Wednesday, 30 September 2020

Is Ending Moratorium Crucial for Economic Recovery?

“It is imperative for the country to move out of the moratorium period in order for the economy to begin recovery”, CIMB Group Holdings Bhd CEO Abdul Rahman Ahmad said during a media roundtable session with selected bank CEOs and Credit Counselling and Debt Management Agency (AKPK).

Following that statement, the banks CEOs in attendance during the media roundtable urged those who are unable to manage their loan repayments after the moratorium period ends on Sept 30 to come forward and seek help from their respective lenders.




Meanwhile, Bank Islam CEO Mohd Muazzam Mohamed advised borrowers to be prepared to review their spending levels from the next month onwards, since their disposable income will be reduced as they resume repaying their loan instalments.


“We understand that in the last six months, spending and expenditure patterns may have changed for some people. But now is the time for them to revisit their financial planning so that they can continue repaying debts from October onwards,” he said.


According to Bank Rakyat CEO Datuk Rosman Mohamed, civil servant borrowers will begin to see their salaries automatically deducted from Oct 1, 2020 to pay for loan instalment and that their disposable income will return to pre-moratorium levels.


We all want to get back to pre-moratorium period. We all want to settle our debts to our lovely compassionate banks! But we don’t have the means! Talk to the banks?


Let me share my experience. One major bank suggested my business cannot have any further moratorium but will consider 50% of the instalment due. It is not just interest but interest and partial principal payment. This was communicated over three weeks ago from end September 2020 (moratorium period over). I have submitted lasted audited accounts and management accounts to the bank. There was no response to-date from the bank. Meanwhile, full instalment will resume on 1 October 2020. 


On 29 September 2020, the Star reported Singapore’s central bank was in discussion with lenders about extending debt moratorium programme beyond 31 December 2020. MAS is suggesting  another six months to June 2021. Why? To avoid the so called “cliff edge effect” once relief measures end. That’s response for you from a  regulator!



1. Ending moratorium is crucial for economic recovery, Focus Malaysia, 25/9/20

2. Singapore regulator, banks in talks to extend debt relief scheme, The Star, 29/9/20

Tuesday, 29 September 2020

JendEla Has Aspirations?

Starbiz reported on Saturday, 19 September 2020 that JendEla, the National Digital Infrastructure Plan, seems to be the new branding that the telecoms regulator Malaysian Communications and Multimedia Commission (MCMC) has given to digitise the country. It overrides the RM21.6bil National Fiberisation and Connectivity Plan (NFCP) (2019 to 2023) created three years ago to transition towards 5G technology, and deliver ubiquitous high-quality broadband services at reasonable rates.

JendEla was created after a month-long lab series that identified the current state of telecoms services availability/speeds, and gaps that need addressing using existing and new technologies including 5G. Digital transformation is vital to stimulate economic growth over the next decade.

World Bank’s estimates suggest every 10% rise in fixed broadband penetration raises GDP growth by 1.38% in developing nations. That translates to about RM20bil for Malaysia. 5G deployment and use will contribute over RM12bil to GDP and create over 40,000 jobs between 2021 and 2025, according to a report by Malaysia Institute of Economic Research. As it is, mobile cellular penetration rate supposedly has reached 133% with over 43.7 million subscribers.

JendEla will be implemented under the 12th Malaysia Plan (2021 to 2025). 5G services will only be delivered in 2022, a year later than the NFCP targets. Phase one of JendEla starts now until 2022. It involves a phased shutdown of 3G by the end of 2021. At the same time, 4G network will be prepared for 5G.

JendEla aims for broadband coverage to rise from 91.8% to 96.9% in populated areas. Speeds will go up from 25 megabit per second (Mbps) to 35Mbps.

Phase two involves using fixed wireless access and other technologies to further address gaps in the digital divide. By 2025, there should be nine million premises with fast broadband access.

For JendEla to work and deliver results, the players need to work together but more importantly, MCMC should get the local councils to cooperate.


We are excellent in developing plans, but poor in implementing them. Tell that to Veveonah, the Sabah girl who had to climb a tree to do her exams. TM has always promised but many times it may have looked like below:


JendEla’s Aspirations, B.K. Sidhu Starbiz, 19 September 2020

Monday, 28 September 2020

Is Britain The Playground of Fugitive Billionaires?

After Lalit Modi and Vijay Mallya, Nirav Modi is the third Indian billionaire fugitive seeking asylum in Britain. The British policy is to grant asylum first and then let countries plead in the British courts for extradition. The process is lengthy and cumbersome and often takes years as Britain has some of the best legal brains and lawmakers fight for the wealthy billionaires who seek refuge in the UK.



The British, do not favour asylum seekers and have been at loggerheads with the EU on this issue. But the attitude changes drastically when it involves fugitive billionaires. Here Britain is way ahead of other EU nations.

A Deutsche Bank report says that between 2006 and 2015, UK received $129 billion from fugitive asylum seekers that was routed to its offshore havens — the British Virgin Islands, Cayman, Gibraltar, Jersey and Guernsey.

Since the UK does not prosecute money-laundering offences, banks in the UK launder money with impunity, says Corruption Watch. Hence the UK is considered the safest and most lucrative haven for financial fraudsters.

Corruption Watch estimates that “UK’s wealth management industry manages $800 billion of global wealth at particular risk of laundering.” The Financial Control Authority (FCA), which is the regulator for the financial sector, has brought zero prosecutions for breaches in UK’s Money Laundering Regulations since 2007, claims Corruption Watch.

Britain’s financial industry is based on opaque laws, but the FCA has not budged despite immense global pressure. Be it money laundering, round-trip trading or hedging securities, UK laws provide full protection to investors against any legal scrutiny. The International Commodity Exchange (ICE) at London is the hotbed of deal-making where Big Banks and Big Oil along with Swiss commodity traders provide unique opportunity to convert all forms of money into commodity trading wealth with no questions asked.

According to Tulip Financial Research, Britain has some 135,000 “high-net-worth” individuals, with liquid assets averaging £6.4 million. The Independent says Britain is today known as ‘Switzerland on the Thames’. It says: “More than 200 foreign law firms now have offices in the UK, while more cash is said to be managed out of a couple of square miles of Mayfair than in the whole of Germany”. So, it is highly unlikely the UK will adhere to extradition requests by India or others.

The biggest wealth to Britain comes from Russian tax fugitives and oligarchs. Among them are Nikolay Glushkov, former Director of Aeroflot, Andrey Borodin, the former President of Bank of Moscow, accused of financial crimes, Boris Berezovsky and Sergei Kapchuk, all billionaire Russian fraudsters who have received political asylum in Britain. They have all bought exclusive properties in Mayfair, in Berkshire, in Belgravia and in Chelsea. Together with dozens of other billionaire fugitives they have helped make the UK the undisputed financial capital of the world.

Why didn’t Najib, J. Low and others follow suit?



Why Britain is the Playground of Fugitive Billionaires? Sandip Sen, DNA, Jun 26, 2018 (

Friday, 25 September 2020

“Suspicious Minds” or Suspicious Transactions

Elvis Presley sang the song “Suspicious Minds” in 1968. “We’re caught in a trap, I can’t walk out...”.  The Straits Times, Singapore reported on September 21, 2020, a number of banks in Singapore handled about US$4.5 billion (S$6.13 billion) in suspicious transactions between 2000 and 2017. Those mentioned included DBS Bank, CIMB Bank and Deutsche Bank among those that processed the largest sums of such funds here.

The findings were from the International Consortium of Investigative Journalists (ICIJ) on leaked files, comprising so-called suspicious activity reports, from the Financial Crimes Enforcement Network (FinCEN) in the United States.

The consortium noted that, within almost 20 years, Singapore received about US$3 billion and sent US$1.5 billion in 1,781 suspicious transactions. In all, the ICIJ reported on Sunday (Sept 20) that the files contained information about more than US$2 trillion worth of transactions between 1999 and 2017, which were flagged by internal compliance departments of financial institutions as suspicious.

Experts told The Straits Times that filing suspicious activity reports do not translate to wrongdoing. Furthermore, banks and financial institutions are obliged to flag unusual transactions so that regulators can follow up on them, they added. For example, an account which typically sees small transactions getting an unusually large deposit of money might pop up on banks' radars, the noted. Alternatively, if bank customer who has $1 million in his account decides to transfer all his money to another bank - such a transaction might also show up as "suspicious".

The consortium released a list of banks in Singapore involved in the allegedly illicit transfers, based on more than 2,100 reports amounting to some $35 billion, that were filed by about 90 financial institutions.

The list "displays cases where sufficient details about both the originator and beneficiary banks were available, and is designed to illustrate how potentially dirty money flows from country to country around the world, via US-based banks", said the ICIJ. The consortium reported that five global banks appeared most often in the leaked documents - HSBC Bank, JPMorgan, Deutsche Bank, Standard Chartered and Bank of New York Mellon.

In Singapore, DBS Bank was listed as having sent US$596.8 million and received US$228.3 million in 461 suspicious transactions between 2000 and 2017. CIMB Bank was noted to have sent US$250.4 million and received US$34.3 million in 294 suspicious transactions, while Deutsche Bank sent US$224.3 million and received US$62 million in 19 suspicious transactions within the same period.

How respectable have banks become? Or, is it societies that have become lax on what is right?


Source: The Straits Times


FinCEN leaks: DBS, CIMB and Deutsche among banks in S'pore that handled about $6 billion in suspicious transaction, Aw Cheng Wei, The StraitsTimes, September 21, 2020


Thursday, 24 September 2020

The 4-Hour Workweek: E for Elimination

The second lesson from The 4-Hour Workweek written by Timothy Ferriss is: E for Elimination. (Read more on the first lesson here)

Forget about time management. Being effective is more important than being efficient. Ferriss wants you to know that:

  •  Doing something unimportant well does not make it important.
  •  Requiring a lot of time does not make a task important.

What you do is infinitely more important than how you do it. Efficiency is still important, but it is useless unless applied to the right things.

According to the Pareto principle, also known as the 80/20 rule, 80% of the wealth and income are produced and possessed by 20% of the population. This can also be applied outside of economics: 80% of the results come from 20% of the effort and time, 80% of a company’s profits come from 20% of its products and customers.

Therefore, the New Rich (as defined here) understand the 20% of the sources that cause your problems, your unhappiness and another 20% that may bring you your desired outcomes and happiness.

Next is to have selective ignorance. The first step is to develop and maintain a low-information diet. Just as modern man consumes both too many calories and calories of no nutritional value, information workers eat data both in excess and from the wrong sources. Lifestyle design is based on massive action—output. Increased output necessitates decreased input.

Ferriss reads only the front-page headlines through the newspaper machines. All he needs to do is to ask the rest of the population in lieu of small talk: "Tell me, what's new in the world?" And, if it's that important, you'll hear people talking about it. Same thing Ferriss followed on presidential election. Despite being in Berlin, he made his decision in a matter of hours. He contacted his friends who shared his values and asked them who they were voting for and why. He let other dependable people synthesize hundreds of hours and thousands of pages of media for him. It was like having dozens of personal information assistants, and he didn't have to pay them a single cent.

Learn to interrupt interruption. Create an e-mail auto response to answer all the ‘interrupting’ e-mail. Check e-mail twice per day, once at 12:00 noon or just prior to lunch, and again at 4:00 P.M. Both 12:00 P.M. and 4:00 P.M. are times that ensure you will have the most responses from previously sent e-mails. Never check e-mail first thing in the morning. Instead, complete your most important task before 11:00 A.M.

Find your focus. Avoid postponing more important projects due to interruption. In the next section, A for Automation, we'll see how the New Rich create management-free money and eliminate the largest remaining obstacle of all: Themselves.



Timothy Ferriss, The 4-Hour Workweek 

Wednesday, 23 September 2020

Is it a K-shaped Recovery?

In an April 2020 Reuters poll, the majority of economists predicted a U-shaped recovery – prolonged stagnation before recovery. Others who were more optimistic viewed a V-shaped – a speedy recovery. And some picked “W” – a shape following a second wave of the virus. Now the trend is a “K”.

Essentially, the concept rests on the idea that while the fortunes of some in the economy have nearly or fully recovered (broadly defined), the fortunes of many are still declining. Do we find any evidence in support of this case and how does it differ from past downturns and recoveries?

Supporters of the “K-Shaped” recovery usually present rising asset markets as the first exhibit for their case. Equity markets have largely recovered since pulling back earlier in the year. And housing prices, measured by several indexes including the Case-Shiller 20-City Index, also continued an upward trend despite the massive contraction in real GDP.

The uneven performance in the labor market usually represents the second piece of evidence. Different job categories declined at different rates. Atypical of most downturns, the lower-skilled services industries generally suffered the greatest number of job losses. That occurred because government shutdowns forced certain businesses to close. Consumers avoided (and continue to avoid) many businesses due to fear of falling ill. Many of the individual occupations associated with such businesses, such as retail salesperson, fast-food workers, and waiters/waitresses, rank among the top 10 most common occupations in the U.S. This contraction exacerbated job losses in the U.S. Although the labor market has recovered somewhat over the last few months, not all segments of the market have improved at the same speed.


By contrast, workers who would typically head into an office, such as those in financial services or professional and business services, have fared much better. Job losses for them, though still significant, total far less. Because of their ability to sufficiently (if not efficiently) operate from home, demand for these positions from employers has remained firm and, in some cases, increased.

Whatever the alphabet, people on Main Street need help if recovery is to be real. The divergence between the “haves” and “have nots” can be addressed by a tax regime that flattens propitious gains owing to pump priming / QEs.

According to Frances Donald of Manulife Investment Management, it is time to discard the shape of a single alphabet – V, U, L, or K – that can represent profile of the coming recovery. What may be more instructive is to view what lies ahead as a 3-stage recovery with its own set of themes.

          Phase 1: Rapid Rebound (up to September)

          Phase 2: Stall Out (up to end 2021)

          Phase 3: New Normal (beyond 2022)

During Phase 1, recovery could rebound up to 60% of economic output lost. It may look like a V but will not last. Why? Once government transfers peters out, household incomes drop. This suggests governments need to continue with stimulus packages until a vaccine is found. But that raises public debt substantially which has future consequences.

In Phase 2, the “Stall Out” stage, recovery could fizzle out unless more “fizz” is added to the Coke! It is unclear which governments and when support measures are withdrawn. But businesses will suffer in operating capacity, revenue streams, employment numbers and reduced profitability. Defaults may increase, bankruptcies and liquidation will follow. Consumers may remain cautious because of uncertainties. The looming problems of trade and Brexit will exacerbate the discomfort of a “Stall Out”. Then there is the U.S. Presidential election and its fall-out!

In Phase 3, de-globalisation and its attendant developments will change supply chains. Alternative arrangements and decoupling become the new focus. Many nations will realise their fiscal position is in terrible shape. Interest rates remain at or below zero for a fair period in the foreseeable future. Rise of interest rates may happen in 2025 or thereafter. Many “zombie” firms will crash once reality sinks in. Governments need to look at new ways of improving productivity.

Covid-19 has brought uncertainty and confusion to both the financial and real markets. Decisive actions by some governments has reduced the emergence of a full-blown global crisis. It is time to look at scenario development and measures tailored to both local and international requirements.

1. K-shaped recovery taking hold of emerging markets, Starbiz, Friday, 4 September 2020.
2. The case for a “K-shaped” recovery? Jones Lang LaSalle IP, Inc., August 18, 2020

Tuesday, 22 September 2020

New Glove Players: Will the High Entry Cost Pay Off?

Despite the high cost incurred to set up glove production lines, the number of Malaysian public-listed companies that are jumping into the healthcare-related industry is increasing. The interest in such businesses is gaining momentum in the face of the yet-to-abate COVID-19 pandemic outbreak.

The new entrants include precision engineering outfit AT Systematization Bhd, crude palm kernel oil producer Green Ocean Corp Bhd, construction firm Vizione Holdings Bhd, IT solution provider MSCM Holdings Bhd, automotive battery maker GPA Holdings Bhd and property player Iconic Worldwide Bhd, among others. Rubber-related Karex Bhd, which manufactures condoms, has also ventured into glove production.

Many of the companies, being new players in the glove scene, are starting from scratch right from land acquisition, which makes the entire process to commence operations longer. Some will be using their existing facilities to produce the gloves and would just need to invest in the production lines. Some like MSCM have rented a factory for the purpose.

Interestingly, such companies’ share prices have tended to shoot up even before any official announcement was made. Their new ventures range from the manufacture of personal protective equipment (PPE), the production of rubber gloves, to potential distribution of COVID-19 vaccines.

The downside risk is that glove demand may decrease gradually upon a vaccine is introduced. Also, more players or suppliers could lower their average selling price (ASP) to secure market share. Apart from not having economies of scale, the new entrants may not have the reach and network of the supply chain that large glove companies currently have. So, will the high cost of entry eventually pay off?


1. Many new hands in glove sector, 5 Sep 2020, The Star
2. Will the rush into healthcare-related ventures pay off? 3 Sep 2020, The Edge

Monday, 21 September 2020

U.S. Foreign Policy: “Hard” or “Soft” Power?

Power is one of the more contestable concepts in political theory. It is conventional and convenient to define it as “the ability to effect the outcomes you want and, if necessary, to change the behavior of others to make this happen.” (Joseph S. Nye, Jr.)

In recent decades, scholars and commentators have chosen to distinguish between two kinds of power, “hard” and “soft.” The former, hard power, is achieved through military threat or use, and by means of economic menace or reward. The latter, soft power, is the ability to have influence by co-opting others to share some of one’s values and, as a consequence, to share some key elements on one’s agenda for international order and security. Hard power requires its addressees to consider their interests in terms mainly of calculable costs and benefits. Soft power works through the persuasive potency of ideas that foreigners find attractive. It is highly desirable if much of the world external to America wants, or can be brought to want, a great deal of what America happens to favor also. Americans want to believe that the soft power of their civilization and culture is truly potent.

American culture is so powerful a programmer that it can be difficult for Americans to empathize with, or even understand, the somewhat different values and their implications held by others abroad. The idea is popular, even possibly authoritative, among Americans that the U.S. is not just an “ordinary country,” but instead exceptionally blessed (by divine intent) and, exceptionally obliged to lead Mankind. When national exceptionalism is not merely a proposition, but is an iconic item of faith, it is difficult for usually balanced American minds to consider the potential of their soft power. American values, broadly speaking “the American way,” are attractive beyond America’s frontiers and have some utility for U.S. policy. But there are serious limitations to the worth of the concept of soft power.

When considered closely, the subject of soft power and its implications for the hard power of military force reveals a number of plausible working propositions as suggested by Prof. Colin S. Gray.

1.    Hard military threat and use are more difficult to employ today than was the case in the past, in part because of the relatively recent growth in popular respect for universal humanitarian values;
2.    The political and other contexts for the use of force today do not offer authoritative guidance for the future;
3.    The utility of military force is not a fixed metric value, either universally or for the United States;
4.    For both good and for ill, ethical codes are adapted and applied under the pressure of more or less stressful circumstances, and tend to be significantly situational in practice;
5.    War involves warfare, which means military force, which means violence that causes damage, injury, and death;
6.    By and large, soft power should not be thought of as an instrument of policy. America is what it is, and the ability of Washington to project its favored “narrative(s)” is heavily constrained;
7.    Soft power cannot sensibly be regarded as a substantial alternative to hard military power;
8.    An important inherent weakness of soft power as an instrument of policy is that it utterly depends upon the uncoerced choices of foreigners;
9.    Soft power tends to be either so easy to exercise that it is probably in little need of any policy push;
10. Hard and soft power should be complementary, though often they are not entirely so; and
11. Provided the different natures of hard and soft power are understood—coercion versus attraction—it is appropriate to regard the two kinds of power as mutual enablers.

From all the factors above, it follows that military force will long remain an essential instrument of policy. That said, popular enthusiasm in Western societies for the placing of serious restraints on the use of force can threaten the policy utility of the military. Soft power tends to work well when America scarcely has need of it. And in a world full of nuclear weapons it maybe best to “walk softly and carry a big stick...” (Theodore Roosevelt).

Through fiscal year 2020, the U.S. Federal Government has spent or obligated USD6.4 trillion on wars in Afghanistan, Pakistan and Iraq. This excludes macroeconomic costs to the U.S. economy, opportunity cost and future interest on borrowings. All current wars have been paid for almost entirely by borrowings.

Source: David Mdzinarishvili © Reuters




1. Hard Power and Soft Power: The Utility of Military Force as an Instrument of Policy in the 21st Century, Colin S Gray, Prof. Of International Policy and Strategic Studies at University of Reading, England
2. Costs of War, Watson Institute for International and Public Affairs

Friday, 18 September 2020

India’s Economy at the Crossroads?

The coronavirus pandemic has impacted many emerging markets hard. Beneath the surface, however, the pandemic is causing lasting change by accelerating disruptive forces. Two accelerating trends are likely to benefit India - a growing digital economy and its reinvestment in manufacturing.

Source: Asia Insurance Review

India’s digital economic potential was laid in 2014 when the country’s government began the process of formalisation (bringing its largely small-scale, cash-based economy into a more accountable, modern infrastructure). It was a necessary step, as India’s informal sector—which employed 90% of its workforce but contributed only 50% of GDP—significantly dragged down overall productivity.
Digitisation was central to the formalisation process. Under formalisation, every adult in India was given a bank account (Jan Dhan) and a 12-digit unique identity number (Aadhar) linked to a mobile phone number. Called the JAM trinity, it empowered people to conduct cashless, paperless, and presenceless transactions through formal channels.

The formalisation agenda coincided with the onset of 4G telecom networks, rising internet penetration, and the availability of online products and services. Digital adoption was evolving in India. The launch of Jio’s 4G network in September 2016 led to a significant growth in data usage.
The penetration of 4G jumped from 8% in 2016 to 49% in 2019, and average mobile data usage jumped 8x, to 11.2 GB per user, per month, between 2016 and 2019. As new e-commerce business models emerged, India’s internet economy attracted significant capital from the likes of Walmart, Amazon, and Facebook.

Despite the strong growth in user base and revenue, India’s penetration across digital opportunities remains far behind that of the United States and China. The events of the past five years have made India’s small businesses ready for e-commerce, but penetration in these small businesses has just begun. On one hand, smartphone penetration has grown considerably—to 65% as availability of data and devices has grown—and stands much closer to the United States and China. On the other hand, e-commerce penetration still lags far behind and presents a tremendous growth opportunity; India’s total addressable market is estimated at ~US$900 billion, with e-commerce penetration at just ~3%.

Governments across the world are turning more protectionist as they grapple with higher unemployment and falling domestic growth. Apart from announcements of rising tariffs on imports, which often make headlines, non-tariff trade barriers have also been rising. The current Indian administration has made it a priority to support growth in domestic manufacturing since coming to power in 2014 by making significant investments in roads, power, and telecom networks and by deepening the market for labour, goods, and services. In September 2019, the administration also announced tax reforms that incentivised corporate investment in new manufacturing capacities and encouraged global companies to reinvest in India’s manufacturing. Five years of such reforms have culminated in India showing the most improvement in the World Bank’s rankings for ease of doing business.
India can increase import substitution in products in which the domestic market size has reached critical mass and the share of import components as a percentage of total domestic consumption is still high. The country’s large market size makes it viable for global brands to set up shop and start developing the ecosystem to increase value addition over the medium term. In consumer durables, India’s domestic market size is second only to China within Asia, but penetration is much lower—an ideal condition for new investments.
India’s also sees strong interest as an alternative sourcing base as global supply chains reorganise themselves away from China due to trade tensions, rising environmental compliance risks, and demographic shifts. India is high on the list of preferred countries in shifting production away from China in various surveys. In one such survey, India was second only to Vietnam. India will benefit from this trend in products—such as specialty chemicals and engineering goods—as the country already has a sizeable manufacturing base and established export presence.

India’s formalisation through a digital economy and its reinvestment in manufacturing can serve as primary tailwinds for growth potential over the medium term. On one hand, formalisation is driving growth of a massive digital economy. On the other, the digital economy itself is driving the formalisation process by boosting productivity. India should continue to attract global capital to realise this potential. As manufacturing grows, there will be more formal jobs created, driving income growth and consumption and unleashing another virtuous cycle of growth.

India at the crossroads of disruption – a tipping point for growth, Rana Gupta, Koushik Pal, July 24, 2020 (

Thursday, 17 September 2020

The 4-Hour Workweek: The D Principle

The mainstream expectation of working life is to work hard during your 20s or 30s with 40 hours per week in-front of office desks until you reach your retirement age of say 60. Then you start to live life. But what if you could sample a mini-retirement on your deferred-life plan before working 40 years for it?

Timothy Ferriss published his book ‘The 4-Hour Workweek’ to teach people how to escape the 9-5, live anywhere and join the New Rich using his DEAL principle: Definition, Elimination, Automation and Liberation. Who are the New Rich? The New Rich are those who have abandoned the deferred-life plan and created luxury lifestyles in the present using the currency of the New Rich: time and mobility.

What separates the New Rich (NR), those who create options, from the Deferrers (D), those who save it all for the end only to find that life has passed them by? The Definition of goals.

D: To work for yourself.
NR: Will have others work for you.

D: To work when you want to.
NR: To prevent work for work's sake, and to do the minimum necessary for maximum effect ("minimum effective load").

D: To retire early or young.
NR: To distribute recovery periods and adventures (mini-retirements) throughout life on a regular basis and recognize that inactivity is not the goal. Doing only that which excites you.

D: To buy all the things you want to have.
NR: To do all the things you want to do, and be all the things you want to be. If this includes some tools and gadgets, so be it, but they are either means to an end or bonuses, not the focus.

D: To be the boss instead of the employee; to be in charge.
NR: To be neither the boss nor the employee, but the owner. To own the trains so to speak and have someone else run them on time.

D: To make a ton of money.
NR: To make a ton of money with specific reasons and defined dreams to chase, timelines and steps included. What are you working for?

D: To have more.
NR: To have more quality and less clutter. To have huge financial reserves but recognize that most material wants are justifications for spending time on the things that don't really matter, including buying things and preparing to buy things.

D: To reach the big pay-off, whether IPO, acquisition, retirement, or some other pot of gold.
NR: To think big but ensure payday comes every day: cash flow first, big payday second.

D: To have freedom from doing that which you dislike.
NR: To have freedom from doing that which you dislike, but also the freedom and resolve to pursue your dreams without reverting to work for work's sake (W4W). The goal is not to simply eliminate the bad, which does nothing more than leave you with a vacuum, but to pursue and experience the best in the world.

Ferriss believes that you don’t need a million dollars to live a million-dollar lifestyle. What you need to live the life of luxury are flexibility and mobility. It’s these two things that will allow you to live a life that enables you to do whatever you want, whenever you want. By redefining your goals, you will have a clearer perspective on how and what you should aim for in order to live the life you want.


Timothy Ferriss, The 4-Hour Workweek

Tuesday, 15 September 2020

US Fed’s Mortgage-Buying Spree at US$1 Trillion?

The Federal Reserve has acquired up to US$1 trillion of mortgage bonds since March. The US central bank is trying to blunt the impact of the Covid-19 recession on American homeowners.

The Fed bought around US$300 bil­lion of the bonds in each of March and April, and since then has been buying about US$100 billion a month. It now owns almost a third of bonds backed by home loans in the US. Buying the securi­ties has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of end August from 3.3% in early February.

That drop has allowed homeowners to refinance their mortgages, tantamount to giving them a raise by cutting their month­ly loan payments. It’s also helped consum­ers buy homes. But the Fed’s efforts are causing its balance sheet to balloon, and with the central bank owning so many US home loans, it has unusually high power over setting mortgage rates.

The Fed’s purchase efforts started on March 15, when it said it was slashing its benchmark interest rate back to 0% and would purchase “at least” US$200 billion of mortgage-backed securities. On March 23, the central bank signaled its willingness to buy near-unlimited amounts of the debt, changing “at least” in its state­ment to “in the amounts needed.”

By the end of that month, mortgage purchases totaled US$291 billion, an av­erage of US$23.4 billion per day. While the Fed has been buying mortgage bonds, it has bought even more Treasury securities: around US$1.8 trillion since mid-March, according to data from the New York Fed. The central bank’s purchases have expand­ed its balance sheet to US$7 trillion from US$4.7 trillion on March 18.

Morgan Stanley analysts pointed out in late March that the mortgage buying was running at eight times the pace seen in prior episodes of Fed purchasing under programs known as quantitative easing. The current monthly rate of about US$100 billion translates to about US$40 billion net, after accounting for borrowers’ principal repayments from the mortgage bonds al­ready on the Fed’s balance sheet.

The latest statement from the Fed has promised to keep buying “at least at the current pace.” If the central bank does so, by year’s end it will have purchased about US$1.4 trillion in mortgage bonds — and added around US$900 billion net to its holdings.

The QE strategy has two significant consequences for consumers – mortgage rates are low but home prices move up. Lenders are able to reduce rates and increase volume. This has sparked a buying and refinancing spree. Mortgage applications shot up over 54% in June compared to same month in 2019. Prices of homes moved up with inventory of homes fell in June by 27.4% year-on-year.

So the U.S. will have created an asset bubble (stocks, homes etc) driven by responses to a health pandemic. Is that acceptable? Don’t bubbles burst at some point? Then what? More stimulus and more chaos?

1. US Fed’s Mortgage-buying Spree at US$1 Tril With No End in Sight, Christopher Maloney, TheEdge CEO Morning Brief, September 3, 2020
2. Fed Policy Has Kept Mortgage Rates Low. It’s Also Driven Up Home Prices, Natalie Campisi, Forbes Advisor, July 28, 2020