This book is Book 3 of “Show Me the Money” by Teh Hooi Ling. The subtitle is “Fighting Paralysis in a Market Meltdown and other curious facts about the market”.
The author was a journalist writing for The Business Times until 2013. She covered the market meltdown of 2007,08,09 that was known as the Global Financial Crisis. Her articles cover period from 2007 to 2012 with updates up to June 2015 on most articles.
As I was reading this book, the world faced another financial meltdown in January this year. The book brought me back to the dark era of 2008/09 Great Recession sparked by the sub-prime mortgage crisis of the United States. So much lessons can be learned from this crisis and these were well written by Teh Hooi Ling. It was extreme fear for the investors as we saw our investments plunged in value, some by more than half the costs of our investments.
I tried to draw some parallels between 2008/09 recession with January 2016 meltdown. The major differences between the two are:
- This time economy of China is driving the crisis and not the US.
- Oil prices declined to US$30 per barrel due to oversupply of oil with demand not picking up.
- The US Federal Reserve started to raise interest rate in December 2015 moving away from ultra loose monetary policy since 2008.
- Japan and Europe are still facing poor economic growth.
- Economies of some emerging markets and middle-eastern countries are badly affected by low oil and commodity prices. This includes Australia.
The fear by investors is essentially the same. How can we navigate in this period with our investments? Is there anything an investor can do to ride this economic storm? How long will this crisis play out? It appears same same but not exactly so with differences in the conditions prevailing now and in 2008/09.
Teh Hooi Ling’s third book showed what strategies work with the benefit of hindsight. Staying calm and not to panic when everyone is, is the way to go. One can get good advice from reading her book.