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Successfully reduced volatility, that’s most important.

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A friend exclaimed the other day, ‘Did you know one of my friend who visited Thailand could not exchange his Ringgit because the moneychanger there did not want to accept Ringgit?’ I asked for more details but none were forthcoming. I asked who was his friend, when did it happen, which city in Thailand was it and what was the amount that his friend wanted to exchange. No answers. I think we do agree that volatility of ringgit is really a huge issue. Especially of interest is the fact that the cause is always ‘loss of confidence.’ I do not understand loss of confidence in what. GDP growth? Trade Surpluses? Corporate results in BURSA? (PE numbers) On all these accounts mentioned, Malaysia is better than that country which had a new President recently.

Perhaps it is the household debt vs GDP percentage? Well, if this is the case, please just say this is the case and then quickly start dumping another currency for which its property market is so hot and its household debt vs GDP is now 123 percent!! (Yes, the amount owed by the households is BIGGER than the GDP). Yes, this is about Bank Negara Malaysia (BNM) and Ringgit. You may stop reading now if you disagree with BNM’s move to take the excessive speculation out of the Ringgit and feel that this is like a capital control. Actually do we know that Malaysia has trade surpluses every month and every year for many years already? However, BNM’s foreign reserves did not rise for the past few years.

Let’s also read an interesting article too. Here: Malaysia’s Ringgit Crackdown Spooks Investors. Please read the article carefully. It said, “Malaysia’s crackdown on currency speculators has come at a cost. While it has successfully reduced ringgit volatility, it is threatening to discourage overseas investors.”  First sentence was about the success of BNM. Clap, clap, clap. Second sentence technically means nothing. ‘Threatening’ does not carry the same weight as ‘KILL’ and ‘discourage’ is also extremely different with ‘STOP.’ By the way, the title says, ‘Malaysia’s Ringgit crackdown spooks investors.’ I would like to reiterate that when we put in some money and we hope for quick or very fast returns, that’s NOT investment and we are not investors. A better word may be a gambler. Just as fundamentals do not change overnight, why is the currency going up and down a lot within days? Disagree? It’s okay, there are lots of other strong currencies to hedge against the ringgit. By the way, Warren Buffet’s famous statement about ‘investment’ versus ‘not an investment?’ Here: “Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” Invest, please. Cheers.

written on 8 Feb 2017

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