5 Years On

I wasn’t paying attention last month and completely forgotten about it, but this blog hit its 5th anniversary on the 3rd of February, 2014.

Seems like I just started out yesterday, but its been a heck of a journey – personally, professionally and intellectually. Reading some of my old posts now, I can see many of my mistakes, but I also see just how much I’ve grown and matured through this process. It’s been an immensely rewarding and enriching experience.

Moreso since, based on my stat counters, the blog also hit 1 million page views some time in January, and over 600,000 visitors. Those are numbers beyond believable, which I never even looked for 5 years ago when this site was started as no more than a personal project to stay connected with my ex-colleagues.

Somehow it grew, and through it I’ve connected with a larger world, a larger Malaysia, than I’d ever thought to see. It’s brought me both friends and enemies, agreements and arguments, and I cherish all alike.

So from the bottom of my heart, to all my readers and commentators, and to my wife who has always encouraged my sometimes crazy mania for blogging, thank you. This site would be nothing without you…and neither would I.

Regulation And Ratings

There’s a fascinating new working paper at the NBER that examines how the confluence of ratings and regulation conspired to help create the 2008-2009 global financial crisis (abstract):

Rating Agencies
Harold Cole, Thomas F. Cooley

For decades credit rating agencies were viewed as trusted arbiters of creditworthiness and their ratings as important tools for managing risk. The common narrative is that the value of ratings was compromised by the evolution of the industry to a form where issuers pay for ratings. In this paper we show how credit ratings have value in equilibrium and how reputation insures that, in equilibrium, ratings will reflect sound assessments of credit worthiness. There will always be an information distortion because of the fact that purchasers of ratings need not reveal them. We argue that regulatory reliance on ratings and the increasing importance of risk-weighted capital in prudential regulation have more likely contributed to distorted ratings than the matter of who pays for them. In this respect, much of the regulatory obsession with the conflict created by issuers paying for ratings is a distraction.

Skipping over the math, what Cole & Cooley observe is that credit ratings and rating agencies continue to function pretty well, even under the potential conflict of interest arising from the “issuers pay” model, at least for “vanilla” credit securities.

Perceptions of Inflation

Pemandu serves up some thoughts on the CPI from the Ministry of Domestic Trade, Co-operatives and Consumerism (now isn’t that a mouthful?) (excerpt):

Food Price Increases Not as Dramatic as Public Perceives It

Many Malaysians have expressed concern over the increase in price of items in the food basket in Malaysia, seeing it as a knock on effect of the reduction of fuel subsidies. However, the reality is that these are part of a global trend where the prices of goods and services are on the rise.

February 2014 Consumer Price Index

Question: Has there been an increase in inflationary pressure in the last few months?

Question: Has weakness in the Ringgit contributed to domestic inflation in Malaysia?

I think the answers might surprise a few people, for so far the answer to the first is no (at least, not yet), and the answer to the second is both yes and no.

Let me explain.

BNM Annual Report 2013

I think I’ve finally settled down enough to start writing for the blog again, but posts will be a little sporadic still until I feel like I’ve got all the pieces of my new job in place. That might still take some time, so I’ll be focusing less on day-to-day data releases, and more on big picture stuff for now. I’ll probably go back to more regular posting in a few months or so.

In the meantime, Bank Negara released their annual report yesterday. There’s no big surprises in terms of their view on the economic outlook – better recovery in advanced economies (leading to higher export demand), and moderating growth in emerging markets. They’re less pessimistic on growth prospects for the latter than many others are. The Governor for instance was quite emphatic that China will be able to overcome their structural and financial imbalance issues, and avoid a hard landing.