What Could Derail The Market?

When the bill arrived, the restaurant manager said no signature was needed, as the meal didn’t cost that much. I did wonder, at the time, if he was politely telling us that we should have spent more.

Thankfully, he went on to say that signatures are now no longer required for transactions below S$50.

Wow! Has S$50 become so meaningless in Singapore these days?

Perhaps it is a sign of the times. Maybe price inflation is worse than we had originally thought.

It blew my socks off. How long will it be before the buying power of the dollar in our pockets shrinks in the same way that S$50 has now become relatively insignificant?

That day may not be too far away.

A trillion here, a trillion there

Just look at what is happening in Europe over the Greek debt crisis.

It seems that certain influential individuals in Europe are now resigned to writing off some of the €360 billion that Greece owes.

In some ways they could be right. In the grand scheme of things, Greece’s debt pales in comparison to the money that has been printed by central banks around the world.

Or in the words of retired American baseball player, Yogi Berra: “A nickel ain’t worth a dime anymore”.

The US has created some US$4.5 trillion of new money. The UK has created £375 billion or US$580 billion. By the time the European Central Bank has finished with its minting, it will have created €1.1 trillion or US$1.2 trillion.

And let us not forget the money-printing scheme at the Bank of Japan. That could see as much as ¥80 trillion or US$650 billion pumped into the Japanese economy.

The vast quantity of money created should be something that we need to worry about.

Worrying times

On the subject of worry, I was recently asked to comment on some worrying events around the world that could derail global markets.

These include the slowdown in China’s economy; the Greek debt crisis; US interest rates, the rise of the Chinese stock market, the strengthening US dollar and gyrating oil prices.

But as investors we are worrying about the wrong things, if that is what we are fretting about. Countries are more than capable of looking after themselves.

They will adjust interest rates, fiddle with taxes, default on loans, nationalise things, privatise things, redistribute income, and, if they have to, print money to get themselves out of a pickle.

We, on the other hand, have to look after ourselves.

We have to decide how to invest our money in the best possible way to protect its buying power over the long term.

Focus on the sneakers

If we buy shares, then we should be looking at what is happening to the companies in which we have invested. Peter Lynch once said: “GNP six months out is just malarkey. How is the sneaker industry doing? That is real economics.

We here at the Motley Fool Singapore focus on the sneakers.

We want to know whether earnings could grow at Dairy Farm (SGX: D01). We want to know whether top-line revenues at BreadTalk (SGX: 5DN) are sustainable.

We want to know how quickly Thai Beverage (SGX: Y92) converts cash. We want to know whether Ho Bee Land (SGX: H13) generates sufficient profit for every shareholder dollar invested in the business.

Of course, there are many things that could derail stock markets. That is because the market is driven by emotions in the short term.

But confusing the share price with the story is the biggest mistake we can make. So, focus instead on the story behind the company. The price will take care of itself, in the long run.

A version of this article first appeared in Take Stock Singapore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.