Dec 14, 2008

small change

Hard times but let's take heart

Reports of two suicides lead me to ask if things are so dire that one should take one's life. The answer is no

By Goh Eng Yeow

No matter how difficult the times may be, Christmas has always been a period of giving and rejoicing for me.

After all these years, I can still remember the joy that lit up a little girl's face when she got a gift from a Santa Claus at the neighbourhood Woolworths store when I was a young undergraduate in England.

This year, as the Christmas mood goes into full swing, walking down Orchard Road and imbibing the festive spirit has taken on a whole new meaning for me.

You see, I have been cooped up at my desk all year round, often late into the night, trying to make sense of the grim news coming out of Wall Street.

But last weekend, I felt rejuvenated as I watched happy-looking shoppers lugging bag after bag of Christmas goodies as they emerged from Paragon and Takashimaya, which were jam-packed with the festive crowd.

The shoppers seemed oblivious to the crisis financial markets are going through as central banks across the globe race against time to stop the world's financial system from collapsing altogether.

Yet, I also felt a sense of foreboding. Will this be our last dance together with the good times before the music screeches to a halt?

It has been more than a year since the start of the credit crisis, when a vast number of mortgages soured in the United States. No end to the crisis is in sight.

The bad news only gets worse with each day. Investment banks such as Bear Stearns and Lehman Brothers have disappeared into the pages of history.

American International Group, whose unit AIA is a key insurance player here, is on life support, while once mighty lender Citigroup had to be bailed out by the US government.

In Singapore, economists seem resigned to seeing the economy shrink next year as the credit crisis runs amok and hurts all sectors of the economy - from manufacturing to tourism.

Their prognosis is that, over the next 12 months, more businesses will fail, more jobs will be lost, and further strains will be felt by the global financial system.

The toll on the rest of us is mounting too.

We do not share the big bonuses dished out to the fat cats on Wall Street during the boom years, but we are certainly sharing their pain now.

Tales of financial woes are beginning to circulate as people lose their jobs and their life savings on ill-considered financial products such as the Lehman Minibonds.

There was, for instance, a report in the evening daily Lianhe Wanbao last month about a young man in Hong Kong who decided to take his grandmother along with him to the netherworld, after incurring big financial losses.

He wrapped his arms around her to stop her from struggling as they gassed themselves to death, it was reported.

Then there was the ghastly tale in the same paper last Sunday of a stock dealer who was found dead at Changi Beach.

It all makes for very grim reading before Christmas.

Are things really getting so desperate that some people have to resort to taking their own lives? I should think not.

Until recently, the party had been in full swing as we enjoyed full employment and rising standards of living.

That might have caused many people to forget what it meant to undergo some financial hardship.

For the many Singaporeans who had entered the workforce during the boom in the last few years, this is the first serious economic downturn which they have encountered.

But I can recall worse times in recent years - the Sars crisis in 2003, for example.

Shopping malls were empty as people cowered in panic at home to avoid the deadly virus. If the health crisis had not come to a speedy end, the Singapore economy would have literally collapsed from fear.

It was a scary time to be in business.

My good friend, Phillip Securities' managing director Loh Hoon Sun, recalled that during that trying period, desperate retailers would resort to any means to get their sales moving.

He had noticed that each time he passed by a certain garment outlet, the shop owner would have slashed prices by a hefty margin since the last time. But there were still no buyers.

In economics, we call this phenomenon deflation - shoppers holding back purchases as they wait for lower prices. Once this psychology takes hold, it can set off a self- feeding spiral that is hard to stop.

Take a look at Japan. For the past 18 years, while it suffers from the trauma of falling prices, home valuations have halved while share prices on the moribund Tokyo stock market have sunk to a 22-year low.

But despite all the gloom, I believe that something good will emerge from this financial mess.

Investors would have learnt the hard way that a fool and his money are soon parted - if they fail to check the credence of every ***y story that crops up on the stock market.

At the height of the superbull run last year, many of them had berated me for being so dour in my market outlook. Must I be such a party-pooper, they asked?

For instance, when I raised questions about the $300 million profit guarantee which a China start-up firm purportedly put up in May last year, I was derided as being stubborn and cynical.

Why could I not believe that miracles do happen - that a young firm is capable of making a technological innovation which produces solar panels so cheaply that it would transform the lives of millions?

But nothing has been heard from the China firm after its attempts to value its business at $3 billion through a stock listing here failed.

More such stories may emerge in the months ahead as the credit crisis unfolds. But I believe that we will all be richer for the experience.

As Tiny Tim, the cripple in Charles Dickens' story A Christmas Carol, noted: 'God bless us every one.'

Most of us are indeed blessed - in good health and surrounded by loved ones - as we confront the challenges ahead.

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