No Rates Increase For Now

Last Friday, Malaysia's Central Bank decided to put interest rates on hold, thereby squashing speculations that rates might be raised by 25 basis point, to counter the recently published high inflation of 7.7% experienced in June. The latest action by the Central Bank was taken in lieu of the country's slowing economy and therefore meant to avoid putting further pressure on growth and consumer spending, despite inflation being the highest in 26 years! The argument against inflation is that there is a likelihood it may ease going forward given the slowing economy and consumer spending.

From my observations, many analysts (some local and mostly foreign) had taken this piece of action negatively. They perceive that the country is at risk of posting even higher inflation going forward, given the Central Bank's move to retain interest rates. They felt that Malaysia should have raised rates just like many of the other neighbouring countries did! (Herd's mentality, perhaps?) As of Monday, Ringgit was under heavy selling pressure as a result.

Contrary to expectations, the stock market reacted positively as it went up 1.1% on Monday.

One thing is certain. A higher interest rate environment will deter spending on businesses and consumer. Moreover, higher financing cost does not bode well for everyone. This is certainly not good for the economy and the people considering the already slowing growth caused by global credit crisis and high inflation.

In my view, it may not be an entirely bad idea to put on hold certain actions until events are more certain or crystalized.

For those who intend to secure new loans, it may be wise to secure it now and go for fixed rates scheme, particularly for those who do not like to stomach fluctuating cost.

What do you think? Should the Central Bank raise interest rates?

End Of Global House Price Boom?

Year 2007 had seen eventful and glorified moments for emerging markets such as Singapore, Hong Kong and Shanghai (China), where housing prices had shot up from 30% to 40%! However, things have changed dramatically since the sub-prime crisis erupted in US. By 1Q 2008, weighed down by the global credit crunch and high inflation, the global house price boom appears to have ended, according to Global Property Guide's latest survey of house price indicators.

According to the survey, only 13 countries in which dwelling price indices are regularly published saw prices rise during the year to end Q1 2008, while 21 countries saw dwelling prices fall in real terms, i.e., after adjusting for inflation. Even in most countries where house prices are not falling, they are clearly losing momentum.

It is interesting to note that when adjusted for inflation, many of these price rises look much less impressive. The world’s top-performing housing market (after inflation) was not China or Hong Kong or Singapore, but Slovakia, where real house prices rose by 29.3%.

The biggest house price fall was in Latvia, down -38.2% by May 2008 from a year earlier, after adjusting for inflation.

US prices also fell during the year to end of Q1, from -4.2% to -18.1%, after inflation.

In Europe, significant real house price falls also took place in Ireland (- 13.2%), Luxembourg (-5.8%), Portugal (-4.3%) and Malta (-4.9%).

UK house prices were only slightly down at end-Q1 from a year earlier, the house price crash having begun in earnest in early 2008. House prices fell during the first quarter by between - 0.7% to -2.1% (inflation-adjusted).

In Japan, the housing market appears to lose momentum once again. The urban land price index for 6 major cities was up only 4.1% year-on-year (2.9% after inflation), down from 7.8% over the same period in 2007 (7.9% after inflation).

The survey also concluded that loan volumes are likely to fall going forward. Therefore, it seems likely that the world’s house price momentum will continue to go down.

For the full story, please visit Global Property Guide.

As for Malaysia, it is likely that the impact will be less severe given the country's limited exposure to sub-prime related securities, relatively unharmed credit liquidity and the relatively cheaper property prices (relative to other major cities). However, a slowdown is imminent.

Get-Out-Of-Debt Community

Are you having problems with too many debts getting out-of-hand? Do you need advice on debt related matters from debt consolidation, settlement, consolidation loan, payday loans, dealing with collection agencies, creditors and credit cards? Look no further. I have recently come across a debt consolidation community that provides free debt counseling with experts financial coaches.

They appear to do this for FREE and have helped many people overcoming their debt problems.

I recommend you to check them out should either you, your loved ones or friends need any debt-related advice.

Debt Consolidation

How To Invest Like A Shark

For possibly few lucky ones, it might have been a fruitful journey and were early to read the danger signs but for most, it's more likely to be a rocky road with encounters of many land mines! Given the current financial turmoil the world is facing, perhaps it's time to review your own investment or trading strategy.

I recently come across a fine investment book "Invest Like A Shark" written by James Deporre. Deporre was a featured writer for Jim Cramer's TheStreet.com and RealMoney.com since 2001.
In it he makes the case that you can not only beat the markets consistently, but also make money, or at the very least protect your money, even when the market is tanking.

But DePorre says the way to do it is NOT to do what the mutual funds do or what experts tell you to do - sit around waiting for a fundamentally sound stock to go up. Instead, use your advantage as a small investor to get into a stock already on the way up and hop out before it falls-getting in and out like a shark.

DePorre opines that the vast majority of investors have been brainwashed by traditional Wall Street into thinking that it is just plain foolish to approach the market in any manner other than the way a mutual fund or pension plan might. It has worked for them since the inception of the stock market so it should work for you equally well. The truth is that in most cases traditional investment advice doesn't even work that well for the big funds. The vast majority of funds never consistently beat the major indices, but the belief is still widely held that it is best approach for everyone. Unfortunately, the Whales of Wall Street really have no choice but to invest like whales. They are limited stylistically due to their size and the way that Wall Street works. The problem is that they keep trying to justify what they do by telling the rest of us that it is the best and most profitable style of investing. Maybe it is for them but not for the average individual.

DePorre also believes that investing the way many mutual fund investors did certainly is not the best way for the small investor who is investing his own funds.

The best approach according to DePorre for the average investor, who is managing his own money, is to invest like a shark. That means moving quickly, aggressively and running for safety at the first sign of trouble. It means looking at the market in a very different way than the big institutions and traditional brokers, and it means being in control and not being pushed around by powerful forces that the small investor has no control over anyway. Most individual investors have no clue and never will understand how lucrative and safe it is to be a quick, aggressive fast moving shark in an environment that is dominated by huge slow moving whales.
It is worthy to note that DePorre is not particularly interested in a stock's fundamentals or even what a company does; he just looks for the trend. While he does offers some thoughts on averaging in or doing limited stock sells along the way to take profits, this is not a book offering specific techniques. It's goal is to help you develop a mindset, to start thinking about how the market provides plenty of opportunities for big gains, and how the market often clearly signals when it's time to exit.

DePorre's technique is obviously not for everyone, but for those who are open to new ideas and do not have a good "system" yet to follow, this might be worthy to pick up.

You can get more details about his book on http://www.investlikeashark.com

Should You Gear Up or Pay Up?

One common question i always received, is "Shall I gear up on my loan or pay up the loan as fast as possible"? The answer depends. Confused? Well, there is really no real right or wrong answer here.... The answer lies with the risk tolerance of an individual and to a certain extent, age too.

First of all, let's break this down into different categories...For those who are in the 20s and 30s, it probably makes sense to take on a greater risk by gearing up, that is, leverage through loans with longer tenure, with the assumption that you have a regular income and/or reasonable amount of savings, investments or businesses that are able to generate some consistent decent returns. These group of people generally can afford to take on more risks and in the worst case scenario, they have something to fall back on.

On the other hand, people who are more than 40s and approaching retirement age may consider taking on lesser risk. Bear in mind that the maximum lending age is generally up to 65 years old. Basically one should make sure that one is able to continue servicing the loan post retirement. Another reason why i like properties such as high-rise apartments or commercial properties that are able to generate positive cash flows. In essence, the monthly rental is more than able to pay off the loan installments so you don't need to worry about it too much!

Overall, you should review your own financial goals, resources (such as savings, investments and other diversifications) and risk appetite in order to come to any conclusion. eg., if you settle your loan first, you may lose out on other investment opportunities that may potentially give you much higher returns than your loan rates. On the other hand, if investment is not your cup of tea or if you have limited knowledge, then early settlement may be the better choice since it is a sure gain. Also bear in mind that all investments come with risk, so you need to be able to bear the risk if your investment decisions turn sour!

Other things to consider include the economy and the likely interest rate direction. Currently i would consider a good time to borrow since the banks are offering very attractive rates to the extent of BLR (Bank Lending Rates) minus 2, which works out to be around 4.75% (assuming BLR = 6.75%). However, in lieu of the current high inflation, banks may raise interest rates going forward. So, you could risk paying more interests in the future! However, i believe the rise should be negligible since the current inflation is cost driven rather than demand.

Another important element is from a tax perspective, it may not be advisable to settle early since there are certain tax benefits that come with investment property such as tax deductibility on loan interests against rental income. Effectively you will be paying less tax on your rental income. If you have two loans for your home and investment respectively, settle the home loan first.

Last but not least, if you have credit card debts (balance transfer and installment plan not included), you may consider refinancing your current property so that you could use the excess funds to pay off the outstanding credit card debts! Like I always said, never ever borrow money through credit card!

Do share with me your thoughts.

JG8D69D

A Brand New Look!

How do you like the new outlook of my blog?

With the help of my good friend Bokjae, i finally managed to convert my blog into the popular 3-column platform and re-organized the information and widgets around the blog. I believe this will facilitate ease of reading.

Being a non-techie, this actually took me several hours to do the change and to reorganize them into appropriate places!

I hope you will like it too!

Have a good day!

Bad News Galore....

The past six months had been a very eventful period indeed. A string of bad news seem to flow one after another...let me recall, it was Bali where i was having my vacation with my family back in January this year and then, Malaysia's stock exchange reached the unprecedented historical high on 14th January! However, it was quickly followed by literally a rapid free fall thereafter, taking a 25% dive effectively until yesterday!

First it was the worsen US credit crisis which does not seem to get any better anytime soon, then the record crude oil prices which trigger off global inflation and spark off potential food crisis in certain developing countries. fear of US recession and the global economic slowdown, Myanmar typhoon and the China Sichuan earthquake that took away thousands of lives! As if these are not bad enough, locally in Malaysia the country "decided" to make the headlines too, with first the embarrassing and unprecedented "defeat" of the long standing coalition government (although still in power), then the political uncertainties caused by internal rumbling and power jostling, coupled with the opposition's resistance and attempt to topple the Government! Last but not least, the 40% fuel price hike further pour fuel to fire, causing price escalation across the board, particularly in food, transport and cost of building materials! Property developers and contractors are all in a limbo in relation to the current state of rising cost of building material!

On Wednesday, even the national Stock Exchange trading systems "crumble" under the pressure....trading was down for a full day due to severe technical problem! Many panic traders and investors were caught in a state of shock as the market sentiment across regional and local remain shaky!

What else are there? Well, both of my favourite football teams, Portugal and Holland, lost out in the recent Euro 2008 co-hosted in Switzerland andAustria! The only "consolation" was Germany didn't win!

What could possibly revive some ray of light? Well, perhaps the Olympics in Beijing can re-inject some optimisms in the form of sportmanship and winning mentality..... other than that, there is really not much to look forward to in the year 2008, except for some hopeful miracles...

On the bright side, the current market weakness may have also generated great investment opportunities for those who can either time it right or have the ability to spot and hold on to the jewels....