Tuesday, 28 October 2008

Tuesday reflection on a recession

Late last month, I wrote an entry which hovers around

Recession is bad for poor…
Recession is worse for the rich…
But recession is worst for those who are poor but think they are rich…


Some commented and disagreed with the above saying that the poor will be badly hit. Well, did I say a recession will be a good thing to the poor? Put it this way, when a recession hits, no one will be spared.

Why did I say a recession will be worse for the rich, generally at least? For your information, a lot of rich people have got their wealth slashed by more than half in the last couple of weeks.

Of course, with half of their wealth gone, many of the rich are still left with plenty to spare. That is actually quite true but it does not change the fact that rich are affected more compared to the poor. Anyone here got their wealth slashed by more than half?

And then there are those who commented and said about their fear of losing their jobs and unable to pay their mortgage and car instalment…

Well…

If you have been earning RM4,000 to RM6,000 a month and you are driving a nice and big Japanese car and at the same you bought a RM400,000+ apartment… or worse… if you are earning that amount of money and you are driving a BM or a Merz and living in a nice luxury condo in Mont Kiara… don’t you think you belong to the third category above?

Oh yes, the usual crime-rate-will-increase. You mean crime rate in this country… THIS COUNTRY… will improve if there is not recession?

Let me reiterate… a recession is bad. And it appears that this is going to be the mother of all recession. Just in case you didn’t know, the last version of such recession started World War II.

In the last couple of weeks, I have witnessed that greed will always present in everyone’s heart. Everyone is just trying to make the best out of the situation. The middle class jumped into the share market thinking that it was the worse. The rich whine and whine about losing so much money and needed to make back what they have lost when they still have millions with them. The poor are thinking about using their lifelong saving to “capture the opportunity”.

Everyone just want to profit. And I see a lot of rich people trying to trick middle class and poor people into believing that they can profit so that the rich can regain their wealth. This is why I think I think a recession is good. It will put some realign the lives of many… a healthy reshuffling of wealth as some call it.

And is the worst over? Well, someone said that 2 weeks ago… and also last week. And probably, someone will also say the same thing this Friday.

32 comments:

Freethinker said...

Somehow I doubt there's a good reshuffling of wealth..

Jed Yoong said...

Hey Zewt

I agree with your theory in general which is if you dun play the market you are ok and that you dun overextend yourself that you are ok.

Re the rich cheating the poor, it's all very sad, esp the invst banks selling those investments to pensioners etc. Sometimes it's about human greed but sometimes or most times this richer, greedier ppl just exploit the simpler, more trusting ppl Sort of like the Chinese to the rural Malays in the past but it applies across races.

But I disagree that everyone just want to profit. It depends on how you profit, charging ppl exorbitant prices just 'cos they dun know better is unacceptable and so are other forms of cheating like selling bad products.

Some people just want to earn a decent living and retire comfortaby but not necessarily out of exploitation or profiting from others but by rendering a service or good.

Some people will even help others without thought of profit.

If they are rich, and rich bcos of their hard work, it's more likely that after whining, they will get down to work to get back their wealth, like you said, or control their losses, or make the best of the situation. Those who are rich by inheritance, won't really even care so much....

One should also take responsibility if one has been "cheated". Perhaps if one was less greedy or naive, then it would have been avoided.

Rin said...

this can't be worse than the Great Depression kut... I hope not.

Maybe bcos I'm still a student, w/ earnings from part time jobs sufficient to cover my daily expenses. And maybe bcos I don't hav to pay for car/house/credit card instalments etc, I (and my family too I think) haven't really felt the effects of this recession yet...

yeah prices have gone up and we have to cut down on spending/be thrifty, but most of us can still afford 3 meals a day (though less McD/Wendy's/TGIF etc allow!), electricity, water, petrol, streamyx!...So, dunno, for me it's not that bad...I think most of us ordinary people should be able to scrap through...the hardest hit will still be those who are really poor...Donations to the needy have decreased internationally...

as for the rich, I don't give a damn how much they've lost...Those are their "extra" money after all, they'll survive.

littlepolaris said...

True. Everyone is living a hard life and they are struggling very hard so that they won't lose their job. At this kind of period, I think everyone should learn to put down their 'face'. No BMW or Merz nvm, most important is family. As long as everyone is safe and well fed.

littlepolaris said...

True. Everyone is living a hard life and they are struggling very hard so that they won't lose their job. At this kind of period, I think everyone should learn to put down their 'face'. No BMW or Merz nvm, most important is family. As long as everyone is safe and well fed.

suituapui said...

I don't think it wil ever be over...or at least, not that soon. Everyone will just have to accept that it's a global thing and adapt their lifestyles, too bad if they have already got pinched, and move on from day to day...and hopefully, get back on their feet again...this time, older and hopefully, wiser.

iamthewitch said...

I agree with you on the recession will hit the rich more than the poor. And I'm not mean but I am glad to have a little reshuffling of wealth going on, or else the rich will always get richer and the poor, poorer.

myop101 said...

hehe... of course i want to profit too... but i didn't enter the market now for obvious reasons. the earnings report are not out for companies in US, the oil price (and commodities as well) is still dropping, market sentiment is still weak, banks are not lending to one another... the list go on and on and on...

besides, i have set target prices for some shares i think worth investing...:)

i know if i buy now, it might go down lower (or it might not) but until most of the bad news are in (hehe...i am checking the ground as well on consumers sentiment), i think it is best to keep the monies in my pocket first...:)

myop101 said...

on the rich wanting to trick the middle and poor masses to buy shares, look, they just have to analyze for themselves whether these companies are worth it and whether they have the appetite to invest for more than 2 years horizon.

as for me, i am not in it for the quick kill... it is just buying value investments with solid track records...:)

HuntressMoon said...

ah memories.. i remember once my mom and dad both lost their jobs during a recession in 1998. Mom was working for motorola and dad was an architect.

there was not enough money for food etc, as you know back then money is small, inflation is high. interest rates from banks were 8% and my dad had to pay for his car.

Anyway, recession times made me realised how hard my parents slaved for the kids to live comfortably. yes we were all brats that time.

but, it was my first time getting a part time job as sales assistant in a socks shop in bandar utama and worked to help pay my school books and other expenses. heck, it was the first time i learned about independence.

2x2 matrix said...

Zewt,

I don't agree with you. How is reshuffling of wealth going to happen? All the gains on losses are on paper. It is all paper loss.

I don't see how the rich are "tricking" middle class. You need to back up your opinions with facts. No one is pointing a gun at you to do anything.

Your thinking is rather primitive and communist in nature. I find it really odd because I feel that you are a capitalist at heart. Perhaps you are just disgruntled because you have not made it in life. Don't be despair, try harder and you shall one day be a true capitalist.

PurpLe~MuShRooM said...

If you are talking about assets and money, yes, it affects badly for those who has them invested.

But don't forget, recession affects everything. Imagine, someone from the lower income group may be hoping for the promotion or yr end bonus to pay off some insurance or bills. Suddenly, all these promotions and bonus are freezed. I think the worst hit is still the poor. Very 'cham' one la... I have been through that.

So don't say that it is worst for the rich. It is worst for those who needed money... and the poor needed it most.

Seaqueen said...

I totally agree with what you say. Especially on the crime part. :)

khengsiong said...

Well, an agent of a multi-level-marketing (MLM) company may want to drive a big car, or two, even if he/she isn't rich yet. This is purely for marketing purpose.

Remember, MLM agents don't make money by selling goods. They make money through recruitment. OK, they do sell goods, but mainly to their downlines.

By driving big cars, they essentially tell the potential recruits, "If you join me, you can get rich too." Now that economy is slowing down. Many people want to have side income. This is a good time for MLM. Consider buying the shares of Amway :-)

Alex Yap said...

Things going from bad to worse. The pain part is yet to be seen. We are going to be hit as hard as other country.

When our government keep insisting that Malaysia will be able to absorb the impact. Absorb with what? Our money lor.

There is a common saying, when America sneezed, the whole world caught flu.

zewt said...

freethinker - acknowledged, perhaps a realignment of wealth vs un-wealth is more like it.

Jed Yoong - perhaps everyone is a generalisation... i will say most want to profit. to the least, most want to 'capture the moment' and many are feeling the heat right now.

Rin - hahaha... yup, the last time when there was a recession... in 1987 and 1997, i was not in the work force yet and never know what it was like. i did notice a few change in my neighbours, but not my parents.

littlepolaris - yes, now is a time to reflect on what is more important. which is why i think that a recession may not be a bad idea. better than generating fake wealth for everyone and everyone think they are happy and rich.

suituapui - yup, time for everyone to come to their senses. better now or never. bring back the humanity side of things.

iamthewitch - that is exactly what i am hoping for. but look at some comments, some are still hoping to protect their position.

zewt said...

myop101 - well, did u read the NST yesterday? did u read about one company having a fair value of RM7+... i wonder how many ppl jump into the market after that.

huntressmoon - that recession brought back a lot of humanity to things isnt it?

2x2 matrix - no, pointing a gun will not be 'tricking', pointing a gun would be 'forcing', please get your facts right. tricking means announcing to the world that the worst is over and this company and that company is worth investing. just browse around the news portal or bloomberg and you can see. if i sound like a disgruntled capitalist wannabe, then you definitely sound like someone who is up there refusing to come down. while i need to try harder to get up there.... you are definitely coming down in the light of things.

purple-mushroom - yes, which is why is is bad. everyone will be hit. it's time to reassess things and bring back humanity into things.

seaqueen - sad isnt it?

khengsiong - hahahahaha... nope, cash is king and i am going to hold on to it with my life.

alex yap - that is true. it's something we cant change, being at the mercy of the big bully. now i understand why TDM dislike america so much.

vegemaster said...

well, i guess this is the time where we will finally get too see who is the "snake" and who is the "dragon" around you.

People who manage to pull through this least affected will be the winners.

Recession will definitely come, the reason we still havent felt it as bad is because its just at its beginning.

I have an uncle who is working as captain and next year 10 containers ships are to set sail. dont you think that the company would love to cancell it? They have no choice because they already paid for it. But after that 10 ships, do u still think they will continue with 10?

we'll just have to wait and see

Swee Ping said...

i agrees with zewt at some point. those that feel the hardest will be the rich ones because they cannot forbid their high end living lifestyles and of course those who pretending to be rich.

haih, as usual, rich will be richer.

2x2 matrix said...

Zewt,

You are wrong. Fortunately, I am not directly affected by the recent economic upheavals. I am not affected because my exposure is low.

However you are right to some extend. I am up there, but even if I fall, sorry to say it wont come down to the level that you are referring to. Though I am not an investment banker and I have no sympathy for them, I am sure they will be able to survive in the longer term. Life is fair, you always need a leader and someone to be led. Some people just make more money than you.

I would think that it is better for you to embrace what is happening than to complain that life is unfair (or modern slavery, whatever you want to call it)

CSK said...

Short cut/imaginary wealth creator like MLM,investment banker, finance people will always be the nemesis .

But my respect will go to Entreprenuers that build their business. I think they deserved their wealth vs the risks that they have taken.

Taxy Driver said...

The multiplier effect of making money out of money has its equal and opposite reaction during down time. That's just about it.

The rich are rich because they are the ones who:-

1. make money outta thin air (derivatives trading and what not)
2. sold stuff (and services) to those who made money outta thin air
3. sold stuff to those who sold stuff to those who made money outta thin air

So, when number (1) does a Newton's third law in the market, numbers (2) and (3), whom could rank in the rich or even not so rich level of the money making food chain gets to feel the domino effect.

The poor are formerly numbers (1), (2) and (3) as well as employees of those same numbers whom are retrenched because they could not provide (2) and (3) to their employers anymore.

Part of the vicious circle that is capitalism.

ummie said...

I frequently travel to Batam. Getting a bigger paypacket more than their countrymen in other islands of Indonesia does not make them any richer. Being most of their basic necessity comes from Singapore, inflation or not, they're paying almost everything very much more than us. With this recession, it has made their life more and more miserable.

myop101 said...

not really... i don't believe in analysts at this point in time...:P

but i do know some shares are attractive...:)

myop101 said...

oh btw, even that particular one you are saying...trust me, it is attractive too... the fundamentals are there and it will only be a matter of time before it goes up. which is why, we shouldn't look at it from only a few days or weeks investment horizon.

i am picking only those that yield high ROE, consistently good dividends and low gearing with a strong market position. but meanwhile, i am waiting for the signals to appear that things are stablising... i can wait...for another month or so...:)

Leah said...

Most people are broke and in debt up to their eyeballs with credit card debts, car payments and mortgages. Actually, debt isn't used by wealthy people nearly as much as we are led to believe. Most wealthy really build their wealth by investing what they have saved, not what they owed.

Huei said...

i think those who fall into the 3rd category will disagree with u..no? living in denial! hahah

MLM? do people still fall for that? recently i was introduced to this new scheme. apparently u pay RM700 registration (non refundable) and RM10k deposit (refundable), together with potential shops that you want..if approved..they will get that shop for u..renovate..provide u with the basic things like shelves..cashier..PC..and also additional things like CCTV..MASSAGE chairs...TV..and you get all your stocks for goods (stuffs like amway)..completely at no charge at all..n whatever you sell..u get 10% or 5% as ur "salary"..u believe anot?

the most recent update i got was..they have over 700 applicants already..if you ask me...700 x RM700 (registration fee) = that's hell alot of money! AND counting!

i wonder how many will be "approved"..and if it's really REAL, i wonder how many % will go to friends and families

with current recession..the third categories might fall for that above..unless it's a REAL thing..

but i always believe in one thing..

"bin dou yao gum dai jek kap la chui gai tieuu"?

Faisal Admar said...

You might be right. Rich is always greed and wants more. End up belong to the average category and the average afraid of losing money and keep saving. End up, reshuffle. Who knows?

zewt said...

vegemaster - well, at least that 10 containers have been sold. the money your uncle gained should be be able to sustain for the time being.

swee ping - that is why it is important for the rich to stop being richer

2x2 matrix - i am sure u already know my reply.

CSK - not until they exploit ppl.

taxy driver - hahahahaha... now, i will call that taxy driver 3 laws of recession...

zewt said...

ummie - that is bad news. let's hope ppl will stay calm when the tsunami is here.

myop101 - well, they are going to write off a big forex loss i heard. it's already in the news. well, i just dont want to touch anything now. cash is king.

Leah - in america? well, when they have reached that level... they shuld contribute back to the society.

huei - wow... that's almost half a million in registration fee alone. trust me, during recession times when ppl are desperate... a lot of scams will come out. and a lot will fall for it.

faisal admar - i think reshuffle is too far fetched... maybe realignment... anyway, both are equally good.

myop101 said...

wrote off liao....RM100 mil some more... but it is ok... this company is still the most efficient of the lot...:)

zewt said...

myop101 - guess the shares soared already... :P