Revision to the Mean

The global stock market has gone into a free-fall. Some notable statistics:

• The Nikkei has fallen 35% over the last 6 months
• The Sensex had a one-day plunge of 12% today
• Temask's 2bn pounds investment in Barclays is halved, if marked to yesterday's market price
  
• 150 bn pounds was wiped out from the FTSE100 yesterday

This bloodletting in the equity markets was a delayed reaction from the wipeout in the credit markets a couple of months back. Some correlation or contagion effects I suppose. A couple of myths were dispelled here:

• The decouping theory - Asia is still very much linked with the American economy, or rather investors, when in panic mode, will sell down whatever holdings, regardless of geographical fundamentals
• Equities are at a historical low PE - I guess when growth slows, forward PE does not look too pretty

The current bloodletting is further acerbated by the short positions taken up by the hedge funds. I guess the smarter traders are making a killing out of this global rout. There is more to go but do watch for the bounce.

A sale of two cities

It's interesting to see how the winter retail sales are played out in London and Paris. For one, the Paris sales are mandated by law that retail stores are only allowed to have 2 sales per year and there is a pre-determined date when the sale starts and ends. In London, the retail stores began slashing prices as earlier as christmas last year, in an effort to draw in the crowds and there is not really an end to the sale period - the sale ends offically when all the products on sale are sold out!
In Paris, the stores are pretty discreet about how the sale is being advertised. In most stores, there is hardly any signs to publicize about the discounts. In addition, the price cuts are still pretty subdued by many standards - usually a price discount of 20% is considered generous. I sense that there is a stigma attached to be seen buying discounted stuff in Paris, or it could be that most parisians have already made their way cross the Atlantic to partake in the London sale. Given the strength of the euro in the recent weeks, it is no surprise that the French have choosen to visit London during this sale period, to maximise their purchasing power.

Here's a pretty cool Paris sale site - there's even a recommendation on the different possible shopping circuits in Paris.

Obama's message of Change

The strength of the American people lies in their resiliance and their ability to get back on their feet when the chips are down to make a change. In Obama, I hope that the Americans have found the leader who will be able bring the U.S back to its standings as a nation united.

I loved the speech Obama made in his Iowa victory.

I will be going short on whatever this fellow is buying

Mike Norman, founder of the Economic Contrarian Update has this to say about the housing market back in 31st Dec 2006:

Question: What is your opinion on no-money-down housing developments, like those going up in the Poconos? — Scott (Fair Lawn, NJ)
Mike Norman: Scott, I think no money down is great. It's one of the ways that Americans are benefiting from trends like globalization and the rising use of technology. By lowering capital costs we have access to more credit and that helps the real estate market. As long as we don't enact policy that harms these macro trends, then there is little risk in these highly leveraged loans. As for the Pocono developments themselves, they may have run up too far too fast just as most other properties have, but long-term they're fine.



Mike Norman, again on Fox news, expounding his ever-optimistic view of the housing market. He might as well be renaming his company to the Economic Optimist instead.

Singapore is Tops again - in terms of Pay

Article on the earnings of the top world leaders. Singapore is tops again - enuff said.

The Union Bank of Singapore

The Singapore Investment fund (GIC) was reported to have invested 11 bn CHf in convertible notes in UBS. The terms of the deal are as follows:

a. Convertible note with 9% interest payment
b. Maturity period of 2 years
c. Upon maturity, if stock price lower or equal to 51.50 Chf, convert @ price = 51.50, Approx 213.6 million shares, equating a 10% stake
d. Upon maturity, if stock price higher or equal to 73.60 Chf, convert @ price = 73.60, Approx 149.5 million share, equating a 7% stake
e. If upon maturity, price is between 51.5 and 73.6, strike will equal price

Kinda like buying a call option strike at 73.6 + selling a put option strike at 51.5 with maturity 2 years.

What it means,

1. Great positive publicity for sovereign funds - providing a much needed source of liquidity and shedding the 'barbarians at the gate' image
2. Positive signalling effect for investors with investment horizon greater than 2 years for financial stocks
3. Dilution effect for existing shareholders - looks like some investors will not be pleased, expect to see some defensive moves from the board and the chief executive

Going forward,

Expect more capital injections to the investment banks as the credit turmoil continues with the liquidity coming from the Middle East, China and countries with huge foreign reserves.
A further depreciation of the US dollar if these sovereign funds liqiudate their holdings in US treasuries to fund their investments (if investments are to be paid in currencies other than USD)

Condolences to a fellow Singaporean rower

I am deeply sadden to hear the news about the sudden passing our five Singapore dragonboat rowers in Cambodia, My thoughts are with their families during this difficult time. I am still in a state of shock as I type this entry.

Stephen Loh was a member of the Singapore national team since 1999 and I had fond memories rowing with him when I was still part of the Singapore team. He was a great team mate to have around, always dependable and was one of the fittest member in the squad. He has got a great personality and his smile and kind words never fail to lift my spirits after a tough workout.

I will miss him greatly.

Will we ever have this in the Singapore Parliament?

Check out the exchange between Gordon Brown (the current UK PM) and David Cameron (the opposition leader).

'He's demonstrating no common sense at all. Would they see a Prime Minister who trys to control everything but actually can't run antyhing.' - David Cameron addressing Gordon Brown.

Gordon Brown's government is under tremendous pressure these couple of days due to the many failings which happened lately - the loss of 25 million UK citizens' bank data, the handling of the Northern Rock fiasco did not help the Labour party any bit.

I am impressed by the quality of the exchange - something I dont forsee taking place in Singapore at least for the next decade

St Pancras is a Star!!

Had the pleasant experience of using the St Pancras station since last week and my verdict is that the station is simply fantastic! With the old Waterloo station, there was the usual feel that you simply wish to get in and get out into the train as quickly as possible - it was a functional place where people basically wait to get onto the train.


The St Pancras station was different - it evoked the same kinda of feeling as Changi Airport - where I wouldn't mind checking in half an hour earlier just to bask in the atmosphere. The new station went beyond fulfilling the functional need - I simply loved it!

And to top it all off, I was lucky enough to get complimentary drinks and canapes at the champagne bar in St Pancras. Wifey, we are heading to St Pancras this weekend! Yuppie!

Saying Goodbye to Eurostar Waterloo

A typical week for me would be as follows:
Starting Monday
a. Crawling outta bed at 5.30 am in the moring - it gets tougher in winter .. I am finding it harder and harder to leave the cosy bed, especially with my wife beside me ...
b. Leave the flat by 6.00 am to catch the tube to Waterloo station - it's bloody cold and dark at 6 in the morning in winter
c. Check into the Waterloo Eurostar station for the 7.09am train to Paris - on some days I barely make it
d. Reach Gard du Nord in Paris at 10.59 am Paris time and make my way to the office

And on Friday, I make the return trip home across the Atlantic, usually reaching home at about 9 or 10pm London time.

The interesting thing to note is the different way I am treated by the immigration officers. The French officers usually take less than 20 seconds to waive me through the checkpoint. They take a look at my passport, have a look at my unwashed face and let me through. At the british checkpoint, it usually takes me between 2 to 5 minutes, a barrage of questions unleased upon me; what am I doing in the UK, what is my wife doing, how long will I stay in the UK, what's my occupation, why do I make that many visits to Malaysia (cos I used to be working for a Malaysia client); I have grown smarter since and I now know that a BIG smile usually works wonder.



I was this close to missing the train at Waterloo .... The train departs at 7.09am ... That was the last time I departed from the Waterloo station.
Beginning 14th Nov, the Eurostar departs from the St Pancras Station, which I think is long overdue; the train travels on the normal rail lines from Waterloo to Ashford, UK, which means travelling at a speed no faster than 70km/h until it reaches Ashford.

Check out the volatility on the FTSE this afternnon

Check out the volatility on the FTSE index during the last 30 mins of trading. What can I say ... it's a see-saw, no, it's a roller coaster ride out there!

What happens in a market where there are no buyers??

If a tree falls in a forest and no one is around to hear it, does it make a sound?
If there are no buyers in a market, will there be any prices?
We have not seen the end of the credit turmoil - check out the the interesting comments given by the CFO of Citi - some of his comments border on desperation and pure absurdity.
'No market to hedge CDO book' , 'No observable prices to judge prices', Citi is really in deep deep trouble here.
I am quite skeptical about our local banks as well - they did report holdings of CDOs on their books in August but Singapore accounting rules do not require them to mark these positions to market/model since these CDOs are held-to-maturity. The question is, if the underlying securities are marked down in ratings or have a higher risk of default, the cash flows from these CDOs will no longer be guaranteed. Expect more volatility ahead.