AndrewChia.com

Source:  Straits Times, Singapore

Highlights

1.  Singapore’s property market stagnated suddenly.

2.  Banking executive, Lily Lim, saw her income plunge from $10,000 to $1,200.

3.  An economy can go from boom to bust very soon.

4.  Job woes have suddenly overtaken overspending as the key reason to mounting credit card debts.

5.  Counselling centres advice:  “stop using the facilities and continue to pay whatever you can.”

6.  Credit card rollover debt in Singapore ballooned by $296 million to $3.3 billion.

7.  LV, luxury holidays overseas, lavish gifts are common shopping items that cause one to be in debt.

8.  Without proper accountability, one can lose control and “don’t know” how much they spend.

9.  Marketing executive Genevieve Lee, 33, used her credit card and overdraft facilities to pay $30,000 for a distance learning course.

10.  Part of a financial counselor’s job is to help debtors list out their income, expenses and surplus and work out how much they can afford to pay back the banks.

11.  Internet betting is another reason for credit card debt.

12.  You need emotional control and discipline, such as a birthday resolution, to overcome debt.

Comments

1.  Money is a subject not taught in schools, nor is it taught anywhere else.

2.  Lack of financial intelligence is the root cause of money woes.

Learning message:  Get smart.  Get educated financially, and find your rightful place in our money world.

Source:  Fortune

Highlights

1.  At the dawn of the 21st century the U.S. had $5.7 trillion in total debt.

2.  As we approach the end of George W. Bush’s presidency only eight years later, that sum has nearly doubled.

3.  Yet any such calculations are penny ante compared with the fiscal disaster that is bearing down on America. It’s no longer an event in the misty future. It officially began earlier this year when teacher Kathleen Casey-Kirschling of Maryland became the first baby-boom retiree to collect Social Security benefits. She will be followed by about 78 million more boomers over the next 17 years.

4.  Even if the economy were to grow at the level of 3.2% a year, as it did in the 1990s, and these other savings were achieved, they wouldn’t come close to addressing our federal financial problem.

5.  The only way to get across the chasm is to begin making tough choices now to change our current course. Delay will make the problem worse.

6.  In fact, the deteriorating financial condition of our federal government in the face of skyrocketing health-care costs and the baby-boom retirement could fairly be described as a super-subprime crisis. It would certainly dwarf what we’re seeing now.

7.  The U.S. Government Accountability Office (GAO), estimated last year that the unfunded obligations for Medicare and Social Security alone totaled almost $41 trillion. That sum is equivalent to $352,000 per U.S. household.

8.  Why call it a super-subprime crisis? Besides its gigantic scale, there are very disturbing similarities between the current mortgage-related crisis and our next potential disaster.

9.  First, federal programs were launched without adequately thinking through who would bear the ultimate cost and related risk. Just as originators of mortgages let themselves off the hook by unloading packages of dubious loans onto others, lawmakers have increased spending, expanded entitlement programs, and cut taxes while expecting future generations to pay the bill.

10.  At the heart of these problems is our leaders’ collective failure to act in the face of known challenges. Our country has veered from its founding principles, which held to individual responsibility and accountability today in order to create more opportunity tomorrow. When our constitution was written, the concepts of thrift and prudence were no less at the center of the American spirit than liberty and justice.

Comments

1.  It is wise to pay attention to such reports as this one.  We will then not be caught unawares when the markets take an Acapulco high dive.

2.  Investors should have these warnings at the back of their minds whenever they make any meaningful investment decisions.

Learning message:  The average investor usually takes action when it is too late.  Don’t aspire to be average.  It is too  risky.

Source:  The Star, Malaysia

Highlights

1.  Paul Krugman is the winner of the 2008 Nobel Prize for economics.

2.  “I saw there would be a burst bubble and there would be a lot of pain, but I didn’t realise how big the pain would be.”

3.  He was “extremely terrified” of the financial crisis.  He wondered how economists and politicians “could have been so blind”.

4.  “We created a financial system that basically outgrew the defence we created back in the 1930s to protect against crises. We should have understood that because the system had outgrown those defences, there was a possibility of another one.  But very few people saw it coming.”

5.  Paul was a fierce critic of George Bush’s handling of the global financial crisis.

6.  He says that when Dr Mahathir announced sweeping new currency controls on National Day in 1998, he was partly responsible for influencing those decisions.

Comments

1.  By 1930’s Paul Krugman was referring to the Great Depression.

2.  The current world financial crisis is beyond the expectations of even a Nobel laureate.

Learning message:  Most people underestimate the extent of financial damage inflicted by the US on the rest of the world due to its prolonged over-indulgence.

Source:  The Star, Malaysia

Highlights

1.  More than 11,000 people, mostly bank employees who paid between RM1,500 and RM5,000 to join an exclusive club have been left in a lurch as the multi-million project has been abandoned.

2.  To make matters worse, the National Union of Bank Employees (NUBE), the owners of the Eco Park and Country Resort project located in Seremban, need more than RM100,000 to revive it.

3.  Some members who bought the membership when the project first started in 1995, said that if the union cannot complete the project they should get back their money.

4.  NUBE general-secretary J Solomon said that the project stalled because the company appointed to carry out the project was wound up in 1995 itself!

5.  And NUBE could not continue funding it as they lost a lot of money in the stock market during the regional financial crisis in the late 1990’s.

Comments

1.  The union lost money in both property as well as share investments.

2.  A lot of things can go wrong in an investment project.  In this case, the reasons mentioned are a contractor who disappeared, and a regional financial crisis which seemed to have affected almost everybody.

Learning message:  Investing requires skill, one of which is the ability to do eventuality planning.

Source:  CNN.com

Highlights

Federal deposit insurance protects the first $100,000 of deposits that are payable in the United States.  This protects depositors (partly) in the event of bank failure.

1.  Here’s a safe bet for uncertain times: A lot of banks won’t survive the next year of upheaval despite the U.S. government’s $700 billion rescue plan to restore order to the financial industry.

2.  The biggest questions are how many will perish and how they will be put out of their misery.

3.  The government’s commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.

4.  “It will help, but it’s not going to be the saving grace” because a lot of banks are holding construction loans and other types of deteriorating assets that the government won’t take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.

5.  While this may sound gloomy, the prediction will still not beat the Savings and Loan (S & L) crisis of the 80’s and 90’s.  Between 1980 and 1994, more than 1,600 banks failed.

Comments

1.  With such gloomy predictions the Dow went further on a down trend from 8,000/9,500 points in October 2008 and reached a trough of 6,500 points in March 2009.

2.  The fact that Obama got elected as President in November 2008 did little to arrest the downtrend, but the market did post a rather strong recovery to  touch 8,500 just two months later in May 2009.

3.  This sudden rally caught many people by surprise.  Influenced by articles such as this one, many traders were expecting either further downside, or the Dow to stay at 6,500.  They were still betting against the trend in the third week of March. While more experienced traders capitalised on the uptrend, some only realised that a reversal has occurred when the Dow touched 8,000.

They have missed the train.

4.  If you are an investor you are not too bothered if the Dow plunges to 6,500 or even lower.  You are not selling.  Neither would you be upset if it stays above 8,500.  You are not selling, too.  (You may be tempted to take profits only if you have bought it at 6,500.)

Learning message:  Stock investors (some call them value investors) pay little attention to market fluctuations.  Traders capitalise even on short bull runs and make a lot of money in the process.