I like finance and economics. They are so fun to read. I admire people who writes articles on economic and financial news. It requires alot of imagination and creativity. Look, they have to explain whatever happened to the market, day in day out. Today, when they see the market rising, they have to come up with ideas and themes like "election", "January effects", "plantation play", "oil and gas" stories and etc and etc. Remember last week? When our own KLCI has reached an all time high? People are targeting 1600 points for the year 2008. People were chasing plantation stocks like it is going to be the fastest route to riches. Then there were also people who opted for companies that are politically linked. Where else to speculate when the election is a sure thing this year? (I wonder why election got anything to do with investing in a company's future performance. Well, there maybe, but it's just beyond my understanding.)
There were also views that the China and India markets are going to lead the next global boom? Even new term was created, called the "Decoupling of the Asian market from the US market". What does it means? The meaning is not as fancy as it sounds, it simply means that the Asian markets no longer rely on the US market for growth or survival. I do agree that these Asian markets have lots of growth potential, with its big consumer market, and most importantly, the liquidity. Even big companies from the US and Europe are finding ways to invest in these countries, although the barriers to entry, the working culture and regulations are much different from their own countries. It's no longer about its cheap labour or land cost, but the potential it offers, and the opportunity to get closer to the Asian markets. They can't afford to miss out on the economic booms in the region. Well, I didn't made these up. They were all over the papers. Some of these were the views given when the Asian markets are moving in different directions from the US market, namely, last week!
And one fine morning just a couple of days later, when the overnight US market plunged, the Asian markets follow suit. (uh-oh.. reasons? reasons?) First on the US market. Economists were saying that the US market is heading into recessions. Then some data are given, including unemployment rates rising la, house sales drop to whatever months low la, new houses launches dropped la and etc. Then to make matters worse, even corporate news like the biggest losing quarter of the Citigroup in its 196 years of history has been brought to attention (wow! that's like the biggest achievement in a few generations!), followed by Gold and Oil prices fell into dunno how many weeks low la and so on (Now I am confused whether we want these prices to rise or fall). I am also glad that I have learnt a new word in "Stagflation" (I haven't heard of this term back in my uni year.. gosh! I must have skipped too many classes..). Anyway, this means a stagnant inflation. Back in the old days, when the economy booms, inflation usually follow, where the prices of things rise. Simple demand and supply thingy. When the economy is good, people makes more money, they are willing to spend more money, so prices of things go up. But when stagflation happens, inflation rises with the economy contracting or stayed stagnant. Imagine such time when people are losing their jobs and business going out of business but prices of things still increase. Aren't that a very bad thing to happen? Anyway, what caught my attention this morning was the latest story that the US market is heading into a bear market. A bear market is said to be in play when the index fell 20% off its last peak. The US market will "officially" be in the bear market if it falls below 11,358 points, which is only around 650 points away. If we apply this definition across board, the last time I checked, the Singapore, Japan and Hong Kong markets are all already in the Bear market! (Surprisingly, Malaysia isn't already yet! Malaysia Boleh!!! or is the storm looming? or we aren't in such situation because we haven't seen much rise earlier when the others are booming?) And then, there were people from the other camp that stood up and said proudly, "hey, see what I've told you? the US is still the world's largest consumer market, if it fails, the whole world is still gonna suffer!!" (now, I am confused, which camp should I follow? The "decoupling" guy or the "American still rocks" guys?) So now, the whole thing suddenly turn gloomy again at our own soil. (The sun no longer shining, the wind no longer blowing and the birds no longer singing).. And the Asian stock market crashed!
Well well, I guess I have more or less summarised what I have read for the past few weeks. So, how's the road ahead for us investors? (Long term loyal readers to my site should have guessed what I am going to say) Told you I am not good with economics. But from what I have read, it seems like the US is really in for a pretty hard time, so is their stock market. Not because of a couple of bad corporate news, but also the sentiment of the whole economy as a whole. However, it doesn't mean that a couple of bad things are going to bring the whole world into a collapse. Of course, companies who relied heavily on the US consumer markets are going to suffer, but there are also businesses that are going to survive, and continue to grow regardless what's happening to the other part of the world. As an investor, we should concentrate our efforts in finding these good companies with business prospects that are going to flourish in the long term. In fact, this could be one good opportunity to accumulate shares of good companies. Well, if you believe in long term fundamental investing.
There were also views that the China and India markets are going to lead the next global boom? Even new term was created, called the "Decoupling of the Asian market from the US market". What does it means? The meaning is not as fancy as it sounds, it simply means that the Asian markets no longer rely on the US market for growth or survival. I do agree that these Asian markets have lots of growth potential, with its big consumer market, and most importantly, the liquidity. Even big companies from the US and Europe are finding ways to invest in these countries, although the barriers to entry, the working culture and regulations are much different from their own countries. It's no longer about its cheap labour or land cost, but the potential it offers, and the opportunity to get closer to the Asian markets. They can't afford to miss out on the economic booms in the region. Well, I didn't made these up. They were all over the papers. Some of these were the views given when the Asian markets are moving in different directions from the US market, namely, last week!
And one fine morning just a couple of days later, when the overnight US market plunged, the Asian markets follow suit. (uh-oh.. reasons? reasons?) First on the US market. Economists were saying that the US market is heading into recessions. Then some data are given, including unemployment rates rising la, house sales drop to whatever months low la, new houses launches dropped la and etc. Then to make matters worse, even corporate news like the biggest losing quarter of the Citigroup in its 196 years of history has been brought to attention (wow! that's like the biggest achievement in a few generations!), followed by Gold and Oil prices fell into dunno how many weeks low la and so on (Now I am confused whether we want these prices to rise or fall). I am also glad that I have learnt a new word in "Stagflation" (I haven't heard of this term back in my uni year.. gosh! I must have skipped too many classes..). Anyway, this means a stagnant inflation. Back in the old days, when the economy booms, inflation usually follow, where the prices of things rise. Simple demand and supply thingy. When the economy is good, people makes more money, they are willing to spend more money, so prices of things go up. But when stagflation happens, inflation rises with the economy contracting or stayed stagnant. Imagine such time when people are losing their jobs and business going out of business but prices of things still increase. Aren't that a very bad thing to happen? Anyway, what caught my attention this morning was the latest story that the US market is heading into a bear market. A bear market is said to be in play when the index fell 20% off its last peak. The US market will "officially" be in the bear market if it falls below 11,358 points, which is only around 650 points away. If we apply this definition across board, the last time I checked, the Singapore, Japan and Hong Kong markets are all already in the Bear market! (Surprisingly, Malaysia isn't already yet! Malaysia Boleh!!! or is the storm looming? or we aren't in such situation because we haven't seen much rise earlier when the others are booming?) And then, there were people from the other camp that stood up and said proudly, "hey, see what I've told you? the US is still the world's largest consumer market, if it fails, the whole world is still gonna suffer!!" (now, I am confused, which camp should I follow? The "decoupling" guy or the "American still rocks" guys?) So now, the whole thing suddenly turn gloomy again at our own soil. (The sun no longer shining, the wind no longer blowing and the birds no longer singing).. And the Asian stock market crashed!
Well well, I guess I have more or less summarised what I have read for the past few weeks. So, how's the road ahead for us investors? (Long term loyal readers to my site should have guessed what I am going to say) Told you I am not good with economics. But from what I have read, it seems like the US is really in for a pretty hard time, so is their stock market. Not because of a couple of bad corporate news, but also the sentiment of the whole economy as a whole. However, it doesn't mean that a couple of bad things are going to bring the whole world into a collapse. Of course, companies who relied heavily on the US consumer markets are going to suffer, but there are also businesses that are going to survive, and continue to grow regardless what's happening to the other part of the world. As an investor, we should concentrate our efforts in finding these good companies with business prospects that are going to flourish in the long term. In fact, this could be one good opportunity to accumulate shares of good companies. Well, if you believe in long term fundamental investing.
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