Taking risk

When market risk is heightening, when we do not have confident to predict future, it is no point to risk our saving.

I do not take blind risk. It's better to do nothing when I know nothing. I do something only when I foresee something and have strong faith about it.

How this crisis unfold 2

I think US is going into recession. Fiscal spending is limited by politician and by country debt level, business spending is not growing because of pessimism, consumer spending is not growing due to high inflation, therefore, aggregate demand is not there. Monetary policies already being used till limit.

Europe is worse in terms of fiscal spending as their country debt is higher and more complicated. They still can play with monetary policy to generate demand by lowering interest rate.

Are we on the right path? Making USD stronger will let American to feel rich, consume, encourage people invest in US, generate job, and American can pay down debt? Can politician convince investor this is long term solution that they can be persevere about it?

But in this way economy between china and US will be more unbalance, thus create bigger future problem. But making USD depreciate neither can solve problem as we experienced in last 2 to 3 years. Cosumer and Business just won't spend and money piled up in inflating asset price in stock equity, commodity and property.

Or this strengthening of USD is just temporary? Until US economy gain foot, money will flow back to china and emerging market, push up china and emerging market currency again. If long term depreciation of USD is undeniable, I think this process will continue rentlessly, until china is on par with US. Every time crisis happen in advanced country, they will request china for help, and in return, china get something advantage from them. China buy more raw material when the prices come down significantly during crisis time. China is a high growth country, they are still very flexible and can always expand when others face difficulties. Until when china reach a size where growth is limited domestically and their growth is significantly depend on those big advance economy, China is more or less on par with US.

What will happen then? I think we need to find another China......

How this crisis unfold

I have no idea about how the crisis will unfold. But I know as USD become stronger, the american feel richer and they can start spending. Asia country currency depreciate will again provide a platform for exporter to earn in good profit and generate wealth. Another good things will be the getting lower price of raw material and commodities, reducing the burden of all people.

How about US huge debt, I don't know. But if no solution seen along the time, the problem will surely continue to haunt back threatening the economy.

How about Europe, I have no idea how to connect the dots yet.

What do you think?

Let it be.

When Mr Bernanke said the fed will sell short term treasury and buy long term treasury bond with the same amount, he means the fed is not going to print money, which is good long term wise. Short term interest rate will rise and long term interest rate will fall. The yield curve is flattening, can even inverted, which the curve reflect negative outlook for economy.

As short term interest rate go up,Investor will have no interest to borrow short term to invest in stock market or risky asset anymore. If they want to borrow, they have to commit long term. In this environment, most speculators will be filtered out.

Stock market will fall greatly, 1st selling by speculator, 2nd, selling by general public that need cash and not so wealthy, lastly follow by panic selling. You can imagine when they sell at whatever price, means they can sell at 40, 50 or even more than 50% discount. Other risky asset prices played by speculator is at risk as well, like property? Commodity? Etc.....

You have a plan for bottom fishing?

Thought of bottom fishing?
A lot of us accumulate cash but have no idea which counter to bet into. We sometimes aim this counter and sometimes aim that counter. No matter how much cash we have, soon we will be out of it. More worse, we will be out of it long before bottom.

You need to have a long term plan for bottom fishing. We need to make sure we can continue to fish for a long time in this shallow sea. We don't aim at fishing when the sea is so shallow that almost no water left, we target shallow sea.

For those who is lack of patience, lack of discipline, lack of cash, lack of time, lack of investment know how, buying mutual fund is always a good idea in uncertain time like this. We can build discipline by buying into it monthly or quarterly. It is easier to plan long term for your bullet in mutual fund than in stock market.

Choose the big solid ship

Those companies that promise you the moon, they not only dream big, but dream too big, the companies' size do not match their dream, too small. You better sell faster at whatever cost. Those companies most probably borrow too much to fulfill their dream. They will be easily being caught up when economy is down for a considerate period of time. Less business, less cash flow but still have to pay down debt. When interest rate increase, they prepare to go bankrupt.

Choose company that have cash, low leverage, conservative and solid business. Those companies are big solid ship that can weather whatever big turbulence, big chance that they come out stronger.

All Bearish signs

Mostly all economy indicators all pointing down. Going forwards economy will be turning bad again. It reminds me of year 2008 where equity market coming down for slightly more than a year long bottom up in early 2009. I think equity market will keep going down for a while. So, I prefer sitting at the sideline watching while accumulating cash for crazy shopping spree when market become dirt cheap!!!

Quote of the day

"if you're not able to work on your dreams, if you're only work on work, you're not in the right place."
Quoted from Howard Behar, former president of Starbuck International

Instinct or sense need to be developed

Do you believe in your instinct? I believe.
I believe idea is generated through instinct. But how the hell those successful investor, businessman, song composer, leader that choose the path by solving tons of problems, inventor, have so much idea, non stop? Got so much instinct, non stop? Do they just lucky? Do they borned with instinct gift?

I believe not. Instinct, luck can be developed. If we prepared ourselves, focus on the problem, consistently, I believe one day, may be in 1 year, 3 years, 5 years, luck will surely come. Practice, practice, practice, failed, get up,, failed, get up, failed, get up, luck will surely come. By that time, instinct will keep on finding you.

But before that, we need to be patience.

Books nowadays

I kind of feel that book is only as good as changing our mind. The more you read, the more you know.

But reading is a passive thing. It does not lead you anywhere. You can't understand how to invest until you invest; you can't understand how to build a business until you do it; you can't understand people until you take effort to go into people's heart. Most of the book is just bullshit because they are just a mind game tempting us to keep buying book to fulfill our mind needs. They are simple, they are summary to make the commonly known difficult topic look simple.

Reading is just a guideline to guide us, and for us to avoid some mistake made by other people.
To know, we need to go through the hard way.

Ego trap

We need to keep reminding ourselves what we know is just a drop of water in the ocean. Otherwise we are prone to fall into ego trap, especially when the years go by.

We started from zero. Everyone in our society is expert to us. We were humble. We learned everything from the society and our learning curve was steep initially. As years go by, our learning curve started to flatten. New things for us to learn become lesser and lesser. Our job slowly switch to teaching the fresh entrant. Because there is nothing new to learn and no meaningful exposure, we tend to think that we know a lot, but not ego until we thought we know everything, until..........

We found another society. Their level is so much higher that makes us feel that what we know is just like a baby started to crawl.
The lucky one found out in the early year of their carreer; the unlucky one never found out until near their retirement age. The really unlucky one never ever realize that.

It is ashamed when we found out, but at least we know what we don't know. Then we become humble. Then we keep learning. Keep looking up and never give up.

Bubbles creation in progress

The only way to come out from this global economy difficulty is to create jobs, reduce the unemployment and therefore keep people spending. Only in that way the economy engine can restart again.

The problem now is we keep lowering interest rate, printing money, and all the money iis either pile up in equities or pile up in treasury bond, or pile up in gold, or property. If the economy still not running, the inflation of those asset price will eventually become bubbles that waiting to burst.

Success and failure of democracy

The success of democracy is depending on it's people. Low knowledgable people produce failure democracy. They can't regconized and retain the best leader. Even their leaders are extremely knowledgable, they eventually fail because they do not get the support from their people. Knowledgable nation's democracy is definitely successful. Their people can choose the best among the best to lead them.