Category: Uncategorized

25/55 – We are into the 25th day of the Circuit Breaker Lockdown today. 30 more days to go till 01 Jun.

Life has gone into a routine now. Daily morning run followed by a callisthenics session at the front pouch, then breakfast and reading the newspaper. After a shower, its PC from late morning till dinner time with short breaks in between for lunch and a coffee. Some days are occupied with conference calls for my Myanmar job or keeping busy with online courses and video editing. Weekends are a highlight with so much free premium online content to watch. I am also trying to read 4 ebooks at the same time as it is easy to borrow from the national library with an extended 21 days rental time.

Days are getting similar as each day rolls into another. Weekends and weekdays look the same nowadays. Every member in our family goes into their own rooms for work/play/study and meet only during meals. I constantly remind myself that we are luckier than most, that we do not have to worry about where the next meal is coming from.

The week has been peppered with news of promising solutions on the vaccine front. Stock markets seemed to be running ahead of itself just because of this reason. With the energy of the whole world focused on Covid19 now, chances are getting better now of an accelerated discovery of a cure. But global leadership is fragmented and lacking. The private sector has to step in to play this role, though it is chaotic sometimes.

I came across an article this week that summarizes the difference between this pandemic and past crises. I would like to share it here and add a few more. New Normals will be established after all this is over. Some points to highlight:

1. Pandemic crisis worsens due to self-inflicted moves

In order to starve the virus and prevent the spread, all governments had to voluntarily shut down their economies via lockdowns. This self-inflicted move was inevitable due to the swift contagion spread of an unseen enemy that does not care for borders. Previously, a crisis was the result of factors that triggered the situation eg. GFC caused by the collapse of Lehman. Now we intentionally manufacture it ourselves.

2. Speed of this downturn is unprecedented

This happened in a matter of months! End to end, the GFC took almost 18 months to play out. Things still looked normal in Feb and look at where we are now, just after 3 months. The first cases were detected in Dec and it has now swept through the whole world in weeks.

3. Each and every individual on planet earth is impacted

This pandemic affects everyone at the same level. Fear of our own mortality during every waking hour is very real. What if I get it? How will it affect my love ones? Will I spread it to my grandparents? For the 2008 GFC, most of the general population that did not hold stocks were not even aware of the financial crisis around them.

4. Take up of technology has been accelerated exponentially

WFH (Work From Home) had created the need for a firm’s tech infrastructure to become robust overnight. Going cashless and shopping online take-up rates have shot through the roof. Food delivery is the norm now. Netflix video streaming video on demand is a given. Zoom/Hangout/Skype/Teams group calls to connect are essential new knowledge. Just this week alone, we did a Zoom video call to celebrate my dad’s 91st birthday. We also had a virtual happy hour call with close friends yesterday evening.

Do we really need offices and do overseas business trips after this episode? If one can work from home using technology to connect rather than go to an office, why do we also need to travel for business anymore?

5. Is Globalization good?

Interconnected processes, the specialized center of excellence for production factories have revealed the close interdependence weakness of supply chains. All countries now worry about having alternate sources of food and basic necessities. The major flaw of globalization has been exposed. Nations are now thinking twice about moving production overseas and would prefer self-sufficiency in the future.

6. All our weaknesses have been exposed at the same time

Each and every government have been scrambling to resolve the virus situation. Every weakness in the system has been mercilessly exposed. S’pore and its FW foreign worker dilemma. America with its broken multi-payer health care system. The plight of developing countries with zero ability to stop the virus. Examples are endless.

The only bring spot : all these economic stoppages have given mother nature time to recover. Pollution is down and hopefully, climate change risk is reduced.

7. All businesses big and small have been kicked in the nuts

No business has been spared. It has created a tsunami of pain for all companies big and small. Instant closure of businesses means that cashflow goes to zero immediately while expenses (salary and rental) continue to be incurred. This is a non-viable and life-threatening event for all firms. As David Chang said, this is like Thanos in the Avengers flicking his fingers and 50% of F&B firms disappear. Big global companies are in shits too. Airlines had the carpet pulled from under their feet as everyone stopped flying. Tourism dollars disappeared overnight.

We are all permanently scarred by this virus. Lives have been turned upside down and everyone has been forced to face a new reality. It has been an in your face punch to every individual, pushing one into an unknown future and limbo that is still evolving.

A whole new different world is developing. New norms are established which no one could have foreseen just a few months ago. We are into a brave new world once the virus pandemic is over. What we take for granted previously will have to change drastically as the old ways die.

Just into the middle of our 1-month Circuit Breaker (CB) / Lockdown early this week, the nation was informed that it will be extended by another month till 01 Jun… 🙁

Cases in S’pore started to run above a thousand per day when we had an outbreak in the huge dormitories housing Foreign Workers (FW). The privately-run dorms can house between 5k to 25k of people each. They are professionally managed and stick to strict Ministry of Health guidelines. The country currently has more than 300,000 FWs and this pandemic had caught the government with its pants down. Most FWs were from neighbouring South Asia countries who were attracted by the prospect of higher pay and S’pore depended on them for many lower-end labour intensive jobs that its citizens will not do.

FWs are a hidden sector living amongst us which most citizens have chosen to ignore and to leave it to the government to manage, as long as we get our high standard of living and 1st world progress. Now that the virus has spread to this large and vulnerable group, we suddenly get a surge of enlightened armchair critics accusing the authorities of mistreatment and missteps.

True, they should have done certain steps to have avoided this in the first place, then admit the mistakes and move on to address the problem. But hindsight’s 20/20. The Covid19 invisible enemy is evolving every day and the world is still learning. What I can not stand are critics who were previously ignorant and blind to this topic are now suddenly saying that we are ill-treating the FWs putting up in terrible living conditions, without looking at the overall facts and jumping to conclusions. They are even offering have baked “solutions” too!

A few years ago, I had the chance to visit 3 of these FW dorms. It was for a business opportunity to manage a supermarket within the premises of a new dorm. The partner had the experience of managing one in an existing dorm and was looking to bid for another in a new dorm. She wanted more new partners like us to help spread the risk.

We visited a few of the dorms to do our research. It was also for me to evaluate the situation. I found the existing dorms to be well run, with tight security and clean surroundings. They were much better than previous haphazard ways of housing FW in construction sites or cramp quarters in a cheap shophouse. I do agree that this virus had exposed the weakness of the dorms, but these critics cannot give sweeping statements that they are living in non-human livable dorms after just seeing some photos and videos. That includes you too, Tommy G! That is just wrong.

Then to suggest unworkable proposals to “resolve” the living standards is also not right. There is a time for further discussions on this topic and now is not the time. Let the authorities address this outbreak first. We citizens complain a lot and expect them to spoon-feed us. But when something goes wrong, finger-pointing is fast and accusations swift. Yes, the top government officials have big salaries (to avoid corruption), but they are human and prone to mistakes too. Let’s stay objective and keep to facts. There is a time for everything and now is the time to stay united to continue to fight the unknown enemy.

With regards to Covid19, we are seeing many countries moving to action plans which are getting similar to what the rest of the world is doing. Best practises that show some success is being adopted all around. Some countries are still far behind the learning curve for various reasons – resources, ignorance or just sheer stupidity.

The lockdowns are now happening to more than a third of the world population in the month of Apr and most are extending it into the month of May too. in order to starve and stop this virus, the world economy has to stop. This had led on consequences of economic and financial collapse everywhere. It is unprecedented times that no one had experienced before in our lifetimes.

There are more than 70+ initiatives now to target the virus. Some are with regards to fast-tracking the vaccine research, others on speeding up the testings process. Some involve the detection of antibodies while others are testing existing drugs for a cure. Even AI/Machine Learning is being utilized to ramp up the learning curve.

The WHO organization has provided some guidelines and steps which I mentioned last week, on what authorities must do in order to get back to opening up their economy again. The main push now is to have aggressive testing amongst the population to identify the cases and to isolate them as soon as possible. South Korea is a recent success story for others to emulate.

My main concern on aggressive testing: is this enough and what’s next? Asymptomatic carriers are still around us. About 15% of recovered cases were shown to be still carrying the virus. The virus had mutated to strains A, B and C within months and remains highly contagious. Countries and cities are all interconnected via many channels. It just takes one carrier to unwind all the work that has been done to contain the virus. S’pore is already seeing the 3rd wave and so has China at its border with Russia. Vaccine discovery may still be months away at its fastest.

No one has an answer and the environment is evolving day by day as the cases and deaths continue to rise. Meanwhile, Mother Earth is recovering from the economic stoppage. I can feel that the environment greenery around me is getting better, the air seems fresher during my daily morning runs. Is the virus Nature’s answer to solving Climate Change and pollution? Humanity continues to ignore that Gaia is suffering and hence we need Covid19 to knock some senses into our thick skulls?

This pandemic looks like a hard reset for humans, to bring humanity back from its excesses and not to take simple things in life for granted, like the ability to socialize and have a meal with friends. It had made us appreciate family time during the lockdown. We are also putting on weight and drinking too munch vino LOL…

I will survive, my Corona Virus (credit to the songs from Gloria Gaynor and The Ramones)…

It is like the world is in the middle of an Avengers movie now. We are all united against a common enemy – Thanos/Corona. The main difference here is that the superheroes are nowhere to been seen. The enemy is also invisible too.

Instead of a united front to fight the enemy and to co-ordinate similar action plans, all countries are left to their own to decide what is best for themselves. In order to starve the virus and flatten the curve, the economy has to come to a standstill. More than one-third of the world population is now in some sort of lockdown and told to stay at home till at least end Apr or into May.

Trump/MAGA continues to sprout chaos with flip flops and lies, leaving American states to fend for themselves. It makes for interesting but sickening youtube videos, to see examples like the recent mass protesting idiots fighting for their “freedom” in Michigan in the midst of an epidemic while American cases and death numbers continue to rise. Instead of leading the world to fight the enemy, America is imploding into a self inflicted infighting orgy…

WHO has come out with a 6 pointers plan on how and when the world can slowly reopen again:

1. Expand, train and deploy your public health force.

2. Implement a system to find every suspected case.

3. Ramp up testing capacity and availability.

4. Identify and adapt key facilities you will use to treat and isolate patients.

5. Develop a clear plan to quarantine contacts.

6. Refocus the whole of government on suppression and containing COVID-19.

Absent of a vaccine for now, it means that every country needs to aggressively ramp up testing amongst its population to get a handle on who is infected and to quarantine those that are.

America is still only testing 100k/day and is way behind with a 300 million population and only 1% tested. Hence death rates are relatively high compared to known cases. They now have the highest number of cases in the world. And they want to talk about opening up soon, looking like a premature foot in the mouth action plan… More Twitter nonsense from the orange one to support “uprising” in the 3 states he won in the last election…

S’pore is having an unusual problem at the moment. It dropped the ball on monitoring FW (Foreign Workers). We have more than 300,000 FWs living in professionally run dormitories that house 5 to 25 k persons. These close living quarters were ripe for the creation of new multiple virus clusters. The army is now also activated to handle this human logistical nightmare as we hit new daily highs in cases uncovered.

The worry now is of asymptomatic carriers of the virus who display no signs (fever, cough). They may be lurking amongst us. Even if a country has successfully contained the situation, it only takes someone from overseas to restart the whole problem again. The virus is so contagious. China freaked out this week at its border with Russia when some visitors from Russia tested positive. Even Putin is rumoured to be worried now as they were late into the containment process.

We are into week 2 of the Circuit Breaker Lockdown in S’pore. Movements have been restricted further as the FW cases caused numbers to jump to a new daily high. We now have to wear masks whenever we are outside. It used to be just only some supermarkets the previous week. The only exception is that if we are doing strenuous exercises like running, jogging, cycling, drills for warm-ups and brisk walking.

My wife, older son and I have settled into a daily routine while the younger one is back in the army camp for NS and books out for the weekend. I have resorted to doing a quick run in the early morning by 7 am, then back home for a shower and breakfast before sitting in front of the PC for the whole day. Trying to read more, 4 books at the same time – borrowed 3 ebooks from NLB and one physical book. Doing one of my 2020 new year resolutions list items – to edit home videos. Watching too much youtube videos and signing up for some free Harvard MOOC online courses.

We are halfway through the one-month lockdown soon. But early signs point to an extension into May as some countries have already indicated so. The world needs to coordinate closely in order to defeat this enemy decisively. We are pretty much into the unknown now. No one has ever experienced this in their lifetimes before and yet we have no idea how long this will last.

By trying to flatten the curve, we have stopped the economy and starved the individual of everything like food and social interaction. Many are clamouring for an end to the lockdown and to restart the economy again. I fear that like in S’pore’s case, a resurgence of the ugly virus may happen again very quickly. Having a vaccine is the ultimate solution but that may be at least 12 months away.

What do we do now? Live a day at a time? Never had something like this affected every living soul on planet earth before. Each country in the world is at different stages of the curve in a never-ending fight against it. Meanwhile, aggressive testing seems to be the only game plan now. We can still do contact tracing but is this a winnable war against an invisible enemy?

Superheroes, where are you when we need you?

It has been a weird week of everyone trying to stay sane as we started a one-month Circuit Breaker lockdown of the entire country. S’pore thought it was out of the woods a few weeks back as coronavirus cases were declining. Little did we know that the 1st wave was just the beginning of more to come.

As the Western world started to grapple with the viral onslaught, a call was made in S’pore in mid-Mar to get its overseas students to return from the infected countries. This started the 2nd wave when they brought back the disease into the country. After realizing what was happening, the authorities had to quickly institute strict 14 days quarantine on returnees the moment they touched down at the airport. Given that hotels were already suffering from a lack of business anyway, this was a win-win situation for hotels to at least have some business during these trying times.

Then the 3rd wave struck last week. Asymptomatic virus carriers were still able to spread the virus while displaying little or no symptoms at all. The explosion of cases occurred at the workers’ dormitories that were housing them by the thousands. Years ago, the government decided to house all foreign migrant workers in large dormitories manned by private companies as a way to ensure that a certain acceptable level of standard was provided for their living quarters. Previously, the employers would seek less than preferred housing for them at the construction sites or at cheap and unhygienic locations.

These huge dorms house 10 to 20 men to a room and can contain up to 5,000 to 10,000 workers. Employers pay a monthly per-person fee to these companies who have to follow rules set by the Ministry of Manpower and Health. They have common kitchens for cooking, sports facilities and a resident supermarket where the workers can buy groceries for meals after work.

Interestingly, I went to visit 3 of these dorms a few years ago as a possible investment opportunity. My friend’s friend operated the supermarket for one of these facilities and wanted to put up a bid to run a similar supermarket for a new dorm. So we spent a few trips visiting them to check out the situation there. I also did my own investigation at one of them in the East Coast, even going to their canteen for a meal.

Now that this 3rd wave had happened, many people were highly critical of the supposedly time bomb that had happened. Most citizens were not even aware of this dorm industry and why we were very dependent on these foreign migrant workers for our infrastructure projects. I had an argument with some good friends on this. Making sweeping statements and hindsight comments are always easy. We just have to look at the history and facts before making a judgement call. No one would have wanted this to happen in the first place and everyone is trying to contain the problem now.

By the latest estimates, 50,000 workers have now been quarantined and many new cases had surfaced. We are now facing a resurgence of new daily highs. The government decided last Thurs that a full countrywide lockdown of a month is now warranted. They call it a Circuit Breaker exercise which looks and smells like a complete lockdown, except then it is less stringent as we are still allowed to move around for groceries and necessities. It started on 07 Apr, Tue and will last till 04 May. It could be extended, subject to conditions then. Meanwhile, the army had also been activated to provide living quarters for the workers as a stop-gap measure.

Cases in the USA continue to surge and they now have more than half a million cases and 18k+ deaths. The peaks have not even been reached and Trump talks about reopening the country again soon, after the recently announced Apr lockdown… This guy does not have any human empathy at all to be a president, asking everyone to forget about this sad episode once it is over!

As the world goes into a shutdown mode in order to starve the virus, the only bright lining is that most major countries are locking down at the same time in a semi-coordinated way this month. Hopefully, that would work and scientists would know more about how we can treat the virus soon. But there are yet many other countries that are still way behind the curve like Africa, South America and Indonesia. What eventually happens to them will also ultimately affect the rest of the world too. Look at S’pore’s case with the 2nd and 3rd wave. This might also happen to those that passed their peaks to only realise that the curve may shoot up again.

In my Myanmar job this week, we had set out an action plan to address the situation based on a few assumptions which are fluid at best. The government had just issued a directive to lockdown for this month too. We aim to hunker down for the next 3 months as business slows and to keep liquidity high as a conservative move. We did a lot of conference calls with our lenders this week to update them on the country situation as well as our company’s proactive plans and to keep communication channels open.

Myanmar is only starting to experience the 1st wave and may not be prepared for it, as their biggest annual holiday starts this weekend. They also have a lot of citizens who are migrant workers returnees from neighbouring countries who have started lockdowns elsewhere. Without jobs and ahead of a big annual celebration, most are return back to their villages en masse. It is a difficult scenario that is unravelling in real-time.

This coronavirus event has taken the world by storm, choking off its oxygen and forcing us to our knees. It seems like mother nature is exacting revenge on mankind for not heeding its warnings. This shut down of the global economy has actually given Gaia time to repair itself. Pollution and climate warming has been coming off and mother earth recovers. It is the only silver lining I can see in these depressing times.

It seemed so long ago when we were in Feb, where the world was in a different place… As I try to remember what had happened each week on this blog, it feels like no end is in sight and that we are heading towards a deeper hole. Every government is trying to scramble and figure out the best way to fight the invisible enemy on a day to day basis.

For me, this week was the unravelling of the country that I have been working as a consultant for the last 2+ years. Myanmar is a developing country that has a lot of upside potential, having been closed to the world for 50 years and just opened up again less than 7 years ago.

We have been running a very successful microfinance business with the new CEO whom I have known in my previous job. Our loan portfolio had grown by a factor of 7 times over this period of time and its infrastructure strengthened to withstand this growth. Then this Black Swan pandemic event hits the world.

Myanmar has not even experienced the first wave of the coronavirus yet. The lack of medical resources (less than 100 ventilators for a population of 55 million) and slow government response are worrying signs. We could literally see all Asia countries been engulfed in this fight but ASEAN countries like Myanmar and Indonesia did not publish any statistics on cases till very late into the virus onslaught.

It did not help that most of its citizens had over the years moved to neighbouring countries for work and are returning en mass as Thailand and Vietnam started lockdown programs which effectively put them out of work. Given that they generally do low-end work that the citizens of that country do not want to do, most have no choice but to consider returning to Myanmar after losing their jobs. This is a looming problem as they may bring back the virus to their villages in a big way. The last count was that over 30k had returned and more on the way.

The various provinces started to react this week by having lockdowns on its regions for the whole month of Apr. It does not help that there is a long holiday in mid-Apr of 10+ days – ThingYan is like the water festival which most Indochina countries celebrate. It is about the beginning of spring and water represents life as farmers start to prepare for the new planting season. Like in China’s case in Jan, the government had to shut down the Chinese New Year celebrations in order to contain the virus. I hope that Myanmar can do the same too, before its too late.

Meanwhile, our company is urgently reviewing our BCP (Business Continuity Program) to try to forecast the effects of the lockdowns and how it will affect our cash flows. We had numerous conference calls to try to pin down the many unknowns to come up with a coherent action plan in a worst-case scenario. The more we discussed, the more we see newer obstacles we need to resolve. It is a logistical nightmare with so many moving parts. As I write now, we are still trying to work out the non-repayment situation and how they will affect our outstanding loan facilities’ financial covenants.

The news around the world has gone from bad to worse. There is still no end in sight and the numbers are simply worsening every day. While we want to get updated daily, the novelty of it is wearing off as the updates get more depressing. Hearing that New York hospitals may run out of PPE and ventilators as soon as the next few days is really not a joke anymore. If the most developed country in the world is descending to such 3rd world chaos, is there hope for the rest of us?

European countries are no better, although there are signs that the peaks of the curves in some countries do seem to be flattening a bit. Many manufacturing and Fintech companies are trying to band together to come up with innovative solutions. Governments seemed to have run out of ideas other, heading towards a total lockdown as an ultimate solution. In order to starve the virus, we have to stop the global economy first. This will have a dramatic effect on everyone.

US unemployment claims hit over 6 million this week, a new high again. Governors like Cuomo in NY have been told by the inept Trump that they have to take care of themselves and not depend on the White House… Seriously?? Calling yourself a wartime president and doing nothing – that’s weak leadership for all to see.

Thankfully, the best place in the world to be in at the moment is S’pore. On Thursday, the PM LHL decided to step up measures by a notch. That is almost equivalent to a full lockdown which will be for a month starting this Tues. S’pore had weathered the 1st wave successfully but the 2nd wave of returning citizens from the West hit us 2 weeks ago. The new worry now is that the 3rd wave consisting of carriers who are asymptomatic and may be silently spreading it among the community again. Social distancing with a full lockdown is inevitable.

CDC and other researchers are now suggesting that everyone should aim to wear masks while outside, as another measure to lower the spread. Countries like Japan and Taiwan seemed to have better success as most people there wear masks annually during the flu season and even now during the coronavirus pandemic. This social consciousness had helped them to flatten the curve much faster. Maybe the whole world should wear masks if they need to go out. Trump even suggest scarves now. The big ramp-up in mask production should be able to help achieve this goal eventually. We decided to aggressively stock up on masks, just in case. On Fri, I saw a shop which was selling them and bought 24 boxes for my extended family as a result.

We have an interesting week ahead of us. Weekends are filled with dread as to where the next bad news will come from. For us, Tues will signal the beginning of a new full month of lockdown.

We live in extraordinary times. Never in my 30 years career have I seen the way the world is unravelling and decelerating at breakneck speed. Unlike previous financial crises, this one encompasses all aspects of economic life and human social interactions. It is impacting each and every individual in a very direct way which we have not experienced before in such a scary and systematic fashion.

The world first caught wind of this in late Dec as news leak out of China. As we head into the third month, the pandemic has quickened its pace and moved from East to West to engulf all nations who were ill-prepared and resisted the creation of a wall around their country in an effective way.

I originally thought that with the coming of spring and warmer weather that the virus will die a natural death. But what experts did not foresee was the emergence of the 2nd wave of infections from the West to the East. By trying to flatten the curve to manage hospital resources, we might have to prolong the pain. The virus is now reminding us that it is here to stay, by visually moving around the globe. Rumours of patients being re-infected again are scaring everyone too.

There are still too many unknowns at the moment. Every government is throwing everything but the kitchen sink into the widening black hole that used to be their economy. Effecting social distancing and lockdowns have caused economies to collapse spectacularly. USA jobless claims last Thurs reached a historical high of 3.3 million!!! (The previous high was only 800k). Daily rated and gig economy workers’ livelihoods have been wiped out instantly within a week.

The world has been so depressed that the equity markets this week started to grasp at every little good news as if this nightmare could end soon. The $2 trillion US packaged that finally was passed yesterday had caused markets to rally for 3 days this week, including an all-time one day gain in DJI.

Hello?? What are we talking about? The bad news continues to worsen. The virus is still ravaging non-stop in European countries. As expected with Trump’s clown show of a disaster planning so far, the USA had surged ahead to become number 1 in total number of cases detected. MAGA! 102k cases and counting, and Trump want to open for business by Easter… Epic shitshow.

The UK is another disaster waiting to happen. First mic drop moment was the announcement of Prince Charles getting the virus. Then Boris got it yesterday. A big flop of a strategy to let the virus pass naturally through the population has now given way to toilet paper panic buying. If the people at the top of the pyramid has the virus, what about the common man in the streets?

Interestingly, S’pore’s 2nd wave of imported infections is all mainly from the UK too! This implies that the virus may have already touched a large portion of the UK population. But their reported numbers are still surprisingly low. Is it like the US where testing is still very low? All the evidence is pointing to a rapidly worsening situation very soon. My wife’s niece is staying put in London with her 2 young kids as her husband’s parents are still there. They would want to be there for them. My son is supposed to start his undergrad studies in the UK in Oct. He worries if things will return to normal in 6 months time.

What is normal now? If you told me in Dec that this would happen, I would have thought you were crazy. How can the global economy do a backflip and jump off the cliff so fast when it was on top of the world then? On hindsight, the warning signs were already all around us, but I chose to be optimistic. The harbour in Wellington with parks ships and warehouses full of NZ pine wood was a forebearer of how the supply chains have ground to a halt.

We have not hit the bottom yet. The cases are still increasing at an alarming rate. It looks like a bottomless pit in front of the world with no end in sight. Every day is a slow crawl as we isolate ourselves with WFH (Work From Home) directives. Social distancing and closure of places of entertainment are recent actions enacted by the government.

Each individual is trying to internalize and contain the fear and panic that is surrounding us every day. Hopefully, there is a breakthrough soon and a cure or preventive measure is found. These are unprecedented times…

To some people, it seems like the zombie apocalypse which lots of TV shows and movies were based on, is starting to happen. An unseen enemy is lurking amongst us and spreading its tentacles into every corner of the world. Countries are declaring war footing on an unknown foe and scrambling to shore up defences and lockdowns.

This is like a horror movie unwinding. China seems to be nearing the end of the show, Europe is stuck in the middle and USA only at the beginning. Yet there may be a replay of the movie as Asia is beginning to experience a second wave via an increase in imported cases.

Precious time has been lost as the virus travelled West over a period of 3+ months. You can see the storm coming but most choose to ignore it until the facts become undeniable and staring you in the face. I thought I have seen it all, the various crises over my 30 years of financial career. But this one is swiftly becoming the mother of all disaster scenarios. A health crisis is leading to a severe financial crisis.

Unlike previous financial events that may not have affected the common man in the street, this one strikes at the heart of every individual. The sense of fear and panic for each person had heightened the stress level for everyone. The worry about the unknown had increased every day as we see the inevitable country/city lockdowns being declared. We worry for our parents who may have underlying pre-conditions and are the most vulnerable.

Starting from last Sunday, the central banks began to fire off their last rounds of monetary ammunition. The Fed shot a big bazooka on Sunday afternoon but it could not save the Dow from dropping like a brick from the get-go on Monday, shaving almost 3,000 points off, one of the worst black Monday sessions ever. One central bank after another stood up to follow suit over the week by shooting their last bullets in an even bigger scale.

Panic gripped the markets as rumours of large hedge funds and investment houses being in trouble did not help. Mass funds redemptions and margin calls, coupled with algorithmic/black-box trading systems triggering more sell orders compounded the situation. The financial institutions managing the huge ETF bubble, where all outstanding volume is bigger than the underlying, scramble to rebalance their basis risk hedge created an avalanche of red in the equity markets.

Global corporations, clearly understanding that their business is tanking fast, have moved to battle stations to maintain liquidity. It is vital for their survival and they began to draw down all their existing facilities. Most have begun to seek new facilities from their banks and are even willing to pay up to get them at higher rates. Winter is coming and the big boys are planning their worst-case scenarios now, grabbing liquidity at any cost. The big oil battle continues between Saudi and Russia, with American frackers as the casualty as it heads towards $20, halving in value in less than 2 weeks.

It is indeed unusual to see all asset prices dropping at the same time. It feels like asset balloon bubbles from cheap money since the 2008 GFC had all popped at the same time. This lead to the theory that all investors are liquidating at the same time. In order to cash out, they had to sell as much as they can, regardless of the quality of their holdings. If they are stuck with an illiquid portfolio, they will have to sell the more liquid ones that have bid prices. We see wild gyration of US Treasury prices every other day. The 30 and 10 year US Treasuries normally move by only a few basis points per day. Now the daily intraday moves are in excess of 50 bps!

https://www.bloomberg.com/news/articles/2020-03-20/diary-of-a-crisis-inside-wall-street-s-most-volatile-ever-week?sref=TCJIUe33

The coronavirus situation continues to impact the world as we have never seen before. Europe is now the epicentre of the spread. Italy numbers surpassed China and it is still accelerating. My Italian friend in Yangon told me that his parents living in a small town in central Italy have started to see deaths around the village from the virus. China had sent a team to North Italy to assist. Spain, France, Germany and finally the UK succumbed to the lockdown option.

America has seen an almost 10 fold surge in cases to 18k now. Yet it’s testing capabilities remain patchy. The more you test, the higher the number will become. Experts need this information in order to quantify the extent of the problem. Hospitals and first responders are talking about running out of supplies like masks and protective gear. ICU wards are filling up fast. Trump continues to overpromise and under deliver while throwing in a liberal dose of falsehoods into the toxic cocktail.

Next week is likely to be more of the same, except that governments and central banks seemed to have run out of options to use, other than to shut down the world economy. First thing first is to flatten the curve, to prevent a big surge in cases that would overwhelm the hospitals so that lives lost can be minimized. But this strategy means that the whole saga will be prolonged (18 months?) and the impact on the global economy will be disastrous.

Talk about being caught between a rock and a hard place…

 

 

 

I thought we have seen it all last week and that it couldn’t get worse, but boy was I wrong. The world went crazier this week.

It was a week of unintended consequences that caused the financial markets to flip flop like mad every other day. I could see my Bloomberg stock portfolio MTM (Mark to Market) dollar values changing in value by the day, ending about 20% lower at the end of the week.

The week started on Monday after a huge blow up in the oil market on Sat. The Saudis declared open war on non-OPEC countries, Russia and American shale oil and promptly cut prices. The virus situation in Italy also did not help as they suddenly put North Italy/Lombardi on quarantine ala China/Wuhan. Panic exploded on Mon as the markets opened and there was a bloodbath in the financial markets.

Trump vaguely promised by Mon evening to announce actions to help the economy affected by the virus soon and the markets reverse course on Tue for a bit. By Wed, the markets continue to slide as no announcements were made while more coronavirus cases continue to pop up in America. Testing was slow and not 1 million by last week as promised. Even CDC went offline as people realized that many could not get enough testing kits at all. S&P 500 whipped like a spun girlfriend that was betrayed. New one day lows were recorded and it went limit down even before the opening bell. Meanwhile, Italy decided to close the whole country instead.

Then Trump on Thurs did the “masterful” stroke of unilaterally banning all of Europe from entering the USA without informing its closest European allies. That really did it for the markets. It was too little too late. Chaos was created with that announcement as everyone scrambled to comprehend how it will affect them. American citizens were worried that they could not return home before the ban takes effect at midnight on Friday.

We laughed when toilet paper ran out in HK a few weeks ago. Then it happened in S’pore and we thought that was mad. Now the whole world panics and toilet paper is flying off the shelves…  LOL Why toilet paper?

Bill Maher’s Real Time episode today had a guest who is an expert on the subject of Risk and how it affects human psychology. He believes that humans will become more emotional, rather than logical, in times of uncertainty and fear. Hence, in the current times where there is no trust with the leadership and too many unknowns, people will tend to want to cling on to more quantifiable items like toilet paper and even religion. They become mental anchors to the individual and it is a reaction to maintain the sanity of the mind. That sounds logical to me…

If this mismanagement fiasco of Trump still doesn’t bring him down, nothing will. You can lie (16k and counting) and create alternate facts on just about everything. But when lives are at stake, you cannot run away from your responsibilities anymore. It is indeed sad and pathetic that the most powerful man in the world is throwing everyone under the bus except himself. Self-preservation to the extreme is not OK when you are entrusted with the protection of the nation and the free world. It is so disgusting to see him denying responsibility on TV today for the mishandling of the coronavirus process in America and to continue to lie through his teeth.

The virus saga is playing out all over the world like a slow-moving movie. China is (hopefully) near the tail end of the movie while Europe is in the middle. America seems to be only in part 1. We can see the likely unravelling of the plot in America into the next 2 weeks. Test kits will finally be fully available but the horses have already run out of the barn. Positive cases headcount will skyrocket exponentially before a peak can be reached. Draconian actions to have lockdowns may happen but the effectiveness of these moves would be questionable by then.

On the financial front, US Treasury yields have whipsawed the whole week. The whole curve dipped below 1% on Monday. All asset classes/commodities were dropping in prices. How can everything drop at the same time? Even Bitcoin was crashing…

I suspect that the AI trading systems were partially responsible for the selling onslaught. When these black boxes smell a panic, auto sell orders are generated in nanoseconds. Too many machine orders exiting from a single door will create a tsunami.

The other theory is that there are margin calls being triggered by multiple leveraged speculative transactions that were built up over time in a low yield environment. Big hedge funds and well-known investment houses may be in deep shit now. The need to liquidate existing positions to maintain cash for margin calls or for funds redemptions may result in the cashing out of positions that have liquidity while they are stuck with illiquid assets. It is a self-fulfilling vicious circle.

In the next few weeks, more big names in trouble may reveal themselves. H2O management fund from the UK had already pre-empted investors that they had a very wrong bet that had gone horribly bad – long Italian bonds and short US Treasuries.

Just this afternoon, a friend forwarded an article to me that indicates that the coronavirus may not have originated from China! Conspiracy theory? They exhumed some cases of patients who died presumably from flu a few months ago to retest for coronavirus again and the results were positive. Japan had a person that visited Hawaii a few months ago, who tested positive later. When the dust settles down on the bigger panic situation we are in now across the world, this topic may be revisited again by the media.

We live in interesting times indeed…  I cannot imagine if next week can become even crazier than this week… ;-(