Tan Kin Lian's Blog: Keep cash, and be safe

Saturday, November 28, 2009

Keep cash, and be safe

Someone asked for my views on how to invest money at this time. It is a difficult question.

I think that it is better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer. I do not like the stock market as it has been inflated due to cheap money from the government stimulus packages around the world.

The underlying problems of the global economy has not been solved, as there is still high unemployment and lower consumer demand. People will be unwilling to spend, if they are not sure about the security of their jobs and incomes. When people spend less, more people will become unemployed. This leads to a depression.

While the global economy remains gloomy, and the underlying problems are not solved, it is better to keep cash. Some people rushed into gold and commodities, but their prices may be too high now.

I would be more confident when the governments around the world start to adopt Keynesian principles, i.e inflate the global economy by creating more jobs funded by the state. This will cause inflation a few years later, but will have the impact of reviving the global economy. At that time, I will start to invest in the stock markets. If the bond markets gives a higher yield (better than inflation), I may invest in bonds also.

Tan Kin Lian

6 comments:

Anonymous said...: Yes, I agree. No hurry to jump into the stock market.
Sit back and watch the battle.
It is always easy to spend money, there is always many ways to spend it.
The merchant, businessman regard me as his worst nightmare, because I repair my own things ( as much as possible ) I buy quality. I do not succumb to fashion and gadgets. I cook my own meals, I fix my own coffee I bring my own water.
If 20% of us did this, the economy will collapse and we can rebuild anew.
Alas, new immigrants are eager to spend.; November 28, 2009 6:57 PM
Anonymous said...: This is waht government hopes that the FTs will stimulate consumption before they go home. The problem is they are staying put and eating up our tomorrow's produce.; November 28, 2009 7:44 PM
Anonymous said...: The Dubai "debt crisis" seems to be a bit of over reaction by nervous markets. The total debt of Dubai World is only about $60 billion. At the height of the financial crisis, that was the amount which Temasek alone was said to have lost. Moreover Dubai is part of the UAE. With the huge amount of money earned when oil was over US$ 100 billion, it would seem to be a fairly small problem.; November 29, 2009 8:23 AM
Anonymous said...: Dear Mr Tan
Just wanted you to know that you are not alone in longing for the return of Keynesian economics and jobs creation.

Far too many people have forgotten how Keynesian economics pulled the world out of the depression in 1929.

Source: http://en.wikipedia.org/wiki/John_Maynard_Keynes

Inflation is a fairer way of sharing the misery than depression.; November 29, 2009 10:13 AM
Anonymous said...: While Dubai World debt may only be $60 billion, there is a multiplier and leveraging effect, which is common in high finance.

Hence the financial and psychological impact may be much more than the figure would suggest.; November 29, 2009 11:05 AM
Anonymous said...: The Dubai crisis may look like a storm in a teacup. But it may set a precedent for other emerging and third world countries to copycat.
When the going gets tough, countries would lie through their teeth, just like the Dubai Sheik and his officials did one month before their announcement of debt default.; November 30, 2009 5:08 PM