Use a different brush and you might just paint a different picture
Weekend TODAY, 10-12 Oct 2008
THE world seems a mess. The financial crisis in the United States continues to surprise and frighten. Like a train wreck, the banks and financial institutions are rail cars in tow, falling off the track, one after another, day after day. What seems safe and solid one day is tomorrow’s debris. Fear in America triggers panic in Asia and elsewhere.
Then there are conflicts. Georgia, Iraq and Afghanistan seem remote, but they affect the United States and other major powers. Iraq is testing American will; so too, is Afghanistan. Neither conflict seems to have an end, even if the number of casualties falls. The mess from Afghanistan is also spilling over the border into Pakistan, adding to the political turmoil there, with nuclear weapons thrown in as well. In Georgia, a resurgent Russia is bringing back geopolitics to challenge Western dominance.
Closer to home, events in Thailand and Malaysia are messy, and even seem unstable. In both countries, there are shrill contests about who is to be Prime Minister, controversial court cases and street protests.
So whether it is the major markets, remote conflict zones or neighbours, things today are turbulent. There is much at stake, even beyond the big name banks. Some suggest that America’s hegemony as the sole superpower will end. Some potentially see the end of the ideal of free markets and a retreat from globalisation. Some question democracy’s ability to deliver stable government.
What do we do? How do we deal with the mess? A lot depends on who we are, and how we see the world.
There are those who put a high premium on stability, and are so accustomed to Singapore-style political and economic continuity; they will avoid mess. There are those who will be glued to the television for the latest news about the US and world markets, unable to act.
Avoidance or inaction are often our responses to messy situations.
Look at Thailand and Malaysia. Many foreigners there, including Singaporeans, have put off travel and business in these countries. Some brokerage houses and analysts suggest that the risk-return ratio in these countries is now too high to make investment worthwhile.
But there are other attitudes, other ways of responding. As the adage goes, we can’t always control what happens to us, but we can control how we respond. For the financial mess, Singapore and much of Asia must prepare for turbulent times. Our own financial systems may be fundamentally sound. But the economic contagion and the lack of trust in the markets, and even between banks, cannot but affect us. Some caution may be warranted, to reign-in unnecessary expenditure and exposure.
But equally, we should realise that a mess can be a source of opportunity. Contrarians can benefit in times of tumult. In a market that is swinging up and down, a savvy investor can make more money and more quickly than from a steady climb.
Look at Mr Oei Hong Leong, perhaps one of the savviest market players in Singapore. While others panicked, he placed sizeable chips on the American giant AIG, buying as prices sharply dipped. After the US government bailout, and if the market and company prove resilient, there may prove to be rewards. If not, of course, the amounts gambled will be lost.
Such a contrarian approach is not for everyone. A quick but steady hand, a strong stomach for ups and downs, as well as sufficient reserves, are required.
Another important asset in times of mess is to have sharp eyes. We need to sieve through the hype and half-truths. Some headlines may overstate the facts. Others may conceal as much as they reveal. Perspectives differ, especially when politics between rival camps is hot — whether between the United Malays National Organisation and Anwar Ibrahim or as US Republicans
and Democrats battle over the presidency.
In this Internet age, information and opinion are plentiful. But insight is more difficult to find. But a first step is to be open. We must not expect other places to be Singapore — neat, stable and perhaps even dull. An effort must instead be made to differentiate events and trends that portend a fundamental change in the society, and those headlines that will
be today’s big news and tomorrow’s recycling.
We have to see that there are different kinds of mess. Even when the highest level of politics is a mess, other levels and sectors may continue quite unaffected.
For example, with higher tensions between the West and Russia, sectors like oil and gas may prove highly risky, as big Western energy companies have found. But those selling luxury goods to Russia’s new and fabulously rich should
not be scared away.
Louis Vuitton can continue to sell well in Moscow, even as the French government may protest events in Georgia. Indeed, if the West no longer welcomes them, deluxe developers in Singapore or other safe havens can welcome Russians looking for a second home.
Mess brings opportunities, albeit with the spice of risk. In the Asian crisis a decade ago, some companies and countries were relatively unaffected and took decisions to invest in opportunities that would otherwise never have been open. Not all of these have worked out. But some have, and handsomely, for quick profit or longer term strategy.
Asia has been rising, and increasingly interconnected, and Asians hold much of the world’s savings. We cannot wish away the unfolding global mess. We will instead have to find ways to understand and deal with the consequences — both its risks and opportunities.
Next week, a look at the problems in New York and the United States.