Just last week, Microsoft announced its first significant job cuts ever following the disappearing jobs in home building and mortgage operations early in the recession, then across finance, banking, manufacturing, and retailing. Layoff announcements urges everybody to realize that they are in a ‘great depression’ literally and figuratively, no more guaranteed retirement, and seeing the unexpected truth that there is no such thing as a ‘safe secure job’, at least no more…
We know that this ongoing major recession finds it roots in the subprime mortgage which was triggered by a rise in mortgage delinquency and foreclosures in the US, that home property ownership once considered as a promising investment vanished and burst in value before our very eyes.
Capitalism does carry the seeds of its own destruction. Causes and effects of the recession have been recorded and updated in various medias around the globe and it is not within my capacity to explain one by one, nor can I give you my thoughts on its solution, whether on bailing out financial institutions, increase the money supply, refundable tax credits, oh stop it, let Obama and his team do their work. I just want to share simple things about lessons that I learned from the crisis.
Well, I have to say thanks God that most Indonesians are fortunately and unfortunately ‘subprime’ by nature (zero FICO score, ha-ha), let alone knowing the term mortgage, securities, derivatives; most Indonesians don’t really know what a credit card is, it’s true. So where do they get their loan from? Well, other than no loan at all, Indonesians prefer to get the loan from their surrounding environment, family, relatives, friends, acquaintances, etc., or the best practice, pawn shop, yes, pawn shop is one of the last resort if they have collateral. Recalling a story of a friend who worked for a bank and was assigned in a rural area, first timer customers knock the door and take of their shoes before entering the bank, it shows how polite yet how uneducated the people are. Well, seeing this phenomena, I know by heart that Indonesia won’t get into any subprime mortgage crisis, more likely into subprime mental crisis, ha-ha. Seriously, being uneducated or having information barriers sometimes could bring its own positive outcomes.
Some might see Indonesians are consumptive, indeed, but to a certain extend. Personally, I prefer to use cash rather than credit, I use credit just in order to smoothing my cash flow, especially in business. The message is simple, to live beneath my mean, I spend on what I can afford now, not in the past nor tomorrow. And I see myself living in the same style as most Indonesians who prefer to use cash rather than credit.
Secondly, having been raised in a traditional Chinese environment has helped me to learn the importance of having a personal savings, that money is virtually second to God, so to speak, that we’re not merely living for today, we’re living to see the future of our children, and so on. That is why, the opinion that the rich get richer and the poor get poorer, that ‘Chinese artists carefully craft their empire statues’, do count, inheritance does play major role here. Personal savings come in various types, investments, etc. Like many others, I used to believe by heart that house and lot are always be considered as assets, that there is a guarantee they will always appreciate overtime in value, then learning the hard way from the crisis, soon I realized that it is not always the case, it could result to the unexpected negative equity. Although home ownership in Indonesia is strictly regulated, both from the government and financial institutions, at least higher interest rate is imposed, and mortgage is not a common practice in Indonesia, I start to believe Robert Kiyosaki who stressed that a house is not an asset unless it is making money, otherwise, our house is our liability, sad to say.
The crisis also taught me to be cautiously patient, that investment in form of stocks are for us with a long-term horizon, 10 years or more, to be exact. That I once saw and enjoyed the increasing value of my stocks portfolio, but now have to ‘bite my finger nail’ (read: gigit jari) seeing the prices plummeting in a consistent basis, is another lesson not to put all my eggs in one basket. So to where else I should put my eggs if I stuck with declining investments and the volatility of property values. I forgot that I live in Indonesia, where stick and rock become plants, that all you need is a hook and a net (lyric from the song of Koes Plus ‘Kolam Susu’), yes, now it’s the time to get real, nothing’s as real as the real business itself, the relatively fixed investment. All I need to do is to roll my sleeves up, sweat a bit, put a bait on the hook, spread the net, and ‘go fishing’. It’s a wake up call, really, to pick cash over bonds, stocks, house and lot, etc. But the question is where to get the hook and the net, well what really matters is that financial institutions are and will always be my last resort.
Last but not least, always have an escape plan, your personal exit strategy. I didn’t mention anything about escaping from our current quagmire by committing suicide, although that is one of the most effective and efficient attempt. Come on, get real, some might say “don’t take life too seriously, you’ll never get out of it alive anyway”, it’s damn true, but sorry, I prefer to “go confidently in the direction of my dreams, live the life I have imagined!” What about you? Mau? He-he…