The world’s a scary place and a big mess now. Since the start of 2014, we’ve seen (in no particular order) technical glitches in Singapore’s stock market; a rout in Chinese stocks leading to a suspension of trading in nearly half of all listed Chinese companies; a halt in trading just last night in the New York Stock Exchange; the ongoing debacle in Greece and the country’s possible exit from the Eurozone; and, the spread of dangerous diseases like Ebola and MERS. All these (and more) are the worrisome events that a reader had written about in a comment to…
The world’s a scary place and a big mess now.
Since the start of 2014, we’ve seen (in no particular order) technical glitches in Singapore’s stock market; a rout in Chinese stocks leading to a suspension of trading in nearly half of all listed Chinese companies; a halt in trading just last night in the New York Stock Exchange; the ongoing debacle in Greece and the country’s possible exit from the Eurozone; and, the spread of dangerous diseases like Ebola and MERS.
All these (and more) are the worrisome events that a reader had written about in a comment to a blog post of a local investing blog I frequent. The reader also added that “the market is [currently] irrational” and that he’d only “revisit the portfolio when the world is less crazy.”
His words “when the world is less crazy” struck a particular chord with me because it’s a common theme I see with other investors: They often want to wait for the world to get back to ‘normal’ before they invest.
But here’s the thing: There has never been ‘normal.’ This is a thought that’s echoed by my American colleague Morgan Housel. You can see why that’s so in the following partial list of crazy things, borrowed from Morgan, that have happened in our globe since 1990:
“2011 (so far): Japan earthquake, Middle East uprising.
2010: European debt crisis; BP (NYSE: BP ) oil spill; flash crash.
2009: Global economy nears collapse.
2008: Oil spikes; Wall Street bailouts; Madoff scandal.
2007: Iraq war surge; beginning of financial crisis.
2006: North Korea tests nuclear weapon; Mumbai train bombings; Israel–Lebanon conflict.
2005: Hurricane Katrina; London terrorist attacks.
2004: Tsunami hits South Asia; Madrid train bombings.
2003: Iraq war; SARS panic.
2002: Post 9/11 fear; recession; WorldCom bankrupt; Bali bombings.
2001: 9/11 terrorist attacks; Afghanistan war; Enron bankrupt; Anthrax attacks.
2000: Dot–com bubble pops; presidential election snafu; USS Cole bombed.
1999: Y2K panic; NATO bombing of Yugoslavia.
1998: Russia defaults on debt; LTCM hedge fund meltdown; Clinton impeachment; Iraq bombing.
1997: Asian financial crisis.
1996: U.S. government shuts down; Olympic park bombing.
1995: U.S. government shuts down; Oklahoma City bombing; Kobe earthquake; Barings Bank collapse.
1994: Rwandan genocide; Mexican peso crisis; Northridge quake strikes Los Angeles; Orange County defaults.
1993: World Trade Center bombing.
1992: Los Angeles riots; Hurricane Andrew.
1991: Real estate downturn; Soviet Union breaks up.
1990: Persian Gulf war; oil spike; recession.”
Morgan’s list stops at 2011, so here’re more crisis that occurred in 2012 and 2013 (you’ve already seen a list for 2014 till today):
2013: Cyprus bank bailouts (does anybody even remember this anymore?); U.S. government shuts down; uprising in Thailand.
2012: Speculation of Greek exit from Eurozone (yes, a Grexit isn’t new at all); Hurricane Sandy.
Every one of the events above could easily have scared an investor away from investing. And when taken together, it’s a recipe for one to curl up in a corner and wishing this will all blow over soon.
But beneath that veneer of constant danger, wars, diseases, and natural catastrophes, our lives slowly got better.
Singapore’s economy grew tremendously, with our gross domestic product (GDP) more than quadrupling from S$70.5 billion in 1990 to S$390.1 billion in 2014.
The internet came about during those 24 years, enabling all sorts of technologies to flourish. Companies like Google and Amazon appeared, adding immeasurable convenience to our daily lives (can you imagine having to make a trek down to the library each time you needed to find some information? Thank you Google!). The smartphone was created. Driverless cars are now under testing.
Even from just 2006 to 2013, Singapore’s infant mortality rate (per 1000 live births) had gone down from 2.6 to 2.0; the maternal mortality ratio (per 100,000 live births and still births) decreased by 70% from 10 to just 3; and our population’s overall life expectancies increased noticeably from 80.3 to 82.5.
More important for investors, stocks in Singapore prospered. From 1990 to today, Singapore’s market barometer the Straits Times Index (SGX: ^STI) has more than doubled from 1,485 points to 3,285. That works out to be an annual return of just 3.2%. But factor in dividends, and we’re looking at an annualised return in the neighbourhood of 6%; that’s not too shabby.
Big blue chips like Keppel Corporation Limited (SGX: BN4) and Oversea-Chinese Banking Corp Limited (SGX: O39) have seen their shares jump 690% and 850%, respectively, since the start of 1992 after factoring in gains from reinvested dividends.
Meanwhile, a smaller stock like Vicom Limited (SGX: V01) has seen its shares soar by 2,140% with dividends reinvested since the close of its first day of trading on 13 October 1995. Raffles Medical Group Ltd (SGX: R01) isn’t too far behind with a 1,730% gain (again with dividends included) since it came public on 14 April 1997.
There are two big takeaways from all these data:
1) The world’s a scary place now and it always has been. Yet, society progresses and our lives got better. Derek Thompson from The Atlantic once wrote: “I’ve written hundreds of articles about the economy in the last two years. But I think I can reduce those thousands of words to one sentence. Things got better, slowly.” It’s the same, all the time.
2) If you’d want to wait for the world to be ‘normal’ before you invest, you’d never get it. There are always things to worry about. Fortunately, economies, companies, and societies have proven to be resilient and can grow even in the face of adversity – that’s all you really need to know as an investor.
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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 writer Chong Ser Jing owns shares in Amazon, Vicom, and Raffles Medical Group.