Recessions & Crashes: Memories & Lessons

[sidney]

Sad irony was, if gloom report is indeed 100% true, they should come down to Sitex Expo. Boom town. I cannot walk through and lots of sales. Newspapers reported this is due to changes in consumer preference to buy less expensive E-items instead of cars. This is true to some extend.

But the underlying lesson is, there is still cash changing hands despite the gloom. There is still fiscal expansionary phenomina within Expo.

[kennynah]

dont worry....what recession....

everything will come to pass.... just need to tahan oni

[winston]

Did you all remember what happened after the Asian Financial Crisis ?

Markets rallied like crazy as everybody was anticipating the end of the recession. Thereafter, the market drifted downwards for a very long time ( 1.5 years ? ).

Do you think that this time will be different ?

[mojo_]

Here's looking back at the Asian Financial Crisis 10 years ago.
1998 was similar to 2008 - both were years when the STI really plunged.
May 1999 (a month I remember vividly ) was very similar to May 2009 (so far) - STI shot up like a rocket. It went sideways around the 3Q and then shot up again towards end of year exceeding it's old peak. However the AFC recovery was punctured around mid 2000 by the dot com bust and then 9/11 in 2001.

[BlackCat]

Thanks mojo, really interesting for those of who weren't around during the Asian crisis.

Cannot believe back then the STI nearly tripled in just 4 months... and the chart looks eerily similar.... so its possible our current rally has some way to go (only up 54% so far).

Those must have been some wild times. Mabye the lesson for me here is 'don't fight the trend'....

[winston]

However the AFC recovery was punctured around mid 2000 by the dot com bust and then 9/11 in 2001.

Thanks Mojo. I almost forgot about the Dot Com bust and the 9/11 incident..

Anyway, as you know the AFC started on a very small event in Thailand. It then escalated. And next thing you know, it was a full crash when the traders were continuosly shorting the markets..

However, during that time, only the Emerging Markets were affected. The Developed Markets were ok.

This time, the entire world is affected. In addition, we have not seen the skeletons yet from Eastern Europe which may affect a lot of European Banks. Also, Commercial Properties are dropping as well and that may affect a lot of Insurance Companies. And what about defaults on Corporate Debts ?

At this point in time, I cant really see the light at the end of the tunnel and I think this could be a multi-year slowdown..

[mojo_]

BlackCat, u're welcome.

Do take note that the AFC has some notable differences with the GFC as Winston has highlighted above, so the shape of the outcomes may vary.

Another big difference I can think of is the massive quantitative easing and fiscal stimuli by central banks and govts this time which will likely have different short term and long term (unintended) consequences..

[helios]

Those must have been some wild times. Mabye the lesson for me here is 'don't fight the trend'....

flings man ... ... ho ho ...

[winston]

Another big difference I can think of is the massive quantitative easing and fiscal stimuli by central banks and govts this time which will likely have different short term and long term (unintended) consequences..

Agree. I need to constantly remind myself to also look at the positive news rather than to focus only on the bad news

Anothe piece of good news is the rise of the BRIC over the past 10 years...

10 years ago, they were still in their infancy. Now that these places have tasted good times, it's very hard for them to go back to the old days ...

[LenaHuat]

If U were around during the AFC, the Nasdaq collapse, the SARS market collapse and now the GFC AND you have little recollection of these, it could mean either you have a high threshold of pain OR the effects were
不痛不痒. Congratulations You are poised for another ride in the equities market.