IMF said there’s a possibility of property bubble in Malaysia. There are truths there, especially the overpriced condos still empty after 1 year of key handover. However, everyone sits up straight when someone prominent enough tells you an exact date when the financial crisis may happen, again. For those who are overstretched by choice today, perhaps it is time to unwind some of your positions or risk losing it all if the below prediction comes true. There’s just no need to risk everything.
In a news.com.au news the following was reported. Arturo Bris, a finance professor at Swiss business School, IMD and who has taught Yale a few years said that based on his statistical analysis, the world could expect a crisis within 9 months or as early as April 2015, lasting a year.
These are his reasons:
A stock market bubble: “In the past year, stock markets have performed unrealistically well and at some point the situation will explode.”
Banking in China:“A severe crisis could be driven by growing Chinese shadow banking.”
Energy crisis: “If the US (the world’s largest producer of gas) begins exporting to the rest of the world, Russia might feel threatened, causing a geopolitical storm.”
Another real estate bubble: “There is a risk of a property bubble forming in countries like Brazil, China, Canada or Germany.”
Ratings and bankruptcy crisis: “Companies currently have too much debt and the new norm is to have a BBB rating.”
War and conflict: “There is increasing geopolitical tension. Events like the current crisis in Crimea could trigger a market crash, even if there is no war.”
Increasing poverty:“Overall world poverty has increased and whenever the poor become poorer, we can expect a social conflict.”
Cash and hyperinflation:“The surplus of cash that central banks and corporations are holding could end up damaging the economy.”
Briefly, explaining each of them.
A stock market bubble. This is also true for Malaysian stock market. The PER is now at close to 17 times. Personally, this is considered very high to me. Just be careful with the stocks you buy. There are still value but on a whole, it’s HIGH.
Banking in China. Seriously, I do not think this will happen due to China’s available options but then again I am not an expert in banking.
Energy Crisis: I have no idea about this though if we are talking about relationship, US has not been having good relationships not just with Russia but with many other nations including Germany and China.
Another real estate bubble: Brazil, China, Canada, Germany. Personal comment on China, the property prices there are more expensive in secondary cities even when compared to KLCC. Yet the per capita income is lower. Brazil’s economy meanwhile has not been doing great for a few years already.
Ratings and bankruptcy crisis: Personally, if there companies have more debts than its total business, please stay away no matter how much they say the prices will go up. Better be safe than sorry. BBB rating to me is a very bad level already.
War and Conflict. Personally, I think this is limited to certain areas / countries and is unlikely to be the major reason for any crisis. There’s really no reason for any of the super powers to make enemy of each other. Issuing strong one sided statements perhaps but taking actions?
Increasing poverty. If we take Malaysia as an example, we see online news continue to talk about people unable to make ends meet and they quote a few examples. Yet, whenever I go Starbucks, it is full of people. I have no idea who’s right.
Cash and hyperinflation. I think one main reason for inflation would be property prices going up. As for cash, I think majority of the countries have taken a lot of cooling measures. Even for Malaysia, the transactions continue to slide year on year though prices continue inching up.
There are many things you need to read and analyse before any conclusion can be made. Truth is, even when market is good, never ever bet everything you have because the next crisis, to me will come uninvited and definitely not going to be a predictable one. 9 months? No one knows if it may just be around the corner if the war in the Middle East escalates and the oil prices go crazy, causing many countries to also go crazy in the process.