8-9 months have passed since I first wrote the below articles – How good (bad) is Singapore economy now (Part 1 & 2) last year!
Let's hear from the ground TODAY how the condition of the economy is now?
Oil & Gas Industry
What's the situation now
It's been now two years since oil price started its downtrend in June 2014 after Brent crude peak at $112 per barrel. Last year the pain has already been felt when minority start losing jobs and bonuses were cut. Now, the impact had been more or less wholly felt!
Basically there are no more new projects and backlog projects are either finished or finishing. Worst of all, there is no visibility of new projects ahead. Many companies already suffered losses and paying out salaries each month is a big pain. Those with debts are hit even more having to service their loans on top of the reduced revenues and profits.
Recently, instead of spending so much time delving into stocks, I had been busy scrolling phone books and meeting lots of people/friends in the industry lately. I also met up with one of my retired ex-mentor boss who sold the company to the MNC. It is fantastic listening to him what to do during crisis.
Anyway, you guess it; the situation is bad and worse only! Maybe the worst has yet to come!
Retrenchments are widespread! You may have just heard from the news on TV or newspapers, but for me, it is people whom I know. Nowadays, it is so common to receive messages asking for assistance in job opportunity or people. Those not retrenched, some have salaries and allowances cut significantly up to 30-40%. For those who managed to keep their job, life isn't any easy either. They were tasked to do multiple jobs and can be so stressed up! Of course there are also those in better position still busy with the few existing projects recently contracted. Then again, many cost cutting measures companywide also affect them.
Worst ever oil crisis in history
I met many veterans lately. They were in the industry 20, 30 or even 40 years. All lamented that this is the worst ever crisis in their entire career. While the 1980s oil crisis is bad but there isn't as many excess vessels/rigs compared to this one. In my opinion, the main issue is the cheap credit over the past 4-5 years. Since financing is so easy, newbuilding is severely over-supplied and now the biggest bubble ever, much worse than the 2009 crisis.
Therefore even if oil price is to recover, you need many years to absorb the oversupply in these idling vessels before business prosper again.
Companies slashing like tomorrow no longer matters
Huge global MNCs are announcing slashing of jobs like tomorrow no longer matters - one round after another. If you think the "Ang Mohs" are cruel and have no feelings, at least some Ang Moh company (like mine) still compensate based on number of years (1 year 1 month) plus notice period. Others are cutting salaries and allowances such as handphone and other benefits. There are those who worked 3-4 day week also to relieve the company’s burden.
Even big local player resort to unscrupulous tactics
If you think this is only for “Ang Moh” MNC or local SME, sorry folks you are wrong. Below is an account I heard from the horse mouth of how a local big listed company force employees to leave the company without having to pay them compensation.
For instance, the boss will first give you impossible task to fulfil. If you cannot complete as tasked (I already said impossible task), you will be shamed frequently in front of group meetings. After hurting your emotions and if you still stay, they will then cut your salary by high double digit percentage. The younger ones with high levels of dignity and fewer expenses will then leave at this stage.
For the older ones with family who can throw away their dignity and clings on, the company will use the following “unorthodox strategy” as their last resort. The HR will offer the employee opportunity to work overseas. Normally it is in location of lousier working conditions and yet with same pay without any additional allowance for accommodation or your family. With this, you will then have no choice but to resign.
People showing their ugly true colors in times of crisis!
There is saying “True colors can only be seen during crisis!” It is absolutely true. Due to the job insecurity, you will start to see many “小人 (small people)”. It depicts the uugliest side of human nature. People who use to be nice will also soon become scumbags backstabbing and bitching in order to survive. And he/she can just be your closest colleagues during the good yester-years when time is good!
As what I expected, it's definitely not just the O&G industry being affected.
From boss of hundreds to taxi driver
I heard this friend who is the boss of plastic manufacturing plant in China for last decade. Recently business is so bad that he has to shut down his plant in China. He has since returned back to Singapore and is driving taxi now. You may wonder why doesn’t he find a job in Singapore. This is what I asked too. The answer: "Singapore plastic industry is even worst!" Moreover the idea of finding a salaried job sometimes really does not bode well for someone who has been a boss for decade with tens or even hundreds of employees under him.
Electronic sector’s doldrums already for years
Friends in electronic sector say it's not just now for them that the economy is bad. It's been a sunset industry already for a long time already. Profits are declining in the last decade, with more and more divisions closing down. They told me at least O&G sector is booming in the last decade and we had already earned our share of the money. In contrast, they had been suffering for a long time already!
In retail consumption scene, I do not think it fares as well too. Tenants are struggling with the lower sales and still have to face the relative high rents that REITs are charging. Iconic streetwear shop 77th Street who once was so popular among the youngsters and has 16 stores across Singapore is closing its last store by the end of July. Founder Elim Chew said:
"Well, you know, the dream during that time was to open up to 24 or 30 outlets all around Singapore. The rental was then affordable. But as the rental became higher and higher and higher, we find that we're just working for the landlord to pay off the rental,” she said.
“When I first started, (the rental rate) was S$9 per square foot, today it's S$35 per square foot. So, you know, we decided that we shouldn't embark into opening more shops."
Perhaps only the REIT investors here will think that rents can continue to go north and they can get rich and retire easily! Or for some who think that opening a Café means entrepreneurship!
My wife has close dealings with the hotel sector. Hotels are just slashing rates and competition is fierce. Those hotels that use to be so arrogant and rigid are now having a complete change of attitude giving all sorts of flexibility to their clients.
Those still doing ok – Civil Service of course!
Well, it is certain to have many people in Singapore still faring relatively well. For example, those in IT / Data, healthcare, education and those in basic necessity consumer segments. But do bear in mind that during a deflated economic conditions, normally the manufacturing sector will be the first to be hit, followed by the consumer industry, then even the stronger sectors will be hit too! Perhaps the most resilient sector will be civil service, but still, bonuses will also be reduced. I remembered during the 2003 crisis, even many civil servants were forced to leave!
Apparently, everyone now is thinking that civil service is like "safe haven". Yes it is true in the short term. Many will be flocking there and soon there will be a skew in talents in private and public sector! Remember in the long term, this will be really bad because private sector is really the driving force in an economy and public sector is merely the facilitator. Like one blogger hyom hyom said before in one of my posts:
“….We need our best minds in the private sector to create great companies that generate wealth and jobs. Unfortunately, our best minds today, being the best minds as they are, will make career calculations based on the best risk-reward ratio. The conclusion is to go join the public sector. If they are the best minds, a low-risk high-gain awaits these scholars in the public sector. Why join the higher-risk, yet lower-gain private sector? Will this create the perception that winners (1st-class, 2nd-upper honours) go to public sector and losers (2nd-class lower honours and below) go to the private sector? I don't think this bodes well for Singapore's future because the private sector is the wealth-creation part of the economy while the public sector is the facilitator. I am worried about the unintended consequences of the high starting salary of engineers. Stupid of me to say that because I am an engineer but I am primarily saying that as a Singaporean worried about our long-term future.”
S$3,800 to S$4,000 Starting Salary for Fresh ICT Engineering Graduates in Public Service - What do you think?
Expect the unexpected
How a year has changed. Last year this time, people are still enjoying the bull market and best of times. Having already quite a doomsayer then, I was totally ignored. So sometimes it's not difficult to differentiate the ones that speak the truth and those who only speak what the majority likes to hear for the primarily benefit of themselves. Time is the critical factor.
Nonetheless, I considered myself so blessed when people are advocating buy or spend and I was advocating to myself, sell, cash out and invest wisely, back then.
While I am financially and mentally prepared much earlier than most of my peers, emotionally I am still really affected because you seriously cannot be that happy when people you know lose their jobs or are not doing well? I know there are many wicked and selfish people who are happy when others are not doing well, and vice versa. If that is you then please be pathetic about yourself because one day the same situation is very likely to be happening to you! And I am sure this kind of people will not do so well in life either.
The downsizing process in company just like any other companies is an expected truth for me. What I did not expect is how fast the process is really accelerated. This is despite my company still reporting healthy profits with a strong balance sheet. It often takes years to be good, but months to be bad. Famous investor Ray Dalio always warned about the asymmetric risk to the downside!
To me, the worst has yet to come! Nowadays it seems in me that I am always expecting the unexpected to happen compared to the mainstream public.
Not that I am a paranoid, crying and fretting. I am just being prudent. Just like in my article last year, the whole idea is not about worrying what will happen, but instead the greater importance is for us to: UNDERSTAND, ANTICIPATE and then we can TAKE APPROPRIATE MEASURES now. More importantly for those smart one, you will be able to see the GAP between the human perception and reality, hence spotting great opportunity during this time to profit from it.
My ex-boss told me during our meeting few weeks ago that Crisis is the best time to Plan. Once you have the plan, then when the time is right, you will be able to execute your plan immediately and way ahead of the rest who did not plan.
For the average-middle class Singaporeans, if you were to understand my philosophy earlier and take action last year, you should be at least much better off today (or in near future) as compared to the rest!
In case you were one of those cursing and swearing me last year, but now you kind of understand or agree with me, at least it's better late than never to still take action now! If you are one of those still with very high ego and totally hate what you are reading now, just ignore. You will be just fine because either you were already born wealthy or you already have loads of cash on hand or you have an iron-rice-bowl job. If not, I wish you good luck.
Even if you belong to the former group in safe hands, do remember this: your next generation may suffer, i.e. if you already have kids or plan to have kids in future!