Financial Nightmare

These recent weeks were financial nightmares for those who had investments. No one is able to escape the clutch of falling markets. 90% of my investments were in the red. The few exceptions were Johnson & Johnson and SMRT. Some equity prices were very much lower than their net asset value. This is the abnormality of investment.

This is the risk of investments. Risk and returns are proportion. Without risk, the return would be low and may not cover inflation growth.

Some points to note:-

(i) Lehman long term debt under moody rating was A1 in March 2008. That was considered "upper-medium grade and are subject to low credit risk."

(ii) Nick Leeson said: 'For my role in the collapse of Barings I was pursued around the world, and ended up being sentenced to six and half years in a Singaporean jail. Who is going to go after the reckless individuals responsible for this financial catastrophe? Apparently no one.' ... (from The Newpaper article dated 23 Sep 08)

(iii) The financial world is intertwined. It is like domino cards, one fall leads to another. First, it was the sub-prime, then this was followed by the banks, private investment companies. So what's next?

(iv) Great investor such as Warren Buffet is buying when everyone is selling (Purchase of Goldman Sach). This is his guts against the odds. Success will be sweet. It is in periods of turmoil and uncertainty where true profits are generated. Part of contrarian investment strategy.

(v) It is important to hold on to value stock and to have sufficient backup (in savings) to sail through the storm. Just like the technology hype was temporary, so will be the current financial nightmare. The trick is to stay afloat and question the fundamental credibility of the companies before investment.

(vi) The situation is a paradox. Deflation in the equity markers and inflation in the real market.

(vii) This is American year of presidential election. Firstly, it symbolises the complete failure of President Bush policy over the years of governing. Secondly, the debt that was generated over the years through Bush's administration will pass on to the next President. Thirdly, the American public who is picking up the bill for bailing out these banks will certainly be unhappy with the current administration and the republicans.... Change it will be.