Category: Uncategorized

A strange thing happened last week. Protests erupted all over China against the strict lockdowns they have been experiencing. People from all walks of life, mainly the younger ones, took to the streets holding blank white sheets of paper as a sign of being fed up with the unreasonable Covid restrictions.

This was really a glaring sight in a communist/socialist country where it is always the community before self, the exact opposite of Western democracy that places self-interest before society. It was a reminder of what started in HK in 2019 which went south very quickly. Authorities had to clamp down very fast to prevent it from spiralling out of control.

What happened and have we seen this before in other countries? What proactive steps had China taken since then? Let’s take a step back to analyze the situation leading to this.

While the rest of the world had moved on to a post-Covid endemic phase, China was still in its zero Covid strategy. It had served them well since the pandemic started in Dec 2019. Its people could lead normal lives even as the rest of the world started to be hit by the tsunami and borders had to be eventually shut.

With various waves of variants hitting everyone, all of us were helpless and locked in our homes wondering what wiould happen next. It took a year before the vaccines were ready for humankind to launch a fight back against the virus. 2021 was a crazy year where we saw the hopes of a recovery with a strong vaccination rollout.

Yet there were multiple heated discussions about getting the vaccine. My body, my choice. mRNA was a new way to confront diseases which sceptics fought against. In this situation with no previous historical template to follow, many governmental authorities had no choice but to muddle their way through and experiment, rewriting the script as we move along.

The majority of the medical community concluded that the older generation is most at risk. Hence there was a concerted effort to vaccinate the seniors as fast as possible first. Evidence of Covid deaths pointed to the elderly and those with co-morbidities were most likely to succumb to the virus.

The other age groups had to wait for their turn in the face of initially limited vaccine supplies. Meanwhile, many also refused to follow the vaccine mandates. It was a shit show firestorm everywhere where battles were fought about self-right to refusal of the vaccine versus the overall good for society argument.

Then the rebellion started. Gen X, Y and Z started to question why they had to sacrifice their freedom for the baby boomers. Why would protecting the seniors mean that everyone has to be locked up at home for months? If the annual flu was already fatal with seniors with co-morbidities, isn’t it the same with Covid? Survival of the fittest was the rallying cry for thousands who started to protest in the streets, refusing to wear masks nor take the vaccine shots.

Thankfully, the vaccine started to work and like any virus, the mutations became less severe and mortality rates dropped. The virus-living organism aims to survive and killing the host was a bad long-term strategy. After Alpha, Beta and Delta, Omicron was a welcomed relief with its mild symptoms.

And then the world moved onto 2022 as we slowly open up and we arrived at the endemic stage. After 2+ years, everyone started emerging from our cocoon, shell-shocked that a pandemic had turned our lives upside down. Even spending a full day outdoors was a unique and uncomfortable experience by now. We had to relearn what was normal again.

Back to China now. Why were they still adopting a zero Covid strategy? Some conspiracy theory was that they were finalizing their biological warfare playbook for the next pandemic. Hence they were practising large city lockdowns for a final time.

The other theory floating around was that their homemade vaccines was not as effective as the mRNA ones from America. Their scientists had forecasted that if they open up, a million Chinese lives would be lost. With a population of 1.4 billion, that would account for less than 0.08%. Wouldn’t that mortality rate be about the same as the annual flu season?

With the heavily censored Great Wall of China internet, most citizens were unaware of what was happening outside its borders. Until the World Cup happened. Imagine seeing at least 3 matches every day being held in huge stadiums of more than 50,000 spectators who are maskless and shouting support for their favourite teams from various countries around the world.

WTF?!?!?! “Why are we still in lockdown mode?” flashed in the minds of its 1.4 billion citizens. This is crazy!!!! Enlightenment turns to anger quickly. The lockdown strategy does not seem logical anymore. Hence the start of street protests this week. Enough is enough.

China had also not done a good job of vaccinating its elderly population like the rest of the world. Only 60% had done so on a voluntary basis without any vaccine mandates other than movement restrictions. The 1 million projected deaths upon reopening likely consist of a majority of seniors with co-morbidity complications. Like the Western world before in 2021, China’s citizens are now questioning why the majority are been punished to protect the minority (elderly and seniors).

In a large country like China, the socialist regime is a huge ship that takes a long time to do a U-turn. It also takes a while from the top down to filter and change the signalling message in China’s bureaucracy red tape. But the authorities have heard from the people this week and they are a pissed-off bunch.

Steps have been taken within the past few days that indicate a reopening of China will happen sooner than later now. There is a change in the tone of senior officials with regard to softening the zero Covid policy. Positive Covid cases in some cities are now allowed to recover at home. A recent video of a man being forcefully evacuated from his home to the quarantine site – officials had to apologize for the action recently. Even Xi had acknowledged that the virus is milder now, according to a foreign diplomat who had a meeting with him overseas this week. Reports of a new government initiative to speed up the vaccination of seniors are underway. They expect to reach 90% of this high-risk group within a month’s time.

There is fear that China’s authorities have blinked and kowtowed to the people’s anger in the street protest and that it may happen again in the future. But I believe it is more about pragmatism and how to fine-tune the reopening schedule eventually.

China returning back to normal is actually a good thing for the world. It has become so big that its actions cannot be ignored anymore. Chinese tourists have been sorely missed everywhere. Supply chain bottlenecks would be unplugged. It will be more positive for the global economy going into 2023 the faster China returns to normal again. Fingers crossed!!

‘Tis the week of Thanksgiving in America. These are big family meal events filled with turkey and pumpkin pie. This annual tradition of giving thanks date back to the origin of celebrating a good harvest which began a few hundred years ago. The “First Thanksgiving” happened after the first harvest by the American Pilgrims in the New World in October 1621. The feast lasted three days and was also attended by Native Americans back then.

It was recognized as a happy occasion to cement family unity, to give thanks for pulling through another tough 12 months as well as to prepare for Christmas celebrations and getting ready to hunker down for the bleak winter ahead. With the harvest, food can be stored to weather the freezing cold as they head into the new year to welcome spring and the planting of new crops again.

Times were different then and a full stomach was what everyone wished for. In our modern times, most things are taken for granted as our lives become more complex. Sometimes we lose sight of the little blessings around us and worry about the many things that are beyond our control.

Every day should be a Thanksgiving day, where we count our blessings and give thanks on a daily basis. The act of humility and gratefulness allows one to refocus on what is important and filter out the unnecessary noises that cloud our minds. It helps to prioritize and elevate the things we value most while brushing off the unimportant stuff.

Like in work and life, the 80/20 rule is all around us. In business, 20% of your clients usually provide 80% of the total revenue. The trick is to focus and nurture this 20%, to keep them close to your chest. Likewise, recognizing your top 20% priorities and maintaining them will keep you happy 80% of the time.

Once you are able to visualize them, giving thanks and counting your blessings daily would add to one’s fulfilment. It is an easy concept but yet it takes much effort to follow and maintain. There are multiple external distractions that can easily make you forget your priorities. Negative thoughts and emotions like jealousy and hatred can often derail us.

I live by the simple principle of staying healthy and happy. Whenever I encounter an event or process, I will ask if they bring me towards these 2 objectives. This will be my guiding light to pursue or distance myself from it. Negativity is to be avoided while positivity is embraced.

As I passed my halftime in life at 56, there may be 10, 30 or 50 more years ahead of me. The book “The 100-year life” talks about the new 5.0 life journey stage versus the old 3.0 stages of childhood, career and retirement. The reality of a longer life span means that one has to extend 3.0 into 5.0 which develops into the 4th and 5th stages to adapt to a new mode of living. Having a lifelong learning attitude is crucial to this process.

Career changes are necessary to provide financial security while balancing the need for a slower lifestyle. A lower paying and less stressful Full-time or part-time work can provide for extra income to support a simpler day-to-day requirement. Alternatively, working pro bono in community or charity work can also fulfil the heart and keep one active if one’s financials can afford it.

We are of the generation that retires earlier than our parents by our 50s but yet will be destined to live longer. We do not expect our children to support us into our 2nd halftime and so we need to build a nest egg that can provide for a longer runway. We need to fill the void of the next many years with clear goals and objectives in order to maintain and sharpen the ageing body and mind.

It is a work in progress filled with experimentation and discussion with friends on how we can stay active. There is a tendency to retreat into one’s own cocoon to shut oneself from the rest of the world. This should be proactively avoided. The connected world of social media and technology helps us create and maintain multiple support groups to engage with. We must harvest these tools to our advantage in order to maximize our happiness. Negativity can be reduced by exiting those toxic groups that hinder our healthy and happy goals.

I look forward to each day with a highlight-of-the-day event to perk me up. It could be as simple as having a morning run, meeting someone for lunch or just going to a movie. Little daily joys lengthen the overall period of happiness. Counting my blessings every day also provides contentment and reminds me of how fortunate I am.

I took my 93-year-old dad for a medical check-up yesterday. The 4 hours I spent with him were precious to me. He provided for me and made me who I am today with whatever he could with the resources he had with my mum. He could have done much better if he had the opportunities I was given. Now is the time that his children should give back and take care of him.

Just holding his hands to walk to guide him and sharing a meal with him was so rewarding to me. His physical facilities have weakened over the years but he keeps himself busy with various hobbies and activities. He knows that his body is weaker now and has accepted and adapted accordingly. A simple task like updating a checklist could become a full-day event as he labouriously copies the finalized list by hand to produce duplicates to share with us. Buying a cabinet and fixing it by hand is a new project that he looks forward to doing.

The bottom line is to simplify our lives, stay focused on the important things and be grateful, feeling blessed to give thanks for what we have. Happy Thanksgiving!

In the future, history lessons will refer to the old and new normals as pre-Covid and post-Covid eras. They will be reference point benchmarks as to where we were previously and what happens after the great reset. It is hard to forecast where we will be post-Covid.

Things that happened and functioned normally before 2020 ceased to exist. After 2+ years, we are slowly returning to a brave new world in 2022. History will record events as before or after Covid, pretty much like BC and AD in the biblical calendar years.

This great reset that plunged the world into the deep end probably has no historical equivalence. The world was forced to shut down completely to stop the pandemic from crossing borders even as the virus continues to mutant. Looking back now, it seems like the past 2+ years had passed by so quickly. Yet when we were in the middle of it, there was fear and foreboding about what would happen tomorrow as the lockdown nightmare dragged from days into months.

Human nature is such that we are adaptable creatures of habit. It takes time but after a sudden change in the environment, we will slowly adapt to the new situation as we settle into a repetitive schedule. I remember during lockdown I had to start the day with the same short outdoor run within an allowed area of my home, then settled into my study room for the rest of the day. I needed a schedule to remain sane. All my family members went into a routine, locking themselves into their rooms for work/study and gathering together during meals. We have sort of gotten used to this way of life eventually without any idea of how long this bizarre upside-down world will last.

And now as we face the endemic phase after almost a year into Omicron. Life is starting to feel like the good old days again. But how much will we be returning back to the pre-2020 days? 50 or 100%? The world has evolved so dramatically since then. WFH (Work From Home) was the only option that was forced down our throats then. Everyone hated it at the start as we did not have enough broadband bandwidth at home. Using Zoom video calls was a new scary tech app we had to adapt. But now, thanks to the great resignation, hybrid work is necessary to keep workers from leaving…

Our perception of life has also changed with brushes of death all around us during the pandemic. Life’s too short to bitch about little things. Staying happy and healthy is now more important than having a steady paycheck in an unhappy work environment.

No one event in recorded human history has ever affected every human being in such a big way and at the same time all over the world. Covid has made us mindful of our mortality and vulnerability. Life is so fragile if one is unable to control our destiny as an invisible enemy virus floats around us.

From now on, all timeline references will be benchmarked to pre or post-Covid as the defining measurement of whether the current observation is comparable to the old normal. I think we are about 50 to 70% of pre-Covid levels now. Supply chains are still trying to get back to full production pre-pandemic. The market speculation excesses are still being worked out this year of pain.

Meanwhile, the FTX saga continues… I am getting sick to the stomach reading about CEO SBF but the new revelations continue to amaze me. How can power be held in so few hands as multiple professionals throw money at them without simple fiduciary checks? With its rapid growth, FTX did not even have an independent board of directors to curb the over-enthusiasm of a misguided CEO. Absolute power corrupts absolutely.

When Binance was banned in S’pore, it pushed many more sophisticated crypto investors into the hands of FTX, one of the top 5 exchanges in the world then. FTX has over a million users and it is rumoured that more than 5% are from S’pore ie. greater than 50k. Japan and South Korea are also one of the highest numbers of users in Asia.

This week, we are treated to the mystery of the immediate hack into FTX’s assets the moment it declared bankruptcy. First, the digital ledger indicated that most of the stolen goods were wired to Kraken and it looks like an inside job. There were mistakes indicating that an inexperienced person was responsible, probably doing it in haste. Then the latest bombshell revelation points to SBF being the hacker accused of stealing it as he was pressured into it at the behest of the Bahamas authorities since he was aware of all the backdoors to commit the fraud.

The new CEO that took over SBF this week also dropped another bombshell by stating that this was the worst that he has ever seen. And this says a lot, coming from the same guy that took over as CEO of the Enron clean-up after that blew up. The modus operandi is the same, a house of cards with weak Ponzi foundations pretending and CEOs pretending to be financial superstars. An emperor with no clothes and naked underneath the water as the tide recedes.

Just 6 more weeks left to end the annus horribilis year we call 2022. Nothing but pain for all as the financial bubbles continue to pop non-stop, one after another. Investors are running out of cover to avoid the blood baths. This is surely a year which we all would like to forget.

What a week of excitement! The weak-hearted probably would have had a heart attack by now as the financial world went haywire and into all unexpected directions.

The media buildup to Tuesday’s US mid-term elections was another confirmation that poll results cannot be trusted anymore. The expected Republican red wave did not happen and the final results on who controls the house and senate are still being decided. It’s the economy, stupid! It’s abortion rights and the fight for democracy, you idiot! Do I really care as an outsider?

Knives are now being sharpened for the scapegoating execution process. And it seems like we have a winner! The orange one claims all winnings are because of him and denies responsibility for any GOP losses. He successfully lost the house and senate in the last mid-terms, then the Presidential re-election. The current mid-terms will be his 3rd striaght turkey shoot failure as he grapples with his economic survival on the back of multiple pending lawsuits. A reasonable man would conclude that he has managed to turn himself into a political pariah. Hopefully, it is good riddance this time.

We can expect the 2 party system to go into a deadlock again and continue to fight to cripple each other at the expense of the majority. Screw the citizens! Let the 30% control the 70%. So much for democracy at its best. The only thing that they can agree upon is to continue to bash China. The long-term decline of America is painful to watch. We would see more posturing into the year end debt ceiling wayang show next month.

Then we had the spectacular downfall of FTX in internet warp speed. Who would have thought that the king had no clothes on? It took just a weekend to see that CEO SBF was naked when the tide receded (Warren Buffet inside joke here).

The masters of the crypto universe are crumbling faster than we can recover from the last scandal. This triggering of the dominoes is a further confirmation that perhaps everything is a Ponzi scheme which I talked about in my previous blogs. Are there any more black holes out there that are screaming to be revealed?

When one gets too powerful, it sometimes gets into your head to make you think that you are invincible. Look at Elon and his Twitter mess now as another example. The crypto exchanges originally wanted to create their own exchange token as a way to reduce transaction gas fees. But in a rising price situation where the exchange controls the supply of the token, they will be tempted to monetize the token value that they can create out of thin air (eg. like central banks printing money) to fund their excesses and agressive bets like yield farming into more shit coins. The pyramid works only in a rising market. If a weak link is uncovered, the house of cards will collapse.

Binance has its BNB token and FTX had FTT. Both worked well as prices rise, until they didn’t. FTX lent funds to its sister company Alameda, which used its huge hoard of FTT tokens as collateral to pledge back to FTX. When Coindesk mentioned this big hidden risk, Binance CEO CZ tweeted a “sell all” FTT call which tipped the iceberg into an avalanche of client withdrawals from FTX.

It forced FTX to immediately approach Binance for help. CZ issued a non-commital takeover proposal but subsequently pulled out after a day, citing grave concerns. What a brilliant way for Binance to kill its main competitor in one masterful stroke! FTX has now applied for bankruptcy and the authorities are circling in. It does not help that the FTX legal and compliance department had also suddenly resigned.

With FTX happening so soon after the LUNA stablecoin fiasco, sentiment has turned very bearish for cryptos. There could be nowhere to hide as no one is safe. There is now a rush to move cryptos to cold storage, to put all your asset private keys into a thumb drive and hide it under your bed. BTC and ETH were also sold down as there is a rush back to fiat currencies for withdrawal.

The final thing that happened that caught every by surprise this week was the explosive rise of the Dow by 1,200 points on Thurs. The Oct CPI was much better than expected and an improvement over Sep. This is the first concrete data to have come out which suggests that inflation may have peaked. It means that the Fed need not have to continue with its aggressive rate hikes to tame the inflation monster.

Investors who shorted equities panicked and rushed to cover their positions. Retail demand that had been sidelined jumped in, wanting to participate in the bottoming of the stock markets. This amazing almost 5% rise in one trading session caught everyone by surprise. The strong USD also did a dramatic retreat and weakened substantially against all major currencies within 24 hours.

There is too much volatility this week alone. While I was expecting higher volatility with lower liquidity going into year-end, the concentration of these 3 events in one week has led to wild swings all over the place. It is hard to position one’s portfolio in such sudden market turnarounds. What looked good for the past few weeks can easily evaporate within hours.

There is still 7 more weeks to 2022 and I expect more surprises and knee jerk reactions head. Banks are also starting to close their books for the year and liquidity will thin out. It seems that the beginning of 2023 will signal a bullish trend for stocks as the global economy finally put Covid behind us and ramp up to pre-2019 levels again, baring any new conflicts developing.

Is a new world paradigm shift coming again? After Covid hit us in 2020 and caused the world to turn upside down, is 2022 the year of reckoning that things are afoot where the world we knew previously is in for a dramatic change again?Or are we just reverting back to the long-term norm that was missing for the last 14 years due to years of excesses. Is pandemic shock a slap in the face and a wake-up call?

In hindsight, the current runaway inflation was bound to happen in 2022 anyway, as we revert back to normal. It is logical to assume that after the significant drop in demand (-90%, Lockdowns) when Covid hit us in Mar 2020, we would be looking at a much lower starting base before things start to turn around in late 2021 (vaccine rollout, milder and less deadly strains of Covid).

If the 2022 recovery even goes up to 50% of the 2019 level, it would have been multiples of the low base established in Mar 2020. This inevitably leads to huge inflationary pressure upwards as demand surges this year back to pre-Covid levels. The Ukraine war that started in Feb was the tipping point that choked supply chains and made the situation worse.

The Fed has been blamed for being behind the curve on interest rates and hence the current aggressive hikes. But it is easy to point fingers at Powell. Economies were just slowly recovering from the pandemic in late 2021 after huge amounts of money were printed by most governments to ensure that their jobless citizens could pay their bills and have food on the table while being locked at home throughout 2020.

If they had pulled the trigger to raise rates too soon, it would have sent the economy back into a downward spiral. Given that Fed meetings do not occur frequently (only 8 in 2022), they only had few windows of opportunity to fire the silver bullets. The signalling message to manage the expectations of the markets is also tricky and not easy. But once the hikes started, there is no turning back as the inflation monster had already raced ahead and broken down the barn door.

If we look back into history, the long-term trend of interest rates should be hovering around the 3 to 5% range. No thanks to the 2008 GFC, central banks have been artificially suppressing the rates to all-time lows (ZIRP – Zero Interest Rate Policy) and even to negative regions, something never heard of before.

This started a 14 years binge on cheap borrowing costs that created many asset bubbles. The era of cheap money encouraged leveraging and borrowing to the max. Money makes money and using OPM (Other People’s Money) was the rallying call to become rich fast. Look at properties. Put a small downpayment, borrow the rest at 1% and try to get a rental yield of 2% or more. With leverage built in, that 1+% positive carry can easily result in 10x returns. Then use the property as collateral to borrow again for another new property purchase and repeat ad nauseam.

The Gamestop saga, cryptos and NFTs in 2021 were the final straw that broke the camel’s back. There was so much quick and fast money to make that everything looked like a Ponzi scheme but the new “financial” experts touted it as the “new normal” investment strategy. Get in as fast as possible and try to get out asap for the next new Bored Apes NFT game in town. Greed played a big part to discourage logic to fuel the addiction to remain in the game.

I seriously think that this era of excesses is coming to an end now. The aggressive rate hikes are rapidly bringing us back to the long-term interest rates norm. All stock prices including the darling tech companies of Covid have dropped 70-90% from their all-time highs. Crypto market cap valuation has erased 2/3 of their value from $3 Trillion to less than 1 now.

Where do we go from here? The world is heading to an inflexion point by early 2023. Do we bite the bullet and put on a brave front to fight the possible recession to cure ourselves of the years of excesses? Or do we bend the knee and go back to the happy days again of more money-printing addiction? It is a political hot potato that can swing either way.

I see the world returning to the old normal pre-2008. It swings in an opposite way in 2022 to deflat the 14 years old bubble. The abrupt adjustment meant that most asset bubbles have deflated rapidly, mainly stocks and cryptos. The pandemic was the trigger point to bring the era of cheap money to an end. Thanks to technology and social media, market swings are more sudden and violent. They can happen very fast (eg. Mar 2020 upswing). What took many years to form may be reversed in a matter of months.

Inflation was hiding all along in various asset classes. While technology might have dampened it with advances that improved productivity, there was a spill over into many other areas. The Fed has to now tame the raging inflation bull by the horns. The aggressive rate hikes should taper off soon as there are signs that prices may have peaked and plateauing.

The final 60 days of 2022 will see reduced liquidity that will mean more wild swings in all markets. It is a day trader’s dream market but a nightmare for value investors. If intraday trading is not your thing, then one should have a top down approach and try to crystalize the macro big picture to trade on the higher probability trends. USD to remain strong due to higher rates, park some cash in short term instruments like T-bills to prepare to buy selectively into 2023.

For the brave, it could be time to slowly accumulate shares of companies that has a sound business model which is much cheaper now. We will continue to see great volatility till the end of the year. Time to study the preferred stocks and nibble at them into 2023. There will be more negative news coming but we should take it as an opportunity to accumulate more.

Within the last few weeks, we have seen many conflicting signals moving in opposite directions of the earlier views quite quickly. It was negative, then positive, or previously looking down, then up. Investors are confused about the medium-term trend as we head into a highly likely volatile year-end.

First, let’s look at the microchip sector. With the ongoing tech war America had inflicted on China to restrict sales plus post-Covid supply chain issues, demand was expected to be high globally. News of chip shortages had resulted in car manufacturers having to reduce production as they could not procure enough chips, some of which cost less than $1 each.

Then recently, we saw a 180 degrees turnaround, as reports of a drop in PC demand emerged. There was a big surge in buying during Covid due to WFH policies. But the return to normal meant that the sales performance of the past 2 years cannot be repeated. Now we hear that there is a glut of microchips flooding the market and prices have dropped.

The next switcheroo pertains to the coming winter weather. Based on the colder-than-expected winter we had in 2021, the upcoming one was predicted to also be colder. Coupled with the climate change events we saw this year (bigger hurricanes and storms), the forecast was for a bitter winter ahead. Some parts of America even had early snow.

Then we saw some warming weather and everyone changed their minds, predicting a mild winter. Even then, with the ongoing Ukraine war with Russia, Europe is trying to prepare for a cold winter into Dec to be on the safe side.

Next, we have gas prices. It was expected to go higher as we head into winter due to Russia’s closing of the pipelines to European countries as a response to the sanctions. Futures were climbing higher as Europe scramble to secure supplies to boost their reserves and to expect the worst as winter approaches.

Then 2 weeks back, American gas prices suddenly dropped. The reason was that there was an oversupply situation as US producers ramped up production too quickly to take advantage of higher European gas prices. The situation is still being played out as the arbitrage price opportunity between countries on opposite sides of the Atlantic Ocean continues to exist.

The final flip-flop of where the economy is heading is the most confusing. The aggressive interest rate hikes by the Fed to counter raging inflation had economists talking about tipping the world into a recession. Covid had caused a huge collapse in world demand in 2020. Naturally, when we moved into an endemic post-Covid stage in 2022, a move back to normal from such a low base in 2021 would have caused an inflationary environment. In 20/20 hindsight, this was easily predictable, right?

The stock markets had been on a downward trend for most of 2022 but have recently had a volatile seesaw action. We even saw an 800 points Dow rally last night as tech staged a comeback. The Fed is targeting to announce another 75 bps hike early Nov. So are they going to succeed to fight the inflation monster or tip all of us into recession?

While a majority of pessimists see a recession ahead, there is a growing minority that thinks otherwise. They believe that even if that happens, the Fed Put might happen. It can easily pump start the economy with more money printing again like in 2021.

I wrote about many event risks into the end of 2022 previously. One had just passed and that was the election of Xi. He has firmly grasped control and shows that party stability and control is the ultimate objective, regardless of how badly the stock market behaves.

The next event risk will be the American mid-term elections on 08 Nov. Poll results are all over the place trying to predict the outcome. Frankly, one cannot trust the polling data anymore as they are inaccurate in the last few elections. Their sample size do not usually represent the overall population well.

The last risk will be how the upcoming winter will turn out. Will it be colder than last year? Climate change seemed to have made weather swings even more unpredictable this year. The probability is leaning towards a likely colder one though. Let’s also hope that the Russia-Ukraine war does not escalate higher. All bets are off if a dirty nuclear device is used.

Meanwhile, I am staying long USD against JPY, GBP, CNH and EUR on the widening interest rate differentials. I have also bought gas futures for Nov and Dec expiry dates as I see higher prices into a colder winter.

I continue to remain nimble on the equity stocks. I look for dead cat bounce opportunities to trim away the deadbeats in my portfolio in order to increase my cash reserve. China looks interesting again after Xi’s re-election. Averaging in with small bites into blue chip Chinese tech stocks after the big drop last week as a bet on the promise of more “common prosperity” for the people going forward. Tech will lead the way without the previous cut-throat kill or be killed practises.

We are heading into more bumpy days ahead as we face the last 60 days of 2022 into an uncertain 2023. Caveat Emptor!

ETH, BTC

Dad in hospital

We look back to the latest UK political tragedy this week as Prime Minister Truss was forced to resign after just 44 days in office.

The humiliation was even greater when the British Daily Star tabloid launched a live stream of an unrefrigerated head of lettuce with a blunt question for the title: “Can Liz Truss outlast a lettuce?”. The vegetable obviously won this week. So should the lettuce be the new PM? After all, the UK already went through 4 PMs in 6 years…

Well, her consolation prize for all the stress and humiliation seems to be the GBP100+k annual pension she gained from 44 days of work, the fastest deal to reach retirement ever LOL.

Did she try to do too much in such a short time or were the planning and execution doomed to fail from day 1? All the grand ideas to jump start the economy with generous tax cuts and 2 years energy hike caps were essentially dead on arrival as there was no corresponding increase in government revenue to absorb these new expenses.

Someone forgot to tell her that the UK is no more the superpower it once was. Unlike the US, UK cannot just print more money to plug any deficit gaps anymore. With the recent Covid epidemic, all governments around the world have already flushed their systems with newly created liquidity to keep the economy afloat – America added 30% more new money in 2021 alone.

Truss thought that the shock therapy to kick start the British economy by going into deep deficit is a gamble worth taking. The market responded badly to these harebrained approaches by punishing the GBP currency and causing the Gilts (UK bonds) to crash dramatically.

This had a chain effect on the whole UK economy as British pensions are the main buyers of the government Gilts. Not only are they buying, they are also using the ones they own as collateral to buy more. The sudden 20-30% collapse in Gilt prices resulted in major banks issuing margin calls to the pension funds.

As the funds only own Gilts, the banks’ recourse is to force sell the pledged Gilts. This resulted in a tsunami of sell orders which made the situation worse. The central bank had to step in to start buying the Gilts for days afterwards to stabilize the markets and to restore calm.

All these could have been avoided if they had gotten a consensus of how the market could react before announcing the grand moves. Ironically, the person that lost the PM contest to Truss had correctly predicted and pointed out what would exactly happen during their PM debates months ago.

There is also a running joke that a new person by the name of Joris Bohnson might put his hand up for the newly vacant PM position LOL. Sunak probably has the highest chance of getting the job IMHO.

In politics nowadays, trying to rock the boat with big moves to change a broken system in a short time can be disastrous for the initiator. It would require a long process of small incremental moves to get to the final destination. This has resulted in inertia and political gridlocks which are the norm.

Look at America’s GOP and Democrat parties. Both just zone in on the anger and dissatisfaction to try to bring down the other side to make the opposition look bad. They should aim for the the good of the people and follow what the majority wants, instead of being held hostage by the minority. Social media amplifies the little voices that do not represent the majority, making it difficult to have constructive compromises.

There has to be a better way of governance and the UK had certainly shown the world that it’s system is clearly not working. It created chaos and uncertainty with the constant direction changes which are not carefully thought out and executed clumsily.

There is so much crazy volatility in the equity markets this week that we see 2+% moves up and down every other day while the general trend seems to still be trending down.

The erratic moves are making it hard for traders to decide what to do as we head into the year-end period where liquidity will get worse as banks close their books before Nov/Dec. Coupled with the number of event risks we talk about in the last few weeks, this can only mean that there is more craziness ahead of us in the next 60+ days.

China is having its big meeting this week as Xi looks set to win a new 3rd term. Everyone is so negative about China now as its leadership self inflicts its economy with the bashing and crackdown of its big companies, totally destroying their old models of taking no prisoners attitude on business to win at any cost.

The zero Covid policy also does not help as the constant fear of new lockdowns is real. A thousand new positive cases could easily lock down a city of millions whereas, outside China, no one will give a shit overseas. Will this change after the meeting this week? Looking at how HK is easing up on quarantine restrictions, this could hint that the mothership may follow suit soon too.

Unless China knows something about the virus that we all don’t know, this easing up seems logical and practical. The earlier reason that a million people might die if they open up, sounds dated. This argument is moot with such a large population and the common flu already having similar annual mortality statistics. In America with a population of 300+ million, they already have a flu mortality rate of about 250,000 people per annum.

China opening up and reverting back to normal may be the silver bullet to stop the runaway inflation train which the world is facing now. As their factories restart again, they could unblock supply chain issues and take advantage of current higher prices to lock in and profit from their cheap production capabilities.

One of the other highlights of the week was the Jan 06 US hearing on Thur which is supposed to be the last session. It is timed just before the mid-term elections happening in early Nov. All fingers point to the orange one as the menace who orchestrated the whole event. It’s either that or that his ego got in the way to prevent him from ever wanting to lift a finger to use his presidential powers to stop it that day.

At the end of this latest hearing, the committee voted unanimously to subpoena the former president, to invite him to testify under oath about his role in the riot. With so many from the GOP directly incriminating him, even Houdini cannot help him escape from the multiple accusations aimed at him.

With the pending top secret documents stolen documents at Mar-A-Lago and the business tax fraud in New york plus a few other cases lined up, he is like a dead man walking. But yet his supporters continue to back him up regardless of the undeniable facts of each case against him. The amazing thing is that quite a number of GOP candidates running for the mid-term elections are still openly welcoming his backing and stating that the 2020 elections were rigged in Biden’s favour.

On the personal front, there were 3 events which occupied my time this week. The first was an online property talk I signed up for on Tues night to understand co-living investing. Pretty interesting concept for people who are very hardworking and willing to put up only a small amount into this property strategy which is scalable.

In a nutshell, one rents a private condo property for 3 years and then sublets the apartment on an individual-room basis. The living room and kitchen will become a common community space for all the room tenants to share and enjoy together. With regular cleaning services thrown in, it is an attractive and affordable option for students or working singles to just occupy a room while benefiting from a communal environment with condo facilities.

The co-living investor hopes to make a net passive income of at least SGD$1,200 or more per month after netting off the rental fee to the owner and other expenses. For example, he rents a 4-bedroom apartment for $5k/mth and in turn, seeks out individuals for long-term (> 3 mths) leases of $2k/mth. With expenses like weekly cleaning, maintenance fees and apartment rental cost, the $8k income he gets could give him a net profit.

The trainer claims that he currently has 170+ co-living units as this strategy is scalable while using OPM (Other People’s Money) to derive a positive passive income. They were also trying to sell a training package for $3k. The numbers look feasible and promising but there is a lot of hard work involved. The community they have created was an advantage they highlighted which could also provide economies of scale for services like renovation and cleaning services plus property agent referrals and standard legal document template sharing.

With a group targeting approach, the success could be higher and they normally concentrate on non-prime areas where demand is always high for such private single-room residential rentals. With Covid, WFH only requires a room to stay and work in, as we have all found out in the last 2 years.

I also attended the annual NUSS mentorship program opening dinner on Thurs. This was the first face-to-face event after 2 years of online mentor/mentee matching. This will be the 5th year for me and it was a pleasant surprise that I got to meet some old friends that evening. The potential mentees are not as hungry as they should be to seek out mentors even as we are offering our mentorship services on a pro bono basis. The Covid lockdowns probably lowered their EQ skills LOL.

Ended the week with a Friday dinner bash for Sep/Oct birthday babies. We are a group of university mates and spouses who have regularly caught up with each other over the last 30+ years. We have seen each other’s children grow to be adults now. We experienced the days of innocence fresh out of uni into the working world again.

The venue was a glammed-up living room within an old building serving Peranakan cooking (www.littlesocial.sg). We had decided to dress up in 1920s fashion and had a blast pretending to be young and carefree again. The guys posed for a new photo in the exact positions of the snapshot we took in 1988 when we were part of the NUSS Union Ball Dinner & Dance committee.

Overall a pleasant week, if not for the market turmoil that is unwinding before us into year-end…