Subprime Series 5/5 - Outlook for the near future

I would say this is no longer a subprime problem already. As we can see, it HAD unfolded itself into a global financial crisis. I personally feel very pessimistic for the near future after reading/watching the recent news.

Was asking yt for internship prospect in Citibank during next June and now, Citibank is laying off 50,000, not 5000 of their employees globally; not like our DBS, laying off 800. These 50,000 unemployment is telling everyone: Even big boys like Citibank can axe job, whats next?

And so, the next question is will Citibank follow the footsteps of Lehman Brothers? 1st, the share price is free falling already. 2nd, the CEO of Citibank is already talking with the US govt to secure loans from them. To ask for loans means : hey, Im dry already. Do spare me some cash? So, I personally dont think the US govt will let Citibank to fail ( Letting Lehman Brothers failed is bad enough ), but the outlook for the US financial sector is really bleak.

Just when the crisis unfolds, another major sector of US, the car industry also kena. Now 3 of the CEOs: GM, Ford, Chrysler all running out of money and asking for loans. So should the govt bail them? Or let them fail? If bail them out, a) will they default on their loans, given their lack of competitiveness globally as compared to the Japanese. b) other industries will also cry father cry mother, asking for money. If let them fail, a) massive unemployment, worsening the current crisis. b) sending misguided signals to the stock market, shocking it to another vicious spiral fall, which ultimately wipe out everyone's wealth.

No one seriously expected the financial crisis to be so huge in magnitude. Even experts are made to eat up their words for being over optimistic about the resilience of US economy/stock market. So whats next?

US: Will definitely be in recession for next year. As US consumers contribute to a huge chunk of global consumption, this recession simply means every of US trading partners will be affected.

SG: Some people say NASDAQ (US)/Hang Seng (HK) index rise, we rise. These indexes fall, we also follow. I see some truth in it ba. As SG's economy is mainly exports driven, a global weak demand means demand for our exports will be severely affected. Hence, I also don't expect SG to recover in the near future. However, given the increasing in free trades and investments with China, our fall will be cushioned to a certain extent by the growth of them. So I dont think we will be as worse off as the US.

China: Had been doing the right thing to stimulate internal demand by government spending. Given their huge foreign reserves of near US2 trillion, I guess they can simply "spend" their way out of the economy. Piece of cake.

Japan: the recent unwinding of "yen carry trade" - borrow cheap yen and invest elsewhere for higher yield has ultimately hurt their exports. Now all investors being kia si, had simply dumped their stakes elsewhere and hold yen, causing yen to appreciate. So the car industry, being 1 of their economy drivers, will ultimately be hurt by the global weak demand AND the appreciation of yen and hence, outlook for the Japanese seem pretty bad. However, given their huge national savings ( both government and citizens), its an excellent opportunity for them to buy undervalued foreign assets for long term investment.

E.U: Given their close trading ties with US, they are bound to sink with US. Plus the complications of being linked "currency-ly only", multiple nations will have different say/view over this economic crisis. Given such complications, I will not expect any great leaders to tide them out of these economic mess unlike the US, which already been rolling out 700b TARP ( Troubled Assets Relief Program ) etc. My guess is their slump will be one of the longest, assuming lack of leadership.

Rest of world: All will not be spared ( unless you're "self-sufficient" like North Korea. lol ). Its just a matter of how much they are affected and how long they take to recover.

Thats all for my subprime series, good day!