The Recession Litmus Test

It has been a long long time I am out of blogging space. Life is busy, and life goes on. Since 2007, I have been anticipating a recession to happen by 2008. Haha, sometimes i just feel myself looking like the little chicken in Chicken D Little, telling everyone the sky is going to fall. Yes, it has not happened yet, and yet it seems like everyone is waiting anxiously for the "dooms day" to come. Aren't you?
I have thought about this a long time. Why just waiting? At times of uncertainties, what can we do to prepare ourselves or even thrive during a recession? Everyone has some idea but no one has really been putting plans into actions. So , I have came out with some general rule of thumb to prepare myself for the forthcoming recession.

The Recession Preview: The Recession Litmus Test
I am not an economist, but I really like to talk and study about economy. It's just so fun to explore more about supply and demand. These days, even without recession, times can be hard. Rising cost of food, energy and transportation is turning a 10 ringgit note to look more like a 5 ringgit note. However, we will always try to comfort ourselves, "the GDP last years was 6 %, how bad can it be?" . I have thought about it and some of the indications of recession is listed as below:

• Rising Costs of Living: creates inflation, people will have less disposable income to spend on luxuries, properties and hobbies. Eventually ,creating an economic downfall.
• Dependency on limited commodities income: Malaysia, as what Tony Pua mentioned in The Star, is depending mainly on CPO and crude oil income to sustain our economy. These 2 commodities is accounting for almost 50 % of our exports income. Another major income comes from electronics industry, which is also at the brisk
• Properties Overhang: The government has recently allowed Malaysians to withdraw their EPF monthly to finance their housing loans. This act is merely delaying the financial problem to 20 years after. (ppl will suffer during retirement as they have little savings in EPF). Although RM 9.6 billion financial floodgates has been open up, it merely causes goods to inflate. From my personal perspective, those who really need a property, will buy it even without this incentive. While those who has already bought, they will just have more to spend, which can be good and bad. (it will cause inflation although it might boost economy activities). This clearly will not be able to solve the property overhanging problems in Klang Valley. Once the bubble burst, everyone who owns a house will feel it.
• The CPO effect: CPO has a great effect on our countries economy. During days of 97-98, per tonne of CPO can only sell for RM400 versus the RM4000 we have now. I would say , the current CPO price is very shaky as we have experience CPO trading halted for twice due to panic selling this year. If the CPO price permanently drops below RM2000, w will have a problem.
• Stock Market effect: A lot of people like to refer KLCI as an economic health indicator but I prefer to analyse trading volume as indicator of economic health. Trading volume reflects the confidence level of consumers in stock market and it is clear that since Jan 2008, the trading volume has plunged drastically.
• Retailer inidcators: Let's wait for quarterly result from Jusco, Seng Heng, The Store, HSL, Amway and I will be able to tell you more!

I will share more about preparing yourself in the next post. Watch out for more, ;)