Singapore: Three Years of 'Vicious Downturn" - Buys Gold, Loon, Renminbi and Yen - Sells Dollar and Pound

The projection that the Government of Singapore Investment Corp (GIC)has calculated for $3.8 Trillion in financial market writedowns over three years is interesting, considering we are only a third of the way there.

Remarkably, the selection for investment safety that Mr. Yeoh Lam Keong puts forward is very close to items served at the private table of Le Café Américain.

Interesting nonetheless, in particular because of their holding in Citigroup and UBS, and any insight they may have gained therein.

Reuters
Singapore's GIC sees more distress in markets
By Kevin Lim and Saeed Azhar
Tue Mar 10, 2009 2:35am EDT

Fancies gold; to avoid dollar, sterling currencies

SINGAPORE, March 10 (Reuters) - An official from the Government of Singapore Investment Corp (GIC) said he expects more weakness in financial markets in the next 12-18 months, and recommended investors hold gold and other safe assets such as government bonds.

GIC, one of the world's largest sovereign funds with an estimated $200 billion-plus in assets, has invested aggressively in troubled global lenders, picking up multi-billion dollar stakes in Citigroup and UBS in late 2007 and early 2008.

There is "systemic capital inadequacy globally", and the world will probably see "three years of a very vicious downcycle," GIC's director of economics and strategy, Yeoh Lam Keong, told the Investment Management Association of Singapore conference on Tuesday

"This is a very destructive process for assets."

Yeoh, who said he was speaking in his personal capacity, showed a slide prepared by GIC that indicated global writedowns in the financial sector could reach $3.8 trillion by 2013 and that only about 30 percent of the losses had been booked so far.

Yeoh suggested investors hold gold, sovereign bonds and currencies such as the Japanese yen, Chinese yuan and Canadian dollar.

He said he liked gold because governments were under pressure to cheapen their currencies to compensate for falling demand, and that some countries such as the United States and Britain would eventually be forced to monetise their debt by printing money.

"I would avoid these currencies like the plague," he said in reference to the dollar and sterling.

SP Futures Hourly Chart

Although there are many ways to play a market intraday, as indicated by the short term trendlines in red, the US equity markets are in a downtrend that is rather difficult to dismiss.

When will it end?

We are not sure what the catalyst will be, but at least an intermediate bottom will be reached at some point. In the meanwhile short term relief rallies and short squeeze attempts, such as we saw this morning, will occur on an almost daily basis.

Chris Whalen: Tim Geithner is a Disaster and Will Be Out by June

"Tim Geithner has no financial skills. The only reason he is there [the Treasury Secretary] is to protect Goldman Sachs."

Interview with Chris Whalen of Institutional Risk Analytics on TheStreet.com

Warren Buffett: "Economy Has Fallen Off a Cliff"

Warren Buffett is 'talking his book' for a portion of this interview, but he does have some unique insights into the real time economic conditions because of the position of his conglomerate in a number of key businesses that measure the pulse of economic activity.

He sees inflation ahead, and rightly so. The question however is, as always, when?

Adding debt capacity to the system now is useless. Yes, stabilizing the financial system is important. But the demand for debt is so lagging, and the prospects for profit so poor, that one wonders if only the desparate will cry for more credit while they drown.

The solution will be an improvement in the median wage, systemic reforms, and the orderly writedown of debt held by effectively insolvent banks. 'Saving the banking system' as it is constituted now is more than a fool's errand.

It is the path to a test of the fabric of our government not seen since the 1860's.

Bloomberg
Warren Buffett Says Economy Has ‘Fallen Off a Cliff’
By Erik Holm
March 9, 2009 09:29 EDT

March 9 (Bloomberg) -- Billionaire Warren Buffett, whose Berkshire Hathaway Inc. posted its worst results ever in 2008, said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s.

The American public is fearful, confused and changing their buying habits, which is showing up at Berkshire’s operating units, Buffett said during an appearance on the CNBC television network today. While the recession will end and future generations will live better than their parents, the economy “can’t turn around on a dime,” Buffett said, adding that some inflation is appropriate right now.

“We are doing things now that are potentially very inflationary,” he said. Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needs a commander-in-chief. “Patriotic Americans will realize this is a war,” he said....