London Votes!

It's funny how wife and I never had the opportunity to vote in Singapore but are now presented with a chance to do so tomorrow.
The face-off is between Ken Livingstone, the Labour incumbent versus the Conservative Party (read opposition) candidate Boris Johnson. We had polling cards, a leaflet explaining the policies which each candidate is proposing and what each of them stands for, sent to our flat.
The incumbent is riding on his past credentials and the fact that he had presided through the 'golden years' of the revival of London as a global financial center, a consequence of the policies his party has implemented. However, there is always a tradeoff for achieving such goals. Public transport is expensive, population growth has seen an exponential spike due to the attractiveness of working in London and the rising cost of living.
The voting will take place on the 1st May, which is not a public holiday unlike the rest of the world.
I can't help recalling my younger days in Singapore where my parents were voting ...

Olympic's Shame

Wife and I were at Leicester Square, London on the 6th April to witness the Olympics touch relay.
The day started with a huge snowfall, pretty unexpected as this was 'supposed' to be Spring. The decision to go to Leicester Square was made due to the desire for a 'warm bowl of noodle soup' rather than for the Olympics touch. We were unaware of the huge fiasco surrounding the touch relay beforehand. It was only after lunch did we realised that protesters were trying all kinds of ways to extinguish and put out the Olympics flame.
The atmosphere at Leicester was supportive and we could hear shouts of 'Long live Beijing', 'Long live Olympics'. For a while, I felt proud to be a Chinese and felt no different from the Chinese supporters beside us from HongKong or China.


The Olympics flame, when it arrived, was heavily guarded with at least three rings of guards surrounding the touch bearer. It was hard to see the torch bearer or the flame - on hindsight, it was not difficult to see why there was so much security.



In retrospect, the protestors do have the freedom to voice their displeasure about their views on China's policy on Tibet and human rights but I question the method through which they raise their protests. It was heart-wrenching to see protestors trying to snatch or extinguish the Olympics flame - I am not sure what they are trying to achieve in carrying out those acts. Perhaps a more meaning action such as running alongside the relay team with their flags would bring across a stronger message which will gather more supporters to their cause.



This is a huge PR lesson for China indeed, it is not lost on me that translation between the Chinese language to English may not be perfect and subtle meanings may not have been conveyed by the English media. In addition, China's hardline approach towards the protestors is likely to fuel more anger and anguish. Perhaps a more reconcilatory tone from China may be the better way forward.

The cost of the appreciating SGD

The SG dollar has strengthen against every other reserve currency since the start of 2004.

There was a report by the New York Federal Reserve in 2004 which quantified that for every 10 percent appreciation of the Singapore dollar against the U.S. dollar and other reserve currencies would result in a domestic currency capital loss of more than 10 percent of GDP.

Looking at the charts above, since the start of 2004, the SGD has appreciated more than 15% against the USD, more than 10% against JPY and GBP and remained unchanged against the EUR.

Given Singapore's GDP of about 140 bn SGD in 2006, these currency fluctuations would mean a loss of about 14bn SGD ... wow ... which may explain GIC's and Temasek's interest in the US banks - better to hold their stocks than to hold the USD.

The Importance of being fiscally prudent

Looking at the crumbling asset prices in the US and around most parts of the world, it inevitably reinforces the virtue of being financially prudent, rather than financially savvy.
The past 5 years have seen unprecedented creation of credit and the world economy was awash with 'cheap' money. As a consequence, property prices have also risen to unprecedented levels and there was a time when investors were 'educated' on the benefits of investing in properties - the huge potential financial gains that could be made simply by placing a 5% downpayment on any property developments. Every 1% upside in the property valuation would result in a gain which is 20 times multiplication of the investor's initial outlay. Such is the lure of leverage.
However, the reverse of the situation is also true. A 1% decline would also imply a loss 20 times the initial outlay.

The sticklyness of property prices - marked by sellers' reluctance to sell in a weak market and aided by cheap refinancing options means that the current downturn would take more than just a couple of months to clear. In the meantime, there will be many false dawns but until the speculative element in housing prices is replaced by realistic pricing, it is still wiser to remain at the sidelines and hang on to pure cold hard cash.

Prepare for more pain ahead

It is estimated here that total losses from the credit crisis will reach 400bn USD. The tally so far is about 160bn, so there is still more pain to come.

Recent reports were debating about the seemingly wide mismatch between the gloom in the credit markets and the sunny outlook in the equities universe. There is a bit of a spillover delay effect at work there and I guess today, with the Dow falling almost 200points, the markets are gradually converging.

There is definitely a slow down heading our way - tighten your seat belts and enjoy the ride!!

They don't seem to like our Money very much

After spending almost 30bn USD to bail out financial institutions in the US, the Singapore sovereign funds still do not have much support from the US public.
In the survey done by Public Strategies Inc, the American public favours the Australias and the Norwegian sovereign funds but have strong negative sentiments for the funds from Asia and the Middle East.
Transparency and timely disclosure of the funds allocation may most likely be a reason for the Americans perception. I guess having good public relations with the international media help as well.

The star of a bank's back office

In almost all operations and back office teams in financial institutions, these departments are considered primarily as cost centers and play a supporting role to the front office traders, the rock stars or money makers for the banks.

Having spent six years in the company supporting clients in the back office domain of processing and financial control, I have seen my share of gross wage and hours worked disparity between the rock stars and the backroom operators. This was the rule of the jungle - the traders rake in the big bucks with an army of support staff at their disposal, to ensure that the trades have been confirmed, the payments settled, their P&L verified.

In a dramatic turn of events, Jerome Kerviel decided that he had enough of the jungle rules and wanted to prove that he was also able to rack in huge profits despite his humble beginnings in the back office. He busted a 3.6bn pd hole in SocGen's balance sheet with his 50bn pd positions on European equity futures.

How he managed to deceive his managers and the risk departments will be thoroughly analysed, I can bet that his fraud will be pored over with just the same intensity as his banks' famous quants poring over their 5-factor pricing models.

In many ways, the back office is the last bastion of control for any banks. Any mismatched confirmations, unfixed trades or unsettled payments should have raised alarm bells. But as the rule of the jungle goes, the back office operators are too insignificant in the whole food chain - traders usually have the right of way and can easily brush off any mismatches with scant excuses or simply just by throwing a fit. It is perhaps the time now that the balance of power starts shifting more towards the back office.

Running in near zero degrees Stockholm

When the company puts me up in a hotel without a gym during overseas missions, there is only one available option to get a good workout - get out for a jog. It's good for the body and a great way to get to know the city. Well, things are slightly different at this time of the year - any runs outdoors have to be carried out at near freezing temperature.
So I did all the preparatory touch ups - lip balm smeared all over my lips, two layers of gloves, a dry-fit skull cap, long running tights and drapping a windbreaker over my dry-fit singlet. Short of doing shuttle-runs in my hotel room, I felt prepared and ready to face the chill wintery night of Stockholm, Sweden. The temperature check was 1 degrees with a cool 4mph southeasternly wind. A short text message sent to my lovely wife to let her know that her hubby is undertaking something new, and for her to share in my excitement. I think on hindsight the text message for my sweetie was more of a safeguard - in case I did not make it back :-)
40 mins and a bucket-full of tears and phelm later, I made it back to the hotel. I did not exactly go according to the planned route, but I guess I met the objective - which was to make my way to the client's place.
Mission accomplished. I am really to tuck into some swedish meatballs.

A ratatouille car

Spotted this car along Rue de Longchamp, Paris.

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.