Sept 23, 2007
In my previous post, I compared the market to a card game. That is the market is way way far more unpredictable unlike a deck of 52 cards.
In my effort to find what lies ahead, I read the opinions of some financial analysts. Though, I had a tough time grasping economic concepts, I came up with a few points.
1. Definitely there will be a US economic slowdown. --Nobody could commit as to whether a US recession is coming or not, but the odds are more on the grim side which is a recession. Some would even say, that the best case scenario for US, if not a recession, is a subpar economic growth.
2. Whether global expansion continues despite US economic slowdown depends on whether China's growth engine continues to move ahead --Clearly, the effect of US economic depression will be global as markets are interrelated. But the fate of global economy (especially Asia) which used to rely on US (contribution to global economy they say is down to 30%) is actually now dependent on yet another economic superpower--China. But since the US is the major importer of Chinese products and raw materials, when US economy weakens, so is China, so is the world. An implication here, the full effect, we have yet to know.
3. The best part -- if ever recession can not be prevented (despite efforts) is that most agree that we will outlive this problem. Now this one is based on past market trends and faith on man's abilities. In fact, according to Alan Greenspan (dubbed as the best economist), it is in man's ability to adapt that leads him to be optimistic about the future. Still, according to him, it is not by accident that we persevere and advance in time of adversity. Instability is needed for growth, since it's when, that man works for the better.
Now this isn't in any way telling us to be completely complacent about investing. You see, one analyst views this turbulence as one that is brought about by prosperity itself (for which I totally agree). Paradoxical growth of the US economy (despite obstacles such as 9/11, corporate scandals, and high oil prices) has given false confidence to businessmen, investors and consumers alike to embark on risky acts. In a way, they were blinded by the seeming guaranteed economic growth that they completely shrugged off the risk and acted in ways that raised it, like the subprime housing mortgage.
The morale of this all,
If there is one certain thing about the market - it's uncertainty
So:
Acknowledge the risk
Take calculated ones
Most importantly, accept the consequence of your decisions. In my previous post, I compared the market to a card game. That is the market is way way far more unpredictable unlike a deck of 52 cards.
In my effort to find what lies ahead, I read the opinions of some financial analysts. Though, I had a tough time grasping economic concepts, I came up with a few points.
1. Definitely there will be a US economic slowdown. --Nobody could commit as to whether a US recession is coming or not, but the odds are more on the grim side which is a recession. Some would even say, that the best case scenario for US, if not a recession, is a subpar economic growth.
2. Whether global expansion continues despite US economic slowdown depends on whether China's growth engine continues to move ahead --Clearly, the effect of US economic depression will be global as markets are interrelated. But the fate of global economy (especially Asia) which used to rely on US (contribution to global economy they say is down to 30%) is actually now dependent on yet another economic superpower--China. But since the US is the major importer of Chinese products and raw materials, when US economy weakens, so is China, so is the world. An implication here, the full effect, we have yet to know.
3. The best part -- if ever recession can not be prevented (despite efforts) is that most agree that we will outlive this problem. Now this one is based on past market trends and faith on man's abilities. In fact, according to Alan Greenspan (dubbed as the best economist), it is in man's ability to adapt that leads him to be optimistic about the future. Still, according to him, it is not by accident that we persevere and advance in time of adversity. Instability is needed for growth, since it's when, that man works for the better.
Now this isn't in any way telling us to be completely complacent about investing. You see, one analyst views this turbulence as one that is brought about by prosperity itself (for which I totally agree). Paradoxical growth of the US economy (despite obstacles such as 9/11, corporate scandals, and high oil prices) has given false confidence to businessmen, investors and consumers alike to embark on risky acts. In a way, they were blinded by the seeming guaranteed economic growth that they completely shrugged off the risk and acted in ways that raised it, like the subprime housing mortgage.
The morale of this all,
If there is one certain thing about the market - it's uncertainty
So:
Acknowledge the risk
Take calculated ones
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