, many mega projects planned in tandem with the greatest buildings of the world, hardly reach completion and if they ever do, they remain empty shells for years to come.
Mega Projects planned and under constructions.
Singapore has two major casinos under construction at the moment, there are reports of Las Vegas Sands in trouble at the moment and they being one of the bidders for the casino in Singapore.Dubai has the world palm islands under development and Burg Dubai, the Tallest Building in the world.
The correlation between these two markets is as follows. Both have no natural resources and are very much service oriented economies. Speculation was rife in both of these markets with highly leveraged transactions, Buyers requirements were simply, as low as 1-2% option money for a transaction and if delivery is taken, 10% and no money down till completion. Banks were lax in lending despite the values of underlying asset had already appreciated 300-500% from the last crisis (Singapore 2003 SARS / Dubai 2003 Iraq War). Both were eyeing to become the New Mecca of the world, with Dubai being at the epic-center of the oil kingdom and Singapore with its rhetoric of first world, cleanest, safest place in the world to do business, aptly called the Switzerland of Asia.
Just as the axe fell on rating agencies for not being prudent in the stock market, Banks are probably looking towards their respective property valuators in this scenario. There is still (false) hope prevalent in these markets and all that is required is, the local economy/stock market remains sideways for another two quarters and we shall see various sales liquidations coming to market.
While the stock market may see snap-back rallies from depressed levels, again its not a long term play as what most media channels predict, the excesses of the economy have to cleaned up for good, before chapter 4 unfolds.
- Our real estate fund has no position in any of these countries except in KLCC, Malaysia, we are long prime downtown properties with 100% tenancy.
- Our emerging markets equities fund, is long short term call options in India.