Let's Talk About Economics

When it comes to economy, people often think about supply and demand. To a certain extend this is true but these are not the fundamentals of an economy. I will use several examples from selective countries but the main focus is on the U.S, China and Malaysia as I have been in those countries. A countries supply (productive output whether it is goods or services) hinges on a few factors. I'm not touching on demand simply because the world is big enough for any country. Humans grow to want more than just necessities so there is nothing to worry.

1. Population: the source of future workers but it is not to say that a bigger country will be more economically powerful . E.g. China is bigger than the US in population but it's economy is only 1/3 of the US. It is the combination of population + productivity (how much workers earn) that determines economic growth. In ideal case, you need both in to grow efficiently. Note that population growth can come from immigration as well. The next two factors determine how productivity is determined.

2. Investments: in order words you need capital which means putting good use of the nation's wealth. By building more infrastructure, investing in land or equipment. Spending capital has a downside, it can only do that much. With 10 workers, you can add 10 trucks but adding another one more truck will not improve productivity as much unless it is being used.

3. Ideas: innovative and creative thoughts bring forth new inventions that enables us to overcome the investment downside. These come in the form of better processes or newer products. I like this phrase "Economic growth springs from better recipes, not just from more cooking". 

Lan Houng (Vietnamese model)

Having said so, it is crucial to have a honest and trustworthy government because it encourages investors & innovators to take on more risk for greater rewards. And not forgetting, investment in education is important to ensure that we can take advantage of the latest trends/ideas and also for future generations.

France: One of the most productive countries in the world with most people working in a 4 day work week and about 7 hours of work/day. Yet is Europe's darling next to Germany. Fertile country and not short of investments and ideas, it is an economic powerhouse.

Singapore: This is more interesting. Without Malaysia, it is a dead country so love your country also la. Population growth came primarily from Malaysian migrants. This is later coupled with sound investments and a more open economy, an up-to-date education system that gave birth to ideas that pushed it up to the high-income status it is enjoying right now.

Indonesia: Population is not a problem. Due to rampant corruption until now, the country lacks investments and ideas. It is slowing emerging from its long slump.

China: Population is a sort of a paradox. They need to grow yet they cannot grow too fast. This could be a problem in the end as this might be a case where the country "grows old before it gets to be rich". Investments and ideas are not lacking. In fact, teachers are the highest paid workers in China. Can you imagine how much they invest in infrastructure and education in the last decade!

United States: Population growth is one of the highest in the advanced economies. Not short of investment but prioritizes are not set properly. What is beginning to lack is an overhaul of the education system. The details are shabby but I can see there is much talk on this issue.

And we have Malaysia:

• Population growth is not a problem BUT we are attracting low skilled workers e.g. constructions estate/odd-job workers from very economically weak countries! Plus we have this problem of a major exodus of skilled Malaysian to other countries. Double whammy!
• We put too much investment into infrastructures that are either not being utilized, not required and not properly maintain. Private sector is doing a better job indeed but when you look at most of the GLCs...you get a big sigh in the end.
• Ideas. Lacking in short. We are not investing properly into education nor are we even trying to fix the fundamentals. When you add the migrants, you are fast losing good talents. When it reaches a point of equilibrium where you lose as much as you get and it continues, we will have a generation knowledge gap. This is bad because instead of going up the value chain, we go back to the basic of agriculture/manufacturing based economy.

These are the 3 most basic elements in any growing free market economy in the modern world. If we could compare countries around the world, you will see that Malaysia is in a gloomy state indeed. So whatever is bring preached outside that Malaysia's future is good, think again. Think again before buying an overpriced automobile or a house hoping to earn some money fast, our economy is on the route of bubbling out/collapsing and its a matter of time before we would experience some sort of hyperinflation (the tell tale signs are there already). "Roti up, fuel up, electricity up, astro up, sugar up...everything up la except our god-damn salary."

Inflation woes~!

You are better ought saving your money and invest in your children's future. Just like ICAP, I think it is wise that you slowly move your investment assets (Bursa) out of the country this decade or minimize the risk by choosing a local company with a global presence (you should already know that I do that with my choices).

Want To Be A Better Runner?

It looks like running is infectious =) Since joining RunKeeper: http://runkeeper.com early this year, my street team has expanded to 8 members, all pure Malaysian! Certainly I would like to expand it further once I get closer to people over in this side of the globe. Some have been running longer than me (I only have about 1 year since I become more serious with it), some just started. Unlike other recreational physical sports, marathon is relatively inexpensive and easily accessible. It is also the one of the single most physically and mentally challenging activity (childbirth should be harder) that is if you run a full or ultra-marathon event. Want to be a better runner? Here's some tips based on my experience so far. All of these are important in no particular order.

1. Start from scratch. You must condition your muscles and skeletal system to be able to withstand the strains of running. You must be able to jog continuously for 30 minutes. The distance does not matter.

2. Drink 4 cups of water an hour before running and the same after running. One hour of jog will lose you 1 liter. For me, coffee works (subject to individuals).

3. Of all the gear, do not be a cheapskate when it comes to buying a good running shoe. You can use this online profile to understand more of your feet: http://www.myprecisionfit.com. A good shoe will cost between RM350-RM550. I really need to stress this point. A pair of shoes will last you 500miles (800km).

4. Supplements. A multivitamin sup with glucosamine is ideal. Can pick a MLM product (not all are scams) or go to a pharmacy and ask for recommendations. You will lose sodium so take those energy drinks too.

5. Don't be sleep deprived! I need 6-7 hours of sleep for an effective run.

6. You can be excited but start slow for first few minutes or miles. Do start at conversational pace but not too slow till you can even sing.

7. Warm up. This is also very important. Calf, quadriceps, hamstrings, front of lower leg (all those are for your legs), low back (for posture), neck and shoulder (if you run long distances, these two will be tired first before your legs so you need to ensure they are stretched properly).

8. Pace yourself. Once you can jog for 30mins. Try a moderate 5km run and time it. That will be your reference.

Training/running marathons can lose you weight but it will more or less be the same as your muscle builds. Runners for marathon train on level higher than those who want to lose weight (fat burning zone). For fat burning activity, you strive for consistency combined with long duration and slow pace (you cannot do it quick as it will cause injury to your knees because of the weight bearing down). 

The below chart will show you my full marathon training schedule targeted for those who wants to complete it (focus is on distance NOT speed/time). All expressed in miles (1.6*km). Long runs on weekend and rest days sandwiched between it. So it is usually a Tues, Wed, Fri, Sun run for me. Training for speed is a lot different so out of this posting.

Some basic tips and prep talk for you. If you really want to learn more I suggest getting this extremely good book: http://www.amazon.com/Non-Runners-Marathon-Trainer-David-Whitsett/dp/1570281823 Might be difficult to source in Malaysia, let me know if you need my help to get it. Another thing to note, run to finish it not run for a time (unless you are a pro). If someone demotivates you for running slow, dare them to run and finish it, if not STFU! You'll know how satisfying it is to cross the finish line. I'll leave a my favourite quote before signing off.

The challenge in running is not to aim at doing the things no one else has done, but to keep doing things anyone could do—but most never will. ~RW

Possibly de Best Yogurt Indulging Shop!

Not quite appropriate to post this in my blog but I have readers whom are in that vicinity of Portland, Oregon in America. Welcome to where "Kindness and Laughter translate in any language". This sweet shop is located in the heart of Portland's Restaurant and Cultural District (just google search it).

The place has colours that just seemed to match perfectly and the whole decor within its place is indeed very cozy. With summer approaching, I headed there with a couple of friends to cool ourselves down and took this panoramic picture from the shop's entrance.

The place features 15 rotating YoCream flavours and the best of all over 100 different toppings of any imaginable kind here. From fresh cut fruits (I took lychee haha), chocolates and assorted sundries. You can then create your very own materpiece! Weigh and pay by the ounce (44cents), cheap in comparison to Malaysia's absurd Tutti Fruti price. Below here is my masterpiece.

More reviews/user comments: http://portland.citysearch.com/profile/604438002/portland_or/tartberry.html#profileTab-reviews
 
You can view more of my pictures here: http://www.flickr.com/photos/63783031@N04/sets/72157626780635469/

I hope those back in Malaysia will feel cooler after seeing those pictures :)

Taking A Look Into The US Dollar

The USD rise lately has given much discussion whether is it in the office space or with friends and family. Though I am not the currency guy with any experience, anyway I don't fancy currency trading due too its volatile nature it is nevertheless important to know the basic of it that builds our economy. I also need to know because I am holding some USD denominated assets.

Everyone knows the US dollar is the world's currency. This is due to the fact that is the most widely transacted money in the world and also is the world's reserve currency. It alone holds 60% of all reserves globally only to be competed next by Euro at ~27%. The US also boast great stability thanks to their almighty United States Treasury. There is currently no good substitute against the US dollar. Euro has problems due to the sovereign debt crisis they are having, Yen is too weak, after all they are still technically in recession for very very long time. Yuan is also a no having subject to capital controls and therefore not attractive in the world of free market.

The USD movement has a lot to do with the FEDs, a.k.a America's Federal Reserve System. The chairman is easily the world's second most powerful man (before the President) if not the most powerful man in the America. The Fed is a mix of public and private institutions whose sole main purpose is to do two main things: ensure low inflation rate & steady economic growth. The Fed is America's central bank just like our BNM. It is has extremely godly powers including lending to banks if they run out of money to pay its creditors. This is what happened during the 2008/09 financial crisis period. The other power is having the ability to carry out monetary policy meaning it can control the supply of money, or raising/lowering the interest rates to to hold down inflation or preventing deep recessions.

Many people are confused or can I say brainwashed by the fact that they control the entire economy. Wrong! As with all central banks worldwide, they CANNOT make the economy grow more quickly or produce jobs, this depends on other factors (which I will talk in a separate posting). The central banks have tremendous power over the business cycle ONLY. By controlling the interest rates, they can control household spending and the prices of goods.

The Feds in America meet 8 times a year and is the most widely monitored and followed event in the financial world. It is independent because the President and Congress has no control over their decisions except by appointing the Chairman. I am not overstating their power, they truly have lots of because it can control the USD's supply at will to protect financial systems from panics and secondarily to manage business cycle.

Usually the central will use the interest rate avoid recessions or hyperinflation but because the US has already fell the rates to near zero levels at 0.25% and it has not helped the economy a lot it has resorted to what they call Quantitative Easing a.k.a QE. In layman terms it is called printing more money and flooding the market with it to create more liquidity. It is essentially buying more more bonds that will push-down long term interest rates. By flooding the market with more of its US currency, it makes the currency less valuable and thus we see the USD going down since QE and QE2. All that will change if QE3 does not happen and the global economy continues its path of mediocre growth.

The question is will QE3 happen? I take a look at the US's debt ceiling limit which is set at ~USD14 trillion. BUT the catch is that this ceiling has been raised a total of 74 times. If the US blows the debt ceiling again meaning they can't borrow more money the govt has three choices: cut spending or increase taxes by September 30 which is the end of their fiscal year. The other way is to default some of their debt obligations and risk cutting their triple-A credit rating making the US dollar less favorable as the world's reserve currency. There's more ways to get away from debt (again I'll leave that topic for another posting).

In my opinion, it seems that the US has gotten itself into you can say a breaking point. I would see that they will come into a political compromise to cut government spending and also increase the tax for the wealthiest portions of the American society since they are already so damn rich. They could also however increase taxes to all Americans to curb consumption and increase savings, not likely because that defeats the purpose of them to encourage spending to promote economic growth. BUT because the US is still very much favorable to be the world's currency made part by their good long-term economic growth (highest population birth rate in the developed world, has capital and not short of innovation), I cannot rule out that they will raise the debt ceiling and thus QE3, printing more money. I would give it a 60/40 chance hoping they realized that you cannot get out of debt by having more debt anymore. There needs to be a point where you need to stop all these and go into reserve mode before they go into a really big SHIT of mess.

I have gotten USD-Ringgit levels right twice. I may not be lucky for the third time but let me try my best. It will hover at 3.00 with a range between 2.9 to 3.1. BNM will try to hold the USD at a competitive rate as we are still an export driven country, Malaysia. I set a range this time because there is a possibility of QE3 and it will drive the USD weaker to 2.9 which can help reduce their debt to a certain extend because the value goes down. Smart asses!

Reference: http://money.cnn.com/2011/05/16/news/economy/debt_ceiling_deadline/index.htm