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Finance: Market crash or merely correction?

Legacy Phuket Gazette

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Finance: Market crash or merely correction? | The Thaiger
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PHUKET: The recent market volatility and media hype surrounding it may have you panicking that another stock market crash (or bear market) is coming. After all, there are serious geopolitical and economic concerns ranging from a migrant crisis in Europe, to Putin on the march in Eastern Europe and Syria, to concerns about the overall health of the Chinese economy and the recent terrorist attacks in the United States and France.

Add in the uncertainty as to when the US Fed will finally raise interest rates and we have the perfect storm of bad news and uncertainty that’s hurting stock markets and investor confidence. However before you head for the market exits, you need to understand the difference between a stock market correction and an outright stock market crash or bear market.

A market correction is usually defined as a 10 per cent decline to adjust for an overvaluation in a market that is otherwise in a longer term uptrend or bull market, and such declines can be localized to certain sectors or asset classes. A market correction is often just a way for the market to bring some sense to over-enthusiastic investors and usually has a much shorter duration than a bear market or recession.

On the other hand, a stock market decline of 20 per cent or more is usually considered to be a stock market crash or a bear market, and such a decline is more likely to trigger a recession (or even a depression) as it’s usually a market-wide meltdown with few safe havens.

The good news is that for a stock market crash to happen there needs to be a really big trigger that seldom strikes out of the blue, and usually it involves some sort of a bubble. For instance, the dotcom crash happened because there was a huge and very obvious Internet bubble, in which certain stocks with little or no revenues (or even prospects for revenues) were given crazy market
valuations.

The 2008 financial crisis occurred after a credit crunch/contraction that was ultimately caused by a massive US housing bubble where people with very low or uncertain incomes were able to buy (or flip) houses with little-to-no-money-down mortgages. These toxic mortgages were backed by guarantees from American taxpayers and then repackaged and sold by banks to often unwitting investors.

One recent exception to the rule that obvious bubbles will cause stock market crashes was the October 19, 1987 crash where the Dow plunged 22.6 per cent causing $500 billion to vanish in one day. In that crash, the most important factor was program trading that was intended to act as a market hedge. Instead, the computer programs exacerbated existing market weaknesses by liquidating positions as certain loss targets were hit – pushing prices ever lower in one day.

What does all of this mean for you and your investment portfolio right now?

My take is that as of October 2015, the stock market is in the midst of a 10-15 per cent market correction rather than an outright crash or bear market. And while some valuations are looking stretched (biotech stocks, for instance) and there are some isolated bubbles (such as China), there are still no bubbles that can compare to those that caused the dotcom or 2008 meltdown. The fundamentals of the US economy continue to improve slowly despite the negative headlines.

Either way, the key to surviving a stock market correction or crash is simply to not panic and to make sure you have some extra cash on hand to take advantage of lower prices for high quality stocks that get dragged down by any panic.

Don Freeman, BSME, is president of Freeman Capital Management, a Registered Investment Adviser with the US Securities Exchange Commission (SEC), based in Phuket. He has over 15 years experience working with expats, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Call for a free portfolio review at 089-970 5795 or email: freemancapital@gmail.com.

— Don Freeman

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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Domestic air passenger numbers double those of January

Maya Taylor

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Domestic air passenger numbers double those of January | The Thaiger
PHOTO: Vietjet

Passenger numbers on domestic flights within Thailand have doubled within a month, rising from 4,000 in January to over 10,000 this month. Having nearly recovered to pre-pandemic levels, domestic travel plummeted once more when Covid-19 resurfaced late last year.

Apirat Chaiwongnoi from the Department of Airports says 15 of Thailand’s 29 airports are now operating domestic flights, with more expected to follow. He believes the aviation sector will continue to recover further in the coming 6 months, bolstered by the national vaccine rollout.

Around 120 domestic flights a day are now operating, which is twice the number that were operating at the lowest point in the crisis. Prior to the resurgence of the virus in December, domestic passenger numbers had recovered to 30,000 – 40,000 a day, around 80% of pre-pandemic numbers.

The DoA says airports must continue to adhere to the Covid-19 hygiene measures put in place by the Health Ministry and the Civil Aviation Authority of Thailand.

SOURCE: Bangkok Post

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