Serious me

I clearly remembered when I applied for my Masters exactly 2 years ago. Part of my personal statement was me expressing my opinion on the 2008 financial crisis and why I wanted to pursue Financial Mathematics. They bought it. I got it.

Today, as I prepare myself to yet again reapply for my Masters after I declined this year’s intake, it’s like living a de javu. Just that this time, I’m talking about a wound that can’t be cured anymore with any sort of medication. Only thing it can be healed with, is by giving it time and having the discipline to not either scratch or touch or do anything to make the wound worse. Yes, the process will take a damn long time. Exactly how the market is out there right now.

Potentially a recession might pop by for a visit. There is no more solution out there come on, everyone knows it. But an attempt to show that the authorities are doing something to help the economy does help, even if it can’t do much. It’s a chicken and egg situation. Attending to growth concerns would mean the opportunity cost is the inflation concern. Likewise, if it was the other way around. Debts are rising, but you need public and every Tom, Dick and Harry to borrow in order to have the money to create demand and subsequently make the economy cycle faster to recovery.

So, this week was a pretty interesting one. I was very eager to read the minutes from the FOMC meet. Fed’s decision to launch ‘Operation Twist’ this week was not a surprise and was a clear evidence that the market perceives monetary policy is becoming less effective in supporting the economy. Buy long term, sell short term. Was reading the history on this and it was first introduced in 1967 to curb recession. Another history was in 1980 during the oil crisis triggered by Iranian revolution and quantum of rate cut was 1050 bps in the shortest time! Holy schmolly. From 20% down to 9.5% in 4 months! Freak of nature betul.

But ok. I thought it’s still better than dumping in money through a QE3. I don’t know. QE2 only sparked up inflation and damaged the real income of the middle class. It might help, but I believe only short term before inflation rises and things get expensive and people need more money and more borrowing, more defaults. That was in laymen terms. I believe it’s more complicated than what I just lined up. Clearly Operation Twist is less inflationary and it’s about time they don’t play dumb anymore.

Will it work though given that rates are already promised to be kept at close to zero till mid 2013? Interesting as it is, it’s all easier said than done. With limited options out there, seriously, only time and discipline can make up for it. As I see it, I think market’s gonna hurt for a lil longer this time before it slowly crawls back up :) Just be cautious to those playing with shares! To be honest, I’m having a really good time at work, learning and at the same time working around this falling market and taking advantage, making good out of it. A motivation in itself this market crash :)

At least for me. I don’t know if this works for everyone. Highly unlikely.

The next significant event this weekend is the G20 meeting, and the IMF-World bank annual meeting, both taking place in Washington.

Have a great weekend everyone! Mine already started very well with futsal tournaments this morning :))) Us in corporate finance team, up against our clients, auditors and consultants! Oh-so-ohsem!