Friday, December 18, 2015

Interest Rates Awaken ! [SPOILER ALERT]

The big news in the investing world is that the US has finally raised interest rates. As the markets have already priced in the rate rise, interest rate sensitive investments began to rally and REITs in particular had a great session in spite of an overall down market just now.

The overall direction of interest rates in the US is going to be up but I expect the pace to be slower than most folks would expect because the low interest regime is good for growth and there is no risk of inflation as of this moment.

The situation in China may make things worse for global growth. It seems that the downturn was largely caused by corrupt civil servants curtailing their spending in the midst of a crackdown as it may be engineered by the Communist government. Moving forward, if China can clean up their act and allow their working class population to participate in their economic prosperity, growth would return with more above-board consumption, but this may take many years to happen. One possible bright spark is if the US under President Trump would have some sort of a reconciliation with Putin which I think may create some upward pressure in oil prices and bring some salvation to the oil and gas sector.

So right now, I have no useful insight for everyone because local interest rates have already gone ahead and gone up and I'm not too sure whether SIBOR will resume it's meteoric rise. This will impact many local households who will less disposable income for discretionary spending and I expect the government to follow this closely. The only possible thing a reader can do is to ask themselves what happens if interest rates hit 3% for their mortgages. For me, my worse case scenario is to prepay the mortgage entirely and get ready to return to the workforce after graduation - I have lasted close to 24 months without drawing upon my investment capital and even paid off $70,000 school fees.

A rising interest rate environment is actually quite new for many new entrants to the workforce. Many of us are so used to cheap borrowing and many households are surviving under leverage. This new economy is going to painful for folks encumbered with loans.

And talking about change and progress....

... Let's talk about the Force Awakens.

I caught TFA as soon as I could on the day it opened because I know that there will be spoilers everywhere. Star Wars is a religious experience and no amount of practical criticism is going to decide whether fans love or hate the movie so I doubt any discussion on tropes, plot and pacing would have a bearing on box office revenues.

So far, based on my shallow observations,  what divides the folks who love it ( like me ) and the folks who hate it is that the folks who hate it tend to be very emotionally attached to the Expanded Universe which had to be sacrificed to give Disney a clean slate to decide on the storyline.

The insight for me is that sometimes it helps to be unsophisticated if you are one of those readers who are more concerned about personal finances. I never developed a palate for good food or wine. I never felt any desire for watches or fast cars although I like the science behind them. This allows me to get high on simple food like thosai or satay bee-hoon.

While I remain very snotty when it comes to self-help and finance books, I remain quite unsophisticated with fantasy and sci-fi fiction. I seldom read fictional works but enjoy almost all my fiction reads ( but the Force Awakens bridging novels by Chuck Wendig sucks ). I also have a thing for B grade movies and count The Last Witch-hunter as one of my favourite movies of 2015.

The essence is this : Be discerning where it matters to you.

A finance reader should be able to spend 5 minutes and decide whether a investment book should be categorised as a classic like The Intelligent Investor or a complete waste of time like something from Robert Kiyosaki or Harv Eker.

A detailed analysis is definitely overkill when it comes to Star Wars movies.

Yes, the Empire never learned anything about single points of failure and fault tolerance, but I guess taking 5 planets down with one shot from the Starkiller base allowed the First Order to break-even. And the twist was very much expected if you followed Harrison Ford through his convention appearances and knew how much he hated playing Han Solo. That dude is Indiana Jones but everyone still wants him to be Han Solo.

Anyway, if you have a highly refine taste for wine, you will overspend on wine. Similarly if you have a highly refined taste for art, you would overspend on art. If you have a highly refined taste for Star Wars, no movie can satisfy you, definitely not one by JJ Abrams and George Lucas would do even worse.

I have a highly refined taste for academic and industrial credentials.

I think that's quite enough of me.


  1. thats a very enlightening theory you have there. simple and practical. thank you

  2. You're welcome !

    Hope it's been a good year for you so far ?

  3. for non-fiction -- i've learnt never to spent any money on books written by a journalist, or someone who makes a living only from writing, those people only know sensationalism.

  4. hi chris!

    this year was good. i made progress in some areas and gained clarity in others.

    understand lately its been tough for you. hope things will get better.

    congrats on progressing in your JD and navigating another tough year in the market.

    ever considered writing a book on the singapore dating scene and economics behind it? im sure it would be highly controversial (: