You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.
Well, I have gotten my bonus, and this has helped to increase my war chest ammunition. In the meantime, I have been spending time reading up on companies. The market seems to be on an uptrend. We are entering into the 6th year of the bull run since the 2008/2009 Great Financial Crisis.
My thought drifted to an idea – the worse case scenario. What if I am in the middle of a deep recession, am retrenched with no income, the economy is at a stand-still or contracting, what stocks would I be looking at. What are the really defensive companies that will still be quietly swiping money from under my nose in the worse of times. What if I have just $1000 left – what do I have to spend on to survive?
Firstly the “wants” will be gone eg. Cars & Taxis (Vicom & Comfortdelgro) , Dining out (Japan Food, Aurific, ABR Holdings, Sakae Holdings), Holidays (SIA, Straco, Penguin International Ltd), buy private property (CapitaLand, CDL, HongKong Land Holdings) etc.
Well, I probably still have to:
- Fix that leak in the toilet / kitchen – or rather pay people to maintain my flat (ISOteam);
- Pay to throw my trash (Colex, 800 Super);
- Take public transport (SMRT, SBS);
- Buy food & necessities from the supermarket (Sheng Siong, Neratel).
Healthcare although it is a need – I would probably go to the local nearby poly clinic for my common cold and cough. If some critical illness crop up, there is always the government subsidized hospitals (Alexandra, NUH, etc). Would probably forgo Raffles Medical.
If these companies (item 1 to 4) can still profit from a desperate guy like me during my darkest moments, then there is a high chance that they will not be that deeply affected by the macro economics. Well of course, defensive business aside, one must first look at the fundamentals of these companies first. If they have a high debt to cash or equity ratio, with yearly declining earnings, poor management efficiency – then even without a recession / correction, they won’t do well.
If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes. Peter Lynch