Category: Uncategorized

China is one of the oldest civilizations in the world, having a continuous recorded history of about 4,000 years. Other than the period of time when the Mongols took over China and started their global conquest, China had historically remained relatively peaceful and non-expansionist except for periodic short skirmishes with neighbouring countries like Vietnam, Korea and Japan.

A journalist who had worked in China for a number of years wrote a book about his experience and mentioned that China thinks in 100 years cycle. It believes that the country had reached rock bottom in 1940 and therefore its economy will peak in 2040. This could be why we frequently see many China statements stating 2040-2050 goals. We are less than 20 years from the Chinese belief that they would achieve peak influence and become a global superpower to reckon with soon.

China thinks in very long-term and strategic cycles. We will attempt to analyze its recent moves and the likely implications for the world in the near future in this article. They have been planting and formulating their overall plan and fine-tuning it even as America is constantly trying to box it into a corner to get Western support to slow down China’s development.

The speed at which China can move when it focuses its mind and energy on it has been proven again and again over the last 20 years. From buying bankrupt steel mills in the USA to disassembling them piece by piece. Then shipped them back home to reassemble the factory for local production in the early 2000s until it became a global steel exporter.

There are rumours that China was also helping Myanmar construct its new capital Naypyidaw which sprang out in the middle of nowhere in 2005. This was China’s first large-scale experiment to build a city from scratch. The experience helped it fine-tune and to perfect the infrastructure planning process to then build hundreds of new cities all over China.

The Chinese high-speed rail system started in 2008 and it now has the largest collection of bullet trains in the world with an impressive 40,000 km network within 15 years. In a span of 40 years, China has lifted almost 800 million of its citizens out of poverty through vast improvements in the standard of living with country-wide initiatives rolled out for the benefit of all.

My first visit to China was in 1990 to visit some relatives on the island of Hainan. By 2019 during my 4th visit, the place had been transformed with 2 high-speed rail lines running across the island. My 2018 study trip to Hangzhou also blew my mind with how advanced they have become with electronic money like Alipay and Wepay. The same goes for my business trips to Chengdu, Nanjing, Beijing and Shanghai over the years.

Naturally, its people have much to be proud of the accomplishments done in such a short time, within a generation. It is a rising star that is on track to become a global superpower. There is a hint of growing arrogance in their rhetoric at times but most of the Western world still does not want to acknowledge or respect its growing strengths and that frustrates China.

Instead, over the last few years, there is a blatant attempt to gang up against China to impede its rising status on the global stage rather than to come to the table to sort out the differences and disagreements. This has put China in a precarious position to defend and protect itself. Meanwhile, China’s politburo intellectuals began to plan for long-term strategic solutions. They are not swayed by short-term election cycles like the rest of the world. One perfect example is the “One Belt, One Road” initiative to win over the hearts of countries without colonization. There is no need to use a single bullet to flex their newfound economic might.

This leads us to the main topic of today – The Art of War China style and strategic moves ahead. There has been a number of brilliant China strategic developments in recent times that had been planned for a while and are only being executed now. These moves will lead to a new paradigm shift in the world economic balance. In Xi’s own words to Putin this week: There will be “Changes not seen in 100 years”.

After their victories in World War 2, the Americans have prided themselves as the protector of democracy. They frequently need to have the upper hand to ensure control. Since then, several needless and countless wars have been initiated and fought to help maintain military supremacy. Korea, Vietnam, Syria, Iran and Afghanistan to name a few.

Very often, sanctions work because America can hold a gun to the country’s head by denying access to the USD Swift system of payments, making it an instant international pariah. On top of that, the dollarization of its currency (eg. Oil Petrodollars and overseas Eurodollars) made it impossible for countries to escape the drug-like dependency on it. Many have to hoard USD for reserve requirements and to use their surpluses to buy even more US Treasury paper to fund the ever-growing US deficit black hole.

The systematic rise and blowing up of the American deficit with its endless money printing machine by the Fed in recent times had made many countries question why the rest of the world should continue to subsidize its excesses. Total US public debt has skyrocketed to more than $27 Trillion, almost doubling within a span of fewer than 10 years. The only available solution? To continue to raise the debt ceiling and hold the Senate/Congress to hostage situations via government shutdowns…

Another example of arrogance is the Ukraine war. The Western talking point that “you are either with us or you are against us” mentality has finally rubbed certain countries the wrong way. The BRICS countries are now pushing back. They are speaking out to chart their own paths and voice opposition to say that America does not hold a monopoly on the ideological truth it speaks of but has ulterior motives to support its military war machine. Fun fact: America has 750 overseas military bases in the world and quite a number surround China, which only has 5 globally.

America is also pushing China into the corner to halt its rise in many ways by targeting to slow down its economy. Attacks against TikTok and Huawei by a superpower against a single private company were previously unheard of before. They are becoming an American norm nowadays. It forced China during the pandemic to seriously consider if it should turn inwards into its own domestic economy to shield itself from the global economy as a way to reduce tension with America.

But the brand new grand China strategic plan has slowly been unveiled in recent months. It is the aim to de-dollarization the global economy. Leading the charge will be the RMB (Renminbi) aka CNY (Chinese Yuan). The actions and events speak for themselves.

China kick-started its CBDC (Central Bank Digital Currency) late last year in a number of provinces to introduce it to its citizens. It brokered a peace deal in the Middle East and aims to price oil in RMB soon. Xi’s recent meeting with Putin has resulted in a number of signed agreements which will further strengthen the use of RMB in global trade. There is a concerted move to get away from Petrodollars and the USD Swift system soon and many non-Western countries have agreed to follow suit.

In the next few weeks, China will likely begin to provide more details on the rollout plans to further internationalize the RMB. Many European and Asian countries are already paying tribute to China with visits to Beijing to hedge their bets as it reopens up post-pandemic. America is at its wit’s end and in a panic to try to further sabotage the plan. Destruction of the Nordstream pipeline to deny Europe of Russian oil and sending more troops to Taiwan to aggravate China further are some of the unintended consequences.

China’s rise to become a global superpower is inevitable. America has to contend that its number-one position for many years has now met a competitor that could dethrone it. Rather than fight it and put roadblocks in front, it should work with China for the good of the world to share the global stage and not just for its selfish interest alone. The move away from a US Dollar regime could be very bad for the US economy. Exciting times are ahead…

The recent bank run has claimed several scalps in the banking world and the biggest one was Credit Suisse (CS). After 166 years of operation, this prestigious name is no more. Its dramatic collapse happened within days after the SNB (Swiss National Bank) central bank forced UBS to take over CS at a fraction of the last traded share price plus including a lot of free backstops to the buyer.

UBS was the unwilling suitor that was dragged into the altar kicking and screaming in horror at the forced shotgun marriage to save its main competitor. The number one Swiss bank will now absorb the number two to form the biggest bank in the whole of Switzerland. Yes, the Swiss banking system is officially a monopoly now.

CS shareholders watch in despair that their beloved bank was sold for about CHF 76 cents from the last traded price of over CHF 2 dollars. UBS will convert CS shareholders to CHF 3 billion worth of UBS shares as a purchase price agreement. At its peak in 2007, CS was worth CHF 75 and now sold at CHF 0.76, a 99% drop.

The other bigger shocker was that the outstanding CHF 17 Billion of Additional Tier 1 (AT1) of Coco (Contingent Convertible) bonds were written down to zero value overnight. This was the first time that it had happened to the AT1 Coco bond industry which currently has a total value of USD 275 Billion in outstanding bonds globally.

AT1 Cocos bonds are bank capital securities that banks issue to contribute to the total capital required by regulators. Higher capital adequacy norms were imposed after the 2008 global financial crisis when several high-profile banks collapsed. AT1 was therefore created and issued by banks for additional capital to help absorb losses in an event of a collapse. This mitigates the need for a bailout from the regulators and instead requires AT1 bondholders to be the next in line to absorb the losses after all the shareholders are wiped out.

AT1 bonds are usually issued as perpetual bonds and are junior subordinated. They are classified as hybrid securities as they have features similar to bonds and equity (Convertible). The bonds do not have a maturity date and it is at the sole discretion of the bank to call back the bonds on their call date. AT1 bonds are therefore riskier than typical plain-vanilla bonds due to the subordination of the bond.

The credit ratings for AT1 bonds are also rated a few notches below the respective bank’s issuer ratings. This is due to the higher risk of investing in these bonds due to the respective clauses and its ‘hybrid’ nature between equity and bonds. Due to its higher risks, AT1 bonds are issued at a higher coupon in order to compensate investors for taking on more risk.

These AT1 bonds may result in a total write-off and become zero value for the investors when a trigger event happens. A trigger event, as defined in the document clauses, may be caused by a 1) contingency event OR a 2) viability event. When either of these events occurs, a partial or full write-off of AT1 bonds will be automatically triggered.

1)    A contingency event may be triggered when a bank’s capital adequacy ratio falls below a certain threshold. Typically, the threshold level where AT1 bonds are to be written off is when Common Equity Tier 1 (“CET1”) ratio falls below either 5.125% or 7.00% depending on the terms of the AT1.

2)    Meanwhile, a viability event is triggered when regulators deem that a write-down is necessary in order to prevent the bank from becoming insolvent or bankrupt.  A viability event can be triggered if measures to improve a bank’s capital adequacy are deemed inadequate by regulators to prevent insolvency or bankruptcy or when a bank receives support from the public sector to boost its capital adequacy.

When the UBS takeover of CS was being finalized, FINMA (Switzerland’s independent financial markets regulator) determined that a viability event had been triggered and hence CS’s AT1 clause was breached. The bonds were immediately written down to zero value.

The bondholders screamed murder because the assumption was that shareholders were supposed to be wiped out first before the AT1 bonds. Yet shareholders managed to get CHF 3 Billion of UBS shares from the buyer while the AT1 bondholders got nothing. The move shocked the whole AT1 industry as it had never happened before.

Of the total CHF 17 Billion outstanding CS AT1 bonds, most were denominated in USD except one. The exception was in SGD and supposedly had a size of about SGD 1 Billion. It looks like the SGD 1 billion tranches were mainly owned by Asian HNWI (High Net Worth Individuals) clients based in Singapore. I suspect that the CS Wealth management arm and most private banks may have marketed them to their clients as a relatively great investment with attractive yields.

This CS 5.625% Perpetual Corp (SGD) that was issued in 2019 probably had a yield of almost 9.75% in SGD in late 2022 as it had traded below par by then. Most investors would have assumed last year that it was unlikely that a global name like CS could go under that easily. Given that the minimum size for execution is SGD 200,000, it would have attracted a lot of private bank customers who are always on the lookout for higher yields. With a global banking name like CS paying almost 10% on a bond pre-2022 aggressive rate hikes, why not?

Imagine waking up the next day a few days ago to be told that your bond is now worthless, without the opportunity to be converted to equity while the shareholders were not wiped out first. Lawsuits should be flying fast and furious now. A lawyer friend of mine just mentioned that he has been experiencing all-nighters in the office for the last few days. This topic is probably top of mind for many HNWI customers looking to lawyer up.

I honestly don’t think that the bondholders stand a good chance of winning this debate as the SNB had already blessed the FINMA decision to completely write down this bond. It could be a long drawn out lawsuit that could take years of court battles to fight. Even if they win, the best case is that they will get CHF 3 Billion from the shareholders. This will be less than 20% of the bond principal notional (17 outstanding / 3 from UBS). The lawyer fees will also add up and eat into the recovered sum. They might have to give up and move on at some point in time.

https://www.bloomberg.com/news/articles/2023-03-23/could-credit-suisse-s-at1-bondholders-challenge-writeoff-in-court?utm_medium=email&utm_source=newsletter&utm_term=230324&utm_campaign=fixedincome&sref=TCJIUe33

Regulators have learnt an important lesson from the 2008 GFC. Bank shocks require quick preventive actions to proactively avoid contagion which could make the situation even worse in the end. The domino effect made the GFC even bigger as one after another bank was swallowed into the black hole. Regulators were headless chickens then and spent too much time debating on what to do next.

I for one do not think that we are in a worse situation now than in 2008. The leverage is much less and there is less toxic stuff now. Remember GFC’s CDO squared derivatives with exponential risk? Regulators are also reacting much earlier to stem the rising panic tide. There are rumbles and rumours of DB being the next victim as we head into the weekend… Let’s see what other surprises may hold for us next week.

Meanwhile, a number of opportunistic fund managers are buying other AT1 bonds due to the crazy market price dislocation as they see upside value. Another group is also grabbing AT2 (Tier 2) as they see an oversold situation as a safer alternative, to purchasing cheap and oversold bonds.

The financial world was in turmoil for the last 10 days as one bank after another fell off the chair in a domino effect. First, it was Silvergate, then Silicon Valley Bank (SVB) and First Republic Bank, followed by Signature Bank and then Credit Suisse.

Naysayers were predicting the Great Finance Crisis (GFC) of 2008 all over again while another camp insisted that things are much better this time around. Both were equally right in certain aspects we will dissect and explore them today.

The banking world has changed a lot in the last 15 years, fuelled by cheap borrowing costs and addiction to leverage to reap maximum profits in the fastest possible way. Predictions of an end to the party were persistently wrong as buying on any dips became the winning strategy.

The end finally came in 2022 as we emerged from a pandemic where even more money printing was required to support economies. The Ukraine war woke up the inflation monster and central banks finally had to act to hike interest rates aggressively within a matter of 12-15 months.

Into 2023, we are now seeing the aftermath of what the rate hikes have done to burst asset bubbles last year and uncover the ugly truths of leverage indigestion within the portfolios of financial institutions.

Technically, we are not as highly leveraged as in 2008 with the CDO derivatives voodoo black magic where even strippers can own 5 properties with no money down then. Watch “The Big Short” movie for quick enlightenment. This time around, it is more of traditional banking practices gone horribly wrong.

A normal bank usually attracts mom-and-pop depositors who are relatively sticky by offering CASA (Current Account and Savings Account) facilities. These funds are not volatile as clients normally bank with only one or two banks for all their needs, be it for loans, investment or credit card requirements.

The banks in turn set aside some of that as reserve requirements (around 10%) and tries to place out the rest to earn a higher yield. They pay the depositors a low-interest rate and pocket the rest as revenue. To be on the safe side, a big chunk of the 90% may be placed in longer-dated instruments that pay back the principal at par upon maturity. These include Treasury bills and bonds which are of the highest AAA rating.

This all went haywire when the Fed raised rates quickly in 2022. Bond prices have an inverse relationship with interest rates. If rates rise, bond prices will fall. There is a push for money to switch and reinvest in the newer bonds at higher rates of return and to get rid of the older lower-yielding ones. So if any bank were holding onto bonds purchased before 2022, their values will see a drop versus the current market values where they can sell them.

So SVB was stuck with a gapping problem. Its internet-savvy fintech depositors were not sticky as earlier thought and smelled danger last week (thanks to Peter Thiel’s rally call). They pulled out so fast that SVB had to sell its bonds portfolio at a mark-to-market loss. Otherwise, it could have held the bonds to maturity and gotten their funds back at par value without any principal loss.

The other stunning revelation was that SVB was operating without a CRO (Chief Risk Officer) for most of 2022!! The old one quit in Apr and hung around till Oct doing nothing while the new CRO joined in Dec. All banks normally have an ALCO (Asset and Liability committee) to monitor risks like interest rate exposures. So it seems that no one was red-flagging SVB’s interest rate risk during the greatest rate hike year of the century.

Most banks are in fact having the same gapping issue as SVB throughout 2022 with the rapid Fed rate hikes. Banks normally lend long-term and borrow short-term to “ride” the positive yield curve. But the curve has been inverted for some time and this tried and tested formula now results in a negative return. Worse still, the bonds in the portfolio are now trading below par. A report suggested that all banks probably now hold unrealized bond losses of at least $650 billion as a result. SVB had to crystalize about a $2 billion loss last week to pay depositors who were pulling out their funds as a bank run was formed.

The other irony occurred in Signature bank. One of its directors was Frank Barney, the architect of the Dodd-Frank Act. The Act was created after the 2008 GFC to strengthen the banking infrastructure with stress test scenarios which would have failed SVB for its interest rate exposures. This act was removed in 2018 by Trump as it was deemed that banks had reformed after 10 years LOL. Elizabeth Warren had strongly criticized the revoking of the Act in 2018 with no avail as the GOP was leaning towards less government intervention.

Funnily, for First Republic bank, it was the other big American banks that eventually came to its rescue. The too-big-to-fail banks decided late this week to cough up $30 billion to deposit into First Republic for at least 120 days to shore up the bank. Ironically, depositors were pulling out their funds to place in these bigger banks in a flight to safety! Yellen and Dimon managed to convince everyone that it is in their interest to re-deposit funds back to reduce the contagion bank run effect on the whole industry.

Credit Suisse was the next in line to get a backstop emergency loan from the Swiss National Bank (SNB). Its numerous losses and scandals have finally caught up to it. Even with a recent CHF 4 billion of new equity injection in Dec at a CHF 10 billion market capitalization, its market cap still fell below CHF 7 billion this week.

This week’s bank fiasco is not like 2008. Taxpayers’ monies were not used to bail out troubled banks. But thanks to technology, things now move at lightning speed. A bank run can happen in 24 hours via electronic transfers in real-time. The Fed is likely to only hike 25 bps next week instead of the expected 50 which Powell hinted about a week earlier.

The contagion effect should be minimized into next week assuming that there are no more new shocks. The regulators had surprisingly been extremely proactive in arresting the panic within days without bringing in the big cannons yet. The people will be braying for bankers’ blood to hang for their oversights this time as no one went to jail the last time during the 2008 GFC. Don’t hold your breath though 😉 …

Recently, I had a chance to revisit Hong Kong after more than 5 years. My last trip was in Feb 2017 for my previous banking job. My wife was also on a business trip this time and I tagged along for the free accommodation plus we decided to also add a weekend extension for a short vacation.

I had always found HK to be a fast-moving city with its citizens always on the move. They have a never say die attitude for life and believe that no one owes you a living except that you have to work hard to get what you want. The laissez-faire environment with minimum government intervention means that it was a great place to do business in. I wanted to see how HK has changed after COVID and the after-effects of the 2019 riots clampdowns.

For the first few days, I had the opportunity to roam around the city on my own to soak in the sights. I had also signed up for 2 walking tours to experience first-hand via the insights of local tour guides. It was enlightening and heartwarming to re-engage with the country again. My association with HK goes back many years with HK ex-colleagues and vacations with the family there.

My timing was also perfect as the government decided to suddenly remove all requirements for mask-wearing on the second day of our arrival. It was initially targeted to be phased in within the next few weeks but given that Macau had done it a day earlier, they decided to cut short the rollout of the relaxation of the restrictions. It felt odd for the locals to show their faces after more than 3 years of hiding behind face masks.

I started the vacation with an introductory walking tour in Central with a female guide and 3 other fellow travellers. She showed us a number of land renewal projects like the Central Market Building, Tai Kwun (Former Central Police Station Compound) and PMQ (historic site of the old Hollywood Road Police Married Quarters) as we walked around the Central business district.

As I understand Cantonese, I had a good conversation with the tour guide to understand the HK situation over the past few years and how it has affected their livelihoods there. Everyone was cautiously optimistic coming out of the lockdowns. Many are trying to come to terms that a slow return to normal is finally happening after almost 3+ years.

I also had good sunset drinks meet-up with an old schoolmate who had settled down in HK for 20+ years with his HK wife. He had also set up a successful accounting firm in the city. The pub he chose for our drinks was next to the Jockey club. The cool 16-18 degrees Celsius weather under the setting sun was a lovely setting for a few pints of Guinness.

The following day, I met my friend again at his office before going for lunch. I see the old electrified narrow HK tram cars moving through Hong Kong island as a nostalgic reminder of its past. Since I had nothing better to do, I decided to take the tram from one end of the city to the other and back. It was only HKD 3 per trip each way and it took me a total of 2.5 hours to enjoy the rich history of HK as a tourist on the upper deck of the double-decker tram bus to watch the world go by.

HK has many old buildings along the tram journey which remain untouchable as the crazy rise in real estate prices made it hard to acquire for redevelopment. Those that are lucky to have owned properties cling onto them as rental costs shoot up. Public housing is so difficult to obtain and the younger generation seems resigned to not being able to experience home ownership. New private rental units are also becoming smaller and 200+ square feet units are the norm now.

Over the next 2 days, I explored the Kowloon side to try to discover the real HK where most of the population put up at. I signed up for another walking tour on Friday which was called the “Dark Side of Kowloon”. The well-spoken guide brought us 4severalo a number of historical sites and the rich stories behind them. We visited the flower, aquarium fish and pet bird markets to understand the history of how they are created.

The final part of the 2 hours tour was the most unforgettable part. He explained about the terrible housing situation of the unseen and unheard population who are surviving below the poverty line. As an example, he highlighted that a citizen earning an average annual salary would need up to 30 years of his pay just to be able to afford to buy a new shoebox apartment at current prices.

We were ushered into an actual micro apartment in Kowloon to see whlike. It was basically a space formed from the segmentation of a dark and narrow upper floor of one of the old buildings. The room measured 10 by 10 feet wide without any windows. They managed to squeeze in a shower point and cooking area with a bed for a family to live within. The rental cost was about HKD 5,000 per month.

We often hear about coffin-like human cages being offered as a cheaper alternative. We were shown one such space which was just big enough for a single bed that the renter can put all his belongings within the coffin-like box cage and use a lock to secure his belongings. It was going for HKD 1,800 per month. Bed bugs are a constant problem in these cramped living quarters.

The government has historically been profit-driven and depends too much on land sales (>20%) for revenue. Too many people have been stuffed into these unlivable quarters in Kowloon that the real number is unknown. The government doesn’t have a solution to offer. Public housing is non-existent and the last thing they want to do is to have a proper consensus on this situation to discover that most are fire hazards waiting to happen with many safety issues. It is a hornet’s nest they prefer not to stir.

I have bittersweet memories of HK. It was the gateway to China and prospered for many years because the northern China Dragon had opened up in the 1980s. The false pretence of British-influenced democratic ideas before the 1997 handover to China had doomed a new generation to failure. This came to a head in the 2019 riots. Big brother has patiently waited for Covid to settle down before clamping down on the “traitors” to the motherland in 2022.

Chinese cities like Shanghai, Shenzhen and Guangzhou are now ready to steal the limelight away from HK. Its strategic value will continue to diminish over time as it continues to experience more brain drain in the ongoing China/USA tensions. Those that remain will continue to have a mixed sense of loyalty to HK or to China. Hopefully, there will be a push to increase public housing as it was and continue to be a big sore point for its citizens.

HK’s past glories seem to be impossible to relight again post-Covid given its current situation. It will require more governmental changes and willpower to help its citizens reposition for the future. I wish it the best of luck as the city starts to open up now.

Ukraine crossed the 1st anniversary of the Russian invasion this week. It was 12 months ago that a superpower attacked the country on the premise of liberating its citizens from Nazi control.

Since then, the war narrative has evolved while the world was severely affected just as it was getting out of the pandemic nightmare. Supply chains were disrupted and commodity prices surged. Sanctions were thrown at Russia and oil embargoes made things worse. Hedge funds made a ton of money in 2022 betting on the rise of raw material prices.

The Ukrainians fought back with everything but the kitchen sink. Their warrior history did not allow them to play dead and be trampled by the invaders. Putin’s expected walk-in-the-park lightning victory did not happen and multiple military generals changes later, we are still at a stalemate.

Initially, the West refused to send troops to help and hesitated to provide weapons for fear of escalating the tensions and provoking the Russian bear. That “supplying weapons” Rubicon line was crossed a few months later. NATO countries and America started to pour equipment into the country for Ukraine to defend itself against the invader.

Russia threatened the nuclear option repeatedly but had not pressed the button yet. We are now at the point where tanks and fighter jets are being sent over into Ukraine. The impasse going into winter seems to have hardened the resolves of both sides. They are dug in and aim to battle it out until the last man is standing.

Putin had initially proposed that Ukraine should stop its push to join NATO as a condition for a ceasefire. That made NATO and the EU even more determined to support the underdog against a bigger enemy. America contributed billions to date to arm and supply additional ammunition to the war effort.

There are 2 sides to the story and things are getting more complicated by the day. Russia claims that it is feeling threatened by the encroaching NATO countries circling them as more former Soviet Bloc countries signed up. Putin looks back to gaining the former glory of the USSR era before it collapsed in the 1990s.

The ease of the annexation of Crimea in 2014 by Russia emboldened Putin to try again in 2022 to capture more Ukrainian lands. The West and America had not done enough then and now realized that a stronger effort is required to push back the aggression.

India and China have steadfastly refused to condemn Russia for its actions, preferring to remain neutral. A non-Western cynic had even commented that Europe always thinks that its problems are the world’s problem, yet the world’s problems are not its problem. That thought process is coming back to haunt them as Asia superpowers refused to toe the line to join them now.

An Indian minister had insisted that it is the country’s right to do what is best for itself and not be dragged into other people’s problems. It continues to buy Russian oil as it is the cheapest. China still maintains that it will continue to have a strong relationship with Russia. It even proposed a plan to stop the war yesterday. The reaction to the proposal from the West was lukewarm as stopping the sanctions against Russia is a non-starter.

The overall winner? America. As more made-in-the-USA weapons are used and stockpiles are depleted everywhere, new orders are swelling up. The West has set up and positioned Ukraine to front the war against Russia by supplying it with seemingly endless weapons to fight back. Its citizens are suffering from daily bombardments that have destroyed its cities and created millions of refugees who have escaped to neighbouring countries to seek safety. American weapons manufacturers are very happy with the outcome as new orders are streaming in. The US deficit ceiling can just be increased further as the Fed prints more dollars to pump up its military machinery.

Unwittingly, Ukraine has become a pawn in America’s goal of maintaining its world leadership position. Rallying the Western world to fight for democracy and having Russia as the bogeyman spins a good narrative against Putin’s many years of warning NATO not to expand its borders. There is also the recent destruction of the Nordstream pipeline which some point to America as the culprit. The conspiracy theory was that it was done to deny Europe the ability to buy Russian oil. Why would Russia score an own goal to blow up the pipeline as most Western media sources are suggesting?

How will it all eventually end? The Western idealistic goal of defeating Russia is impossible unless we want to start World War 3. Just to kick them out of Ukraine requires endless tons of weapons and time. Lasting another year into this war is foolhardy. Russia needs its pound of flesh to retreat gracefully without its tail between its legs. Ukraine will need to surrender some territory to negotiate a meaningful peace settlement. Why not give up Donbas? It is pro-Russia and housed the rebels that were fighting Ukraine for a separate state. This may be a reasonable means to end this unnecessary war that has destroyed the country.

Meanwhile, we see a similar situation in Asia which the world had already forgotten that it still exists. No one hardly pays lip service to it anymore. Myanmar had a military coup a year earlier on 01 Feb 2021. Many of its citizens had been killed or imprisoned. The generals refused to negotiate and the country has since turned inwards into itself, having only open up to the world 11 years ago after 50 years of exile.

Foreign investors have gotten out of the country and sold out their onshore stakes. The country is now a pariah to the world and nobody wants to lift a finger to help. It is a forgotten topic as Ukraine news hogs the limelight. The tragedies of war are terrible but there is unequal treatment depending on the big-picture objective. Sad but true.

What is normal to us nowadays? After 3 years of Covid, anything before 2020 looks like a different world altogether. Youtube travel videos from 2019 and earlier cannot be used as a reference point anymore as many businesses may have stopped operating after years of lockdowns.

Are we nearing the levels we were at before the great shutdown of 2020? The initial collapse of supply chains and then the knee-jerk start-stop motions more than a year later had created choke points had taken time to unplug.

The final holdout for zero Covid (China) finally broke their walls down a few months ago. The rest of the world has progressively opened up more than a year after the first vaccines were rolled out in early 2021. Looking back, inflation was inevitable into 2022 as the global engine started to crank up again after country lockdowns had caused demand to collapse in 2020.

It was in hindsight that aggressive rate hikes had to happen last year which would lead to asset bubbles popping after many years of cheap borrowing costs since the 2008 GFC. It was a ticking timebomb that was waiting for a perfect storm to happen.

We are moving into a brave new world where Covid has permanently changed the way we work and think about life in general. Technology has allowed WFH (Work From Home) to happen and now a hybrid work life balance is possible. Digital nomads can work from any beach resort while moving around.

Every human being on earth had the chance to re-evaluate life again and assess our mortality as we face the deadly virus without knowing what will happen the next day. Humans are adaptable creatures but yet this once in a 100 years event shook us to our core.

And now we are slowly but surely returning back to normal. I can see revenge travelling picking up with still some cautious over hang of mask-wearing, just in case. Personally, I already had 5 shots of the vaccine to date (2 + 2 boosters + 1 bivalent) plus the flu and shingles ones too… I have never had Covid before but it may had been a mild infection which I did not notice.

The economy is at a crossroads junction and historical data cannot be used to determine the near future nowadays. While US interest rates are now reverting to the long term norm of 3-5% range and looking to touch a bit higher at the 5% level, it is good news for retirees who had to eat into their savings when rates stayed at almost zero for many years.

A paragraph from a Washington Post article probably provides a close enough reply to what we are seeing now:

“The most plausible explanation of all is that the pandemic and subsequent recovery were so unusual that the normal rules of economics don’t apply. Demand surged for everything from toaster ovens to used cars. Supply chains could not keep up. Prices spiked. Now, there’s a right-sizing. Goods inflation has come down for most items (even for eggs) as demand has subsided. The question is whether services inflation for travel, restaurants, entertainment, insurance and deliveries will follow.” https://www.washingtonpost.com/opinions/2023/02/10/economy-inflation-employment/

We are looking at the tail end of the inflation spike that started in Dec 2021 with the reopening of borders and the recovery of supply chains. The Ukraine war further turbocharged inflation fears as commodity prices shot up. There is still a few more rate hikes to go, but at a diminshing pace, in order to keep recession fears at bay.

Newer technological advances in AI (ChatGPT) and climate change innovative solutions should encourage inflation dampening measures as productivity jumps. On the other hand, if America gets its act together and push for a new infrastructure initiative for badly needed roads/bridges, high speed rail and new airports, that can spur inflationary upside pressures in the opposite direction. We have seen what it can do for countries like China and EU as demand for raw materials skyrocket. The opening of China is also a double edged sword as demand and production can pick up as material prices move higher.

Overall, we see a return to normal. But the new normal will differ from the old normal by a lot. The way things work historically will become obsolete and hybrid methods will have to be implemented. Cautious optimism rules for now, a departure from the gloom of recessionary fears just a few months ago. The wild card will be the ongoing Russia/Ukraine war. It is already a year and de-escalation is no where to be seen.

It is important that we look at the evolving macroeconomic picture from a top down approach to investing to further fine tuning of our existing portfolios. Cyclicals seems to have paused its rise and corrected a bit. Coming off from their peaks with big corrections in 2022, Tech stocks seems to have stabilized as they search for the next big thing. CBDC (Central Bank Digital Currencies) are likely to be launched this year as there is a concerted push to move away from USD dominance.

AI (Artificial Intelligence) has always been a mystery for most people. We only think of Jarvis in Iron Man and what the movies tell us of sentient androids behaving like humans but way smarter. That perception is still too far into the future as we must take baby steps first.

With the arrival of big data in recent years and further technological advances in areas like Cloud Computing and Machine Learning, it is possible to build an ecosystem entity that is able to absorb unlimited information to provide responses that amaze us.

ChatGPT https://en.wikipedia.org/wiki/ChatGPT is one such recent milestone that has already started a global AI arms war to bring us to the next quantum leap. It was the fastest app to gather a million users within 5 days when it was soft-launched in Nov 2022, a mere 3 months ago.

ChatGPT was a novelty at first, it was fun to ask questions to a new chatbot and to task it to provide a simple and yet very comprehensible answer. Its responses were next-level and totally blew our minds. I started to play with it and was impressed with the answers which sounded more intelligent that the ones we are used to from Google and other chatbots.

We have reached a point where the latest chatbots like ChatGPT have most likely been able to pass the Turing test https://en.wikipedia.org/wiki/Turing_test to make it indistinguishable from chatting with a human. One of my NUS lecturers had been toying with the creation of 2 distinct chatbot profiles from OpenAI and posted the conversations he has had with them on LinkedIn. He just published a book on this experiment called “Bedtime Stories from an AI”. https://www.amazon.co.uk/Bedtime-Stories-AI-intelligence-changing-ebook/dp/B0BHNGXCH2

Soon, many enthusiastic users found new ways to utilize this tool. The more we played with it, the more users discovered its potential to seriously disrupt the way we do things. It may give wrong answers once in a while but generally, the longer responses seem like a well-thought-out writeup which is created in mere nanoseconds.

One can prompt ChatGPT to go into a frame of mind before tasking it to respond to a particular question based on the parameters given. By assigning it as a specific persona right at the start, the user can help it narrow down its search for a well-thought-out reply that is more relevant to the question asked. For example, start with: “Imagine you are an interviewer/CEO/scientist” etc. That sharpens ChatGPT’s response and provides an even more impressive answer that is specific to the needs of the user.

Just a few days ago, I asked it to help me fine-tune my LinkedIn profile. The advice was that my write-up needed to sound more professional and it reworded my intro to become more concise and impactful. A number of tips were also given for me to think about. I even suggested to my mentee to use it to help to tighten the resume cover letter as I felt it was too lengthy and not concise enough.

The sky is the limit now as other similar search engines feel threatened and want to showcase their challengers to ChatGPT. Google rolled out Bard to protect its turf as the most used search engine. Chinese names like Baidu and Alibaba are also doing the same. They do not want their cheese to be totally eaten by ChatGPT even as Microsoft is now integrating it into its Bing web browser.

There are so many more ways yet to be discovered where this new AI technology can be utilized than we can ever imagine. I had the chance to work with a firm to develop a chatbot for a Myanmar microfinance a few years back. It was tedious work trying to train the bot just to answer simple client queries on the company website. A question had to be asked in multiple alternative ways just to ensure that the machine can learn to provide a credible response to the end user.

ChatGPT has already been pre-trained and had absorbed all information up to 2021 from the World Wide Web via sites like Wikipedia and much more. Being already trained on the huge database of info, it can then be twitched and customized to any type of Chatbot requirements, be it business or leisure focus.

With so much recent hype on the Metaverse, it clicked on me that ChatGPT might finally be the missing piece that can create a virtual universe with avatars living through immortality can exist. Let me backtrack this a bit to expand on my hypothesis.

The very good dark humour British TV series Black Mirror had an episode that won many awards https://en.wikipedia.org/wiki/San_Junipero a few years ago. What if one can live forever in a virtual world once the physical body ceased to exist or expires? That was the premise of the plot which the star of the show had to grapple with, to stop existing when one dies or having one’s mind ported to an alternate world to live forever. She found a new love in that virtual world while test-driving and was faced with a hard decision on whether to enter it before her death.

From the many ChatGPT articles I had read so far, it seems that one can train it with one’s personal data to create an artificial “you” that will talk like you. If we combine this with a human-like digital avatar and artificial speech synthesis, we can technically create a digital alter ego that can live in a Metaverse universe. Hence, one can technically sustain one’s “digital self” or even create “digital love ones” of persons who have died. These can then be placed in the new Metaverse and live all the way to immortality with similar avatars in the simulated virtual world as it will be inhabited by similar “intelligent digital entities” of many other like-minded persons.

And where can we get enough personal data to do that, you may ask? Well, you already have a digital device that you cannot live without on your hands. Your mobile has been capturing your behaviours and life history since your first iPhone. Cloud backups ensure that it continues from an older to a newer model. Each of our personal Whatsapp accounts alone already has at least 5 to 10 GB of personal data on how you interact with all your social contacts over many years.

We can now feed all the above data from our mobiles to train ChatGPT to respond like a customized and personalized chatbot of oneself. All this looks scary and spooky but isn’t this feasible now?

This is just one of the many ways that the advent of this AI tech will help us explore new frontiers of uses we could never have imagined were possible just a few years ago. Almost 90+% of big data was only created in the last few years. Machine learning and deep/reinforced learning trains better the more data is given to them. With quantum computing, speed will not be an issue to digest more data to provide even better responses.

Whether we like it or not, Pandora’s box has been opened and we will explore the new frontier with AI evolving constantly.

I

This has been the Golden Rule passed on for generations to provide a guideline on morality. It also cultivates a sense of empathy for others. The reverse is also true: “Don’t do unto others what you don’t want to be done unto you.”

It basically means that one should treat others the way one wants to be treated. It is to walk the talk and not be hypocritical. Some think that they can do anything to others but others cannot do the same to them, a highly selfish way of behaviour that is morally wrong.

We see such behaviours around us all the time. Friends who take you for granted and assume that you can be there for them all the time but yet avoid you like the plague when shit hits the fan. Or that they lie to you all the time but yet accused you of not being honest with them when you try to avoid their negativity.

This extends to countries and their actions towards others. A particular superpower country is so guilty of it that its citizen assumes it is a God-given right for them to do anything to other weaker countries but will cry murder and retaliate viciously if the same was done to them in reverse. It is basically “Do unto others what you don’t want to be done unto you”. Or “I can do to you whatever I want BUT you cannot do the same to me” syndrome.

The hypocrisy is so obvious and mind-blowing at times that it is so blatant. Sometimes the ulterior motives are wrapped within some altruistic goals (eg. protecting democracy) which can be puke-inducing. You then need to peel back the onion to reveal its rotten core. Neutral outsiders can see through the charade and call it out. But the accused will pivot to either change the subject or threaten retaliation moves as they know that they have the upper hand.

By now you might have guessed the country I am referring to. Yes, it is the hypocritical United States of America. Why so? it has used its military might since WW2 to exert its powers to control and topple various countries for its own objectives in the name of Democracy. It is the self-designated police person of the world to protect the version of democracy it wants to roll out to others.

Just look at the latest fiasco on the air balloon that is hovering over the USA which they claimed is a China spy machine. They could have easily shot it down or captured it. But the reason given was that the debris may crash land and harm its citizens. But dude, can’t you just crash it over the desert or get a plane/drone to trap it?

It is just too newsworthy to cry murder and use it as an excuse to immediately cancel a planned USA-China meeting. One tiny balloon to scare the nation indeed. By the way, America has been using its U2 and SR71 spy planes to spy on others by flying over them for decades. We can do that to you but you absolutely cannot do it to us!!! How dare you! They finally took it down this morning over the Atlantic before it drifts beyond the American border. More “newsworthy” reporting ahead on the debris found.

America has been using its USD Swift system as a gun over the head of nations that do not toe the line for years. To cut off and deny access to the global financial system. It also encourages others to embargo the target to make it a pariah. The action cripples the economy of the targeted nation while it further encourages the Western world to join it in the fight against evil.

Why do you think China and Russia are now trying to create a CBDC system and try to use non-USD currencies to price commodities? America has been using the US dollar as an economic weapon, printing it like there is no tomorrow and holding the world addicted and hostage to this drug. It also uses its military sales to supply countries with weapons of destruction. Sending their old stock to Ukraine means that they can order more from Lockheed/Raytheon/Northrop while creating new demand from NATO to buy more.

The pot calling the kettle black is another useful term to label them. Infrastructure is crumbling and way behind the rest of the world. Healthcare costs are sky-high and a stubborn refusal to learn from the successes of others. Violent gun crime has been normalised with a gun-crazy 1st amendment right to own arms. Yet they try to call out other countries for the same weaknesses that they have.

Look at the way they are trying to stop the rise of China. China bashing is so fashionable in the Senate. They cannot let their mighty military industry collapse as they face a new competitor that does not fire a single bullet but uses soft power via economic strategies to gain influence.

The Huawei saga is one such bias attack. It has been a number of years since they “exposed” that its chips had back-door access. But I have only seen ONE article sensationalising this conspiracy. Why have no tech journals ever dissected and exposed this chip as it will be so newsworthy? Never before have I seen a superpower country concentrate all its might on a single company to ensure its demise. Imagine the EU trying to destroy Tesla for the perceived “conspiracy” of producing evil autonomous EV cars.

If TikTok was dangerous and brainwashed its citizens, what about American inventions like FaceBook and Instagram? Aren’t they doing the same on social media? Remember Cambridge Analytica and the election influence of Trump using FB data?

There is now a concerted effort by America and its allies to ban the sale of chips to China to prevent and cripple its advancement into AI. Yes, China has been stealing corporate technology and it should stop. But so has America for many years and will it stop? Just because your number one position is under threat, must one go out of its way to sabotage a rising competitor constantly?

I enjoy listening to chat rooms in Clubhouse and Twitter Spaces to understand the views of others. There are usually a majority of Americans participating. Whenever a topic concerns global issues, everyone is allowed to provide their opinions. But if it was an American-centric one, non-citizens are usually told that they do not understand the situation at all and should keep quiet. This self-righteous superiority behaviour is so repugnant and most Americans embrace it.

The Golden Rule also applies to an individual. I try to walk the talk and remove myself from any toxic relationships that give out too much negativity. Life is too short to engage in such one-sided behaviour which weakens your soul constantly. It is better to seek out new ones or cultivate positive ones than to dwell in deadbeat ones.