The Calendar

Today I received my company year 2009 calendar. There are some changes being made compare to the previous year’s calendar. The good thing is for the 1st half of the year, all Saturdays (26days) declared as an off day, compare to previous one where it depend on holiday’s pattern, the more public holidays in a month means less off day for Saturday. It is a good change anyway, since I feel that working in Saturday is a waste of time, energy and money.

By the way, for the 2nd half of the year, there are 14 out of 26 Saturdays being made as a working day. And it is not just like that, the working hours have been extended from 8.00a.m to 5.00p.m. Currently it is from 8.00a.m to 12.05p.m.

Overall, we have 40/52 days of Saturday declared as an off day. It seems very good even though I am a bit disturbed with the decision to extend the working hours. Well, initially I think that the decision is not in favour of the employee, but I change my mind. I think it’s better now.

The changes are made in consideration of the current economic condition. Probably to cut down operating cost. Every here and there people are talking about bad economy condition. The emotions are very tense when they only can see the dark side of the future. Do you think the economy is that bad? Probably yes. The GDP has reduced from 6.7% in 2Q to 4.7% in 3Q. Some experts even predicting that the 4Q GDP will be around 3.5% or lower.

But I don’t think it will be that severe as what many people talk about it. It won’t go further into a situation of panic or cause havoc unless the US economy continues to go into deep recession. From what I read at the current economic assessment, many economists are confident that Malaysia will not fall into recession. Well, 1st Half 09 probably will be bad, but recovery will start to take place gradually in the 2nd Half 09.

Manufacturing sector especially the electronic industry will be the most vulnerable and service sector is the most resilient. Company needs to maintain a healthy cash flow during this tough time, and avoid associating in heavy debt. How about making additional investment expansion at this moment? Is it a good move? Well, It depends.

But put it this way, if you expect demand will increase in future, then you do the right thing. But if everybody think that the economy is getting worse, situation is getting harder and harder, sales expected to reduce, what is the purpose of expansion?

There is no right or wrong answer here. IT DEPENDS!!. What can you conclude if your company is going into that direction? Only two reason. One, they do not know what they are doing. Two, they are ‘confident’ that the bad situation is not going to prolonged, and through their wise judgement, expansion is required. I believe, the latter is more reasonable.

As an employee, we listen and be cautious of our surrounding, but at the same time, we must have our judgement, and do not simply believe what people telling us.

To be continued…..


P/S:
Today I received a letter from a bank saying that my loan interest rate has been revised accordingly to the recent reduction of the OPR from 3.5% to 3.25%.

Economists believe that the OPR will go down further gradually until 2.75% by next year. Probably, this is the time for us to borrow more money, and put into investments which promise good return. Or is somebody going to start a business? If yes, go borrow money while the interest rate still low. Hehe…..

Proceed on: "The Calendar"

Saving

1st Scenario:
We start saving our earning at the age of 30 years old. We save RM 100 every month which will gives us RM 1,200 per year until the age of 60 years old. We invest this money in a mutual fund which gives 9% after tax return.

2nd Scenario:
We start saving our earning at the age of 20 years old. We save RM 100 every month which will gives us RM 1,200 per year, but until the age of 29 years old. We invest this money in a mutual fund which gives 9% after tax return.

We will be surprised, that at the age of 60 years old, the amount of money we have at Scenario 1 is still less compare to Scenario 2. Even though in Scenario 1, we keep saving until the age of 60 yrs old.

In Scenario 1, we invest a total amount of RM 37,200 (31 yrs x RM 1,200)
In Scenario 2, we only invest a total amount of RM 12,000 (10 yrs x RM 1,200)

We can see here that saving at the earliest possible time do make a huge difference. We heard about the power of compounding interest and we understand it very well.

It’s proven that in order for us to benefit from the power of compounding interest, it’s really needs us to start investing as early as possible, regardless of how much the saving amount will be.

I am sure most of us here can afford to save more that RM 100 a month. Make it a habit to save and invest.

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Proceed on: "Saving"

Inflation or Economic Growth?

As generally known to all of us, inflation is a situation where there is too much demand, but limited supply. Let say, money is not a problem for us, and we can afford anything, and demanding the same thing at the same time, which will cause the supply to be limited, thus, the price will increase.

Interest rate is the amount of money charged when we borrow money from the bank. Be it a credit card loan, personal loan, car loan, mortgage etc. are bound to the interest rate. There are indeed, many types of interest rate.

Who control the interest rate? It is the Central Bank (in Malaysia it is the BNM) to determine the value of it. In what situation the central bank will decide to reduce or increase the interest rate? It is according to current economic condition, whether they need to increase the supply of money or reduce it. (If not interested, please stop here.....)

By controlling the interest rate, the Central Bank (Gov.) may control inflation. If the inflation is high (More money than supply), the Central Bank will increase the interest rate. This means borrowing money become more expensive. As an example, would you want to buy a new house if the interest rate is, let say 15% per annum? Of course you will avoid borrowing money.

On the other hand, if the interest rate is higher, we will be encouraged to save and keep our money. Which mean, we spend less (reduce the circulation of money over something limited), and when customer spending reduce, inflation will reduce also.

So here we can conclude that, high interest rate tends to keep inflation lower, and low interest rate tends to drive inflation higher. Increased the interest rate will result in lower customer spending and vice versa.

Economic growth shows how much the overall economy progressing over a period of time. In order for it to have a positive growth, customer spending (Demand) must grow. The consumers have to buy product, then only production will occurs. This in return will generate income for the government and to the people and boost the economy. The cycle continues.

So we can see that, interest rate, inflation, economic growth is interconnected. When the government increase the interest rate, inflation could go lower with customer spending reducing, thus economic growth will also reduced.

Anyway, if the government reduces the interest rate, it will be easier for people to borrow money and depositing money into the bank is not attractive anymore, which in turn will drive the inflation higher. But because supply of money has increased, customer spending (Demand) also increased thus will lead to a higher economic growth.

So, when the BNM decided to leave its key overnight policy rate unchanged at 3.50 pct, I think they were worried about the economy growth as well as the inflation. They believed the 3.5% rate still supportive to the economic growth. As we all know, the government projecting an economic growth target at 5% - 6%. Their hands were tied up. Any movement will result on the inflation or growth to further deteriorate.

Recession happens when the economic growth (GDP) become negative. A country with possible threat of recession, will usually acts by reducing the interest rate to stimulate customer spending and to prevent the stock market from further stumbling. But, they are facing the threat of higher inflation.

One more correlation we can learn here. Reducing the interest rate indirectly may bring the stock market price higher. Because company can borrow money at low cost to expand their business. This in turn will boost the economy growth, and vice versa.

Proceed on: "Inflation or Economic Growth?"