Cheap stuff under high inflation

These days we are told that the world is experiencing high inflation. Things are expensive. But do you know that there are many things that are incredibly cheap now?

At any single point of time, there will be things that are cheap and worth buying. If you don’t see them, you are probably looking at the wrong direction. After all, most people are drawn to what is hot in the market. They are stuff that marketers want us to buy which are heavily advertised and over-hyped by the media.

Spend your Singdollar overseas now

Last week I saw my neighbor leaving six big luggages in front of their house. Dressed in long sleeved clothes, the family of four soon boarded a mini-van heading to the airport for their holiday. They were likely going for a shopping trip in Korea, Japan or Europe. Whatever their destination, they would be chirping happily like birds – making the sound of cheap cheap cheap cheap cheap throughout their vacation.

My girlfriend went for a business trip in Korea last December. This month she traveled to Seoul again for business. She told me that after the Korean Won plunged, prices of everything were down 20 percent. It’s a perfect opportunity to stock up on all the best-selling Korean skincare and cosmetic products. Wait girl, I will be joining you for your next UK or Europe trip.

Thanks to Singapore’s monetary tightening policy. Except the US dollar and currencies that pegged to the US dollar, all foreign currencies slide to their 5-year or 10-year low against the Singdollar. Many are even at their all-time low.

To strengthen the Singdollar, the Monetary Authority of Singapore (MAS) suffered a $7.4 billion loss in the last financial year. MAS explained that the loss was “the effect of translating the foreign currency value of the Official Foreign Reserves into Singapore dollars”. All in all, the negative currency translation totaled $8.7 billion arising from a stronger Singdollar.

The currency translation cost is expected to be even higher this financial year. Since we can’t object to the MAS policy “to secure low and stable inflation as the basis for sustained growth over the medium term”, we might as well make good use of the strong Singdollar and spend it overseas.

Things are so cheap!

Since Hong Kong implemented “0+3” zero quarantine policy, Hong Kong people flocked to Japan. Many call the country their “second home” (this is Japan my second home, not MM2H Malaysia My Second Home). Before the pandemic, an informal survey showed Hong Kong young couples traveled to Japan average three to four times a year. Besides eating and sightseeing, they buy Japanese food, fashion, skincare, toys, electronic goods and everything popular in Japan.

With Hong Kong dollar pegged to the US dollar, now many feel they are millionaire in Japan. The latest documentary showed Hong Kong tourists enjoying their shopping spree in Tokyo’s shopping district.

“This was priced at HK$100 during my last trip in 2019. Now I can buy it at HK$60. Yesterday we were still shocked by how low prices have come down. Today we are not even looking at the price tag. Anything we like we just buy in cartons. Anyway, things are so cheap!”

Riding on the weak yen, Japan is targeting to make ¥5 trillion (USD34 billion) or more from tourists in the next financial year. With the strong magnet of a weak currency, it looks like the Japan National Tourism Organization can easily achieve its target without spending a cent on advertising.

The Japanese government warned investors not to speculate on the yen and threatened for intervention. What a show! If they are serious, why is the Bank of Japan continue to maintain ultra-low interest rates?

Properties are even cheaper

Foreigners are also snapping up Japan real estate because they look cheap now. There are Hong Kong property investment tours traveling to Japan to buy not just residential homes, but commercial properties and land as well.

Those benefited are not just the developers and brokers, but the Japanese government too. There is limited revenue for the government from consumption tax, airport tax and departure tax from the tourists. But once foreigners start dabbling into properties, this is when the government can start making some real money from stamp duties, registry license taxes, real estate acquisition taxes, property taxes, etc.

You might read from our vested media that rich foreigners, especially the Chinese, are buying up private properties in Singapore. Really?

According to the data from the Ministry of National Development, the number of non-residents who bought private properties in Singapore in the first half of this year is 444. That is a miserable 3.3 percent of the total of 13,311 private home buyers. Even if we double that number for the whole year to 888, it is still much lower than 1,135 in 2021 and 1,017 in 2019. Mind you, our so-called “foreign buyers” also include those living in Singapore for some time but still waiting for the approval of their PR.

Try telling a Japanese real estate broker we have 3.3 percent foreign buyers and an average of 74 private properties sold to foreign buyers every month. And these foreigners don’t mind a strong Singdollar and close to 4 percent mortgage rate. They are also happy paying the Singapore government 30 percent ABSD, as well as property taxes of 11 to 27 percent in 2023 and 12 to 36 percent in 2024.

Good stocks are cheap too

In my July blog post “Cash is king now”, I mentioned that the strong US dollar is rising by the day. Japanese yen and Euro fell to their 24-year low. Three months on, the deep diving continues. The same is true for other foreign currencies. Malaysian ringgit has hit 3.34 and Thai Baht almost touches 27 against the Singdollar.

The Chinese renminbi also plunges to its 14-year low against the US dollar. With China’s 2,296 highest officials in closed-door meeting at the 20th National Congress, they couldn’t possibility check their messages to approve the GDP data. The delay in release of Q3 data caused widespread speculations in the western media.

I also mentioned in my July blog post that many stocks in my to-buy-list have slipped into 52-week low. And I was waiting for their 2-year low or even 5-year low to enter the market. Three months later, many have fallen well below their 5-year low.

It was investors’ wishful thinking that President Xi’s press conference at the National Congress would boost investor confidence and stock prices. On the contrary, today (the following Monday on October 24) the Hang Seng Index gave everyone a heart attack with a deep dive of 6.36 percent in one day. It sinks 1,030 points to its 13-year low. It is now at the same level in 1997 25 years back – only a bit better than the worst time during Global Financial Crisis in 2009.

I look at my list of stock to-buy-list and keep murmuring cheap cheap cheap cheap cheap throughout the day. I know prices may continue to fall after I bought. But I couldn’t resist the temptation to pick up one utility stock which is a monopoly in the country. It’s simply too cheap!

Go for no risk reasonable return investment now

I mentioned in my July blog post “Cash is king now” that 12-month fixed deposit interest rate is 2 percent. And Singapore Saving Bond offers average 10-year return of 3 percent. Some people laughed at me. They said these conservative investments are for homemaker aunties (that is me), retirees (I am one of them) and the elderly (I am approaching that too).

Three months later, 12-month fixed deposit interest rate is now 3.2 to 3.4 percent. The cutoff rate of the last issue of Singapore 6-month treasury bill is 3.77 percent, with interest (or discount refund) paid upfront upon issue.

How many Singapore investment properties can enjoy a net return of 3.4 or 3.77 percent after 3.5 percent mortgage interest, 12 percent property tax and a few hundred bucks of maintenance fee?

Above all, they are principal protected with guaranteed return. I trust the Singapore government and the local banks won’t go bankrupt or run away with my money. Also, I don’t have to pay a single cent for tax or management fee. They are no expense no risk guaranteed return investments in my portfolio. Forget about high-risk high-return. When no one knows how long the next downturn will last, we are looking at investments with low or no risk reasonable return now.

I must admit that I am simply following what the savvy investors are doing now. After a long sell-off, nearly USD15 trillion has been wiped off the US equity market so far this year. Many traders have cashed out and are sitting on the sidelines. By now close to USD140 billion has poured into money market funds, including cash, cash equivalent securities, fixed deposits and treasury bills.

So I am just copying what they are doing. After all, what is the point of losing big money to learn the same lesson?

Food for thought

Interest rates are high doesn’t mean they can’t go higher. Our parents or grandparents have gone through the days in the 1980s with saving rates close to 10 percent and mortgage rates higher than 10 percent. That is why they only put money in the banks but never borrow money there.

Similarly, things that are cheap don’t mean they can’t be cheaper. Assets including properties, equities, commodities and foreign currencies may still have a long way to fall before they finally bottom out and recover. There will be many buying opportunities.

There is a Cantonese saying “贱物斗穷人” (cheap stuff against poor people). Things are cheap but we are running out of spare cash to buy. We may soon find ourselves in that situation.

As seen in past recessions and financial crises, if there is no cheap money, property prices fall across the board. Of course not all property segments are born equal. When prices drop 5 to 10 percent, there will still be buyers. But when prices drop by 15 percent, 20 percent or even more, there will be increasingly less buyers in the market. When there is blood all over the streets, people begin to lose heart and believe that prices will continue to fall. This was what I experienced when I bought at the bottom of the market. The same happens in the stock market. There are not many contrarians because it takes a lot of guts to be one.

If you need advice on property matters or residential properties in Singapore, you can check out my personal consultation service.

My new book Behind The Scenes of The Property Market is now available for preview and order online. You can also check out my online courses.