Crisis Of The Credit Crunch

So it’s  kinda official.The financial market is truly downsizing and on the brink of crashing.So what’s new?The telltale signs were evident throughout the whole of last year.As I had highlighted in my workshops over the past few months,and as written by Robert Kiyosaki,it was just something awaiting.I had once highlighted about the usefulness of watching the YOUTUBE video entitled Zeitgeist.In it,it briefly describes and gives you an idea on how the banking system in US and the rest of the world works.It’s useful because it gives you that needed knowledge on how money is created and distributed to the market.

The thing about the mortgage crisis is primarily the issue of bad debts.If you are to imagine this scenario.Take it that Bank A,one day decides to issue out loans to people who wants to buy homes.Now,Bank A has decided to take on the policy of not caring whether the borrower has good or bad credit.What it means is that,Bank A do not really care or know of your financial capability to pay off the debts/loans.Now supposedly,this policy is being followed through with the hundred thousands of citizens applying for mortgage loans.What you’ll have over time is Bank A issuing out loans with the non guarantee its borrowers can pay back.Now,imagine if Bank A had actually issued out loans beyond  its liquidity capabilities?It’s just like me having only 100 bucks in my bank,but I issue out loans say in the amount of $1000.I am banking on my borrowers to pay their debt/loan plus the interests incurred.But that is based on my good faith.What if these borrowers just decided that they cannot pay out of non afford ability?Who will be left with the bulk of the problem?Me,of course.In the financial world,it’s the banks of course.The thing about loans these days,is that it is a contract.Nothing more.When you borrow a loan,what you get is a paper assurance that your financial liability ie mortgage can be paid over a period of years with interests.That is why credit rating should have been implemented more strictly in US.Maybe it was the cockiness of the bankers and institutions there,about the over hyped market outlook.They disregarded the golden rule of never committing what you cannot afford.In their case,taking on loans beyond their capabilities.

Whilst some people may choose to line up outside AIA building this morning,to liquidate their investments,others like myself may take a rather pragmatic approach.I’ve always highlighted that market is all about emotions and sentiments.This morning,as I saw the news,I finally appreciate the whole significance of market fear playing on the minds of investors.All it took was just a reported news of a bank going bust,and off they swarmed to liquidate their assets.There is nothing wrong about it.It’s just that if we were to take a long walk down the lanes of history,we would have realized that the same scenario played itself over centuries.Great Depression was such an example.1997 financial crisis was another.They were many.So what it indicates,is that,it had happened,it’s now happening,and it will happen again.There is a cycle transcending all these.If people observed.

So what do smart financial people do?They capitalize on the fears to start investing and buying into good funds that had taken a dip in its offered prices.When the majority of the herd panicked,they remain composed and steadfast in their long term planning.Buy cheap and wait.For the next cycle.Strangely,such knowledge is not taken in by the masses even with the influx of massive financial knowledge available these days.Another strange thing.Whilst our community busy itself with spending in the merriments of Geylang,it’s my Chinese associates that had been calling and asking for my views and takes on the current scenario.In fact,whilst I was at the Success shop over at Peninsula,I had an engaging chat with a few of the browsing customers and the boss of the shop.What a contrast in response from two sets of community.I just hope that our community know what is happening in the world these days.

My pal Rezdwan had just launched his site,RezdwanHamid.I was privileged and honored to have been given the opportunity to sign up for his weekly ezines.The thing that made me happy and proud to be within his circles of associates is the fact that,he is a testimony of a humble spirit of enterprise.Someone who tries to pursue his area of interests,and at the same time,on his way to achieving his financial dreams.His level of expertise is his knowledge on websites buildings.It is in his plan to make it a profitable venture with time.What sets him apart from the many Malay guys/girls out there,is that you can sense his passion and enthusiasm from the way he writes.I loved the way he writes.And coming from me,you know,I mean it.In fact I implore and suggest that you guys sign up with his ezines and read up on the wealth of info he’s sharing.And yes,I am not getting any commission cuts from him.Because,his infos are all free!!!No kidding!So before this guy makes it big time,you better jump on his band wagon and learn a thing or two.I am learning from him,that’s for sure.

Tip of the day from me…

“Despite the market situation,don’t panic!Remember what happened to those who panicked in the sinking of the Titanic?They drowned.You have a plan!So stick to the plan!”

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