Food for Thoughts : 2013 is Stock market year.

From Prof. Chan's newsletter..

The aftermath of 2008 global financial tsunami has been far reaching; post crisis impact is
still with us today. US launched QE1, QE2 and QE3 by printing currency notes, but US economy
has yet to recover; unemployment rate remains high, and real estate market is still at its ebb. The
problem of European national debts seems to have resolved, as European Central Bank has decided
to print unlimited amount of currency notes to buy national debts of Euro zone, on condition that
countries receiving the aid must tighten up their public expenditure, an exercise that could lead to
economic recession in Europe. The 3rd large economy, Japan is even worse. They change prime
minister every year. Why? It is beacause nobody can solve the country’s economic problems. Now
that Libeeral Democratic Party is running the country again, it has decided to wantonly print
currency notes to rescue the economy. China was the most prudent country in 2012, not dared to
print currency notes to stimulate the economy due to experiencing high inflation rate in 2011, and
had to squeeze the money supply then. In the last month of 2012 Chinese market however, after
prolonged bearish trend certainly turned around rapidly. Investors are now fancying China might
print curreny notes again to stiumulate the economy.
               
               In short, it seems 2013 is the year in which whole world woud be printing curreny notes.
               In theory, abundant cash will lead to inflation we are concerned with. But the US printed
currency notes consequent to the quantitative easing monetary policy are retained in the financial
circle without benefiting the real economy to create employment. With high unemployment rate,
people will not dare to spend monies, and without spending, there will be no inflation. Inflation
equates to prices of consumable goods for which if no increase in consumption, prices will not go
up. The monies retained in the financial circle thus become hot monies moving the markets.
             
Therefore, the reason Singapore market certainly surged upward in the last momth of
2012 is because QE3 monies became hot monies flowing to Singapore. 
               After prolong negotiations, the US fiscal cliff issue was at last settled on the last day of
2012. We can optimistically look forward to this year’s markets. But rising markets do not mean
the economy is better. The US and European economies do not seem to have recovered yet.