What The Government Should Be Doing For Flood Victims

It looks pretty obvious that maybe not enough has been planned to mitigate the repercussions from the present floods' disaster. Some 200,000 have been affected, and possibly another 100,000 will be affected indirectly for those who might be dependent on the former group.

What needs to be done immediately:

a) Unit In Charge Of Logistics & Aid Distribution - self explanatory. Too many ketua kampungs acting as toll gates, preventing aid from reaching the victims.  Presently the kind of aid also changes accordingly. Many places do not need food but more so for cleaning products and medication. Right now, its a free for all. All good intentions are not properly directed, and a large portion may be wasted in the end.

b) Unit In Charge Of Infrastructure Rebuilding - A detailed study of whats immediate and whats medium term. The kind of funds needed and how to get them, and disburse projects asap.

c) Unit In Charge Debt Relief & Insurance - Many people have lost a lot of property and assets. If you have two cars under water, you are looking at RM30,000-RM50,000 in damages. Before you now it your monthly car and house payments are due again. The unit should be there to negotiate with all banks and insurance firms collectively. Maybe a grace period of one year could be given to those who apply.

d) Unit To Cater For SMEs and Companies - Looking into the after effects to companies as they are the backbone for people to rebuild lives. Without jobs, how are they going to rebuild their lives? Hence special assistance loans should be given on a case by case basis to alleviate the pain.

e) Unit To Cater For Planters and Farmers - Many crops and cultivation have been devastated. Similar to above.

This flood is a national disaster, not a leave your house and go back a couple of days later to clean up and things back to normal. Many who are middle class or lower middle class, suddenly find themselves below poverty line.

The government needs to stop playing politics and work with state governments as too many lives and livelihood are at stake. Remember, we do not have SAFETY NETS ... there is no unemployment insurance, and if you did not get extended coverages, you have lost your cars and your house needs a huge renovation loan. Not to mention those whose houses have been totally decimated as well.

Act now, act fast and decisively.

Things To Consider About Oil Prices In 2015

Let's be frank here, I did not think oil prices would plummet like it did. It is largely a black swan event which went past the estimates of a large majority of investors, experts and amateurs. So this is not anything profound, its just some important pointers that one should know going forward.

$50-60 for oil seems like soo... drastic, and it is for all players within the oil and gas arena. More so for economies that are highly dependent on oil revenue for a substantive part of their budget spending.


A look at the chart below show the budgeted price of oil for their "revenue estimates", blue was the price budgeted for 2014 and red is for 2015, both were WAY OFF ... something's got to give ...

a) A real correction or an aberration - The thing is on hindsight ... this 
correction is not an aberration but the last 5 years for oil prices to be around $100, now that was an aberration. The long term, 20-year average is, in today's money (adjusting for inflation), is more like $US60. It wasn't that long ago that the Organisation of the Petroleum Exporting Countries was targeting $US25 oil, which back then seemed a comparatively high price. 

b) The new normal, or the real normal - On hindsight again, the price upswing of oil coincided with two major developments. It started from $40 to above $100 over the last 5 years owing to China's so called unstable demand, China's unstoppable growth projections, and China's storage of oil to ward of excessive oil price increase; plus the easing of money supply from most developed nations affected by the subprime and Euro crisis. Hence if we are shifting to the new normal - the new normal has China struggling to post moderate growth, the new normal has seen China being over invested in many mines (commodities), the new normal is seeing a mismatch between demand and supply, the new normal has seen shale/fracking oil being a major contributor to the supply equation.

c) Supply brought on by high oil prices - Turn back the clock to 200 and price of oil is less than $30. The rise and rise of oil prices have caused large investments and spending in innovation and research, which brought forth much of the new supply. Its like a pendulum, you swing extreme on one side then you swing back to rebalance. In much the same vein as any new "innovation/ventures", e.g. the rise of internet, smartphones, online shopping, etc... every time there is a new "area", the investing community will throw money at it to speed up extraction of easy money till its no longer easy like now. These dishes of liquidity is deemed as necessary as it pools funds into innovation and new ideas, but will throw off excesses as well.

d) Contango looking bright - If someone were to examine future delivery for oil, the futures' prices is much higher thus leading many to conclude that a strong rebound is imminent. I believe this has more to do with remnants from players still fixated with oil prices at $80-$100. There is a strong inherent bias in the way we make estimates or guesstimates or even make prediction - its called "anchor & adjust", which in itself is usually useful but would preclude us or blinkered us in terms of our decision options. An example is that if we have seen oil trading at $80 for the past 2 years, if we were to hazard a guess for the price of oil 6 months down the road, we would anchor at $80 and adjust slightly up or down depending on our beliefs and knowledge of the subject matter, henceforth in that case most guesstimates would probably be around $70-$90. It would take gargantuan balls and chutzpah to call for oil prices to be at $60 or $110 6 months down the road.

Above was the daily production back in 2001 by countries. Just look at the current daily figures. Most economies' budget have probably increased multiple folds from 2001 to2014. Russia's pumping more today than in 2001 and is in a more severe position financially. While we have been fixated by shale oil from the USA, its not the culprit in the supply equation - the USA has been constant in its daily production back in 2001 and today. What has changed is the emergence of Canada (oil sands) and China, they were nowhere back in 2001.

	Country	Production (bbl/day)	Share of World %	Date of Information
—	World	84,951,200	100%	2014 est.[6]
1	Russia	10,053,800	13.80%	2013 est.
2	Saudi Arabia	9,693,200	13.09%	2013 est.
3	United States	7,441,200	12.23%	2013 est.[7]
4	China	4,372,000	5.15%	2014 est.
5	Canada	3,856,000	4.54%	2014 est.
6	Iran	3,518,000	4.14%	2014 est.
7	Iraq	3,400,000	3.75%	2013 est.
8	United Arab Emirates	3,087,000	3.32%	2013 est.
9	Venezuela	3,023,000	3.56%	2013 est.
10	Mexico	2,934,000	3.56%	2013 est.
11	Kuwait	2,682,000	2.96%	2013 est.
12	Brazil	2,633,000	3.05%	2013 est.
13	Nigeria	2,525,000	2.62%	2013 est.
14	Norway	1,998,000	2.79%	2013 est.
15	Algeria	1,885,000	2.52%	2013 est.
16	Angola	1,840,000	2.31%	2013 est.
17	Kazakhstan	1,635,000	1.83%	2013 est.
18	Qatar	1,631,000	1.44%	2013 est.
19	United Kingdom	1,099,000	1.78%	2011 est.
20	Colombia	1,011,992	0.97%	2013 est.
21	Azerbaijan	987,000	1.20%	2011 est.
22	Indonesia	982,900	1.66%
23	India	897,300	1.04%	2013 est.
25	Oman	890,500	0.95%	2013 est.
26	Argentina	796,300	0.93%	2013 est.
27	Libya	700,000	0.85%	2013 est.[8]
28	Egypt	680,500	0.80%	2013 est.
29	Malaysia	693,700	0.82%	2013 est.
30	Ecuador	485,700	0.58%	2013 est.

Hence in the current scenario, we have a loaded situation wherein most player have seen oil prices dropping 40% over the past 3 months. Thus at $60, most futures would see a strong bias on the upside as many believe they may have missed out on the big drop already. The chances, seemingly, is higher for it to go higher than lower from $60 in the next 3 to 6 months.

That is a huge fallacy in my view. Thats because if you think that, you are basing it largely on how oil has been trading for the past 4 years. However, as explained, this correction is taking out the excesses of easy money and depleted demand in light of rising output. In my view oil has a higher propensity to go to $40 than $70 over the next 3-6 months. I wish I will be wrong, I really do.

Understanding the NEW Base Rate effective Jan 2015

New year always come with some new changes. In 2015, we have this thing called "Base Rate" (BR) which will replace the previous Base Lending Rate (BLR) we commonly used for years. What does it mean? What are the differences? How much is the rate actually?

The new system of pricing...

With the new base rate, banks are allowed to price their loans products more efficiently based on their ability. How is the computation method being used for base rate? Read our previous explanation here...

The New Rate for different banks...

• * Indicative Effective Lending Rate refers to the indicative annual effective lending rate for a standard 30-year housing loan/home financing product with financing amount of RM350k and has no lock-in period.
• * Data sourced from Bank Negara Malaysia on 2nd Jan 2015.

The LOWEST Rate is Maybank?

Yes. Maybank set it's base rate to 3.20%, the lowest among all the banks currently. And, guess what? This was already explained and predicted by Finance Malaysia last year !!!

So, does it affect the existing loan borrowers?

No. The new base rate will only applies to those applying for new loans or refinance from 2nd Jan 2015 onward. So, the existing borrowers can rest assured that their loan rate still follow the existing terms and conditions.

BLR is follow the Bank Negara Malaysia OPR rate. How about BR ?

Good question. The previous BLR will fluctuate according to overnight policy rate (OPR) being determined by BNM from time to time. However, since BR depends on the bank's cost of funds and liquidity factors, it can be reviewed and fluctuate anytime to reflect such changes even if there is no changes in OPR. Don't forget the other factors such as statutory reserve requirement (SRR) being set by BNM also.

Any major different in terms of effective rate?

Referring back to the table shown above, the base rate doesn't mean everything. The most important thing borrower must know is the effective rate being charged. Take Maybank BR 3.20% as example, the effective lending rate was 4.55% actually for a 30 years loan. The effective rate generally depends on the loan amount and loan tenure. Lesser the loan amount and longer the loan tenure would lead you to higher effective rate.

Hope this article enlighten you...
Stay tune for more updates...

How to Responsibly Use & Manage a Credit Card Account ?

Using a credit card doesn’t have to be difficult, but there are a few guidelines to follow in order to successfully manage your financial accounts, then you’ll be ready to go !!!

Be prompt

First of all, pay your balance on time. This is probably the most important factor in determining whether your credit score improves or not. If you don’t pay your bill on time, your APR may be raised, and there will likely be a fee. A great way to remember to pay your bills on time is to set up a reminder on your calendar. Google Calendar is a great option that alerts you via phone or email when something is due.

Watch the watchers

Keep an eye on your credit report in order to avoid errors and to keep track of whether your score is going up or down. All requests for credit reports eventually go through the central bank, Bank Negara Malaysia (BNM), which is why it makes sense to just cut out the middle man and go to their site.  Your credit report is free of charge—you’re merely required to provide necessary documentation, and you can apply remotely or in person.

Quality > quantity

Rather than take out a lot of credit cards, ask for credit increases on the ones you have.  The older and more established your credit cards are, the more your credit score stands to improve. Being in possession of a card for ten years, as opposed to one week, makes you appear to be more secure — which, in turn will improve your credit.

Exceed the minimum balance due

Pay your balance in full — or as much as you can afford — each month. This will signal to your credit card companies — and credit report agencies — that you view each credit card account as a personal loan that needs to be paid back, as opposed to permission to go on a shopping spree.

Exercise restraint

Don’t go above your credit limit. If you do, you’ll be charged a fee and it will negatively affect your credit report. Depending on the card, your credit limit may or may not increase. It’s always best to give the credit card company a call to see what they say as they may be willing to increase your limit if you’ve had an account with them for a while, but it depends on the bank’s policy. It may not always be the best idea to raise your credit limit: the higher your card limit, the more you’ll eventually have to pay back.

Transfer your balances

Consider transferring your balance to a different card after the free 0 % APR year, if applicable. Always apply for cards with the lowest available APR — and if you have any cards with a high balance or APR, transfer some of that balance to a card with a lower APR. Keeping your balances below 50% will improve your credit score. There are numerous online tools for finding and applying for a credit card that's great fit for you.

Start small

If you’ve never had a card before, or you’re looking to improve your credit score, consider cards with a relatively high approval rate, such as department store cards or credit cards through your bank or credit union, to get started. This way, you can establish your credit—assuming you are able to pay your monthly balance on time. Then you will eventually qualify for ‘silver’ and ‘gold’ cards with lower interest rates.

Monitor yourself

Finally, create a budget to follow. There are more than a few budgeting apps out there. Making — and sticking to — a budget will make it easier to follow the aforementioned advice.

Why John Oliver Is A Must Watch Show ...

The comedic talents emanating from the cavernous  cave of illicit intellectual masturbation that is The Daily Show, have sprouted wings to conquer the airwaves and brainwaves as well. It all started with Jon Stewart, who is actually a less angry incarnation of the indefatigable late George Carlin, the father of honest/rude/crude/intellectual/in your face commentary that happens to be extremely funny. From The Daily Show, the first to sprout wings was the "hard to box in" Stephen Colbert, who may have sold his soul a little to take over David Lettermen's show.

The third member who left The Daily Show was John Oliver and his Last Week Tonight with John Oliver is a must watch for his incisive commentary of what's wrong with politics, people in power, people and corporations that make stupid decisions, on the often anal attitudes of some Americans and the general riff-rafts that make you shake your heads. Its highly educational, informative and brilliantly funny.

Here are some of his better episodes:

On monarchies ...

https://www.youtube.com/watch?v=CkfnUm4w-Xk

On recent Indian elections ...

https://www.youtube.com/watch?v=qO2U4wRYE1M

On corruption in supplements market ...

https://www.youtube.com/watch?v=c5nUREYjowc

On the stupidity and misuse of funds of lottery ...

https://www.youtube.com/watch?v=9PK-netuhHA

On Brunei ...

https://www.youtube.com/watch?v=ycpDV9LvgU0

Why Air Ticket Prices won't Come Down just yet? (Dec 2014)

World's oil prices have been tumbling down substantially since June 2014 to current level of US$60/barrel. As most of us already knew, when this kind of news appear, airlines industry tends to be one of main beneficiaries. However, why cheaper oil price this round doesn't really translates into cheaper air ticket price?

The Oily Factor...

Oil is the biggest variable cost for airlines, often representing 1/3 or more of their operating expenses. Hence, the profit of an airline is very much depends on oil prices movements. And, due to this very important factor, many airlines are trying hard to minimize this risk until they found one strategy called --- hedging.

However, there is a flip side to this hedging strategy, which is if they bet on the wrong direction. Normally, an airline would hedge against the rising oil prices up to certain months. It can be three months or six months for example. This strategy works well if oil prices didn't fluctuate much, helping airline to estimate and control their costing.

Good sometime may be Bad also...

But, it's a totally different story if oil price tumbles as much as 40% within few months time as what we are experiencing currently. Instead of hedging against the rise of oil prices, the hedging costs is eating into the benefits of cheaper fuels. That's the reason why air ticket prices just won't come down yet until the hedging contracts is over.

I believe all of the airlines have this kind of hedging strategy. How competitive are they in the next few months would depends on how many % of fuel they already hedge. Let's wait...

The Economics of It's A Wonderful Life

A tradition at Finance: Past, Present and Future is that the final post of the year is both Christmassy and cheesy - for past examples see here and here. This year, we will continue this great tradition with the help of the folks over at EconStories, who have performed an economic analysis of the classic Christmas movie It's A Wonderful Life, starring James Stewart as George Bailey.

I hope that you have a Merry Christmas and a prosperous 2015!