I'm sure you all have seen the headline today in the Star - Stock Market Plunge (all over the world!) I'm not commenting so much on this but the following are some interesting views of mine that you may want to read.
There are too many intellectual views on inflation all over the globe but most of these ‘speculations’ if not treated carefully could be extremely misleading. Of course, inflation happens… and off late this issue tends to be ‘connected’ to the ever rising global crude oil price although this is not only the cause..
Returning to the basics, when services and products/goods prices started to experience a certain rate of increase or we start loosing our purchasing power (or your money becomes worth less than before) then it is very safe to define that ‘these are signs of inflation’. Measuring inflation is usually benchmarked to a basket of services and products/goods on our side and on the production side mainly known as PPI and CPI. Again, these only serve merely as guides as they are still based on conventional random analysis, sampling and ‘playing with a bunch of datum’. But then, how come the CPI rate has remained stable (example in KLCI) despite these rising prices? It’s not just energy alone, there are other rising items as well. Think of other commodities such as health and education. Don’t forget the property market (prices,mortgage,taxes and maintenance)
US Federal Reserve rate hike? This is nothing new!. From my sources, rates have been hiked ‘regularly’ since the last 2 years and I’m sure most economists (be it ‘K’ or ‘P’) and investors will agree with me that that regular hiking will hurt the growth of economy. Another issue is policy making addressing the risk of inflation – another no ending issue! (all depends on future data and ‘blah’, ‘blah’)
To aggravate situation further – SPECULATIONS -spreading ‘DEFCON-type panic’ in the market. Even before the Fed announce the hike, the stocks, bonds, commodities started to be traded lower. Banking and Financial institutions increase their prime lending rate and guess what? Sit back, you’ll be experiencing BLR turbulence known as loans, cards, property etc. etc..
Sometimes unnecessary panic or ‘being too cautious’ may also lead to ‘smart opportunists’ taking advantages. (test the market with 'shocking rumours substantiated by 'so-called' data and see what happens) The 'best' part is that the Feds will still increase the rates even in this ‘simulated chaotic’ situation. I have seen too many times - 'false alarms’/’rumours’ (at first) of rate hike by manipulators/speculators eventually becoming a ‘real one’ (later) eventually due to news of banking & financial institutions 'prematurely planning their ‘rate increasing program’ and sudden change in investment behaviour towards stocks/bonds/commodities/derivatives/futures etc.
Well, it's a common thing, an enemy will attempt to weaken the spirit of another enemy before attacking them.
I have always stressed in this thread :
a) ‘don’t panic’..’relax’,
b) give it just a little bit time,
c) analyse and verify the source of information first..
But some 'smart' people just don’t listen - finally it falls on deaf ears ("Nik you're just being paranoid") Perhaps I am too small to talk
Ok enough with lectures..this time I really wanted to hear something from all of you...please don't turn this into a too hot issue...(even if it does...I won't blame you.)
What is our next action? How to tame inflation? I'll tell you later