US Bond Crisis is Coming!!!

0:00 Oh no, US bond crisis is coming. So a disclaimer, I'm not a expert in the bond market. Usually I analyze, I research and talk about the stock market and and share my research. So this time around I'm very concerned because this impacts everyone globally because we know that the US dollar is the most widely used currency and we had a panic last night because the 30year US government bond yields rallied more and crossed 5.3%. 5.3% seems to be a level that is too painful

0:47 for the US government. As such, they had to take immediate action. The US Treasury Department led by Scott Basson announced that they will double the purchase of long-term bonds. When you purchase the long-term bonds, this will press the use down. So now it's sitting at 5.18% but it's just temporary. The worms have just started to come out. I expect more bad news ahead. This is a reminder of the 208 global financial crisis. This 5.3% yield that we saw last night is the highest level since 207.

1:34 Investors are losing confidence in the US government and they are rotating their funds into alternative assets. Bitcoin rallied 8% and it is now near the $70,000 US level. Gold rall 4% is now about $4,500. So previously I shared with you all that I started to buy into gold in the $4,000 level. So I will continue to dollar cost average into gold but I will buy less because he has already read it 10% since my last purchase. Then for Bitcoin I don't understand I I I don't like so I I tend to avoid uh Bitcoin. Yeah. So my previous video I share a lot about why

2:21 gold was an opportunity but now that you ask me can buy or not. You have to own sell decide. I think don't for chase. You really have to understand the situation then you decide what to do. So the US government debt is approaching 40 trillion is an amount that they can never pay the principle. So they only paying the interest and their debt is actually skyrocketing thanks to the Iran war. They fire a lot of missile. They waste a lot of money and they are emptying their strategic reserves. So the strategic reserves just hit like a 50-y year lows. The strategic reserves man example that there's war or there's emergency. In the past the the Middle

3:08 East they have the cartel the OPEC and they actually uh have a embargo or they stop selling oil to the US. That's why in case of such measures that's why they they have the strategic reserve but now they are using the strategic reserve to artificially press down the oil prices. So not only are they depleting their reserve in such commodities, they have too much of a dep investors are losing confidence in the US leadership. They don't trust Donald Trump as such for us the uh treasury department Scott Basson what they are doing now is actually called operation twist. So they actually

3:53 twist the bond use. So although they mentioned that they are purchasing the long-term bonds, but where does the money come from? They actually print the money. So they're taking on more debt. So they issue short-term bonds, which is based on the fat fund rate 3.75%. And they use the funds to buy the the long-term bonds. So when they buy the long-term bonds, what happens is that the long-term bond the price will go up and then the yields will come down. It's a inverse relationship. Yeah. So they need to press the borrowing cost down otherwise it will go out of control and it will hurt the economy and even send the US economy into a recession. We already seeing that the GDP growth like

4:40 for the full year is likely 2% or less. The US economy is actually slowing down despite uh the data center the AI boom without that already in recession already. Then we see that inflation is actually coming down. It's actually not worsening. It's like 3.5 coming to 3.4. Inflation is actually trending downwards because consumers don't have the spending power because consumers they are facing a higher borrowing cost and consumers they they are worried about AI stealing away their jobs. Actually the drop numbers have been very weak over the past two quarters and it's likely to weaken in the second half. So for the lay man like the common Americans

5:28 most of their borrowings is actually in in their mortgage means their home loan like you buy a house cannot be you pay 100% in cash. So more most of them their their heaviest debt burden is their mortgage loan. So currently in the US the mortgage rates is 6.5%. Why is it so high? Do you know that before the virus before the lockdown it was actually 3.5%. So 3.5% and now 6.5% is a huge uh difference because the way for the banks they price the mortgage rate is the risk-free rate plus a premium. So if the 30y year US government bond use is 5.3%

6:17 then the it makes sense that the banks is they're taking on some risk they must charge something higher like 1 percentage point 1.5 percentage point higher otherwise banks they might as well buy the US government bond which is so-alled risk-free they either park it there risk- free to get 5.3% or they lend it out to to home buyers at 6.5%. %. So the bond use affects the borrowing cost for consumers and also businesses and consumers now they are paying more for their mortgage then it is into their income. They will have less disposable income or to to purchase stuff to buy food to spend on entertainment or to buy

7:03 furniture to buy a PlayStation to go on a Disneyland trip with their children. So consumption is actually slowing down. So when consumers spend less, businesses will also see a slowdown. And businesses not only they are selling less, their borrowing costs also increase. Example, recently there's this build up of data centers and they borrow money like Alphabet, they issue long-term bonds and their bonds was priced at 6%. So it's the risk-free rate plus a premium. So for businesses in the past they borrow at almost zero 3% kind of borrowing cost. Now it's 6%. So their cost of capital increase. So when you are

7:49 borrowing more and your returns on this assets or business is still the same your profit margins actually narrow narrow down. You're less uh profitable. So how will CEOs boost their profitability? They will cut cost. How you cut cost? You spend less on advertising or the easiest way you lay off workers. So this is a negative feedback loop. Higher borrowing cost, more layoff of workers. Workers get less jobs, less income, they spend less, the economy slows down. So higher borrowing cost actually slows down the economy. And if it is uncontrolled, it might even push the US into recession. then it could be a repeat of the global

8:36 financial crisis and what we seeing in the US I I I fear for is the private markets private equity private credit so in the past you saw the advertisements right private credit promising 10% 15% uh use so it's unsustainable when we go into a recession a lot of these uh startups or they will actually default so private equity lose money private credit also go to default. So now investors they already worried they are facing record redemptions and these asset managers they cannot because there's too much redemption request they cannot even meet this redemption. So if things worsen there's even more redemption request they are forced to fire their assets but

9:23 no one is interested to buy they sell at a discount then it becomes a very vicious negative spiral. So, so the US now for me the biggest concern is not the AI bubble. Do not be fooled by all those YouTubers spreading fear on the AI bubble. What I worry about is the financial system, private credit, private equity, the bond market. I'm not an expert in these areas, but it's very concerning to me. and even on the Japan side. So we saw the news that US and Japan together they defend the Japanese yen. Why is Donald Trump suzu so kindhearted to help Japan? Because if they don't help Japan, Japan could drag

10:09 the US down. So that is the worry. In case you don't know, Japan is the number one the biggest uh US foreign debt holder. They hold more than1 trillion US dollar worth of US government debt. So for Japan, in case you don't know, they don't produce their own energy or they like a huge island. Uh they uh import the energy mostly from the Middle East. Then thanks to Donald Trump, we have the Iran war and now energy prices like oil is now at $90 US. It remains elevated as compared to the start of the year, it was like $60 US. So now oil is technically 50% more expensive as compared to the start of the year. And

10:55 we see that the Japanese yen is very weak. So Japanese yen when it's cheap is good for us tourists. We go to Japan, we spend or we have a good time, everything feels very affordable. But for the local businesses that import goods, a lot of these goods is priced in US dollar. Whether you are buying wheat or you're buying oil, you have to pay in US dollar. So not only the the price of oil energy increased by 50%. Their own domestic currency has weakened. So they are actually paying almost double the price. Example like five year ago one US dollar is 110 yen.

11:41 So let's say you if you buy oil at 100 uh US dollar then then it's like uh how much that that 10,000 uh um 11,000 yen am I right? So now one US dollar the exchange rate is 160 yen also it's a huge difference you know that means the yen has weakened very significantly 5 years ago is 110 now it's 160 this kind of movement in the forex is very seldomly seen such an extreme uh movement because investors are losing confidence in The Japanese government they have the same situation their depth

12:27 to GDP is like exceeding 200%. So and they are refusing to raise uh interest rates because if they raise their rates now it's at 1%. If they raise it too much then they worry that this Japanese corporations or they cannot service the interest cost businesses will go bankrupt. So they keep the interest rates low at 1%. so that businesses can survive but they are hurt by inflation. So Japan in the past they have never even experienced inflation before the prices are the same for like 20 30 years. So now they are facing inflation. So they are trying what they trying to do is they trying to inflate away this uh debt issue but this

13:15 inflation is hurting their forex that the Japanese yen. So if they convert their Japanese yen into US dollar to purchase the oil is too expensive. So where are they going to get the US dollar to purchase uh energy since 90% of their energy is imported. So they sell their US government bonds as simple as that. So now they Japan is selling the US government bonds and to get the US dollar to purchase energy and they keep selling. So this will cause the US bond prices to come down. US bond prices come down the yields actually go up or the interest yield actually go up. So

14:00 it's a inverse relationship. So US wants Japan to stop selling. Please stop selling. And but Japan say I have no choice. my Japanese yen is too weak. That's why I need to sell. Then USA, I come and help you defend and show confidence. So like uh Scott Besson is trying to play something very psychological. He like accidentally review his his notepad that he's buying how many billions of Japanese yen. So it's like a game of poker. It's a game of bluff. Will US really defend Japan all the way? I think they want to defend but do they have the financial resources? I think the answer may be no. If they show signs of weakness, the hedge funds will come in and short and

14:48 put pressure like what George Soros did to the Bank of England in the past. It's a very long story. I won't share it here. Yes. Search Bank of England. George Soros. So the US government and the Japanese government, they must show determination. They must show strength otherwise the hedge funds come in and short things go out of control it can turn into a financial crisis. So this is brewing already. So if Japan explodes will it drag the US down? The answer is yes because over the past two decades investors are addicted to leverage and they do it through the carry trade. So because Japanese yen is so so cheap.

15:36 Basically borrowing cost is almost nothing. So they borrow in Japanese yen and they get the US dollar. They invest in the US market. Those that are conservative they buy US government bonds. Though they those that are aggressive they buy US big tech companies to to earn a higher return. So because the borrowing cost is so cheap. So in the past what they do is they they sell Japanese yen because they're borrowing in Japanese yen and they buy into US dollar. But now it's the reverse. If they unwind this carry trade, what they will do? They need to buy back the Japanese yen. They need to buy Japanese yen to repay their loan they owe money to to the Japanese banks. Am I right? So they need to buy Japanese yen in the open market and they need to

16:23 dump their US dollar, sell US dollar, buy Japanese yen and investors are already smelting this already. So you can see that in the recent one month US dollar is actually weakening. That's why I continue to avoid the US dollar. I don't like US dollar. US dollar is toilet paper. So like for this year mainly I'm putting my fresh funds into SGD, Singapore dollar. Singapore is still very stable. Our economy is still very strong. Our government policies are very pro business, very pro the common folks. There's a consistency in our policy. We don't flip-flop. Yeah. So, I think if you are very risk adverse, you you should put more of your money in the Singapore uh dollar. That that's how I

17:10 think about it. Then how I put my Sing dollar, invest my Sing dollar basically in exchange traded funds. I don't really stock pick for my Singapore because every month I'm just putting like maybe $1,000 in. It's not a lot. So I don't have the resource. I don't want to put it into individual stock because it's just a small amount. So I just dollar cost average into exchange traded funds in the Singapore market. Three ETFs that I'm dollar cost averaging that I shared in the past. I repeat again for income dividend I'm putting into CFA real estate investment trust ETF. Then to hedge or to be defensive I'm putting into GLS Lion Gold uh ETF. Then for

17:57 growth I'm putting into HST Hansen Tech ETF. So my Singapore dollar portfolio is just this three ETFs only. HST for growth, CFA for dividend, GLS for for defensiveness for being unrelated to the equity market movement for hedging purposes. Then uh my main portfolio is actually still in the Hong Kong market where I'm very heavily vested in Alibaba and BYD. So Alibaba I hold 16,500 shares, BYD I hold 12,000 shares. It's mainly my conviction in Alibaba to write on the AI boom and BYD to write on the EV energy storage robotics self-driving.

18:45 So is my two big bet on the technology trends ahead. That's why I'm so heavily vested on Alibaba and BYD. So please do not follow me blindly, not financial advice. Do what you feel comfortable. I would say that for most common folks it's better to be diversified and to be vested through exchange traded funds. You should only stock pick and buy individual companies unless you have a strong conviction. So some of you all keep asking me the common question is master you buy Alibaba and BYD is in Hong Kong dollar. If US dollar weaken wouldn't the Hong Kong dollar also weaken and you suffer forex losses? The answer is not true. It means you don't understand. And for Alibaba more than uh the majority of their

19:31 revenues comes from China. So they earn in roming example e-commerce they serve the 1.4 billion population in China. So when they shop online they purchase toilet paper, purchase instant noodles, they earn a platform fee and they earn it in reming. So most of their cash inflow is actually in rem. So their assets, their earnings uh is is in the Chinese UN that is my true exposure. So if and in fact the Chinese UN is actually uh strengthening against the US dollar. So Chinese UN strengthen Hong Kong dollar weaken. So when they report their earnings the results in Hong Kong

20:17 dollar and US dollar if the forex is down 20% the earnings will naturally be up 20%. If the earnings is up the stock price will also go up accordingly. So what in short if you don't understand is if the US dollar and Hong Kong dollar weakens it will reflect with a higher earnings per share and higher stock price of Alibaba in terms of Hong Kong dollar in the Hong Kong market. So we are actually not affected by the weaker US dollar. If you don't understand that that then you don't touch as simple as that then you stick to the Singapore market. So now I will say that there are two sides to to the coin. If you are being greedy then the

21:03 opportunity is riding this AI boom. But if you are being cautious example like the bond market you worry that it explodes. Then you don't want to touch private credit. You don't want to touch bonds. Don't don't touch corporate bonds. Don't touch even bond ETFs are not safe if you don't understand. So where is the safest way to get bond returns? The answer is CPF. OA you get 2.5% risk-f free. SA you get 4% risk-f free. But the downside is that there's no liquidity. You cannot withdraw the money until you are age 65. So if your concern is that you want risk-free returns and you want liquidity, you get SSB, Singapore Savings Bonds. I think

21:49 this month issue there still like 2.2% 2% interest. So maybe it start from 1.5% in the first year, then every year it steps up. Then at year 10 is probably like 2.8 or or or 3%. So average if you hold it for 10 years, you get 2.2% interest. So I would say that the risk-free rate still uh parking in Singapore dollar still can get uh 2% to 4%. Which is not not bad. It's not bad for me. I I'm more risk takingaking. So my spare SGD I put it into HST CFA GLD uh as a basket but for my emergency fund I just put it into the digital banks. So for me currently right because recently

22:35 I'm researching into C limited shopppee what very high revenue growth more more than 40% uh revenue growth. So I gain interest in SE again and to uh have exposure in SE one way that we can do is by purchasing 10 cent in the Hong Kong market because they hold 18% stick in SEC limited but 10 cent like minimum 100 shares is a bit expensive is about 7,000 S dollar. So the bite size is a bit huge. So instead of getting 10 cent, you can get HST, the Hansen tech uh ETF. In the Singapore market, you just pay in Sing dollar 75 cents per share only. So that there's a lot of flexibility. So that's what I'm doing. I buy HST, which

23:21 gives me exposure to Chinese big tech companies like Tencent and Tencent has STS in C Limited. Yeah, I myself I try out their money or which is the Mari bank and I really like their their f Fintech app. So recently I downloaded Mari Bank in the past like when I scan the QR code to make payment. I use my DBS app. I realize it's always very laggy and very slow. So nowadays I use my Mari bank app to scan the QR code and make payment. And the good thing is that I get 1% uh cash rebate. So if I scan like $7, it gives me uh 7 cent rebate. So I get a 1% rebate. So then the spare cash that I park in my Maui bank, it has

24:07 the daily compounded uh interest annualized is about 0.88%. All which is not bad. I think you can get a higher rate if you park it at like example uh Trust Bank. But but Trust Bank is a partnership between uh Stan Chart and NTC if if I'm not wrong. So so I'm not interested in in that related service but I myself I use Shopee the the e-commerce uh platform. So I lean more towards um Mari Bank. So another digital bank is like uh GXS. I think it's a partnership between Grab and Singel. So Mari Bank, Trust Bank, GSX. So these are the three digital banks. So me now as a laanka I'm trying to embrace and starting to use digital banks and

24:54 from that I realized that they can also be a disruptor against traditional banks like I myself I'm using less on the DBS bank app already I'm spending more time on the Maui bank app. Yeah. So uh some of you all will ask me master what I think about uh DBS bank. So see I purposely put it at the end of my video. So only those that watch to the end. So I've been very cautious because when I talk about DBS uh if I say anything negative people will attack me. So I say that DBS now the stock price at 75 Singapore dollar is very very super overvalued. It's two standard deviation from the historical price to book. So the book value let's say very optimistically is at $25. So now it's 75

25:43 three times book value and investors are so optimistic on uh DBS or because they believe that the wealth management will continue to grow but wealth management for it to continue growing it means that the market must continue to remain uh bullish so so that there's uncertainty so I think investors are way too optimistic on the wealth management they think that it will only continue to grow they price DBS as a growth stock and they don't understand the cyclical nature of banks. They don't know that like in 2020 and 208 when there's a down cycle they report lower earnings and they even cut dividends. So there were two occasions in the past where they reduce dividends

26:29 by 20% because the uh the earnings get hit. So banks don't go one uh straight line up. So in the past we have the toxic Tesla bull c. Now I would say that the DBS c has started to become very toxic also. If if you say anything negative about DBS they will attack you. They are becoming too emotional and this is a sign that is that everyone is so highly convinced that DBS will only go higher. They cannot stand any negative. They are very uh sensitive to anyone that spews negative things about DBS. To me, it's a sign already that they're investing based on their emotions and instead of the fundamentals. The

27:15 fundamentals has been uh thrown away already. Yeah. So, this actually at the $75 this DBS is actually the most dangerous. When there is maximum optimism, it usually marks the most dangerous period. It usually marks the peak. Yeah. So I would say that at this 75 uh HGD level, DBS has a huge downside potential. The upside, I don't know. People can shout and shout. It might go to 80, it might go to 100. If it goes to 100, then it will be uh four times book value. Also possible, but I think low probability. it might go and touch $80 briefly. Uh possible. So I I I don't know. I won't speculate. For me, I I

28:02 won't go short. I won't go long. I will just avoid uh DBS. But when the bubble pops and DBS comes down, a lot of new investors will suffer a lot of pain. So I can only warn you all. But a lot of the young investors, they don't like this kind of warning. Yeah. They don't have they feel very irritated. Yeah. So there's nothing I can do. So those that continue to invest in DBS, I can uh wish them good luck. For me, I would just uh totally avoid uh DBS. Although I'm I'm I I like the Singapore dollar. I like the Singapore market, but I won't position myself into the banks because the banks, not only are they overvalued, they are facing a lot of competition from the

28:48 digital banks from like the digital brokers or like Tiger, Mumu, Weeboo, Longbridge. So and then you can see that the uh wealth management platforms uh sasha away endows then digital banks mi bank gxx trust bank there's so much competition am I right then over time they will actually lose market share to this uh digital uh competitors if I think from it as a investor with a long-term perspective like 10 years 20 years I rather be vested in the technology, the new technologies the I would rather be invested in the disruptors example like C Limited, Mari

29:34 Bank money through my indirect stick in 10 cent rather than to invest in DBS which I see as a dinosaur business that they are facing uh disruption just like in the uh automobile industry. Do you want to be vested in Toyota or do you want to be vested in BYD? So I rather avoid Toyota. I rather be vested uh in uh BYD. I rather be vested uh in Alip Pay. I rather be vested in Mari Bank and avoid DBS. So that that's my thinking. There's nothing wrong uh nothing right. In the end, you must invest within your circle of competence. Do what you feel comfortable. So that's all my sharing. Take care all. Bye-bye. And