A book on America Fringe Economy

This post will present a short review on a book ”Shortchanged” by Howard Karger. Next, a personal niggling thought on the stock market is posted.

”Shortchanged” is a book depicting the financial life and debt in the fringe economy in America. It tries to show how financial companies (e.g. pawnshops, credit card, cash cashiers) do business with the low-income as well as debt-ridden consumer (which is the fringe economy). As these low-income or debt-ridden consumers are usually deemed as high-risk borrowers, they are not able to borrow funds at the normal interest rate. Neither do they have the funds to purchased discounted white goods without the use of installments. As such, the financial companies would levy higher interest rate (too high, in fact, as the book describe some interest rate charged is around a few hundred percent a year!) on the loans given to these group of people.

Of course, these low-income consumers are likely to lack the financial education or time to read through the conditions or understand what they are getting into. Even though they understand, sometimes the lack of alternatives for emergency loans may lead them to take up these high-interest loans. The book also discuss on plausible solutions to alleviate the predicament in the fringe economy.

When I am reading “Shortchanged”, I often think whether Singapore will follow the footsteps of America’s fringe economy. We have already seen the impact of credit cards where banks try to offer consumers cash advances at double digit interest rate and the probable scenario that more people are getting into debt-mire with credit cards. In the recent years, we have also seen companies like James and Ezycash offering loans to low-income individuals with high interest rates. While I am not certain of the Singapore fringe economy future, I wonder whether the low-income group will become more debt-laden or whether they will be even be in more dire circumstances in future. Nonetheless, the book ‘Shortchanged’ will be worth reading if one is interested in the fringe economy.

Recently, I have been thinking on the strong run-up seen in Sesdaq. From Jan to the current date, Sesdaq has returned 74%. I guess that Sesdaq will probably advance in the near future. However, what I am concerned about is the future Sesdaq correction. I am guessing that the future correction in Sesdaq would be dire in magnitude. Given that many common people are currently playing the stock market and the strong run-up Sesdaq is having, the correction period may not be far-off (maybe in a year’s time? I dare not predict a narrow timeframe).

Meantime, I will be under-performing Sesdaq for the current year. The under-performance is getting worse. Sigh. This is perhaps not surprising as I am more of a low-PE shooter (ie recent purchase of China Power Print) rather than a growth investor. Therefore, my performance would lag (seriously) behind growth investors when growth stocks are soaring high. Well, happy for the growth investors and hibernation for me.

P.S. I have sold all my positions in Shanghai Asia and Shanghai Turbo recently.