Reality Check: Sustainable?

After experiencing a strong rally of more than a year, it’s time for us to take a step back, and figure out what is actually pushing the share market up to current level.


One year ago, Governments globally lowering down interest rate, pumping liquidity, were rolling out billions of economy stimulus packages. The purpose is to prevent our economy to down deep into depression. Well, these measures seem to be effective thus far. However, reality kicks in while more and more people are jumping into share market hoping it was not too late. Now, it was time for us to do some reality checks on our economy.



Perception 1:
The market is up because investors have confidence in the economy?

Reality check:
At first, they think is cheap and low interest rate environment (mega-sales).
Then, they scared losing the opportunity while others are investing (kia-su).
Then, they invest because others are investing (herd-mentality).

Are all of them really investing based on economy? Definitely NOT…


Perception 2:
Manufacturing sector is recovering with double-digit growth?

Reality check:
Manufactures are producing just to boost up their stocks level (re-fill), after months of decreasing demands and lower production last year. This is not demand-induced. This is to bring the stocks level back to normal, hoping to cater for better demand in the future. Anyway, the demand still not kicks-in and a lot of them already are facing higher prices of raw materials now. Clear example will be in electronics industry.



Perception 3:
GDP growth is above expectations this year?

Reality check:
GDP of a country is based on four main factors, namely government spending (G), domestic consumptions (D), export-import (E-X), and tangible investment activities (I).

G is activated due to stimulus packages.
D is activated due to incentives given.
E-X is activated due to the above reason (perception 2).
I is activated due to history low interest rate environment, and excellent share market performances too.

In fact, the effect of stimulus packages takes years to show the result. Incentives given are stopped now. Interest rate is inching up again.

In my opinion, the sustainable of our world economy need to count on the basic rule – demand and supply. We are producing now without a really strong demand. And, we need a better employment rate and business sentiments to create this demand. Sounds easy though, but many efforts are needed.

Comments

Post a Comment

Popular posts from this blog

Exclusive Interview: 2011 8TV Hot Chef (美食型男) Jason Cha

Image
Dubbed as one of the most handsome guy among the participants of popular 8TV shows Hot Chef ( 美食型男 ), Jason emerged as the ultimate winner, not by his look, but his cooking skills. Since then, he became a familiar face in Malaysia. Did you recognize Jason shopping at Mid Valley lately? In order for us to understand more about him, below are some of the his personal details: Full Name            : Cha Kian Heng Age                      : 34 Hometown           : Ipoh, Perak Status                  : Married Hobby                  : Collecting Thai Amulets Favourite Foods : Italian Pizza with many many cheese Favourite Sports : Badminton Favourite Sportsman : Fernando Torres (football player of Spain and Chelsea currently) The Interview: Q: What makes you decided to join the 8TV's 2011 Hot Ch...
Read more

Career Lessons from Breaking Bad

Image
AMC's Breaking Bad ended with a bang last Sunday, leaving viewers generally content and definitely shell shocked. Though the ride is over, we can finally look back at the series and reflect on how we can learn from both Heisenberg's victories and mistakes. How can a meth kingpin help you and your future careers? Here are some takeaways : 1. Be hard to replace   : Find a specific skill set and make sure you are good enough that nobody can quickly take your place. Whether it be modeling, analysis, writing, communication, or even a certain product with a 99.1% purity, having a specific niche or strength can ensure job security. Just try not to kill fellow associates to eliminate competition. 2. Associate with the right people : If you are the smartest person in the room, you're in the wrong room. Surround yourself with people who you believe can bring out the best in you. Doing business with a high school dropout and drug addict will certainly lead to complications in the fut...
Read more

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans. Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will. Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsid...
Read more