Is it a good time to prepare a war chest?

The next six months ...

In such volatile times, what should people invest in? What will the next six months, or one year, hold?

The last couple of weeks, two developers suggested it may be a good time, or a good idea, to prepare a war chest. That means, liquidate some assets and get ready some cash. There may be something worthwhile to pick up in the next six months, they said.

Soon after that conversation, a real estate professional help to put the pieces of puzzle together.

Consider the following:

Barack Obama has retained his presidency. That means status quo in the United States, recovery will be fragile.

Spain may need a bailout. Eurozone may plummet further.

In October, Hong Kong joined Singapore in efforts to cool soaring property prices by targeting non-residents. The Singapore and Hong Kong property markets are two of the most robust in Asia. Foreign funds like both these markets.

Let us come back to our local property market. Two real estate professionals say the secondary property market, which one buys from owners and not from developers, has been slow the last six months.

Some say it is good that the market is taking a breather. Others say it is a sign of the times.

The valuer says a weak secondary mortgage market is an indication that there are weaknesses in the overall property market. The new launches, however, remain attractive partly because of the various freebies and developer's interest-bearing schemes.

The primary market, where one buys from the developer, remains strong because under the interest-bearing schemes other than a 10% downpayment, they do not need to pay until the project is complete, she reasons. Under construction properties have higher risk than completed ones.

Hong Kong and Singapore have put in place measures to deter purchases by non-residents because the third round of quantitative easing (QE3) by the US has induced a flight to risky assets and he considers property as one of them.

That seems to go against the grain of what many think today. The last couple of years, one of the reasons for the rise in property prices was because real estate was considered as “safe” and a good hedge against inflation.

The safe assets, he says, are inflation indexed bonds, treasury bonds and government securities. The flight to the East to risky assets and to properties is a signal for all of us to take note. This was confirmed by an economist who says when the flight reverses, the situation will be severe.

Malaysia seems to be chugging along well. Will Malaysia be able to withstand the onslaught, notwithstanding “the good news”, “feel good” factors today?

Properties look attractive because of the economic conditions around the world and because of the threat of looming inflation on the horizon. Property being a good hedge is a perception, the property professional says.

This flight to Hong Kong and Singapore may happen in a bigger scale in the next six months to one year, he says. That is what both Singapore and Hong Kong governments are trying to stem out. This flight to the East may create, grow and burst bubbles. Some of that money have slipped into Malaysia and it is up to regulators to keep an eye on the situation.

The solution is to create investment avenues. This is not easy for governments to do and it takes time.

Why create that war chest then if there is so much risk and volatility floating around? The days of long-term investments are over. To be wise in today's volatile times, one may have to be a trader, or a sort of trader. Have a basket of goods, and hopefully one balances out the other.

The holiday season is around the corner. A new year is about to begin. The investing template, like the investment climate, has changed.

Deputy editor Thean Lee Cheng wonders if our finanacial planning professionals are reading the signals.

By The Star (by Thean Lee Cheng)