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Raymond YUEN
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YUEN is a finance professional with over 20 years practical experience in financial accounting, financial management and investment. He is a freelance trainer and grader. He also holds a PhD(Management) with research interest in market crash and Fractal Theory. He served Qualification Program of... More
  • Always Keep An Eye On Opportunity. 0 comments
    Mar 25, 2013 6:24 AM

    No matter for business venture or investment, as business professionals, we should always watch out for opportunity. Opportunity usually happens after a change in something.

     

    This world, some time, does not operate like what the classical economic theory said: We are always in an equilibrium. The reaction of the world to change is sometime fast and sometime slows. When it is a gallop, we may not be able to profiteer from the change because equilibrium arrives very quickly. However, some time, after a change, the reaction to the change is a snail. Then, there comes the opportunity to poach from our competitors during the shift of another part of the economy to the new equilibrium.

    For instance, after the financial tsunami, the US Federal Reserve has executed the quantitative easing for trillion of dollars to reinvigorate the US economy. As a result, the interest rate has been suppressed to a very low level. However, according to classical economic theory, the rational mind investors shall see this and because of wary of inflation, shall dump the US Treasury bills and notes and render a push-up of the interest rate and collapse of the US government bond market. However, the sell short of US Treasury bills and notes has been a temerity in last 4 years. This could be regarded as a conundrum for the classical economist to justify.

    The low interest rate environment has lasted for nearly four years and the US government bond interest rate is still at the record low level around 20-40% of the historical average. As proposed by Keynesian economics, the equilibrium adjustment is slow and gradual. The new equilibrium may not arrive even after years of the movement and rectification.

    Another example is the Great Depression from 1929 to 1938. If the equilibrium shall arrive in a short time, why does the Great Depression with the downward streak last for 10 years?

    So, always head up for changes and the possible resulting shifting processes to the new equilibrium.

     

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