Fuel prices set to be revised but the Damage is done

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Sep 04 2008
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The good news – oil prices extended its decline to $107.91 a barrel, down $1.80 yesterday before it gained strength to $109 a barrel today (while waiting for U.S. crude inventory report). Since July 11th the black gold has fallen from the price of $147 a barrel. More good news – the dollar strengthen against major currencies inclusive of ringgit. The ringgit traded at 3.4215 against the dollar as at 9.20 am in Kuala Lumpur today (I can see many smiling faces who short the ringgit).

In fact Malaysia’s biggest economic think-tank, MIER (Malaysian Institute of Economic Research), which had predicted the ringgit would strengthen to 3 per dollar by the end of 2008 has just made a U-turn – the ringgit will be “almost a washout” and will probably weaken to 3.5 per dollar by year-end. Gosh! You don’t need PhDs to make such prediction, do you? *grin*. The body is right on certain items though – growing deficit, political uncertainties, poor country’s leadership and damaging budget proposal are turning investors away.

The latest good news to the people on the street – the government is ready to cut petrol prices by probably 15 sen a liter if the global oil prices stay at US$109 a barrel or less. Of course PM Abdullah Badawi has no other choice but to pacify many angry faces on the street especially before Hari Raya festival (could there be a snap election?). But everybody would bet their last dollar that it won’t bring down the prices of goods with such fuel reduction agenda. Whatever went up will never come down. If only the administration has brain half the size of Britney Spears (Oops) they would not have increased the fuel price by a whopping 41% in one shot.

Now it’s almost an uphill battle to control the inflation. Consumer spending is worsening if you care to survey the business during the current fasting month. Gone were the days when Muslim fellows flocked to KFCs, McDonalds, Shakey Pizzas, Pizza Huts etc to open their fast. The sight of all the tables being taken up is gone, at least for this year. It’s true that people are still angry and the result from the recent Permatang Pauh by-election speaks volume. People have stop spending luxuriously or at least think twice before reaching their wallet for that piece of good. And this trend is extremely dangerous because it could just bring the country’s economy to its knee.

Abdullah Badawi might thought by spending lavishly it could trigger the magic but someone has to pay for the deficit. And he doesn’t understand the economy 101, let alone to stimulate domestic demands to roll the economic dice. But I supposed he won’t care because he could sense his days are up and what better way than to prepare a huge deficit for his successor – either Najib Razak or Anwar Ibrahim. So, what should you do at the current situation? Unless you’ve endless ammunition, you should just relax and stay sideline the same way I’m doing now. Furthermore activities are pretty slow during the current fasting month and this has direct impact on the stock market.

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