Global Financial Crisis and Its Effects in Asia

Panic Attack As Investors Sell Off Shares at Any Price

Hell in Asia - Panic Attack As Investors Sell Off Shares at Any Price. This was the headline in the Straits Times that I woke up to on Thursday morning. The previous day's trading amounted to a sell-off in Asian markets, despite the coordinated rate cuts in the US, Europe and China. Herd mentality had set in - fearful retail investors (the bag holders mainly) rushed to stem their losses. So while the headline might have been shocking to those not following the financial news, the sell-off reaction in Asia was actually anticipated and in accordance to technical analysis.

When the newspapers start their massive moanings, and everyone is talking about the stockmarket, then expect there to be a rebounding in the markets. It will happen in the US first, then followed by the Asian markets (which will react accordingly as they usually do).

Now having said that (savvy traders actually trade in the up and down swings of the market, and make money doing so) , this financial crisis (mainly the problem with the availibility of credit for economic sustenance and growth) is not something that will easily be sorted out.

Small businesses will suffer because of the slowdown in consumer spending. Americans caught up in debt, are not likely to spur the economy any longer by buying items they do not really need - be it furniture to plasma tvs. Asian imports will decline, and their profits will decline leading to a slowdown in Asia. Asian jobs will be lost, and smaller business will find it harder to expand as credit have all dried up. No jobs, no income, no buying power....See where that leads to....

But some people are actually hoping that the markets will go down futher, so they can do bottom-fishing - that is, buying up expensive items, such as property or formerly high priced stocks at low prices. One writer from the Today newspaper quipped that she wants "a sharp enough drop so that her dreams are within reach". She called this a "slight correction". She also wrote that she felt no sympathy for those hit by the credit crunch because they are the ones who had earned loads of money for taking risks with other people's money. In her opinion, it's fitting that they pay the price.

Ok, she may be able to bottom-fish for property (in certain sectors). If I had more money, I would be buying into property too. And hold it for long-term, and forget about double digit growth that we got used to in the 90s. And definitely forget about bottom-fishing stocks unless one really knows how to read the fundamentals of a company. Too often people buy stocks on the way down, thinking they are getting a deal, and those companies never recover, and the investors who bought the stocks at a seemingly bargain price are left holding an empty bag.

But never mind all of that, let's go back to the Today writer. She chooses to avoid the bigger picture, which is far more dire. A protracted financial downturn will affect everyone - we saw a prelude just months ago with oil and rice price increases, and the effect it had on the poorer people in this world.

The hedge fund managers, bankers and the rich (those people the Today writer was scoffing at) will manage somehow. The rest of us will also manage by tightening our belts and reducing our spending. We will make different lifestyle choices - eat in, instead of out at a fancy restaurant; shop only when necessary; drive less etc.

But it's a different story for the poor who are already struggling to make ends meet. Increases in food prices can literally make a difference between life and death.

It's those people I am thinking about. And that's why I hope there is NO sharp drop that shakes the markets. A sharp drop is not a slight correction. When there was a sharp drop in 1929, it started the Great Depression, which lasted for years leading to misery for many people. The global consequences of such a drop would have far-reaching adverse impact given the connectivity of our economies today.

Would you want that to happen just so your dreams are within reach? Shame on that Today writer for such irresponsible hopes.

Finance | Credit Card Rate Increases

Credit Card Increased Its Interest Rates For No Absolute Reason

I am one of those obessively punctual people who make sure to pay all of their bills, mortgage and credit card payments on time. I even do it the old-fashioned way with a checklist, even if I can automatically schedule recurring online payments. Somehow, going through my checklist, logging online and double-checking that the right amount was paid on the right date, then placing a check mark next to the creditor in question makes me feel good. Something accomplished!

Now, I wish I had paid as much attention to reading the now and the notices regarding card agreements that these credit cards like to send out ever so often. Typically, I throw those out without much thought!

Anyway, I am almost never late. The one or two times I have been late on a payment were due to unavoidable circumstances.

Therefore, when I checked my statement for a business credit card recently, I was shocked beyond words to see that the APR interest rate has been increased to 21.19% from 7.99%! What????

My first thought was that I had made a late payment the previous month, and the credit card had automatically done a default APR. So I quickly checked my 'checklist' to see when I made the payment. It showed that I did it on time. Then I logged to my online credit card account to verify what I had noted in my book. Yup, I had not been late.

When I called the credit card - Advanta Small Business Credit Card - they told me that they had sent out a mailer with the notice of an amendment to their interest rates. Well, it had been sent to my residence in the US and since I was here in Singapore, I did not read it.

This is what I found out - so please those of you who have credit cards with sizeable balances on them had better beware. Credit card companies can magically increase the APR with advance notification through mailers of the impending changes. They will give you a period of time (short!) to dispute the changes. And you have to do this in writing. If you dispute the charges, the most likely scenario is that you have to clear the balance and close the account. This may not be helpful if you have no way to clear the balance, so disputing it may not be an option to begin with.

Now, I am quite angry about this situation. My solution is to completely transfer off the entire balance to another business credit card with a lower fixed APR - and find someway to quickly bring that balance down, in case this other credit card decides to magically increase its APR to an exorbitant figure as well.

I try to pay more than the minimum monthly payment suggested by the credit card company. Why? Because the minimum payment required only stretches out the debt nearly indefinitely. These two charts below show the difference between what happens when one pays only the minimum monthly and when one starts making bigger payments to bring down the debt.




Source: Consumerist

You know what I think. Things have gotten so bad that credit card defaults must be on the rise, and the credit companies are pushing the buck to those of us who have been managing their debt well. People just like me, with excellent credit scores and a clean credit record, and who want to keep things that way. Such people are the ones who will have to pay the high price because we will always find a way to keep up the payments.

But this APR increase from Advanta is complete madness. As soon as I transfer the balance, that card is history! That's one customer you have lost Advanta.