2008 the year that free markets ran amok

04 Jan

I have taken the title of this post and much of its contents from the article that was written by Tan Sri Lin See-Yan which appeared in the Star on Saturday 3/1/09. 

I have written a number of post where I talk of the inability of our minds to predict the unpredictable. A lot of my writing on this subject has come from the work of Malcom Gladwell, Tim Hartford and the likes.

2008 is clear proof of how limited out thinking really is, that at the heart of of society there exist a very strong herd mentality that must go with the flow. Going against the flow, while it may be the correct thing to do, is always rejected.

As a simple example, every airline was busy buying fuel hedges in March through August as the flow said that prices would only go higher.  For any airline to, in that period, not bought forward contracts, would have been suicidal simply because no one, including myself, could envision fuel prices which on July 3rd 2008 was at USD 145 per barrel would drop to USD 31  by December 22, 2008.


Crude Palm Oil was at Rm4330 per ton on March 3 2008 and by Oct 24 it had fallen to RM1,390 per ton.

US long term interest rates reached the highest ever in 2008 , then dropped to the lowest in 50 years.

IN Q1 the issue was inflation, in Q4 it was recession

Six of the 10 best days of the US stock market history came in 2008, and by Q4 it was Wall Street’s  worst performance for 70 years.

US treasury bills actually turned negative for a short period of time (that means i will pay the government to hold its treasury bills instead of the government paying me to interest for holding the bills.)


If there is one person who has called this sequence of events correctly, it surely must be Matthias Chang. This is what he wrote on Jan 1 2008:








by Matthias Chang


The 1st week of the New Year just ended for me today, the 6th January 2008 when I read the final pages of business news in the various Malaysian mass media.

Without exception, all contained absolute nonsense – bullshit and horseshit. For example, that the Composite Index of the Kuala Lumpur Stock Exchange will surpass the 1,500 mark, ushering a year of plenty and a new era of prosperity. Wow! They must have just returned from Disneyland.

These so called experts have not the slightest idea as to what is going on in the world, specifically the financial tsunami that is sweeping across the globe. For the moment, I will not accuse them of deliberately misleading the hardworking wage earners.

The mass majority of people criticised Matthias for being a doom seeker but as you can see, he was speaking the truth.

(the whole article can be read at here)

So the real question is why did we not listen?

We did not listen because we focused on the person and not the message, or the message got clouded by the personality of the person.  This is truly one of our failings. (see ladder of inference to know more about this – click here)

To navigate through 2009, we are going to have to learn to ask for real data and facts and to look at the numbers – without emotion. As far as the government is concerned, its job it to keep optimism high until it is too late. …


Leave a comment

Posted by on January 4, 2009 in Business, General


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: