ECONOMICS

Economics is not science.  When interest rate drop, stocks should go up and bonds will go down.  Similarly, if interest rate goes up, stocks will go down and bonds will goes up. But, in USA, bonds price went up, so do stock prices.

Let us not split hair over economics, or the stock markets, as its neither of them  are absolute science nor art.  I always tell my colleagues, anything that involves human intervention or participation, it is difficult to predict.

Even with research result, to prove that Index investing outperform 80% of mutual funds, trillions are still in mutual funds.  WHY?  It is like, I have prove that your chances of success in mutual funds to outperform its index funds is only 20% and yet, the amount of money invested in mutual fund is so much higher than index funds.  Similarly, a CASINO.  Let us just look at Genting Casino, I have not seen it report a LOSS before.  Perhaps not yet.  Perhaps it will.  I have not seen a toll roads that meet its forecasted traffic loss money, it only increase every year.

NO MATTER WHAT LOGIC or RATIONAL we used, a lot of time we cannot predict human behaviour.  

I have not heard 90% if stocks or currency traders in the market makes millions and does not need to work a single day of his life.  If that's the case, why not start include a subject call "currencing trading guarantee your financial freedom" in the school syllabus in O or A level, or in a degree.  

EDUCATION

Well, some said, I go to university to seek education, not seek to get rich and hope to use my knowledge to change the world to be a better place.  Let just say this young ambitious kid came out to the real world and could not find a decent job, or make it as a businessman, what good is EDUCATION to him?  Why spend millions to elite universities in the first place.  Isn't it the elites universites graduates stands a better fighting chance to land a good job or career than a university graduates from the bottom 10 universities?  

WHAT PARENTS WANT in their CHILDREN?

• good grades
• good behaviour
• good character
• confidence
• great communicator or speaker
• high EQ, i.e. socialble 
• extrovert
• fun to be with

MOST parents will be in for a SHOCK of getting what they want.  First of all, we can't even control what we want in our own life (speaking of in general), how do we expect our kids get what they are suppose to get?

UNCERTAINTY

There is always uncertainty in life as it is in any other fields.  How we wish economics trends goes in linear.  Before the 1800s, assume what I read is correct,  the world economy is dominated by CHINA.  That means, only the later 200 years from 1800 onwards, are dominated by British, Europeans and American.

As days goes by, the volatility of equities will continue to be very high, because it is due to LOW interest rate (some Euro countries has negative interest rates) and QEs by US, Euro, China and Japan.  Not to mention, weapon of mass destruction, not Saddam Hussein or Osama, it is the DERIVATIVES markets.

CONCLUSION

 I WISH I HAVE AN ANSWER FOR MY CHILDREN.  But one thing is for sure, the society is always looking for "development" i.e. a great GDP growth, and never put much attention to the SOCIAL ILL or ENVIRONMENTAL DAMAGE.  Because, no barometer can measure that accurately.

I will go for quality growth in GDP instead of quantity.  The rich is getting richer, high GDP goes more to the reacher, and the gap is getting bigger.  

We have to check our report cards, tell me if this is good for GDP? In pursue of economic growth, millions of foreign workers have came to Malaysia for a better life, in plantations, in constructions, in leisure sectors, food and beverages.  You can see them almost every where, the Indonesians, Burmese, Vietnamese, Nepals, Cambodians and Africans.  More crimes and social ills were brought in as well, so we have higher security costs (example, security guards, CCTVs, auto gate, alarm system, auto detect sensors, assumed each household spends RM10k on this, it will add so many jobs and prosperity to the nation).  But is this quality of growth that we want?  20 years ago, there is no such businesses for these.   

If our income do not catch up with all these additional costs, I do not think any GDP can help.  Nowadays, parents would not even allow their kids, especially girls to walk to school, even it is less than a kilometer away, WHY? For safety reasons.  How much did the parents spend on these? Well it definitely improve the GDP, but is it GOOD for the citizens?  I do not think so.  Even ladies are afraid to go out to shopping complex couple of years ago when there were kidnapps and murders in shopping complex.  Of course, we do not have good memory, we are back to our norm.  Imagine each house has to add grills to the doors and windows, how much is spent?  This costs does not improve their quality of life at all.  What good if our GDP is 8%?  What is an 8% to an individual, if his or her life is in danger the moment he or she steps out of his or her home?

FOC DIY Personal Finance Strategy at www.sosfinancialplanning.blogspot.com