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Thread: Financial crisis coming

   
   
       
  1. #1
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    Financial crisis coming

    To assist readers in following this thread, which has reached more than 90 posts as at 28 Oct 08, we are appending a spreadsheet showing the dates and the titles of the threads.

    Six months ago (8 Apr 08.), when I started this thread on the Financial Crisis, there was a lot of scepticism concerning the severity of the crisis. In fact, the problem has been bubbling since the 3rd quarter of 2006 but many refused to recognize the signs, blindly believing that the US Federal Reserve would be able to get the economy on track as in the past.

    http://www.usj.com.my/bulletin/uploa...2&page=1&pp=15

    I think it will be instructive to review events over these 6 months to see whether we can draw any lessons from it for future events.

    Read on .... 8 Apr 08

    Sometimes we are so busy with our daily lives trying to make ends meet, we don't pay enough attention to major crisis looming in the horizon.
    This one has been 1 1/2 years in the making.
    Please consider carefully the implications for your financial future.

    IMF chief says global intervention needed on credit crisis:
    The IMF is always late to the party.
    When they wake up, it means that a full-blown crisis is already on our hands.
    http://www.straitstimes.com/Latest%2...ry_224661.html (Admin note: page removed from website)

    An understanding of recent financial history:
    http://atimes.com/atimes/Global_Economy/JD08Dj06.html

    Liquidation is only solution to crisis
    http://atimes.com/atimes/Global_Economy/JD08Dj01.html

    The US is in recession already.
    Chances are high that the USD will crash.
    It has already dropped by more than 40% over the past 5 years and almost 30% against the RM.
    A USD crash will pull the RM down with it.
    Gold has gone up by 350% against USD over the last 7 years.
    There is speculation that gold may go up by 500%. So, buy gold as an insurance.
    Food and precious metals prices will remain high in the foreseeable future.
    Food price is underpinned by our need to eat. So far, we have not discovered a way to avoid eating.
    Start planting food in your garden.

    Do not allow the fate of your financial future to be tied to the actions of the World Central Bankers.
    Their priority is to save themselves.
    A clear example is the fire-sale and bail-out of Bear Sterns by the US Federal Reserve, which saved the shareholders of Bear Sterns,
    and benefited JP Morgan (remember this name. A lot of the financial shenanigans seems to be linked to them, going back as far as 1913).
    This bail-out can cost the US taxpayers up to USD 29 billion.

    As far as I can tell, there is not one word from the Govt warning us about this problem. Why are they keeping so quiet?

    Badawi claims that the Malaysian economy is insulated from the US financial problem.
    Remember, this is an economics dropout speaking.
    He said on 12 Feb 2008 that he would not dissolve parliament and promptly did so in less than 24 hours.
    Can you trust him?

    What can we do?
    Trust only yourself. Do your due diligence to verify the facts.
    If you have money in the stock market or mutual funds, especially on margin, get out fast.
    If you have cash, park as much as you can in gold.
    If you have large mortgages tied to houses, sell your house now before the price crashes.
    Clear off your mortgages.
    If you lose your job in a financial downturn, your mortgage is at risk.
    Another risk is that your friendly banker may go bust and your loan is recalled.
    Don't buy property now. It will be cheaper in the future.
    Especially if the State govt start releasing land through public auctions.

    Chicken Little says: The sky is falling.

    All the best.

    pywong

    Attached Files Attached Files
    py

  2. #2
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    DON'T PUT ALL YOUR EGGS IN ONE BASKET

    Post 2: 8 Apr 08
    Quote:
    Comment by AllUrban
    All wise investors should be prepared against any financial crisis at any time.

    Don't put all your eggs in one basket...lots of baskets and lots of eggs.

    Warren Buffet may not agree with you. His philosophy is to have very few baskets, very few eggs and when the right opportunity comes, whack it with all you have got. Last I checked, he was doing quite well. Thank you very much.

    py
    py

  3. #3
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    DEVELOPING FINANCIAL WISDOM

    Post 3: 8 Apr 08

    I commend to you "Poor Charlie's Almanack" by Charles T. Munger.
    http://www.poorcharliesalmanack.com/index.html. In case you are not aware, he is Warren Buffet's partner.

    Wonderful book to develop your financial wisdom.

    py
    py

  4. #4
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    WHY GOLD?

    Post 4: 8 Apr 08

    Comment by waga
    Not investment savy myself but read about buying gold as a hedge against inflation...questions..buy gold from banks (paper transaction) or actual gold from goldsmiths ?? or go for foreign currency as advertised by banks i.e OZ currency with interest of 6% and above....can somebody advise...


    To answer your question, it is useful to have an understanding of the history of money. You may find this article by Ron Paul useful http://www.lewrockwell.com/paul/paul445.html

    BTW, he is the unknown Republican candidate for US President. The news media has virtually blacked him out, just like what our media did to Anwar a few years back. Being a prophet or promoting unpopular causes is a lonely business.

    Why buy gold instead of currency?
    Throughout history, all currencies were debased to zero. Only a question of how long it takes. A few quick ones here Germany 1923 (http://www.germannotes.com/hist_inflation.shtml), here Yugoslavia 1993 - 1994 (http://www.rogershermansociety.org/yugoslavia.htm) here Wiki hyperinflation (http://en.wikipedia.org/wiki/Hyperinflation) and here
    hyperinflation history (http://www.sjsu.edu/faculty/watkins/hyper.htm)

    The point is: currency collapse is not as rare as we imagine it to be. When it hits us, it is very tragic.

    How to buy gold:
    Physical gold:
    Go to www.uob.com.my. See site map, gold prices.

    Certificate gold: You don't hold the gold. It is kept for you by 3rd parties but there is holding costs.
    www.goldmoney.com
    http://www.perthmint.com.au/

    Just do a google for gold and you are sure to find lots of sites offering it.

    Word of caution: There is always risk in investment. So check carefully.

    Usual disclaimer: This is not an advertisement to buy or sell the products mentioned here. The reader is deemed to have done his own investigation to check the veracity of the points made here, blah, blah, blah.....

    py
    py

  5. #5
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    DEVELOPING FINANCIAL WISDOM - TRY WARREN BUFFETT'S ANNUAL LETTERS

    Post 5: 8 Apr 08

    Comment by AllUrban
    I'll forward the link to my students as well.

    Cheers, m


    Could be a bit heavy for them. But if they are willing to invest USD 84.30 (not easy for students) and more importantly, invest the time to study the book, the financial knowledge and discipline they will gain would be invaluable.

    A cheaper alternative is to read Warren Buffet's Annual Letters to BRK shareholders. It is free http://www.berkshirehathaway.com/.

    The sad thing about our education system is that they don't teach the young financial literacy. That sets them up as suckers for the financial system to prey on. Well, that's how they create modern slavery.

    m, You can read about some of it in the KJPP Files section that I told you about - The Rat Race. I have to push myself to write the next segment - "The Pyramid" soon.

    py
    py

  6. #6
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    THE AMERICANS ARE NOT WORRIED

    Post 6: 9 Apr 08

    Comment by besitai2007
    I have asked my daughter who is working in Los Angeles. The people over there don't seemed to be hyped over the matter. Don't know if they are just complacent or is it that we are too proactive?


    Here's an interview of Jim Rogers, the co-founder of the Quantum Fund with George Soros, in Singapore:

    Tuesday, April 8th, 2008

    Jim Rogers: More Pain for the Greenback, and the Failure of the Federal Reserve
    By Keith Fitz-Gerald
    Investment Director
    Money Morning/The Money Map Report
    ......
    ......
    ......
    During that interview here in Singapore, Rogers also said that:

    * Although the United States faces perhaps its most daunting economic challenges in at least a generation, "in America, most people do not understand that there is a problem."
    * Because of these weak-dollar efforts - as well as the billion-dollar bailouts - "America is now the largest debtor the world has ever seen."
    * Although the central bank seems intent on engineering a U.S. economic rebound by creating an ultra-weak dollar, no country in history has ever emerged from a serious financial crisis by "debasing its currency."

    Read more here: http://www.lemetropolecafe.com/pfv.cfm?pfvID=6803 (subscription required)

    What Jim is in effect saying is that the USD will crash.

    The issue for us in Malaysia is:
    How much of our reserves are in USD?
    How much in other currencies that are linked to the USD?
    What is the effect of a crash on our reserves?
    Are our 2 Finance Ministers (First and Second) paying attention?
    Or is our 1st MoF too busy saving his a*s to bother?

    That brings us back to the original thesis of this posting:
    What can we do to protect ourselves?

    py
    Reply With Quote
    py

  7. #7
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    THE CRISIS IS SPREADING TO THE COMMERCIAL SECTOR

    Post 7: 9 Apr 08

    Comment by gary yap
    Heard on the news this morning the subprime crisis spread to the commercial sector.

    Whether M'sia affected or not, play safe. We're not soothsayer so every info coming we have to give some thoughts.


    It spread to the commercial sector months ago and is related to the cycle of increasing debt to pay off past debt. In other words borrow today to pay off yesterday and hope that tomorrow, you can borrow to pay off today. The merry go round stops during a slow-down when company profits cannot grow to meet the increasing debt. Then default starts.

    The problem is aggravated when the lenders collaterised the loans and sell it to 3rd parties after getting a rating agency to give it a clean bill of health and buying bond insurance to "guarantee" the loan. Sounds a bit complicated. This is a good place to read up a bit - http://www.investopedia.com/terms/c/cdo.asp

    In finance, what you don't know can hurt you.

    Our Malaysian bankers insist that our banks are sound and our money there are safe. So did Northern Rock in UK and they had to be nationalized to save the financial system - http://www.youtube.com/watch?v=I20lMyYW83E

    Do you want to put your fate in the hands of some unknown official in the US? Even former Chairman of the Federal Reserve, Paul Volcker, is condemning the action of the Fed to bail-out Bears Stern.
    http://www.bloomberg.com/apps/news?p...d=aCGyDXfClFvI

    One may ask: What has it got to do with me?

    Plenty. Imagine if the Fed went bust!

    That will be the Mother of All Financial Crisis.

    py
    py

  8. #8
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    doomsday scenario!!!great depression of the 30's

    I love this one by 'layman'.

    Post 8: 9 Apr 08

    By layman

    doomsday scenario!!!great depression of the 30's

    unlikely- with ingenius financial instrument concocted and 'invented'by FEd and banks,they can always postpone or even avert any impensing crisis
    look at greenspan-the interest rate wizard who manages to oversee one of the longest period of growth in USA and by extension the world who cleverly avoided any fallouts from the infamous crippling decade long recession in japan,the asia financial crisis,the tech bubble -never seems to bother the great USA
    even with the massive slide in value of US dollar against the euro / RMB and the still unresolved subprime crisis the DJ is still near record high-i am sure the FEd chairman possessed the charm and weapon to tackle the doom predicted by most economists

    so wheres the recession or depression or crisis??

    relax lah
    py

  9. #9
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    GOLD IS NOT EDIBLE

    Post 9: 9 Apr 08

    Comment by fonzie
    But gold is not eatable wor...!

    I think why people go on the streets when there is no job, no food, no money...is because the politicians screwed it up by twisting the arms of the relevant institutions to implement their (the politicians) cockamany ideas..!!

    The financial institutions that failed and "threatened (perceived) to drag all and sundry down" did not materialise - simply because such a scenario was not allowed to play itself out. Talking about "free market principles" (sic!)

    Just hope our working class people beware of people offering financial schemes that smell of snake oil..!!! You have housing loans that can be turned into something else, as an example....

    Cheers!
    FonZie


    Yes, gold is not edible but it is the safest hedge against inflation because unlike paper currencies, gold cannot be printed.

    Stop blaming the politicians for our problems. If we want change, we start with ourselves. Develop your financial resources such that no matter who is governing or what their policies are, you are insulated.

    A lot of the financial traps we fell into is due to our financial ignorance. We have only ourselves to blame for that.

    If you want to blame someone, look in the mirror.

    py
    py

  10. #10
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    Re: doomsday scenario!!!great depression of the 30's

    Post 10: 9 Apr 08

    Comment by layman
    doomsday scenario!!!great depression of the 30's

    unlikely- with ingenius financial instrument concocted and 'invented'by FEd and banks,they can always postpone or even avert any impensing crisis
    look at greenspan-the interest rate wizard who manages to oversee one of the longest period of growth in USA and by extension the world who cleverly avoided any fallouts from the infamous crippling decade long recession in japan,the asia financial crisis,the tech bubble -never seems to bother the great USA
    even with the massive slide in value of US dollar against the euro / RMB and the still unresolved subprime crisis the DJ is still near record high-i am sure the FEd chairman possessed the charm and weapon to tackle the doom predicted by most economists

    so wheres the recession or depression or crisis??
    relax lah

    Ha! Ha! Ha!

    Let me introduce you to the Mogambo Guru. He is just the right person for you.
    http://atimes.com/atimes/Global_Economy/JD09Dj01.html

    Visit him regularly at www.atimes.com

    Friend, the quantum of derivatives outstanding is USD 681 trillion. That's right, TRILLION! If you take the USD 100 note and stack it up, 681 trillion will bring you to the moon and more than halfway back!

    By comparison, the global GNP is less than USD 50 trillion.

    The bailout of Bear Sterns cost the Fed USD 29 billion. That's 29 with nine zeros after it. The latest report indicates that the Fed is reaching a deficit in its reserves because it is buying up all this toxic waste (subprime derivatives).

    What the Fed in trying to do to stave off the impending collapse is to keep on printing money to bail out the banks.

    When is the tipping point?

    Hint. Search for historic chart of gold price at www.kitco.com. It has gone up by 360% in less than 7 years. Is gold trying to tell you something?

    I have a couple of articles that elaborate on this matter but I don't want KW Chang to throw me more bananas. My stomach is full already.

    So, keep praying to the Fed.

    py
    py

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