Many Malaysians who had stakes in the business sector are watching the numbers in March. They say, “March will give you the signs.”

For January and February, the figures are generally on the uptrend. Most contracts end in December the previous year, and payments are collected auspiciously before the Chinese New Year. And of course, the retail sector boosted due to massive spendings in the year-end and pre-Chinese New Year period.

And come March, businesses will usually take a breather, before it picks up again to normal levels. Such is the condition of a normal and healthy business cycle. Yet, many business people has had the same premonitions. The financial institutions’ collapse in the Western worlds will not have mercy on anyone. You can deny till the cows come home but no economy in this world works in isolation, not since the days of the spice trade. It’s not surprising that the more conservative of these business people had already started digging bomb shelters when they heard Lehman Brothers filed for Chapter 11.

If the figures in their balance sheets does not show any improvements by end of March and April, the economy of Malaysia, regardless of what the Government would want you to believe- is going to have a ride down the rollercoaster.

As shrewd as these business people has always been, they waste no time in changing the course of their ships. Besides digging bomb shelters, many has also been anticipating the downturn with an opportunistic attitude. Some claimed that this is the best time to squeeze their landlords. Some says that government would finally get rid of unnecessary tax and tarriffs. Also, trades amongst neighbouring countries will see improvements in terms of reduced tarriffs and less stringent import regulations.

Let’s see what the March Hare has had to say.

Warning: Self-Promotional Message Ahead ;-)

I am pleased to announce that The Guide to Smart Insurance Planning is now available in hard copy. It’s priced at RM29.90 and is available in bookstores.

I would like to thank Mr Goh and his professional publication team over at Leeds Publications for taking the risk of publishing this book and not holding me responsible for the sales of the book. And also to Ms Ammie who’d helped me proof-read the book for the N-th time. Also to colleagues who’d generiously shared their knowledge and experiences. And to readers who’d been stalking this blog, your feedback has been much appreciated and taken into account.

I will also be at the National Library this Saturday (28th Feb) from 10 a.m. to 12 noon, attending a writer’s workshop organized jointly by MPH and the National Library to promote the book.

You can also purchase this book directly from Meshio.com in 2 simple steps:

Step 1: Make payment of RM29.90 to any of the following bank accounts:

i) Maybank2U (Account Number: 5124-4605-2597)
ii) Public Bank (Account Number: 3144-3269-21)
iii) Standard Chartered (Account Number: 6201-2070-5980)
iv) CIMB (Account Number: 1277-0000-5520-55)
v) Al-Rajhi Bank (Account Number: 12100-7061135053)

Step 2: Send me an email with your details below:

Name:
Shipping Address (for West Malaysia Only):

I’ll be absorbing all shipping fees, until notice of a petrol price hike.

I hope this book will help you understand better the need to protect yourself and your loved ones from unforeseen circumstances, and also to ensure that you’ve not neglected some of the most important coverages you must have in your personal risk management portfolio.

If you’ve already gotten a copy at the bookstore or if you’d bought the online edition of this book, I would like to thank you for the support!

Before we engage the enemy, we must first understand as much as we can about the enemy. Otherwise, it will be difficult to decide on the best tactics to neutralize the enemy. So, what’s this recession monster that’s being portrayed to sound like Armageddon itself?

Investopedia defines recession as…

“A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.”

In other words, it’s the downward spiral of everything the economy holds dear, an inevitable part of the economic cycle. Like a strict diet regime for an obese individual, the recession is nature’s way of correcting the mal-investments and artificial booms that has occurred in the course of the business cycle.

Impact of a Recession
So, on the global geopolitical level, we are going to see countries pumping cash into the system in the name of economic stimulus. We will probably see some major tax reforms, revising of the National Budgets, and even Finance Ministers changing hands. Some strategies are aimed at prolonging the inevitable, while some measures are meant to ensure the governing Administration ‘looks good’ in the public’s perception.

On the corporate level, where the impact of the recession is much more pronounced, we are looking at companies filing for bankruptcies, restructuring their business models, and retrenching employees like a slaughterhouse. As for the politically linked corporations – we might begin seeing trend where they start receiving taxpayer’s donation in the name of government handouts.

On the personal level, this is where the average people like you and me is going to see some changes. For starters, we are going to feel the pinch in our pockets. With job cuts and ‘revised’ salaries, there’ll be less disposable income to go around. Nevertheless, it’s not so much of a bad thing after all. It’s a good time for us to reflect on what’s essential and what’s unnecessary luxury. Some will even go to the extreme, switching Milo for Vico, Nescafe for Indocafe. Not that it makes a world of difference, but it helps to feel the recessionary effect.

Shopping and retail outlets will also see fewer crowds. People will eat-in more frequently and skimp on the fashion department. Even your cat would have to switch to a much more affordable cat food. On the upside, it’ll be easier to find parking spaces, and we’ll probably see families spending more time flying kites together or having picnics in the park.

The dark side would not be spared from the downward cycle. Crime rate usually shoots up during recessions, mainly due to unemployment and the sudden adjustment of lifestyles. Generally, intake of alcohol, cigarettes and lottery buying amongst the public would see a sudden spike.

A friend of mine relates to me how even high-level manager who had been retrenched from the workforce faces not only the loss of income, but also pride and dignity. Some even had problems adjusting to a much lower hierarchy in the corporate ladder, resulting in them to consider the possibility of suicide.

For small business owners, dwindling sales figures and inability to pay the bills will be the norm. It doesn’t help when banks start becoming more wary on providing loans to these business owners due to increasing defaults. Hence, it’s important to ensure a good reputation with the bankers so that when you need them, you can count on them.

The Truth about Recession
As we’ve seen from the scenarios above, the recession is not a monster as it was advertised. Yes, it’s depressing to know about the job losses, plummeting stock markets (and hence personal networths), and contraction of spending power amongst the population. However, we also need to realize that a recession is just like any other natural phenomenon, and to prevent a natural event from running its course is only going to snowball the impact of the inevitable. Like the dotcom bust we’ve witnessed in the early 2000, a mal-investment of financial capital would need to be corrected eventually.

An important sign that we must observe from the effect of a recession, aside from the gloom and doom, is that after the crisis, there’s bound to be an opportunity. Remember the Newtonian law? For such a damaging crisis, the opportunity would be equally huge. It could be the rising awareness of a flawed monetary system, as we are now witnessing. It could also be a sign that the existing capitalist economy is no longer sustainable and that certain industries are no longer as profitable as they seemed, and hence there’s a need for a change. If the recession is being resolved with the right attitude and mindset, it could propel the next economic cycle with a stronger foundation and a better living conditions for all.

We have to realize that we are living in a time where great transitions are taking place and there’s no place for self-serving mentalities. It would be detrimental for a government or any political party to place self-interest above the nation’s well-being when the time comes. As I have mentioned before, the only consequence of living in a state of denial is a rude awakening. It’s not enough by just telling the citizenry that recession is going to skip the country (as unbelievable as that might sound) while it engulfs our neighboring countries.

Crucial data that can lead to important decision making for policymakers and business owners should be made available in the public domain and updated consistently.

We also need a government that focuses on serving the people, rather than putting up dramatic power struggle dramas. It might just be the most expensive soap opera every Malaysians would have to pay.

Making Recession Work for You
Following Sun Tzu’s advice- “Know thy enemy, know thyself and you shall be victorious”, you need to look at how your own personal finance is staking up. Let’s look at 10 ways you can turn the table around and make the ‘monstrous’ recession work for you.

1) Firstly, look no further than your own balance sheet. Keeping an updated balance sheet is definitely no rocket science, but is often neglected simply because you do not see the benefit in the short term. Doing a reality check, like looking at yourself in the mirror takes more than just sheer courage- it takes a whole lot of discipline just to keep at it.

Knowing where you stand financially is the first thing you must do before you start messing around with your money. Even if you decide to go forward in the wrong direction, it helps by having a map so that you know how much you’ve strayed! Therefore, if you haven’t already done so, do yourself a favor- start a journal for your personal finance. It could simply be one of the best ‘investments’ in your financial life.

2) Buyer bewares! If you are a shopaholic, a recession can help you train your self-discipline when it comes to your shopping addiction and making you more conscious about your spending.

Here are a few tips that you can protect yourself to resist against such impulses:

i) Always use cash, because it’s much more painful to part with cash than to swipe with a credit card.

ii) Have a shopping list before hitting the stores and REALLY stick to it!

iii) Filter out the discount and sales tags- “they are on discount because nobody wants them!”

iv) Shop with a full stomach. You are more impulsive and temperamental when shopping with a growling stomach.

iv) Here’s one tip I find very useful, and I call it the ’24-hours Craving’- Would you crave and still come back for it 24 hours later? Some cravings evaporated instantly the moment you leave the store.

v) Resist shopping for the sake of shopping. The Chinese has a saying, “Don’t send the lambs into the wolf’s den”, which means don’t do something when you already know there’s going to be a tragic outcome. There are so many other ways you can spend your weekend productively.

3) Get enterprising! No, don’t quit your day job yet, unless you are already retrenched. You’ve probably figure out that you could earn some extra pocket money working on the weekends. There are many ways you can build passive income using the extra time you have. With access to internet, there’s no longer excuse that there’s no market for your skills.

Many skills become even more valuable in a recession. Repair-related industry, such as cobblers, clothing alterations, car mechanics and computer technicians would probably see a surge in their revenue in the coming months.

However, a word of warning though, with so much opportunities opening up, you can also be easily fall prey into scams if you’re not too careful. Pyramid-schemes, Get-Rich-Quick schemes is especially rampant during a recession.

4) Get charitable! In the midst of a crisis, it’s easy to forget about those who are even more unfortunate than ourselves. By sharing what we have in abundance with others, not only would we be spreading kindness and love (which is in very short supply these days), we can also remind ourselves and be grateful with what we have now.

5) Replacing your hobbies for something less inexpensive would also help you reduce the impact of the recession. If you happen to be a shopaholic, it would really help you save once you replace shopping with jogging in the park.

What about if you happen to like reading? Reading would be tough to replace but you can start sourcing for much more affordable reading materials. In a recession, pre-owned books are going to be very much sought after. So, that’s something for bookstore owners to think about.

6) Cut the cards! It’s a good time to cut and consolidate those plastics. It’s already difficult to juggle between your incoming and outgoing cash flow, let alone managing multiple credit card statements. Do yourself a favor; consolidate all your cards into one, or two at most.

7) Review your memberships. Go through all the renewable membership programs you’ve signed up and trim those that you’ve been benefiting from. You might realize that you are not going to the gym as often as you thought you would when you signed up. I am not a gym-fan. Always preferred the natural outdoor anytime to enclosed gym studios.

8) Attack your subscriptions! Check if your Astro subscription is absolutely essential? Maybe you can cut down on some channels, or even start watching your favorite dramas on the web.

What about your broadband packages? Can you surf with the basic package? I am using StreamyX’s 1MBps, which is costing me RM77 per month and is more than enough. Many people I know have already switched from printed news to alternative online news. Not only because it’s cheaper, but also the news are much more less likely to be spin-doctored.

9) Pre-retirement exercise! If you happened to be retrenched, not all is lost yet. How can being retrenched works for you? You can look at the retrenchment and the looming recession as a retirement simulator, except that the simulation is real. This is how it feels when you retire – no income, and living off the money stashed in your bank account (if there’s any left). Hence, this could be a good reminder that if you don’t plan for your retirement now, this is what’s going to happen when you ‘really’ retire.

10) Burn the fats! A recession can be good for your health. Just make a quick estimate of how much you’re spending while eating out right now. If you work around Klang Valley, eating out three meals a day would roughly cost around RM20 (inclusive of 2 meals at fancier restaurants such as TGI Friday or Penang Street). That’s at least RM600 a month. You can cut down on the frequencies you eat out and replace those with home-cooked food. For example, eating-in saved me at least RM400 last month!

Also, if you are interested to know if eating at home really can help you save, follow this link for an interesting debate!

If you are a regular smoker, cutting down on the cigarettes or eliminate it altogether would save you quite a lot and lengthen a few more minutes of your life (depending on how long you’ve been puffing). Same goes with alcohol intake, moderating the consumption can stretch your Ringgit further.

Epilogue
So, still think that recession is bad? No doubt, it is going to disrupt our lifestyles quite a bit, and in most cases change is a painful process. As the saying goes, “what doesn’t kill you only makes you stronger”. In fact, this is the first time in my working adult life I am experiencing an economic crisis, and economists are claiming that this crisis is one of the worst ever since World War 2.

As for the financial planning industry, concerned friends have been asking how had the crisis affect my bottom line. It would be ignorantly optimistic to claim it is business as usual. Investors’ confidence has never plunged any lower before this, and being a licensed unit trust consultant, earnings is surely going to take a hit. Insurance products have never been harder to sell, especially when giants like AIG can announce to the world that they’re facing solvency issues. You can no longer believe the numbers anymore, even when they’ve been prepared by the most trusted of professionals. Mega ponzi-schemes disguised as highly lucrative investment plans are being revealed as you are reading this. Greed seems to be the order of the day.

The entire financial industry is undergoing major transformations. It has definitely make the life for us in the financial planning industry very ‘shaky’, for lack of a better word. However, I do believe that for any businesses, as long as we stick to time-tested values such as integrity, honesty and accountability, we would be able to brace through these tough times. I can’t say I’ve found any silver bullets, as I believe that the crisis has yet to be played out fully. Time is better spent preempting for the worst and ensuring that when the storm hits, you have enough flexibility to ride it out unscathed.

However, I am worried that our government is pushing the problem away from their boardroom meetings, and nothing substantial has been brought up to quench the curiosity and doubts from the public. The recent political turmoil has taken too much focus and it seems our leaders are having problem placing their priorities. Time is definitely running short, and I wonder how much longer these politicians are going to continue buying time and avoiding the issue at hand.

The recent drop in Bank Negara’s OPR rate has helped to remove some burden off housing loan borrowers like me. Also, as I am writing this, a local daily’s headline goes – “RM5,000 rebate for a new car purchase!”. You can also read about it here.

We are also witnessing a higher level of awareness on the financial crisis globally, thanks to the Internet. If we are fortunate enough, we will probably see some positive reformation of the non-sustainable monetary system that we have come to depend on for so long. We now have the chance to review the viability of our current capitalist culture.

If the collective governments of the world do not take pro-active stance to remedy the on-going crisis, it’s possible that we might be entering another World War, fighting for leftovers in a resource-depleted planet. A reader posted this great speech by Vladimir Putin at the recent Davos World Economic Forum.

And here’s an interesting quote to end this post:

It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. ~Author unknown

We can find 101 reasons to justify the overspending we did the last 2 months. Chinese New Year splurge, Christmas gifts for the loved ones, Valentine chocolates… yes, just about anything to make ourselves feel better. The fact remains, the overspent amount still needs to be solved somehow. You still need to fork out extra money to rectify the ‘malinvestment’.

Via The Edgedaily…

The rate of credit card defaults next month will be closely watched. Normally in the month of March, the rate of credit card defaults comes down after increases in November, December and January.

Bankers in the consumer banking segment believe that an uptick in credit card defaults next month would likely show a trend of rising non-performing loans (NPLs) in the credit card segment.

??redit card defaults have been on the rise from December until now, which is a norm, as during end of the year and festive seasons people tend to overspend. However, usually, the defaults come down in March. Should defaults continue to rise instead, we have to be careful and monitor the segment closely,??EON Bank?? head of group consumer banking Michael Lor told The Edge Financial Daily.

??n uptick in credit card defaults in March could spell the start of rising NPLs in the segment,??he added.

More…

If you don’t have the habit of keeping track of your cash flow, you’re probably in for a rude awakening, or maybe you’re already used to paying interest to the bank. Couple with recessionary woes, these credit card debts might just become an even dangerous beast to deal with.

With the tide of economy turning against us, it’s a good time to keep unnecessary debts out of the way. Maintaining a frugal lifestyle will be crucial against uncertainties.

Here’s the Poll Result for the Top 25 People to blame for the Financial Crisis.

Photo-illustration by Lon Tweeten for TIME

1. Angelo Mozilo – Co-founder and former head of Countrywide
2. Phil Gramm – Chairman of the Senate Banking Committee from 1995 through 2000
3. Alan Greenspan – Former chairman, Federal Reserve
4. Chris Cox – Former chairman, Securities and Exchange Commission
5. American Consumers
6. Hank Paulson – Former Secretary of the Treasury
7. Joe Cassano – Founding member, AIG?? financial-products unit
8. Ian McCarthy – CEO, Beazer Homes
9. Frank Raines – Former chairman and CEO, Fannie Mae
10. Kathleen Corbet – Former CEO, Standard & Poor??
11. Dick Fuld – Former CEO, Lehman Brothers
12. Marion and Herb Sandler – Former heads, World Savings Bank
13. Bill Clinton – Former U.S. President
14. George W. Bush – Former U.S. President
15. Stan O??eal – Former CEO, Merrill Lynch
16. Wen Jiabao – Premier, China
17. David Lereah – Former chief economist, National Association of Realtors
18. John Devaney – Hedge fund manager
19. Bernie Madoff – Ponzi scheme orchestrator
20. Lew Ranieri – Father of mortgage-backed securities
21. Burton Jablin – Programmer at Scripps Networks, which owns HGTV
22. Fred Goodwin – Former chairman and CEO, Royal Bank of Scotland
23. Sandy Weill – Former chairman and CEO, Citigroup
24. David Oddsson – Former Prime Minister, Iceland
25. Jimmy Cayne – Former chairman and CEO, Bear Stearns

Source: Time.com

As with any crisis and catastrophe, the first natural instinct is to point fingers, and then cross those same fingers hoping that it will go away. Very seldom do we see people taking up responsibility (in other words, taking the blame) and work something out together.

For instance, in a scam, it always take 2 hands to clap. A scam can never work if the victims does not fall for it. So, technically speaking, it is not so fair to only blame the scammer in a successful scam. Of course, you can argue that the scammer is the one who masterminded the ‘evil scheme’, while the victim is innocent. But wait a minute, how can the victim be innocent if they don’t have the element of ‘greed’, which is what makes them susceptible to the scam in the first place.

Hence, I don’t agree with all these finger-pointing activities. It distracts the rebuilding effort. Yes, it’s good entertainment, but like any witch hunts in history, it doesn’t help or contribute to solving the problem, but merely gives everyone a feel-good effect. And then, you realize life has to go on.

It’s probably been broadcast to death the recent political turmoil that has happened in Perak. Some even rumoured that it’s going to spread to Kedah and Selangor. But before we get too ahead of the headlines, I think it’s a good idea to step back and re-evaluate the reality that is right before us.

What has the recent turmoil achieved? To majority of the people, I think the frogs (amphibian politicians without a strong allegiance to any principles) has just shown us how much politicians are out of touch with the real world issues. What Malaysian politicians are most concerned with is self-interest and the image they portray to the public, regardless of substance. Thanks to the internet, we are now able to look through these opera shows and judge for ourselves.

In the current onslaught of financial crisis, it’s sad that these politicians are placing their priority in power struggle and wrestling the mandate given by the people from one party to another. Sorry for sounding insensitive, but regardless of which ruling party is governing the state, the party that will obtain support from the People will be the party that focuses on bringing positive developments. The recent show that the PKR and BN put up in Perak just goes to show they are incapable of putting the People’s interest ahead of their own agendas. I don’t care if it’s a Camry or a RM10 million frog-money, but it’s very clear that at a time of crisis, the People have a better chance striking 4D than counting on their government for assistance. Imagine how much the small and medium enterprises would have benefited if the government is to inject a RM10 million grant? No, unfortunately, political will has a higher value than the nation’s well-being.

As of today, there are no clear directives from our leaders on how the average people can minimize the threat of an oncoming financial meltdown, which is already spreading like wildfire. Just look at the number of factories and plants shutting down nationwide- BASF, Intel, Panasonic. A reported 250,000 people will become unemployed. (Source). Since official statistics are often rigged, I am not surprised that the figure would be somewhere along 750,000 to a million. Even when we have the numbers, the authorities can still downplay the severity of the issue by telling the public that the rising crime rate is nothing but a perception. How convenient!

Nevertheless, the media continues hyping up the local political drama (can’t blame them, since it’s in their business interest to do so), while failing to inform the public about the actual financial meltdown that is going to engulf the entire nation. Again, this is what happens when our leaders strayed from their responsibilities. Living in a state of denial has but one consequence- a rude awakening!

It’s disheartening to say the least, but all I can conclude is that the People is left to fend for themselves when the reality of the economic crisis strikes. Tough times is ahead of us all, but I know of many Malaysians who are already up in arms against the impending crisis. Remember, crisis and opportunities comes in a bundle!