So Citi (Citibank) has finally announced a new credit card that needs no minimum income requirement, targeting young students and adults. While there are some concerns on students going on a spending spree risking payment default which could end up with rolling interest rates, it does offer another function.
The card serves as an alternative to payment through NETs, the one topic that I had discussed greatly in my blog. Now, anyone in Singapore can get a Citi clear card. It makes more sense for all shops in Singapore to install Visa/Master transaction processors and abolish NETs. Moreover, there is great benefits in holding the card.
Of course, as a trade off to keeping the risk of default payment low, credit limit is low at S$500 a day. The 28% interest rate, which is higher than other credit cards, also seems unattractive. But with the introduction of this innovative product, competition is bound to result in more such cards to be issued by other banks. And this, if popularity among users is to be gained, may spell an end to NETs in the near future.
Monday, July 23, 2007
Irrational Exuberance?
The last book of Harry Potter was released officially worldwide on the 21st July 2007. Not that I am a Potter fan, but with news of over zealous fans queuing outside bookstores at over twilight the day before the release date (earliest at 9pm outside Borders according to the Sunday Times), it seems to parallel the common scenario in the stock market.
Yes, demand for the book 'Harry Potter and the Deadly Hallows' is indeed great. Potter fans all over the world pay their homages on the release day with much fanfare. Worldwide, while queuing for the book, harry lovers dress in wizardry costumes and toy wands, chanting in unison as the second hand approaches the much anticipated magical moment when the gates of the bookstores were opened to them. The cult following no doubt attracted some criticism from religious leaders but as I am no Divine theorist nor sociologist, I am not going to debate on the religious or sociological aspect. What I am interested in is my old friends, Mr Supply and Mr Demand for the Harry Potter books.
Despite the great demand, I am pretty sure there is more than enough supply to cater to it. Reasons: With 6 books before the last book, going by experience and historical sales records, it is highly probable for the demand of the book to be estimated with slight deviations. Going by the Sunday Times (22nd July 07), reporters commented on 'less popular' bookstores having tonnes of the last Harry Potter series with no queues -- equating the notion that supply is readily available.
Going by the experience of the 5th and 6th Harry Potter series, some time after the official release day, many of those books would be left on the shelf after all the anticipation and excitement has waned and died off. With lower demand, prices for the book (especially later released paper-backs) tends to drop. From a pure economical point of view, if I am a rational and practical Potter fan, I would not mind waiting for a few months to get my book instead of spending more time (queuing), money (higher price) and effort (to join in the fanatic crowd queuing overnight to buy the book dressed like Harry or Dumbledor). "You moronic economist! You do not understand our love for Harry! Passion cannot be quantified!" I can almost hear all Harry fans rebutting and rejecting my views, and therefore rationality.
Similar behaviors were replicated in many other scenarios.
(1) Long queues for donuts from Donut Factory in Singapore and Taiwan.
(2) Strangly high demand for a simple food - Roti-boy, but only for a very short duration.
(3) Long queues for the infamous Bubble Tea and thus results in the droves of new tea shops opened during the Bubble Tea Bubble in Singapore.
(4) And of course, the fanatic rush to buy and speculate stocks in China on the Shanghai Stock Exchange.
While different in terms of context (such as the Harry case is due to passion while the Stock craze in China is mainly due to greed which brings it closer to the Tulip Mania in Holland in the 1600s. ) it does shows a similar notion -- Humans are followers and tends to be absorbed into Group Think. If the Harry case is passion and the Stock craze case is greed, then what is the craze for donuts? Is it really so good? I've tasted them myself. Didn't really like it too much as it is too sweet. And definitely not something I would queue for more than 10 min to buy. The next craze I would like to verify is the 'Aston's specialty' at Katong which serves western food. It has been serving long queues since the day it came into operation. Ironically, by saying that I wish to verify the popularity of the restaurant, it is this curiosity that put myself as part of the group think. Curiosity kills the cat. Period.
When someone says something is good and worth buying or queue for, many people follows. "He said it's good, so it MUST be good!" "I heard from AAA that this book is good" "I read from the papers that this restaurant is good" "I heard....I read.....I heard...." and finally, the all familiar story : "I read that the economy is booming. I heard my friend's son's wife's father is earning a windfall by buying stock ABC. I think I should buy now while it is still cheap. I think you should buy too" blah blah blah. Stock price of ABC becomes overvalued, bubble burst, money lost. Over time, market forces have determined whether the choice made is authentic. Bubble Tea bubble burst. Roti-boy and his family members (roti-papa, roti-mama, roti-dunno what) have gone the way of the Do-do in Singapore. And it will be a while more before people get sick of donuts.
Looking at today's red hot Property market and Stock market in Singapore, I sense a lot of irrationality. A single news (media is a great influence and more often than not, never a good indicator) on a 5 room flat sold for over S$700,000 immediately send sellers upping their asking price at least S$100,000 over valuation. With such optimism, peppered by reports of strong economy in Singapore, the STI flickered above 3,500 points contrasting the 2,500-2,600 points only slightly over a year ago. The question we have is: Now that the economy is booming, are we nearing the peak of the business cycle. And when is the bull going to exist?
Going by how irrational people are, and the hordes of people entering the stock market (no thanks to an additional business concentrated university, constant news on the competition and comparison between the 3 local universities in terms of career prospects and pay and courses and teaching methods which translates to more interest in the field of business and finance, and hypes of how lucrative the finance line is, which is true to a certain extent) I doubt the optimistic fervor is ending any time soon.
Yes, demand for the book 'Harry Potter and the Deadly Hallows' is indeed great. Potter fans all over the world pay their homages on the release day with much fanfare. Worldwide, while queuing for the book, harry lovers dress in wizardry costumes and toy wands, chanting in unison as the second hand approaches the much anticipated magical moment when the gates of the bookstores were opened to them. The cult following no doubt attracted some criticism from religious leaders but as I am no Divine theorist nor sociologist, I am not going to debate on the religious or sociological aspect. What I am interested in is my old friends, Mr Supply and Mr Demand for the Harry Potter books.
Despite the great demand, I am pretty sure there is more than enough supply to cater to it. Reasons: With 6 books before the last book, going by experience and historical sales records, it is highly probable for the demand of the book to be estimated with slight deviations. Going by the Sunday Times (22nd July 07), reporters commented on 'less popular' bookstores having tonnes of the last Harry Potter series with no queues -- equating the notion that supply is readily available.
Going by the experience of the 5th and 6th Harry Potter series, some time after the official release day, many of those books would be left on the shelf after all the anticipation and excitement has waned and died off. With lower demand, prices for the book (especially later released paper-backs) tends to drop. From a pure economical point of view, if I am a rational and practical Potter fan, I would not mind waiting for a few months to get my book instead of spending more time (queuing), money (higher price) and effort (to join in the fanatic crowd queuing overnight to buy the book dressed like Harry or Dumbledor). "You moronic economist! You do not understand our love for Harry! Passion cannot be quantified!" I can almost hear all Harry fans rebutting and rejecting my views, and therefore rationality.
Similar behaviors were replicated in many other scenarios.
(1) Long queues for donuts from Donut Factory in Singapore and Taiwan.
(2) Strangly high demand for a simple food - Roti-boy, but only for a very short duration.
(3) Long queues for the infamous Bubble Tea and thus results in the droves of new tea shops opened during the Bubble Tea Bubble in Singapore.
(4) And of course, the fanatic rush to buy and speculate stocks in China on the Shanghai Stock Exchange.
While different in terms of context (such as the Harry case is due to passion while the Stock craze in China is mainly due to greed which brings it closer to the Tulip Mania in Holland in the 1600s. ) it does shows a similar notion -- Humans are followers and tends to be absorbed into Group Think. If the Harry case is passion and the Stock craze case is greed, then what is the craze for donuts? Is it really so good? I've tasted them myself. Didn't really like it too much as it is too sweet. And definitely not something I would queue for more than 10 min to buy. The next craze I would like to verify is the 'Aston's specialty' at Katong which serves western food. It has been serving long queues since the day it came into operation. Ironically, by saying that I wish to verify the popularity of the restaurant, it is this curiosity that put myself as part of the group think. Curiosity kills the cat. Period.
When someone says something is good and worth buying or queue for, many people follows. "He said it's good, so it MUST be good!" "I heard from AAA that this book is good" "I read from the papers that this restaurant is good" "I heard....I read.....I heard...." and finally, the all familiar story : "I read that the economy is booming. I heard my friend's son's wife's father is earning a windfall by buying stock ABC. I think I should buy now while it is still cheap. I think you should buy too" blah blah blah. Stock price of ABC becomes overvalued, bubble burst, money lost. Over time, market forces have determined whether the choice made is authentic. Bubble Tea bubble burst. Roti-boy and his family members (roti-papa, roti-mama, roti-dunno what) have gone the way of the Do-do in Singapore. And it will be a while more before people get sick of donuts.
Looking at today's red hot Property market and Stock market in Singapore, I sense a lot of irrationality. A single news (media is a great influence and more often than not, never a good indicator) on a 5 room flat sold for over S$700,000 immediately send sellers upping their asking price at least S$100,000 over valuation. With such optimism, peppered by reports of strong economy in Singapore, the STI flickered above 3,500 points contrasting the 2,500-2,600 points only slightly over a year ago. The question we have is: Now that the economy is booming, are we nearing the peak of the business cycle. And when is the bull going to exist?
Going by how irrational people are, and the hordes of people entering the stock market (no thanks to an additional business concentrated university, constant news on the competition and comparison between the 3 local universities in terms of career prospects and pay and courses and teaching methods which translates to more interest in the field of business and finance, and hypes of how lucrative the finance line is, which is true to a certain extent) I doubt the optimistic fervor is ending any time soon.
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