Monday 29 September 2008

Why I prefer it to fail

A few weeks ago, the US financial market was reaching a near collapse, threatening a possible global economic recession. Everyone was in a panic mode until the US govt announced a USD700b bail-out plan. Then things sort of picked up a bit, with stock markets around Asia region rallied for a while.

Now, it appears that the bail-out plan may not happen, triggering another major shake up in the market. It sent out a chill to a lot of people late last week as a few more banks in the US failed.

Well, if you were to ask me… I would say… let the bail-out plan go bust!


I’ve been talking to a lot of people about the world’s economic health and I noticed one thing… most, if not all of the people who dread a crash in the market are usually the ‘richer’ ones. These are the people who are currently driving big cars and living in high-class condos, not to mention having a few other units around the region as… “investments”.

They are all very stressed now. They are stressed not because they are afraid of losing their jobs, but because a crash in the financial market will result in them losing their rather luxury lifestyle. These are the people who have been making heaps while the rest of the workforce remain at the bottom of the food chain.

Of course, I am sure you are thinking right now that a global recession will also result in people like us losing their jobs.

That is very true, our jobs may or may not be at risk depending on the nature. But have you been spending beyond your means, regularly swiping that piece of plastic called credit cards and buying things that you do not need to impress people you do not like? If you have not been doing so, you should have amassed for yourself a certain amount of savings to survive.

Put it this way… at the end of this year, your boss is most definitely going to announce something like…

“Don’t worry, the company is doing well. But due to the current economic climate, we have to be mindful of our spending to ensure costs do not escalate. At the same time, I trust that we will all work hard to ensure that this company continue to grow”

But then, it effectively tells you…

“Times are bad. If you still want your job, please work extra hard to ensure that the company stay alive. And while you’re at it, don’t expect an increment or bonus this year.”

Some companies are already drilling this message to their slaves.

The rich has gotten too rich while the poor are not getting any better. Inflation is soaring. It needs to come down. So many of us cannot afford a decent property in town because property prices have been jacked up by people who not only buy one, but a few properties as “investments”. Developers prefer to build high-class condos because they know there are people out there who will buy these expensive condos with an intention to sell or rent.

And who are these people? They are those who fear a recession most.

When recession is here (and yes, it’s definitely coming), crude oil prices will fall, car prices will drop, property market will burst… prices of everything will come down. Some of us may lose our jobs. But if you are willing to take a pay-cut and have not over-committed yourself financially (i.e. buying a car and a house within your income capability), you should be alright as prices of most things will drop to an affordable level.

Perhaps I am being na├»ve, and I may not have been sensitive to the impact of recession to you. But I personally don’t really fear recession that much. Time for the rich boys and girls to face the music and sell off their stuff cheap to poor people like me. And like I said, our bosses are going to screw us one way or another.

Last but not least… let me leave you with this…

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…

Which category are you in?


Anonymous said...

"But recession is worst for those who are poor but think they are rich…"


Another good post and true to a certain extent.

The US bailout is disgusting. Just saving Paulson's Wall Street buddies' asses when they took stoopid bets in the derivatives markets. What to do Paulson was ex-head of Goldman Sachs. Dunno whether got vested interests or not alos. Also, if he is such a great finance brain, why din he spot this coming? My guess? He's been creaming the credit-default swap market too, like his filthy rich USDmillions of dollars a year investment banker pals...

But since we are both considering migration, how will this impact us?

Like you said, if we've not been building up debts buying things to impress "people we dun like", then this is a good time to go shopping. ;)

CK said...

u raised up a few good points which jed mentioned in her comment. jed, u r fast! haha... dun worry, it's not a competition.

hope tis recession is not tat bad for though im poor but i think i am rich...with love :) hahaha...

Surind said...

Hey... I'm considering migration as well.. please take me along... hehe :)

But seriously... I will never have a family, or raise my family here.

Anonymous said...

when recession happen

all those newcomer(graduated undergrad) would definitely feel the pain.

because they once told me.....we should buy a house for investment.....we should buy a car.....we should invest in public mutual.....saving?


when you have liability...and you bound to pay for each of them every are officially a slave....moden slave? hehehe

so let recession happen.....i would love shopping for undervalued stuff...cheers!

myop101 said...

tsk tsk tsk....

damn, i see value investors popping up everywhere....:)

anyway, to be fair, the truly rich will not be badly affected by the coming recession. it is those who overgeared in buying growth investments who will be badly affected.

like you said, they have to reduce their luxurious lifestyle habits to survive.

but alas, the poor just get hit harder.

i am not sure if you are aware but the LIBOR has been moving up of late. this is because there are not enough liquidity in the banking system. good banks holding other banks papers are now reeling because they have to write them off and they are not incline to lend. as a result, innocent people and businesses who need real leverage to do business are now getting stuck. it has a contagion effect and it is now hitting european markets too.

i am sure Malaysia would not be spared as we are a small nation but trading in a big way...

Huei said...

oh well..went through loosing my job..done with that!

and i must say...i hope that it fails too..SOME people i know are just getting too rich by conning their parent's will and getting extra one share..mind you that one share is alot, but not alot when shared among the 6 of them..but they're too greedy u see! and i'm almost defnintely sure a major part of it is contributed in the share now's the time for
"what goes around..comes around"!

Anonymous said...

"But recession is worst for those who are poor but think they are rich…"

I'm poor but spend like I'm not? Thank goodness I don't carry any credit cards. No debts which is the most fortunate bit of my finances for now.

But there will be opportunities and opportunists in every crisis... so look out for more drama to ensue...

Purple~MushRooM said...

Don't really agree. Truly rich people do not worry about recession. The ones who worry most are those who took loans to invest.

Anonymous said...

if the saving is in fast-depreciating currency, then how

Anonymous said...

Recession is the time to spend and pick-up in stocks. Wait and hold till it goes up. Buffett's advice. :)

I guess when you have it all, you get very afraid to lose it all. Its normal. One thing that is hard to learn is accepting loss and seeing it all spiral away.

I still think that those who embezzled should pay back. Why should the gov pay such a huge bail-out? This move for a bail-out is definitely politically motivated.

zewt said...

Jed Yoong - exactly, the bail is only to save the ass of those already super rich, ppl drawing millions per year. why do we need to care about their well being when they have never put the interest of the poor corporate slaves in their mind. as for us migrating, aust is badly hit, not a good time to go seriously.

CK - well, if you poor but think you're super rich and have been spending like hell... God bless you.

Surind Raj - where do u plan to go?

erm - yup.... there's this believe that you will need a car to get a job. but they dont realise... without a job, they can never get a car. people must learn the lesson the hard way... so for those of us who have been prudent and living a controlled life... our time is coming.

myop101 - when you're overgeared as an individual... then it's most probably credit card bills. if you're company... i mean, who cares abotu companies anyway? hehe.... malaysia will definitely will not be spared... behold first quarter of 2009...

zewt said...

huei - hahaha... a bit personal there. but you're right, it's time for the greedy capitalist to pay their deeds.

life for beginners - ahh... truly understand the opportunities in every crisis notion... i for one is definitely looking for the opportunity.

purple mushroom - disagree... they worry... just like those owners of merrill and lehmann... they are already super freaking rich... but they worry their will not be that rich anymore. as for those taking loans to invest... their greed will pay one day.

anon @ 30/9 10.08am - that is something quite out of our control i am afraid.

pinknpurplelizard - precisely... money just didnt disappear. they said the market will have to write off assets worth 4.5 trillion. where is all the money? all 4.5 trill of them? someone somewhere out there in the deep blue ocean is smiling i can tell u.

Anonymous said...

this is a news flash from my broker:

[07:03 MYR NEWS: Malaysia Says Liquidity Ample; GDP Growth Unchanged] Singapore, Sept 30. Malaysian banking system has ample liquidity and its economy is sound
enough to withstand the crisis in the global financial markets, Deputy Prime Minister Najib Razak said. Najib added the govt maintains GDP growth outlook at
5.5-5.7% this year. He added policy of financial liberalization will be maintained despite crisis.]

Fellow Malaysians, don't worry la! Our economy is strong enough to withstand the crisis, ok? *vomits blood*

Unknown said...

No lah, it will hit the not so rich far harder....$20k is peanuts to a millionaire but it is life savings to some of us.....if USD tanks which i believe it will, oil price will skyrocket again & there goes inflation then we all cry cry about expensive fish, chicken, rice, cooking oil etc but these staples are minimal to a millionaire's bank account. THe ones we should hang for this mess is the Fed Reserve for being tidak apa about their lending standards of banks

so what do we do? go buy gold! yup grandma was right :)

Anonymous said...

I agree with you! Perhaps recession isn't that bad to us (poor people) at all!

Mummy said...

hey zewt, actually disagree with you. As much as we all resent these greedy fat cats of reaping the goodies all these yrs, but in any case of recession, the poor & middle classes will be hit hardest. In relative terms, these rich will be less rich, but we wd suffer much more. The ones to lose their jobs at the end of the day are those at the bottom rung. They are disposable & easily stepped over. Inflation will hit not the rich as much, but the "vulnerables". The rich will merely lose some of their investment, but many of the lower classes will lose their businesses & life savings. With worsening recession, crime will rise too.

Swee Ping said...

i agree that the rich people will fear of losing their comfy luxury life but aren't us the same? we also hope to maintain our middle-class comfy life.

taxy said...

You shouldn't want it (the bailout) to fail just because its worse for the rich or those who think they are, but more of why should hard working people paying taxes be financing some rich people's salary just because they decided to gamble with their financial institution's money.

If anything, the bailout is trying to cork the massive hemorage which will be globally felt in less than a month's time. But then again, if you be a capitalist, it be the worst thing they could do... as it'll be like selling your soul to the Devil even though you proclaimed your belief in the Almighty, know what I mean? It'd have been like "Those Communists got it wrong..." but suddenly adopting a socialist outlook just because capitalism got you to the edge which looked like if you tipped over, it'll be the end of you.

I'm talking crap.

Anonymous said...


How is life ? Have been so busy the last few mths.
I think what you have written is just surface only lah, there are more things behind everything happening here.
My golden rule about life is live like a poor then whether recession come and go, you won't be affected.

When I first married my American husband, I asked him to use his old work socks for night socks (why buy night socks ?) and switch off living rooms lights when not in living rooms, switch off central AC (in US, most houses have central AC) when we are not home. Switch off hot water system (central system again) when we go holiday.

Don't buy garbage bags, when go to stores for shopping, ask the cashiers to double bag the goods, they are more than willing. Then use the plastic bags they give to use for garbage bag.

And the lists go on. I live in a very frugal household. My dad had a lot of $ and estates but the old man was so stingy that it passed on to me.

Now as I settle in America, I looked out for every deal that I can spot on.

I have been getting practically all my household goods for free, from tooth paste , tooth brush, shampoo to Tylenol etc because I have learned the art and science of coupons. In fact, one can find free manufacturer coupons for every good that is in the store. All one has to do is 'rajin' to look out for it.

Now I have a whole store room fill with free stuffs. I have gotten myself 200 free of Revlon and Cover Girl mascaras, eye shadows, lip sticks, brush, foundations for free. And I have gotten 1 year supplier of cereals for free and a year supplier of Loreal brand shampoo and conditioner for free.

Recession come and go, it does not worry me a bit. Instead I am it is a time of opportunity for me because of the $ I saved on my house hold items, I am looking for opportunities to buy more real estates as people are losing their home left right center.

Am I cruel, not ! Everyone has the same opportunity like I have here in the US. And I am an immigrant who even have more difficult time when I first came here. I personally do not think there is anyone in America who should be poor, it they are poor, it is their own doing with the exception of natural disasters and health related issues.

Always live below your mean, then recession will mean a time of great opportunity.

whoalse said...

ditto to this post!

can't wait for the property market to bust! it's been going crazy for the past many years til people like you and me couldn't get ourselves our first one! not only that, they have been pushing the rental market up too!

either way, we are at the losing end.

So, hell, to the bail out! why should the rich (and irresponsible financiers) be bailed out when they are pulling such astounding salary?

Bengbeng said...

the rich will lose some of the fat but will still lead a reasonable comfortable life without its excesses. for the poor who lose their jobs n their children 's stomach growling with hunger like my son's every few hrs..this is no joke. recession affects every body and the poor n middle class can afford it least.

anomaly said...

if working for a US investment bank is not bad enough, having this whole process failed will spell more trouble for me. its either i lose my job or get lower pay/hour. bad times will mean fewer deals and fewer deals will mean we work harder..harder and harder to win mandates. likelihood of 100+ hours a week efforts on pitchbooks going to waste will also be higher in this case. so no! must not fail! :)

zewt said...

sooi2 - that's all he can say. unless of cos anwar is the topic of conversation... then he will say... ahhh, economy very bad, cos of anwar.

see - hello there. hahaha... grandma's... ma's advices all very good... we dont listen only. :)

jam - only if you have enough savings.

Mummy - wouldnt disagree with your argument. the bottom rungs are certainly not easily disposed. which is why we must be mindful and should be vary of our spendings and be ready for rainy days. besides, like what i mentioned in the post, no matter what, we will suffer by virtue of us being in the last rung of the food chain.

Swee Ping - hello there, welcome to AZAIG. well, nothing last forever. :)

Taxy Driver - i get the flow. which is more or less the sentiments which i am carrying. these rich fellas have long been enjoying the best in life while capitalising on others and now, when they are shite, they wanna use our money to save their ass... just to protect their lifestyle... bullshit.

jamy - no, you're not cruel at all. and i think your lifestyle should be adopted by many. the pool of money in this world has been slowly gathering in the hands of only a few... this has made life miserable for a lot of ppl... if only the rich knows what's the meaning of moderation... we will be able to turn this world into a better place.

whoalse - my sentiments exactly. and now they are pushing for another round of approval... i say... REJECT IT AT ALL COST!

Bengbeng - i believe the coming recession will hit the poor the most... as the core of it is the financial institutions.

anomaly - hahaha... mate... looks like you're on the other side... :)

Swee Ping said...

keke, you welcome me the second time d :D

Huei said...

because i cant rant about this on my blog =P

Angie Tan said...

Yeap, we slave workers are getting the message too.

Anyway, like what my mom always says, "Horse Die, Walk-lo..."

zewt said...

swee ping - that's called hospitality haha!

huei - why not? i am sure u can.

angie tan - true... i remember during the 1987 depression, a lot of my neighbours started selling chee cheong fun and corn.

Anonymous said...

Hi Zewt,

This is an interesting posting. I agreed with P-mushroom and some other comments, the poor or average income will suffer more. I define rich as those with huge net worth (asset- liability). I think most of those whom we perceived as rich have little net worth or perhaps negative net worth. The latter are the groups who are fretting now.
I think there are lots of people who are financial savvy now, those who live by with second hand cars, utilise credit wisely and committed to save at least >30% of their income. This group are actually hoping and praying for the recession to come. If you read the letters published in the latest Personal Money, there are quite a numbers of savvy investors who are waiting for the crash and perceived the crash as KLSE and property Mega Sale. If they invest wisely and not be greedy- adequate reserves to endure the crash period for at least 2-3 yrs, this group will come out richer in every recession. Ai ya, anyway it's no rocket science that recession is part of economics cycle, it comes about almost every decade. Those who's been through the 1987 and 1997 should know better and most importantly, should learn from the past and be prepared...

Anonymous said...

Ha...I couldn't agree more with your statements, recession is really really worst for those who are poor but think they are rich.

zewt said...

ivy - yes... i fall within those group of ppl, though i didn buy a second hand car. yes, i wish the recession will come cos then, my money will worth much more. unfortunately, those rich are trying to protect their position with all kinda bail out scheme.