Why Economic Recovery Might be "W" Shape?

Why There Might be a W Shape Economic Recovery?

Currently, most analysts are of the view that the global economy recovery will be “V” Shape, fast recovery. However, a few months ago I warned that it is possible for a W Shape economic recovery. In recent weeks, both Tharman (Singapore’s Finance Minister) and Prime Minister Lee also warned of the possibility of a double dip recession.


Why is a double dip recession (W shape recovery) possible?

Let’s look at the BIG picture. Do you know that U.S. alone accounts for 24% of the Global Economy? While Euro Zone accounts for another 30%.


Many people are celebrating that China’s economy might be able to grow at 8% (what they Aimed for) in year 2009. However, do you know that China’s economy currently only accounts for 7% of the World economy? What about India you might ask? Sorry to disappoint you, India accounts for only 2%.


So even if BOTH China and India economy do well and stage a fantastic recovery, the 2 of them would account for 9% of the Global Economy.

Just now we mentioned that U.S. accounts for 24% of the world economy. Do you know that U.S. domestic consumption accounts for 70% of U.S. economy, or 16.8% of the World’s economy.


In Aug 2009, U.S. retrenchment figure was about 210,000, a big reduction of 65% compared to over 600,000 retrenched in Jan 2009. However, the FACT is that total Unemployment rate in U.S. increased from 9.4% to 9.7% instead.


Thus, the pace of retrenchment has slowed down, but Unemployment rate is still rising in U.S. If unemployment rate stays high, it is difficult to imagine that U.S. consumers would increase their spending and thereby trigger a strong recovery in consumption and thus, helping the World economy to stage a strong recovery.


Do you know that year 2010 is a Tiger Year? I read that Year 2010 is a “Wood” Tiger in a “metal year”. Wood and Metal does not go well together. Thus, year 2010 is not an auspicious Tiger year. Come on, don’t be superstitious some of you might say.


However, I’m not sure whether it is coincidence. When I look back at “past” Tiger years, all the Tiger years I saw are NOT good. Year 1974 we have the Oil Crisis, Year 1986 we have the First Singapore recession after independence. Year 1998 we have bottom of the Asian Crisis…..and then it brings us to Year 2010.


What will Year 2010 be? A fabulous V shape recovery? Well, it might happen. I’m not saying it won’t happen. Personally, 70% of my money is already invested, with 35% in Stocks and 35% in Other investments such as Land, UK Endowment, French Fine Wine, Gold and Silver.

If it is a V shape recovery, it is ok for me. The consequence is I would only make less money because I didn’t fully invest my money 100%. However, if it turns out to be W shape recovery, then I can make good use of the remaining 30% Opportunity Fund.


Thus, the KEY thing is that we must position ourselves for all possibilities, when we do this, whether the economic recovery is V shape or W shape, we will still do OK. The important question is have you positioned yourself accordingly as well?


Note: above is just my personal opinion. This e-newsletter is not giving you advice.