Reading Weekly – Economics, Markets & Malaysia
This week is historical for sure. So many things happening it is difficult to keep track. Sometimes, it is better to just sit back, take a news-break and wait for the end of the week to have a summary / analysis of the situation.
Economics
As often, I found one of the best analysis of the past few days to be in The Economist. Their financial crisis – What next? article is a great summary, and take a step back and try to assess the situation. Its intro is particularly punchy
Finance houses set out to be monuments of stone and steel. In the widening gyre the greatest of them have splintered into matchwood. Ten short days saw the nationalisation, failure or rescue of what was once the world’s biggest insurer, with assets of $1 trillion, two of the world’s biggest investment banks, with combined assets of another $1.5 trillion, and two giants of America’s mortgage markets, with assets of $1.8 trillion. The government of the world’s leading capitalist nation has been sucked deep into the maelstrom of its most capitalist industry. And it looks overwhelmed.
I also invite you to read their 9 page special report on the financial crisis – Wall Street Bad Dreams.
Markets
Markets are hit. They are bearish, moody and keep don’t really know on which feet to dance. A lot of my clients are calling me to check how the latest events affect their portfolio. It doesn’t for 90% of them. The reason is that we use a long term, strategic approach to investing. We are not in for the quick buck. The Lessons from the Lost Decade in Stocks article from Morningstar summarize pretty well the way we work.
Lesson One: The long haul may be longer than you think.
Lesson Two: Diversification is your friend.
Lesson Three: Dollar-cost averaging is your other friend.
Lesson Four: Save more.
Lesson Five: Minimize expenses and taxes.
Lesson Six: The past isn’t always prologue.
But there is one thing I feel is dangerous in the current market, Shooting The Messenger – in this instance, Shorting (Maybe Fred should have titled his post “Shorting the Messenger” – eheh). Shorting is seen as one of the reason for the spiraling financial situation today. But it only is viable as long as a purge is needed. Their business is to warn others, to shed light on potential areas of financial crimes. They make money cleaning up the markets. And we do have a need for a clean-up.
Malaysia
Finally, a few words on the current Malaysia situation. Over the past few months, the government and oposition have been at each others throat. The governing coalition is facing the very real possibility of losing its grip on power to the opposition leader, Anwar Ibrahim. This change would be possible thanks to Democratic rules being enforced. A good thing. But now, both sides are playing a silly game of Bluff and counter-bluff. Let’s hope this things get sorted out before Raya (end of the Ramaddan). Raya is the most important celebration for Muslims and is a great opportunity to tighten bonds and invite everyone to share – Muslims and non-Muslims.