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We had just completed our 11 days South Korean family vacation and I would like to use this week’s blog as a travelogue diary before I forget the details. It is also to help me reminisce on the good moments during the trip for future personal review of the wonderful quality family time we had.

This vacation planning was kickstarted when our younger son began his uni holidays after his 3rd year in Med school. He has always been interested in dance and hip-hop. A K-Pop dance immersion trip to Seoul was something he and 4 other good friends decided to embark on. We the parents decided to tag along at the end of their 2 weeks program to extend it to make it into a Seoul family vacation which also include Jeju.

The last time I was in Seoul was in Sep 2019 with my wife and older son, pre-Covid. I had signed up for an overseas Skillsfuture Blockchain program and they had decided to tag along. It was great fun and I was looking forward to visiting Korea again.

27 May, Sat: Wife and I landed in Seoul in the late afternoon. It was raining and we took the AREX train to Hongsik University station (KRW 4,500) as we had booked L7 Hongdae for 3 nights. First meal of the trip had to be KBBQ and we had it at a place called Piggy along the famous Hongdae shopping stretch. Like the last trip in 2019, we signed up for a Hongdae Pub crawl (USD20) to check out the night life with a large group of tourists (50+). We visited 3 night spots with a free shot at every location.

28 May, Sun: Weather was still wet and raining today. We decided to walk around the Hongdae area towards the Han River and chance upon a Korean beef soup place for brunch. The warm soup was a welcomed antidote for a wet weather day. Visited the Mangwon traditional market on the way back to Hongdae for my wife’s haircut and treatment appointment at 4 pm. I decided to join in to cut my hair and added a scalp treatment too. We had a late dinner at a Korea Hwae Sashimi place called Badaae. Lots of fresh fish and abalone with Somaek (beer + soju).

29 May, Mon: The sky cleared and we finally had wonderful weather that turned sunny in the afternoon. Set out to the Bukchon Hanok village in the late morning to check out the quaint traditional houses of old Korea. Then we had a slow walk towards the Gwangjang market through the shopping alleys and had 2 separate lunches along the way. Next was a taxi to Gangnam to do some shopping and we came across the amazing Starfield library at COEX. Then finally took the train and walked to the Bangpo Hangang Park to watch the Han River bridge night water show that started at 8 pm. Finally took a cab back to Hongdae. Dinner was the famous BHC (Better Health Chicken) fried chicken with beer “Chimaek”. Really wonderful and long fruitful day.

30 May, Tue: Finally met younger son at the AREX station at 8 am to head to the Gimpo domestic airport. His group of friends have also just left their AirBnb for their flight back to S’pore. We took a one hour JejuAir flight to the southern island. It was raining again when we picked up our rental car at Lotte. It was my first EV rental and I chose a Genesis GV70 which had a mileage of 480 km for one full charge. Pretty impressive car with the new electronics and a smooth ride. We reached the Ventimo hotel to drop off our luggage before heading for a late lunch recommended by the hotel. It was a cutlass (ribbon) fish stew that is famous in Jeju/Korea. It was raining the whole day and we decided to chill in the room till dinner time at a black pork KBBQ place near the hotel.

31 May, Wed: Small world, met a parent from our Pat’s schoolhouse days at the hotel lobby. She shared with us her Jeju schedule as her group has already been there for 5 days. We had decided to explore the southern parts of the island today. Jeju plans to go all EV by 2030 and traffic is an average of 50 km/h or less throughout the island. First destination was Jeongbang waterfall that faced the sea. Nice morning walk before heading to the next one – Jeongbangpokpo falls that was on the river flowing into the sea.

This was followed by the Cheonjiyeon falls for another scenic walk. Then it was lunch time and we heading to the nearby Seogwipo central market to catch some bites and a simple lunch. We then headed to the Daepo Jusangjeolli cliff for a walk before going to the Camellia hill attraction to visit the flower garden.

For the evening, we went to the Jeju city Dongmun market to check out the eating street before deciding to drive to another KBBQ place to try authentic black pork again.

01 Jun, Thur: We explored western Jeju today. First stop was at Aewol to checkout the scenic cafes overlooking the sea. Heavy rain started after noon time and we ducked into a ramen place for lunch where I had seafood noodles with a whole boiled octopus on top which I had been dreaming about for a while. As it rained for the rest of the afternoon, we drove around trying to look for sheltered places to visit before finally deceding to head back to Lotte to charge the car for an hour. Night time was an Italian meal near the hotel at the main food street area.

02 Jun, Fri: Younger son decided that he had to climb the highest mountain in Korea at Hallasan National Park at an altitude of 1,950 m. It is also known as Yeongjusan, which translates to “Mountain high enough to pull the galaxy”. We parents took up his challenge as we did not want him to do it alone. Little did I know that he chose the longest path because it will reach the most scenic part of the top of the mountain. It will be almost 20 km of walking up and down LOL…

The climb up via the Seongpanak trail was 9.6 km and we started at 0830, reaching the top after 3.5 hours around noon time. We then spent about an hour at the top taking photos before heading down on a seperate trail called Gwaneumsa (8.7 km). The climb down was slower as it is tough on the knees. We had finished all our water by the time we reached the last 1/3 of the trail. We finally reached the bottom around 5+ and took a cab back to Seongpanak to collect our car and drank water like crazy as the trails and toilets there do not provide running water at all!

By the time we reached the hotel, my legs felt like lead weights and knees aching. We decided to do another Black Pork KBBQ within walking distance since it was our last night in Jeju.

03 Jun, Sat: Flew back to Seoul and checked into a lovely hotel for our last 3 nights in Korea. Le Meridien Myeongdong had a nice room overlooking the shopping district and it was easy to walk around.

In the evening, we went to Mingles, the 2 Michelin stars restuarant we had booked a few weeks ago. It is currently rated as number 28 in the top 50 Asia restaurants for 2023. Lovely Korean fusion and I particularly was amazed at the dessert that combined soya sauce and sesame oil which tasted great. Then back to Myeongdong for night shopping and to load up on skincare products.

04 Jun, Sun: Tried the hotel gym in the morning and had a lazy late morning start for brunch to try the Korean raw marinated crab. Then off to Hongdae in the late afternoon for more shopping and also for younger son’s haircut appointment. We also had to try the Korean ice Bingsu dessert there. Dinner was more Chimaek (fried chicken and beer) at the most famous chain called BBQ.

05 Jun, Mon: Our last day in Seoul before our early morning flight home the next day. I went for morning swim at the hotel indoor pool. We then had lunch at the Lotte food court and did some more shopping. Had a minor scare when wife discovered that she lost her passport and our flight home was 9 am the next day. We immediately did a police report and went to the S’pore embassy to get a temporary letter to allow her to board the plane. Last dinner of the vacation was to try the authentic Hanwoo beef that is only available in Korea and cannot be exported. It was quite flavourful and similar to Wagyu beef but less marbling. We went to a famous cafe for dessert that we at our hotel. The concept is interesting and maybe we can do it as a business in S’pore too?

06 Jun, Tues: we had a 9 am flight and reached S’pore by mid afternoon. Home Sweet home…

Overall, a very pleasant and memorable family vacation that was better than expected. It will be remembered for years to come, especially the crazy mountain climbing we completed!!

Time flies and in 2 weeks time, we will be entering into mid-year. It’s nice to be back to normal again after almost 3 years of the pandemic where our worlds were turned upside down.

Typically, I have set up a list of goals to achieve at the beginning of the year. I would do a mid-year review in 6 months to track my progress. Then a final assessment in Jan where I would grade myself. I have discovered over time that I am more of a goal-oriented person and I work better if I have something to aim for.

For 2023, I have decided to call these goals KPIs (Key Performance Indicators) instead of a yearly new year’s resolution list. Some are a rehash of the previous year’s goals while I would also try to set some new and harder ones to challenge myself. I set out a total of 6 KPIs for 2023.

Overall, I guess I got pretty lazy with inertia in the first 6 months as I had a number of revenge travelling vacations and was just waiting for some work related things to happen. Unlike the last 2 years where I had already planned to sign up for some full-time learning courses by the beginning of the year, I only completed 2 easy one-day courses this year.

The first KPI is always about the number of books I want to read. I discovered that I hardly read any books for many years while I was busy with my career and family matters. The same goes for the whole country as we are not a well read country like America. The nation’s top 10 books list hardly changes month on month, year on year. There is simply no excuse not to read more. With loanable free ebooks from the national library, I can easily borrow the latest titles and download them onto my iPad for my evening reading before bedtime.

My target for 2023 is 20 books. This year, I will also include audio books since I am used to listening to various podcasts while I run every morning. Year to date, I have completed 8.5 books so far. To reduce the monotony of reading, I tend to read more than 1 book at a time. I would read a chapter from one and then switch to the other book to read another chapter before going to sleep every night. My reading speed of less than 20 pages a day is definitely too slow since each book is on average about 400-600 pages long.

Learning from a friend (the one that introduced me to the free Libby app linked to national library membership to borrow free ebooks), I would also write a short summary of that completed book on my 2023 KPIs master summary list in my Notes app on my iPhone after finishing each book. This will enable me to remember the highlights of the book whenever I want to review my reading KPI.

The next KPI was to develop my consultancy pivot. I chanced upon an ESG (Environment, Social, Governance) initiative from an ex-colleague and signed up as a consultant in Oct. We submitted an application for a regulatory license in Dec as part of the process and are currently waiting for its approval. If successful, I would start a full-time role in a new SPV setup soon. Hopefully, this will become a successful pivot to a new halftime career path.

This opportunity is a work-in-progress and let’s see where it will take me. This waiting game meant that I had slowed down on my annual lifelong full-time learning journey which I had started since 2017. I turned to short one-day courses this year and did a Sake and Whisky Appreciation instead LOL…

The next 2 KPIs I have really slacked off year to date. I was aiming to complete 10 online courses this year. I started with 2 initially but just lost interest in them later as they became too technical for me. The other failed 2023 KPI was to edit my 2 years backlog of vacation and family videos. I had diligently been compiling them for the past 20 years and was completely relying on a specific auto-edit software but that company folded a few years back. I am still looking for a replacement software and had purchased 2 new ones to play with, without much success. I need to buck up on these 2 underperforming goals for the rest of 2023. I would require better time management to commit some time to them instead of brainlessly watching videos on TikTok and YouTube every day.

The audacious KPI goal I had set for myself this year was to create my personal GitHub page. It was inspired by one of my FinTech trainers who used it to showcase his work/projects and enhance his CV/LinkedIn profile. It will be my attempt to boost my tech skills. As a start, I aim to list all the projects I had completed during my last 5 years of FinTech and AI training courses.

The final and most important KPI is to constantly remind me of my life motto, to stay healthy and happy all the time. As the world opens up from a 3 years Covid induced nightmare, I am thankful to be able to getting back to normal again and being able to travel again.

I am blessed with the opportunity to have travelled to France, Hong Kong and Batam since Dec with family and friends. We are also planning 3 more trips for the rest of the year with the family, starting with Korea this coming weekend. Embracing positivity is the way to go and spending quality time with family and good friends is my happiness goal.

Since the introduction of ChatGPT last Nov, Artificial Intelligence (AI) development has exploded everywhere in our faces. In a short span of months, its rapid evolution has caused some like Musk to ask for a moratorium or to pause its growth for 6 months. It is simply not possible to stop AI’s progress, as we will explore today.

ChatGPT 3.5 is an LLM (Large Language Model) that was introduced by OpenAI to the world less than 6 months ago. GPT stands for Generative Pre-Trained Transformer and this version had at least 175 Billion parameters that were pre-trained with data up to 2021. Before everyone could get fully overwhelmed and amazed by it, ChapGPT 4 was launched in Mar 2023. It is now multimodal (able to take images and text as input) and even more powerful than anything we have seen before. Don’t you feel that Google and Youtube searches suddenly became dumber overnight? I certainly do.

How does ChatGPT work? Basically, it analyzes and breaks down the input prompt from the user word by word via a process called tokenization. It then searches its pre-trained database for words that can be used for an answer. Thereafter, it ranks the list of words by probability from the highest to the lowest to prepare for the response. Using NLP (Natural Language Processing) techniques, an answer is formed and presented to the user. There is also a level of probability randomness built into this process in order to ensure that a slightly different answer is presented each time. For image input, a similar process is utilized.

In summary, ChatGPT works by attempting to understand your prompt and then spitting out a string of words that it predicts with the best answer to your question, based on the data it was trained on. ChatGPT 4 is pre-trained on an even bigger dataset and is able to recognise images versus version 3.5. It seems like 5.0 is likely to be launched before the end of the year as the AI arms war heats up. Google and Chinese tech firms are racing to match or exceed it to maintain their market share and industry competitiveness.

Based on how they work now, the AI we see is actually only ANI (Artificial Narrow Intelligence) which is good at “TALKing”/generating written and image responses to human prompts. What most fear is AGI (Artificial General Intelligence) which is when the machine is able to THINK for itself. We are far from there and the Terminator is not coming any time soon.

The other area of interest is Generative AI. With a simple prompt, the app is able to generate photo-realistic images that are improving constantly. OpenAI started with DALL-E and introduced DALL-E 2 in Jul 2022. Within months, powerful systems like Mid-Journey and Stable Diffusion stormed the world with images that are only limited by one’s written imagination.

These apps use neural network concepts like the human brain to initially train themselves to analyze and recognise images of animals and humans. Then with more sophisticated processes like GAN (Generative Adversarial Network) and CNN (Convolutional Neural Network) using a police-against-thief setup, they are able to generate even more impressive images.

In recent times, we see unreal viral images of the Pope togged in designer Balenciaga wear. With easily accessible animation and voice generation software, it is now possible to combine with ChatGPT-generated scripts to create videos that were not possible just a year ago. Having Elon Musk discuss AI with Steve Jobs? Sure!

Generative AI still has some buggy issues like having 6 fingers on a hand but the latest versions of Mid-Journey 5.1 that was just released seem to have resolved that. More such images will probably win photo competitions in the near future as it becomes harder and harder to distinguish the fakes from the real ones. Their improvements within months are short of amazing when you view the new ones created every minute on their Discord channels.

Another reason why AI is unstoppable. There are almost an unlimited amount of unstructured data being created now. They are available to be mined by AI models as training datasets. Approximately 90% of all dark web data had only just been created in the last few years alone. According to the latest estimates, 329 million terabytes of data are being created every day. Data is the new “oil” for AI. The more it can analyze, the better it gets and there is no shortage of data supply in the foreseeable future.

A recent article can articulate this data explosion phenomenon much better. The Bloomberg title was “The Future of AI Relies on a High School Teacher’s Free Database”. A German teacher decided to create a dataset to help train image-to-text diffusion models. He felt that the info should not be controlled by a few companies but instead be open source. He started a non-manual automated process that crawls the internet to locate the images on the web and associate them with descriptive text.

As of now, this freely available dataset has 5 billion images for anyone to use to train their AI models. His company is called LAION (Large-scale AI Open Network) and it has enabled firms like Stable Diffusion to offer a superior Generative AI tool to create amazing images just by using written prompts. Anyone in the world with determination like him can do so and create their own dataset. The sky is the limit to creating a new dataset and no one can stop you.

Authorities have also been scrambling to try to make sense of AI and look to form a framework of sorts for it. Europe is in advanced discussions on this topic for their EU AI Act while America is still trying to figure it out. The EU proposal is slowly moving through its approval process but it is unlikely to gather strong support like its previous GDPR data protection regulation.

This is because it is humanly unenforceable. How can one ensure that the huge amount of data available on the web to be harvested and used by the AI model has no copyright data? Even if the companies are made to disclose the materials of the datasets used and then asked to remove some questionable data, they are unable to untrain the models. The neural network of the AI model is already a black box like the human brain. Once the data is fed in, one cannot be sure what sort of output it will produce. Hence we are constantly amazed at what generative AI models can now produce.

There is also the fear that these new AI regulatory frameworks may hamper the growth of this sector in that country. Hence they may fall behind in innovation because of these unclear/unenforceable directives. Would they want China to win this AI arms race? Probably not.

Elon Musk wanted a 6 months pause in all AI development initially. Then at the same time, he selfishly started a new AI firm to race to catch up with the competition. Anyone in the world with an internet connection is able to develop his own dataset to train a new AI model. ChatGPT has spawned newer and better uses every day. Someone on Github just created AutoGPT, a turbocharged version of ChatGPT. It is an AI agent that can be tasked with a main goal broken down into sub-tasks with an API connection to ChatGPT which goes into an autonomous loop in order to optimize a final solution.

Thousands of new AI uses are being formed every day. Many are seeking to monetize it while accelerating job efficiency and productivity. For example, the turnaround time and lifecycle creation of data packages like training modules and marketing strategy presentations have shortened considerably to hours instead of days.

Just a few days ago, Google launched the latest AI salvo that promised to be the ChatGPT killer. The new improved and upgraded Bard can now do much more now after its less-than-ideal launch in Feb. Every mother, father and son tech company is rushing to do a catch-up to launch the next new AI tool.

The advent of AI cannot be slowed down or stopped. The Pandora box has been opened and the pace will accelerate. As Thanos had said before: “I am INEVITABLE”.

When my kids were young, they sometimes asked me what I do for a living. This ex-dark side banker will say that I am a magician. I create something out of nothing. There is basically very little economic value to what I do except to take a spread/commission out of every transaction. This could run into millions of dollars in revenue. Going into my 2nd halftime life journey, I try to redeem myself with positive Jedi energy now 😉

A number of banks have been failing in recent times and the question of whether traditional banking has become obsolete. Can non-banks take over the banks’ iron rice bowls now? I wrote about it in my previous blog. Today, let’s do a deep dive into this topic and its likely future implications with a past example and a new Apple threat that happened this week.

A few days ago, the biggest local bank announced a great financial quarter result. Its NIM (Net Interest Margin – difference between the average cost of funds and the deployed lending rate) had improved by 66 bps (0.66%) quarter on quarter from Q1 2023 versus 2022 to more than 2.60%. This came on the back of aggressive rate hikes last year by central banks after almost 15 years of low to zero interest rates because of the 2008 GFC (Global Financial Crisis) saga. The US Fed had raised rates by a total of 500 bps (5.00%) since early 2022 to try to tame raging inflation, thanks to the Ukraine war and returning to normal post-Covid.

At this point, I would like all readers to check their personal bank accounts (CASA – Current and Savings Accounts). How much interest are you earning at the moment? Is it zero or just 0.25%? This, my friends, is the free lunch which banks have been creaming off from everyone for years. Banks get low-interest loans from sticky depositors and deploy the funds at higher rates to juice up their profit margins. It is now even more apparent because of the rapid interest rate increases by the central banks in the last 12 months.

Aren’t depositors going to rebel and vote with their feet to move funds away? Most of us are either too lazy or have had few alternative options previously. But with technological advancement and recent default examples like SVB, it has been proven that money can move out in real-time instantaneously to cripple a badly managed bank.

Let’s take a step back in time now to look at an example of a giant bank killer who managed to upset the bloated banks and took their free lunch from under their noses. This was 10 years ago in China. The aggressor was Yu’e Bao from Alibaba.

Back then, Chinese authorities were in a cosy relationship with the state banks. Regulators ruled that the banks can pay depositors 3% or less while they can lend out the funds at 6% or higher. This 3% difference effectively became a free lunch for the banks to earn easy revenue without lifting a finger. This easy money support for the banks was to provide them with a buffer so that they can have the resources to build and expand the underdeveloped banking landscape in China. It was also to encourage them to support the funding of grand infrastructure projects of state institutions.

Alibaba, a very good corporate tech name by 2013, effectively was at the mercy of the banks. It can only get funding that was higher than 6%. Alibaba also had to fight for banking facilities against the various state project initiatives. Credit was scarce and hard to come by.

At that time, many citizens were already using Alibaba’s platform to buy and sell products online and had accounts set up for the settlement of transactions. Many had idle funds in them, just like the spare cash you have in a metro city card nowadays. It was free float funding for Alibaba as it did not need to pay the customers any interest on these idle funds. While Alibaba needed to borrow more aggressively for its business expansion, it also already had a banking network set up for payments with many local Chinese banks.

The light bulb moment happened instinctively within the company. Why can’t we tap on this and turbocharge it to 100x for a win-win result for everyone? And to screw the banks along the way by destroying their free lunch fat 3% margin while getting a new and reliable stream of funding at a lower cost too.

And so the Yu’e Bao (Chinese for “leftover treasures”) product was created. Alibaba immediately offered all its clients a 6% interest deposit rate which they can transfer their idle cash into within seconds from their mobiles. Clients began to pull out their deposits from traditional banks earning less than 3% into their Yu’e Bao accounts to have an instant 3+% pickup. Alibaba is now able to bypass the banks to access new funding at a much better rate than what banks can offer. It was a brilliant win-win move that caught all the banks with their pants down.

Very soon, Yu’e Bao became the largest money market fund in China. This fantastic success story will forever be remembered as a David conquering Goliath story for others trying to break into the banking cartel to emulate. How one can conquer an unfair banking disadvantage to break it open with an innovative tech solution.

It was good for Alibaba while it lasted. The sad outcome of the Yu’e Bao success story was that it spawned a whole industry of wannabes high-risk yield-enhancement wealth products that spiralled out of control in China. The authorities were always behind the curve and finally cracked down after billions of RMB were lost by retail clients who were chasing higher yields from risky fly-by-night operators. Only after mass protests did the government step in to clamp it down in the last few years.

Since then, many fintech firms have tried the Yu’e Bao method to collect funding by paying up to attract new depositors. That was basically the strategy of new digital Neo banks around the world. They needed to bulk up their depositors’ base in order to finance their lending program. Their digital banking strategy required the leveraging of their capital via new depositors to make their financial numbers work.

Sadly, most of them hit a brick wall soon after as many clients do not really trust low-capitalized new digital banks without any track record compared to traditional banks. As studies later show, most new digital bank clients would not place more than $50k in them, regardless of their parentage.

But in recent times, big American companies have tried to muscle in on this game. Apple has just launched its new high-yield savings account offering an amazing 4.15% interest a few weeks ago. Behind this product is Goldman Sachs, the financial firm that is providing Apple with the banking platform. Within less than 5 days, it has attracted $1 Billion of new funds.

Apple is the largest company in the world with a market capitalization in excess of $ 2.7 Trillion. It is a well-known brand with an embedded ecosystem of millions of iPhone users around the world. Who wouldn’t want to bank with Apple to earn a higher rate of return with their idle funds?

This move will be the monster hit that will put banks on high alert. Banking confidence has fallen with recent bank failures. Consumers have had enough of getting screwed by greedy banks and are pissed. Will this be the future of banking? Only time will tell…

Meanwhile, Musk over at Twitter Land is trying to create a super app, following the examples of Alipay and WeChat. There are talks that he has registered X.com to revive the strategy he had during his early 2000s PayPal CEO days. There are also rumours of him wanting to buy eToro to combine with Twitter to form a super one-stop financial app.

These are interesting times as the American banking landscape is ripe for possible innovative solutions to pay higher interest after recent bank failure turmoils. It is also the awakening of customers questioning why they are being paid peanuts in interest while bank CEOs earn fat bonuses.

There is a realization from strong tech names that the banks’ fat margins in deposits can be eaten by non-banks. The accumulated simmering anger of long-suffering and frustrated loyal depositors is the perfect storm where many new Yu’e Baos will rise in America and other parts of the world soon. We live in interesting times…

We are fast approaching Labour Day long weekend, the May Day holiday for the rest of the world except for America which celebrates it in Sep. We are almost into the mid-year mark and it’s time to review and reassess the macro sentiment for the latter part of 2023. By identifying possible macro trends ahead, we can hopefully strategize and finetune our investment portfolio to try to capture some alpha.

Looking back, the world is finally moving out of Covid after 3 years. Strangely, anything pre-2020 now looks dated and unrecognizable. It feels like another world away as we forget what normal looks like. Into 2023, some semblance of it is finally returning to our focus. For example, the past few months have seen a big increase in overseas travelling volumes and hardly much mask-wearing around us.

Even the favourite annual viruses have returned with a vengeance. Influenza is sweeping across everywhere. My flu shot in Dec did not prevent me from getting it twice in Jan and again in Mar when I went overseas for vacation. The common cold is probably also making a comeback later this year after the influenza pandemic, which just hit us from winter to springtime. The newer Covid strains are non-events as they are turning milder and trying to fight for attention even as they are more contagious.

This leads us to the first big thing to watch out for. China, the sleeping monster during Covid is finally waking up after final lockdowns in Dec and promises of more drops in movement restrictions. Internally, its citizens are now enjoying the freedom to travel within the country. Very soon, revenge-travelling Chinese tourists will swarm the world again. In 2019, 155 million had gone overseas and this year will see a big catch-up soon.

This will help the global economy recover as China’s manufacturing sector starts to crank up again. With better efficiency and productivity, inflation may be under control even as demand for raw materials spikes up. The strength of the economic engine of the 2nd largest economy in the world will have a waterfall effect on everyone.

The Chinese authorities have also given signs that it is loosening its grip on the economy, to give it a kick start. Alibaba has been allowed to announce its new plan to break up its monopoly into 6 entities to unlock greater value after the Ant Financial IPO was pulled down a few years ago. Buy Alibaba now! You get a 6 for 1 booster. The HK clampdown after the 2019 riots are completed. HK now competes for tourism dollars by giving away millions of free flight air tickets.

China might also help to stop the Ukraine war by bringing both warring countries to the table. There could be an agreed compromise for Ukraine to surrender some land to Russia in the bargain to stop the fighting that has crippled both sides after dragging on for more than a year. The biggest risk here: America and the EU seemed to be arming Ukraine to the teeth for a new spring offensive soon. All sides are tired of the neverending war and it does no one any good to try to carry it on for another year. Common sense needs to prevail over national pride and political idealogy eventually.

The next big risk is to predict the direction of the US economy. Recession fears have subsided a fair bit since last Dec. There have not been too many surprises to the financial markets this year unlike in 2022 where asset bubbles were popping left, right and centre as the aggressive rate hike cycle started.

The failure of American banks and Credit Suisse were swift and regulators actions were decisive. Some economists think that the recent bank failures were equivalent to a 50 bps hike shock to the banking system. There is now considerable debate on whether traditional banking is obsolete and if there is an alternative. I blogged about this topic a few weeks ago.

The Fed is expected to hike another 25 bps this week as they meet up for their May meeting. Barring any future bank failure surprises, I believe that this will be the peak of US rates for now as inflation will stabilize at this level for the moment. We will go back to the long-term historical levels of 3-5% rates, finally returning to the norm after 15 years of ZIRP (Zero Interest Rate Policy) due to the 2008 GFC.

The main 2023 interest rate worry is the risk that multiple leveraged loans could be up for renewal this year. Most will suffer a sticker shock of up to a 5x increase in interest cost. Over-leveraged positions may tip many corporations and individuals over the cliff after many years of borrowing to the max to let cheap money fund your business and investments. A rude wakeup call is ahead and that may result in some big failures that could shake the markets like SVB and CS all over again.

We are already starting to see weakness in the commercial property space as hybrid work is here to stay and the glut of office buildings gets worse. Shopping malls are also getting harder to justify as everyone is used to online shopping, thanks to Covid. Hopefully, this will not create a domino effect on the general banking system like the CDOs in 2008.

Overall, I am not pessimistic about 2H’23. Steady as she goes, I see a subdued recovery of the global economy where a recession can be avoided. The world is heading back to where it was before the pandemic nightmare and it takes a while to readjust to normal. The excesses of the last 10+ years of low-interest rate and funding costs are over and the overleveraged purge of weak positions has begun as we all get used to the old long-term normal again.

This week’s main big news was the firing of Tucker Carlson from Fox News and Don Lemon from CNN. Sounded pretty abrupt and brutal but it is becoming a way of life. Just like my sudden retrenchment 11 years ago after 18 years at the same bank LOL. Cost cutting is a big thing now after the many excesses during Covid. Joe Biden also announced his bid for re-election in 2024. Ageism is real everywhere. Political is messy, especially in America. So let the circus show begin!

I was introduced to the concept of Ikigai a few years ago by the founder of a local consultancy firm who believed that this Japanese teaching transcends into one’s reason for being. It provides a roadmap to a long and happy life by providing steps to help an individual unlock and discover his purpose in life.

In a recent LinkedIn posting, someone kindly distilled the 5 lessons of Ikigai from the 2017 book which I found very enlightening and struck a chord with me. The book being referenced is a short 200+ page book that is highly readable.

Below are the 5 lessons of life to achieve Ikigai from the LinkedIn post: (The colourful chart image at the end of this blog perfectly summarizes it).

1. Find your passion: One of the main principles of Ikigai is to find what you love to do. The authors suggest taking time to reflect on your interests, hobbies, and things that make you happy. This can help you identify your passion and what drives you.
2. Pursue something that has meaning: Ikigai is not just about doing what you love; it’s about doing what you love with purpose. The authors recommend identifying something that positively impacts the world or others. This can help give your life meaning and create a sense of fulfilment.
3. Take care of your health: According to the authors, health is a critical component of Ikigai. They suggest prioritizing self-care, such as eating a healthy diet, getting enough sleep, and exercising regularly. Taking care of your physical and mental health can help you pursue your passions and purpose with more energy and enthusiasm.
4. Connect with others: Another aspect of Ikigai is the importance of social connections. The authors suggest building relationships with others who share your interests and values. This can help you feel supported and connected, and may even lead to new opportunities or collaborations.
5. Embrace lifelong learning: Finally, the authors emphasize the value of continuous learning and growth. They suggest seeking new experiences, challenging yourself to try new things, and staying curious. This can help you stay engaged and passionate about life, and may even lead to new personal and professional development opportunities.

I have shared the above summary with many of my close friends this week and it does ring a bell to some. One sometimes questions the meaning of life at the junction of the many stages of our human journey. These instructions can help us to refocus and realign ourselves to get out of a depressive episode while assisting to map out a proactive future strategy.

Points 1 and 2 can be mutually inclusive as many may find it in religion as a passion and meaning to life. It can also be of hobbies or new interests that excite you, like my discovery of new technology like Artificial Intelligence.

Point 3 speaks out to me as my motto in life is to stay happy and healthy always. I am a social animal and Point 4 is what I have been practising to avoid getting into a cocoon of isolation and bitterness as I age. Point 5 about lifelong learning has been one of my top goals since 2018 when I decided that I did not know much and needed to pick up new knowledge to stay relevant.

I will treasure these 5 rules/meanings of life and will constantly reread them to remind myself when I need to stay focused. My halftime journey will have its ups and downs and proactive planning using this roadmap as a guide will result in my happiness of being. I truly believe in that.

On the opposite spectrum of Ikigai will be the sense of negativity leading to anger management issues which we see a lot of in the world this week. It seems that humankind is attracted to anger as it energizes the individual. Social media concentrates anger effectively as it is a proven clickbait strategy. Anger and fear sell more effectively than the spread of boring good and positive news. A company get more followers, likes and profits when you can stir up the volcanic energy of hate, anger and fear.

A few days ago, the American Fox News network has decided to settle the Dominion lawsuit for almost $800 Million rather than going to trial. The untruths about fraud in the Jan 06 US elections had enabled them to maintain their captive viewers while they privately acknowledged that it is all made up. Lies have consequences and many lives have been destroyed.

While some are upset that this case did not go all the way to trial to help protect democracy and transparency, Fox is not out of the woods yet. There is another Smartmatic election fraud lawsuit against them for $2.7 Billion which is similar to the Dominion one. There is an overlap between the 2 cases as evidence revealed to date from Dominion can be reused again. It could prove to be interesting if this goes to trial.

The divisive nature of spreading fear has also resulted in the multiple shooting of innocent people in America this week. Too many guns protected by the 2nd Amendment have created situations where defenceless people are being gunned down and killed at the slightest provocation.

A young boy was shot at for ringing the doorbell of the wrong house. Young girls were shot and one was killed for jumping into the wrong car. Another lady was killed for driving into the wrong driveway of a house.

Why are there so many trigger-happy men committing these senseless crimes? Should they even have possession of guns in the first place? Have they been conditioned by the media into a heightened state of fear, to reach out for their killing weapons at the first sight of anger? What happened to “trying to understand the situation first” and de-escalation of a tense situation before pumping bullets into another human being? Shooting first and asking why later is the norm now.

Americans are crazy. There are more guns than people in the USA https://www.bloomberg.com/news/articles/2022-05-25/how-many-guns-in-the-us-buying-spree-bolsters-lead-as-most-armed-country?sref=TCJIUe33. There are more mass shootings year to date than the number of days we have had this year. Every time it happens, it is “thoughts and prayers” to the families of the innocent victims and nothing is done to prevent the next one.

The often-cited solution by the pro-gun lobby is to have more guns. Arm the teachers. Re-enforce the school doors. Why not ban assault rifles like the AR15 which is mostly used in these mass shootings? No way! American companies even made and advertise smaller AR15s made for younger kids now. The sole purpose of these guns is to kill people quickly and effectively. It is not for shooting squirrels and wild hogs as some claim as excuses to buy them.

Many American states also now allow concealed and/or open carry of firearms everywhere, including in areas like malls and supermarkets. I predict that there will be a wake-up call soon when an “OK Corral” wild west cowboy shootout happens. Imagine when you have a mass shooter in a mall. Multiple vigilante civilians will whip out their guns and clamour over each other to want to participate to shoot the suspect. The police will come in and assume that anyone with a gun could be the shooter. A mass shooting orgy will happen where the body count will be horrendous and everyone kills each other in the confusion.

Apologies for the outburst. I cannot comprehend the violence and the madness of what is happening in America. It is really descending into chaos. We outsiders who look in from overseas only see a broken system where democracy has truly been broken with all the infighting. The rest of the world understands that guns are deadly except for Americans.

I will continue to use Ikigai as a roadmap to find meaning in life and hopefully subdue and push away negativity and anger proactively. I aim to count my blessings every day and choose to stay happy. Wish me luck! 😉

A personal observation of the advent of AI (Artificial Intelligence) since my previous write-up in Feb: https://medium.com/@checkwoei/the-advent-of-ai-chatgpt-and-others-exploring-the-next-frontier-1bce9144aedf ChatGPT was only introduced to the world less than 5 months ago and the pace has accelerated exponentially in this short period. Many new inventive uses are being discovered and completed AI products are appearing on social media posts everywhere.

The genesis of an exponential rise in AI interest in recent times can be traced back to DeepMind’s AlphaGo defeat of the best Go player in the world in 2016. I highly recommend everyone to watch this documentary on youtube: https://youtu.be/WXuK6gekU1Y . It made everyone sit up and realize the potential of deep-reinforced learning. By 2017, China had declared that big data will be its new “oil” resource. It also kickstarted programs nationally to turbocharge its AI initiative since then.

While there is always the fear of jobs being lost to AI as machines take over, my takeaway is that we must learn to embrace and utilize AI in our daily lives. The alternative of ignoring it will be that we will be disadvantaged in our careers and be left behind. AI will improve our work effectiveness and free us to focus on higher value-added opportunities. Newer job opportunities will be created. While old jobs will become obsolete, many more new ones will appear. https://www.bnnbloomberg.ca/335-000-pay-for-ai-whisperer-jobs-appears-in-red-hot-market-1.1901850

At this point, I just like to share a bit of my learning journey and how I stumbled into AI. With the Skillsfuture government subsidies to help mid-career people pivot to growth areas like Tech, I started to embark on a new learning path in 2018. An old dog needed to learn new tricks to stay relevant. I wanted to reinvent myself while trying to pivot to a consultancy career at the same time. I was an ex-dark side banker looking to redeem myself with positive Jedi energies. Since then, I had completed various tech courses to educate myself. This includes a Diploma in Business Analytics, IBM’s SGUnited AI course, NUS’s Fintech program and various short courses that align with my goals.

The more I got into data analytics, big data, cloud computing and machine/deep/reinforced learning, the more convinced I am that this is the beginning of a brand new world where exponential growth is possible. The stars have finally lined up as computing power is now able to absorb and make sense of the huge amount of big data around us.

One area of interest that has progressed so rapidly within the last 18 months is the development and increased sophistication of deep fake image and video production. I remember doing a team project in 2021 for our IBM AI module on this topic. We were showcasing the fake Tom Cruise videos as an example of what was possible then. We used GAN (Generative Adversarial Network) and simple Python programming tied to public pre-trained datasets of less than 10k images to help spot and identify fake facial photos as a new account application security measure. Boy, they sure look crude and amateurish now compared to what one can do nowadays with a simple prompt and a click of a button.

Just look at the most popular generative AI applications like MidJourney and Stable Diffusion which can easily produce any realistic photo-like quality from anything you want via a few sentences. You have probably seen by now the video of the Pope wearing high-fashion Balenciaga outfits that fooled a lot of people. The originator did not need to draw well. He simply had to type words to prompt the generative AI to create realistic images.

With the combination of ChatGPT and these apps, the possibilities are limitless. One can prompt ChatGPT to fine-tune a detailed description to apply to the image-creating software to invent a photo-realistic art piece. We can also easily animate any person’s image to create a video of him/her speaking from any script we want.

Imagine what it will do to the advertising industry! There is no need to hire real people for new advertisements anymore. One can create personas who do not exist in real life to sell products without any fear of copyright violations. There are serious concerns that we will soon be seeing a bombardment of deep fake videos of well-known people hawking consumer products or spewing fake news.

There are also several new innovative ideas on how one can monetize all this new tech. An interesting suggestion was to develop online courses using ChatGPT to come up with full training modules and then create animated avatar lecturer videos to make the training interactive. The turnaround time would be hours instead of months thanks to the AI applications available now.

Another area of huge interest will be the medical field. AI data analytics is good at image detection and will be able to spot trends and patterns which the human eye is unable to. It was also used by banks to help spot fraud signals in credit cards where big data was available. For example, one can train the model on 10 million normal X-Ray images and separately train it on another 1 million images of positive cancer X-rays. Then when you show them new random X-rays, the trained neural network will be able to detect cancer with a high level of probability or indicate that it might happen in the future. https://www.nytimes.com/2023/03/05/technology/artificial-intelligence-breast-cancer-detection.html

To show how easy it is for a non-IT layman like me to do so, I used stable diffusion https://stablediffusionweb.com/#demo to create the following image below by typing a simple sentence: “Merge Joe Biden and Putin into one person, talking in Congress”. I can then prompt ChatGPT to do the following: “Imagine you are the presidents of the USA and Russia. Write a 300 words political speech on the following topic: To offer my sincere apologies to Ukraine and China for what we have done.”

I then use another freely available AI application to combine the face photo with the ChatGPT script to create a talking video. https://www.myheritage.com/deepstories/ The finished product will be of the imaginary person reading the whole speech like a normal human video with various facial expressions. The end-to-end process can be completed within 15 minutes. https://youtu.be/ZBSQZm7WrUs Fakes will get harder to detect as these AI tools improve exponentially in the near future.

The advent of AI is here and the possibilities are endless even as newer versions with bigger trained datasets are being rolled out within months. Let the games begin!

This is what traditional banks have been doing for hundreds of years: They collect deposits from mom-and-pop types of customers who normally use only one bank for all their financial needs. These funds are mostly CASA (Current Account, Savings Account) deposits and are relatively sticky, meaning that they do not leave the bank very easily and are normally dormant too.

Banks take advantage of this CASA by paying little or no interest. It is like a free loan to them! Just check your current/cheque accounts now. You are probably still getting zero interest even after the Fed’s aggressive rate hikes last year.

What do traditional banks do with all these “loyal” and sticky deposits then? They place them out to work to earn a higher yield to boost their profits. A measure of how well and profitable a bank is utilizing its duns is called NIM – Net Interest Margin, to measure the difference between a bank’s average cost of funds versus what it can earn. You will hear “borrow short term, lend long term” regularly in banking circles as a means of a bank’s funds management strategy. Banks seek to lend long-term to corporate and retail clients (eg. credit facilities, building/housing loans) while utilizing/borrowing short-term CASA funds or through the interbank overnight (O/N) markets.

In normal times, the interest rate curve is upwards sloping, meaning that short-tenor rates are lower than long-tenor ones. Banks will effectively “ride” the yield curve by placing out money long-term to earn higher rates and borrowing short. Yield curves may occasionally invert for countries in distress where short-term borrowing costs shoot up much higher as lenders demand a higher risk premium.

To effectively manage the various risks associated with the above-mentioned process, banks traditionally set up ALCO (Asset and Liabilities Committee) groups consisting of the CEO and senior members of the team like the Treasury head and the CFO. The ALCO normally have monthly meetings to review the bank’s portfolio to review various parameters like interest rates, foreign exchange, gapping and counterparty risks. Financial benchmark triggers are also put in place to be monitored and reported in a pre-meeting ALCO deck for members to review. The intention is to spot red flags in advance, prepare for possible black swan events and avoid them via proactive contingency planning.

Funds are also carefully bucketed and monitored by tenor, instrument and counterparty to avoid high-concentration risks on a particular area or tenor. Limits are usually set for each as benchmark trigger points for early warnings and red flags. This dynamic juggling of multiple balls in the air within an ALCO framework helps a bank avoid preventable disasters proactively.

There is a regulatory reserve ratio requirement that regulators set, requiring banks to keep funds in reserve and not to be lent out. To also prepare for a possible run on the bank due to unforeseen circumstances, banks also do create a cash buffer of sorts to backstop these situations. This conservative buffer of X number of months of cash flow needed is kept as cash in the bank at all times in preparation for a sudden run on the bank. Counterparty risks are also monitored religiously to ensure that it is not too heavily exposed to a few opposite counterparties in case one of them fails.

The recent bank failures have brought into question the viability of banks as an effective risk-mitigating mechanism to effectively provide funds management in the global banking system. SVB, Signature Bank, First Republic, Silvergate and Credit Suisse have exposed glaring flaws of the taken-for-granted banking processes which had worked so well before.

See my previous article below for a more detailed writeup on the recent bank failures: https://medium.com/@checkwoei/svbed-a-chaotic-week-and-more-to-come-d33311b74e12

There are preventable internal failed processes which can be identified. SVB’s ALCO was caught sleeping at the wheel during one of the most aggressive rate hike cycles in 2022. Gapping and counterparty risks were ignored. A comedy of errors coupled with a bank run forced regulators to seize the bank to avoid a full-blown banking contagion crisis. By the way, SVB didn’t even have a functioning Chief Risk Officer for most of 2022!

Is the concept of sticky CASA no more? In the current age of online banking and mobile usage, the transfer of funds takes seconds. There is no need to queue up at the bank branch to start a bank run anymore. Most people nowadays bank with more than one bank. Digital neo-banks make the adoption of a new bank account even easier. A serious bank run can now be staged in less than 24 hours with the help of social media. A bank may not be able to react fast enough to a tsunami of funds outflow to save itself from insolvency.

Perhaps in the near future, because of the speed and mobility of money thanks to technology, banks would have to institute lock-in periods for depositors like mutual funds. For example, allowing only 25% of a client’s money to be withdrawn immediately, 25% within a week and the balance a month later. This will provide some time buffer for banks to react and execute their emergency contingency liquidity plans more effectively.

A positively sloping interest rate yield curve is usually the case in a regular market environment. When the curve inverts, it is a warning red flag sign that should be taken seriously to readjust the portfolio for banks. The unusual 2022 aggressive rate hikes inverted the yield curve for months. Many banks had structured their portfolio to borrow short and lend long-term to ride the yield curve. This basic standard operating procedure is now in question.

Gapping issue – the time difference between your assets and liabilities. Bank depositors’ requirements to withdraw (liabilities) versus your assets parked in US Treasuries with maturities in a few years. Too much money rushing out the door while they are parked in longer-tenor assets resulted in a mismatch that became the ultimate stroke that broke the camel’s back for SVB.

A study estimates that all banks currently have about $650 Billion of unrealised mark-to-market (MTM) losses. This is a similar situation to what SVB had on their books due to its gapping/timing issue. These unrealised losses can now be “hidden” if they are placed in HTM (Hold Till Maturity) books where MTM is not required to hit their bottom line immediately. Should this accounting loophole be tightened for the sake of transparency? Maybe banks should set aside a fraction of the total MTM loss of their HTM books (eg 25% instead of zero currently).

Less discussed was another reason why the American banks failed. It was a few years in the making. The Dodd-Frank Act was enacted in 2010 because of the 2008 GFC. It required banks with assets of $50 Billion or more to submit regular stress test results to the regulators periodically. In 2018, the act was “successfully” changed after fierce bank lobbying to raise the threshold from $50 to $250 Billion.

Guess where SVB, Signature and First Republic were in asset size? They all had assets below the new threshold and were able to hide below the radar of regulators. Internal/ALCO management failure coupled with no requirement for external regulatory monitoring via stress testing resulted in shit hitting the fan a few years later. The 2018 changes to Dodd-Frank should be revoked to bring the threshold back to the original level of $50 Billion immediately to prevent mid-tier banks from having the same fate as SVB.

Fundamentally, banks need to re-evaluate the recent close-shave banking crisis and ask themselves if the old way of doing business has stopped working. The yield curve inversion may last much longer in anticipation of a coming recession and this will stress the portfolios even longer. Regulators have learned from the 2008 GFC to react and move swiftly this time to prevent contagion and avoid the domino effect.

Banking is about the confidence game. The speed of transactions has now moved into the nanoseconds of real-time transactions while banks are still using old and “tested” ways of monitoring risk every month. The reaction timing mismatch is glaring. Perhaps it is time now to fundamentally relook at how banking should be run in this new age digital world.