Posts Tagged inflation

The best Inflation Hedge?

In the last post, I talked about gold as the investment of choice in bad economy. After reading an article from investmentu.com, my current understanding is not quite true. Here is the excerpt:

Dr. Jeremy Siegel, a professor of finance at The Wharton School of the University of Pennsylvania and author of Stocks for the Long Run, has done a thorough historical study of the returns of different types of assets over the past couple hundred years.

What he discovered is dramatic:

  • $1 invested in gold in 1802 would have been worth $32.84 at the end of 2006.

  • The same dollar invested in T-Bills, with interest reinvested, would have grown to $5,061.

  • $1 invested in bonds would be worth $18,235.

  • And $1 invested in common stocks with dividends reinvested – drum roll, please – is now worth more than $12.7 million.

The Ultimate Inflation Hedge - Stocks

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Back in Malaysia but…

…nothing much happening. I went back to Kota Bharu after three full days of staying in my brother’s house in Cheras. Other than going to the wedding of my friend’s brother, I met with several old friends and that’s all.

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Everybody seems to be talking about recent fuel price hike. This incident has been much taken as political issue rather than a problem that must be dealt with. We must face the fact that the world price for oil is soaring up to $135 USD per barrel. We are no longer enjoying $65 USD price point like it was when the oil price in Malaysia was RM1.92 per litre.

While the annual rebate is far from enough, it’s much better than blindly subsidizing the oil price. Here’s why:

1. It encourages petrol usage reduction.

Before this, there is no ’penalty’ of using a lot of fuel. If one use tons of fuel for business, he/she is consuming a lot of government subsidy which is meant for those who can’t afford the fuel. Now, if you use around RM140 fuel per month, the cost of the recent price hike will be covered by the RM650 rebate. If you use more than that, you will pay the full price (RM2.78) for the additional fuel.

2. Those in lower income bracket benefit the most from the rebate.

Majority of low income people is using less than 2000cc car and travel less than higher income people. By limiting the rebate to these lower income community, government is focusing its spending and could save a lot from that.

3. No more ’seludup minyak’ problem. Our neighbors also feel discouraged to fill their tank in our shore.

4. Less pollution by (#1) reason.

5. More money for government to spend. Hope their spending benefits us the most.

That’s all that I could think in this short while. If you have any comment or suggestion, let me know through the comment section.

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