Monday, October 6, 2008

Global Market Meltdown: Another Black Monday indeed!!

Asia bourses down between 3-5% today. European bourses plummeting between 5-10% at the present moment. And Dow is struggling to avoid a more than 5% plunge... Surprising? Not at all if you believe my layman view in all my previous blog posts on market trend. Perhaps, all of you would find me unconvincing due to the lacking of the macro and micro economic terms used. Who is having the last laugh now??
So now, who would you believe? Those so called geniuses that CNBC and Bloomberg interviewed or one layman who happened to possess some basic knowledge but enough experience to look beyond.
For the past one year, they have indeed been investing in a state of denial. Creating false hopes and breaching the rule of thumb which is in this case "'hope' is forbidden in equity market". New rule of thumb? Well, it is new to all of you but definitely not to me. This one belongs to me. My creation through my experience. 'Investment based on hope' Kills!!
Subprime failure was the main market force this time. The moment subprime crisis started to erupt, the whole financial foundation from the US through Europe started to crack. And when the cracks appear, it is only a matter of time the whole infrastructure would collapse and bring along everything that was resting on top of it. One thing good about Market Force is: Market force does not discriminate between the rich and the poor. And it is color blind too. Once it strikes, it would just take everything that stand in its way. Our job is to Stay Clear. So simple. Do we really need Oxford's or Harvard's grads or those daily gurus who were picked to give their views over the television to tell us what to do?
Even at this very moment, Bush is talking bulls 'live' on TV trying to hoodwink the Americans.
Go back and read my previous postings for more clues. Catch the main underlying tone. I hope you have learn a thing or two from my layman explanation here. I welcome any challenge from around the world. Please contradict me... Depression? Tell me about it!

3 comments:

peng said...

Just like you, I don't need any economic jargons to convince me of the imminent depression hitting us. A trip to the market or grocery shopping will cause me to flinch at the inflationary prices of food and household essentials. What other signs do we need? I have tightened my financial belt. Whatever little I have in savings, I pray will not turn into 'toilet paper' overnight!

sam said...

If you have difficulty understanding the current world financial situation, the following should help...(I found it circulating around some finance-related blogs and found it to be simple and true)

Once upon a time in a village in India, a man announced to the villagers that he would buy monkeys for $10.

The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts. The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.

In the absence of the man, the assistant told the villagers: 'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when he returns from the city, you can sell them back to him for $50.'

The villagers squeezed together their savings and bought all the monkeys.

Then they never saw the man or his assistant again, only monkeys everywhere! Welcome to WALL STREET.

TheWhisperer said...

Sam,

Thanks for sharing your story here.

It is exactly what is happening around in this world. This one is Mega Huge!! We are talking about the number of fools that have been sucked into this subprime instrument globally.

More than US300 trillion at its peak. From here, we can roughly see how big this problem is if we translate part of it into bad debts (NPL). 10% NPL would be a very conservative figure. Judging from recent events, a 25% NPL would be a realistic figure. So, that US 700B rescue package will eventually turn out to be a selective bail out package for business related to those walking the corridor of power.

Moral of the story here: Do not trust people with your money.

Stay off mutual funds or unit trusts. Go for insurance with 100% coverage. Forget those with investment plan. Hold cash and once this turmoil settles, there will be abundant opportunities.

Track this blog.. Maybe there will be hints for you when the time comes.


Peng,

Perhaps you would want to consider holding on to Sing Dollar.

Your toilet paper theory cannot be discounted for this country.At the rate they are going with those overpriced mega projects and when we start borrowing to finance the projects. It is like borrowing money to corrupt rather than earning money to corrupt. Big difference here. Happened to us during Mahathir era.. Take away those white elephants (wastage), how many of his projects are actually earning revenues for the country. Makes me puke talking about it.