Recently i realised that my conversations keep revolving around my expectations that the crisis we are about to face in 2009 will be worse than the Asian crisis in 1998. And i kept asking the question - if i lost my job, can i get thru 2009. And more importantly i asked all my friends and family the same question.
I am sure that i will come back to this topic in time to come. BUT, for now, i am tired of the bad news or in spreading bad news. So i am asking a whole set of different questions?
CAN you name your top ten Movies?
Someone asked me this question and i was genuinely stumped. So as i lay here with my usual bout of insomnia (i have mastered the knack of typing while lying down)...i have looked to answer this question.
In no particular order -
1. The Godfather trilogy - WHY? coz no other movie has so many scenes that are classic and timeless. From, Michael Corleone telling the Sicilian father - Would you rather gain a son or your daughter lose a father? OR being hit by the thunderbolt and the wedding night scene....or in two when he shuts the door on Kay (no lines but potrays michaels fall from grace or when he kisses fredo and says i know it was you..i know it was you. TO Robert De Nero with one finger wagging calmly or the classic - every time i try to get out, they pull me back in. . 1 was Michael's loss of innocence, 2 was his fall from grace and 3 was his fight for redemption. Definitely one of the best trilogies of all time. (3 was not great but it rounded the stories well and brought it full circle). The greatest ensemble cast of all time.
2. HEAT for the most amazing cafe scene with Robert De Nero and AL Pacino. I can never remember the actual dialogue but they sizzled.
3. True Romance, Tarantino's best script ever (written with Avery something). From the touching roof top scene with Patricia Arquette and Christian Slater...to Brad Pitt's stoner cameo to the most brutal fight scene between Patricia Arquette and James Gandolfini (Tony Soprano) in his malicious best and the best - Christopher Walken and Dennis Hopper in a glorious scene where dennis hopper gets tortured and disses Sicilians with Walken getting more angry. This movie would make my top 5 any day.
4. The Highlander - only the 1. Please destroy the sequels. The Highlander had a touch of low budget but had a great fantasy story - mysticism, mystery, a great villain (the best in my mind). And two lines stand out - there can be only one AND its better to burn out than to fade away.
5. Last of the Mohicans - ok i have to admit Madeline Stowe in this movie was hot BUT who could not love the heroes and their sacrifices. Daniel Day Lewis running to save Madeline and viciously fighting his way thru with two axes. Uncas laying his hand on his father before he gives chase to save the sister. He dying at the hands of the Indian mohawk (another great character) or the Sister jumping to join Uncas. Uncas father with his huge axe running, diving and killing the Mohawk in 3 swings. I am a fan of the book and although they took great liberties in the movie - the sense of the time and the heroes were well potrayed. Another great movie and i swear the best date movie of all time.
6. Bram Stoker's Dracula. I know this is an odd choice but i watched this movie when Winona was the light (remember the light, P). I found it sexy and the final redemption touching. Dont forget Monica Belucci's cameo...damn. Best scene - Dracula in blue Lennon rimmed sunglasses looking at Winona - Look at me, Look at me.
7. Leon - another great cast of characters from the deranged cop, the immaculate assassin, the above her age revenge filled kid...everything worked and the ending superb.
8. The Field of Dreams - who can forget If y0u build it, they will come. A most unassuming and surprising movie but one where you could not help smiling and feeling good after the movie.
9. The Untouchables - the train scene was De Palma's greatest movie masterpiece and of course robert deniro's famous - Fark you and your Family.... or sean connery's massacre and death scene. A great movie with one of the best scores ever.
10. SevEN - the bravest movie of all time where there is no happy ending and introduced the amazing kevin spacey with freeman and pitt playing their roles perfectly. The head in the box was just so damn classic. And the ending line one of the best in movie history - "Dante wrote, the world is a beautiful place and worth fighting for - freeman overtone...i believe in the second part.
Monday, December 8, 2008
Wednesday, November 26, 2008
The Horizon
Recently i got asked some very interesting questions (thanks Rajan) :
Just out of curiosity.. how does this domino effect end? I mean, I know it gets better when the economy gets better, but what causes the economy to get better if people are constantly prudent with spending? When people want to spend more, what has changed to want them to spend more? Higher salaries? What has prompted the higher salaries? Just wondering and will be interesting to know what stops the cycle. Once we know what stops the cycle, can’t we do it now?
.....
I have been so focused on the immediate problems i see, i failed to look forward and that is exactly what the questions above asks. My greatest wish is for leaders in Malaysia to ask the questions above.
I will try to answer it but in the end i think my honest answer is i am not sure.
We need to understand first where our economy gets its growth from. Then we need to make some assumptions on what will happen in 6 months. Finally we need to have plans to address the problems we face in the short term (< 1yr) and in the long term. I believe only when we see those plans in action or being put in action...only then we will be turning the corner.
Malaysia has six engines of growth :
What is happening now?
Oil prices have crashed from the high levels of 145 all the way to 50. I cant be sure but i suspect this is hitting Petronas profits. I will look to track this soon (if i can find the data). Commodity prices have crashed over 50% and this again is not good for our exports. Manufacturing activity in Malaysia has been steadily declining as factories have moved to Vietnam, Thailand and Indonesia. The govt claims that FDI is steady but have you seen any major investments by foreign companies recently. I haven't. Portfolio funds are now actually leaving the country and all of Asia actually.
Our economy is very dependent on exports. So as US and the rest of the world slow, we dont have enough domestic consumption to sustain the drop in exports.
These are my personal views on what will happen in the next 6 months :
We all know that a huge chunk of Malaysia's wealth is abroad. There is a real need to bring that wealth back into Malaysia. To do this, we need to restore faith that our leaders are really serving us and not their own needs.
I would say WE will turn the corner when we see one or all the measures above implemented. Unfortunately i see none.
For individuals i think at the end of the day, they will spend/invest when they feel secure in their jobs and in the leadership of the country. SO the question to answer - "do you feel secure in your job and do we have faith in our leaders"
d.
Just out of curiosity.. how does this domino effect end? I mean, I know it gets better when the economy gets better, but what causes the economy to get better if people are constantly prudent with spending? When people want to spend more, what has changed to want them to spend more? Higher salaries? What has prompted the higher salaries? Just wondering and will be interesting to know what stops the cycle. Once we know what stops the cycle, can’t we do it now?
.....
I have been so focused on the immediate problems i see, i failed to look forward and that is exactly what the questions above asks. My greatest wish is for leaders in Malaysia to ask the questions above.
I will try to answer it but in the end i think my honest answer is i am not sure.
We need to understand first where our economy gets its growth from. Then we need to make some assumptions on what will happen in 6 months. Finally we need to have plans to address the problems we face in the short term (< 1yr) and in the long term. I believe only when we see those plans in action or being put in action...only then we will be turning the corner.
Malaysia has six engines of growth :
- net oil proceeds (we export high grade oil and import low grade oil), we make on the margins
- manufacturing exports (electronic goods etc)
- commodity exports
- domestic consumption
- Foreign Direct Investment (foreign investments in factories, or true capital investment)
- Portfolio funds (these are short term investments in our shares and bonds. Most of our leaders claim that these are actually destabilising forces BUT only when money flows out. No one complains when money is flowing in
What is happening now?
Oil prices have crashed from the high levels of 145 all the way to 50. I cant be sure but i suspect this is hitting Petronas profits. I will look to track this soon (if i can find the data). Commodity prices have crashed over 50% and this again is not good for our exports. Manufacturing activity in Malaysia has been steadily declining as factories have moved to Vietnam, Thailand and Indonesia. The govt claims that FDI is steady but have you seen any major investments by foreign companies recently. I haven't. Portfolio funds are now actually leaving the country and all of Asia actually.
Our economy is very dependent on exports. So as US and the rest of the world slow, we dont have enough domestic consumption to sustain the drop in exports.
These are my personal views on what will happen in the next 6 months :
- Obama will introduce a huge tax incentive for companies to bring jobs back to the US. This may lead to business investment in Asia flowing back to US (especially outsourcing jobs in manufacturing)
- we could see commodity prices stay range from here (especially energy related commodities - oil and so on) as business activity continues to slow. BUT i believe soft commodities - food related commodities will start to rise over the next two years. This is hard to predict but once the shocks of financial meltdown is overcome, people will resume their eating habits. They may not travel so much or buy watches or expensive shoes but they will resume their normal eating habits
- default rates globally is still gonna rise especially among smaller companies and Malaysia is no exception
- our currency is gonna continue to weaken (again here we could see a time when the USD cracks and MYR will appreciate fast) but i think this will be temporary. Our fortunes are oo closely linked to the US and Europe who are still our biggest buyers of our exports.
- alternative energy will be a big global industry in time to come
- our leaders need to stop telling us everything is ok. The limo driver who makes his living ferrying passengers from KLIA to hotels will tell you that their business is suffering. Private drivers who pay 5 to 6k for limo permits will tell you that in the last 6 months, at least 40% of them are now driving taxis as well as they cant make ends meet. Crime would not be so high if all was good.
- they need to boost consumption now and not wait for the economy to slide. Cut personal taxes, drop EPF savings rate to 6% but maintain employers min contribution
- stop spending money building houses or buildings nobody wants. Decide now that Malaysia has to be self sufficient in terms of food production and boost net exports of soft commodities. Spend the money rebuilding our Agriculture business with tax incentives
- make each state accountable for growing specific objectives - improving infrastructure, rebuilding their agriculture business
- start a forum with banking leaders and look to restructure all loans that are due in the next two years for our Malaysian companies. DO not wait for defaults to accelerate.
- issue tax free bonds to any Malaysian or corporation to fund the fiscal packages (the spending in agriculture)
- issue a one off waiver in 2009, that any profits from overseas repatriated to Malaysia in 2009 is tax exempt
- Allow individuals a tax free year
We all know that a huge chunk of Malaysia's wealth is abroad. There is a real need to bring that wealth back into Malaysia. To do this, we need to restore faith that our leaders are really serving us and not their own needs.
I would say WE will turn the corner when we see one or all the measures above implemented. Unfortunately i see none.
For individuals i think at the end of the day, they will spend/invest when they feel secure in their jobs and in the leadership of the country. SO the question to answer - "do you feel secure in your job and do we have faith in our leaders"
d.
Tuesday, November 25, 2008
The Pain is Shared (or will be)
http://www.youtube.com/watch?v=N-qQDG0ChAY
i can see the points he makes. BUT, its scary to see so much pain and this pain is being felt the worst by the working class.
and again, the only clarity i get is - ensure you have excess resources/liquidity to take you through 2009 and maybe even 2010.
Everything is connected.
A worker in a firm that supplies grills to General Motors loses his job along with another 1000 workers. He has tremendous amount of credit that he cannot pay without his job. He defaults on his loans. The banks take his house and car. The bank freezes all credit in that town.
The worker now stops spending and consuming along with another 1000 families. Assuming that each of these 1000 workers have 4 friends who feel their pain and immediately change their consumption habits. Thats 4000. If those 4000 have another 4 friends, thats 16000. At the next level 96000 stop spending. And this continues. Now imagine if 10000 people have lost jobs or even 100000....the change in spending habits will be huge.
As America stops consuming (the biggest consumers in the world) all the countries that are dependent on exports to US (or even Europe) will suffer major drops in trade income. Malaysia is no exception.
Again i am no economist but look at our reserves as our savings account. As we export more than we import, we make excess income which we place in savings. When foreigners buy more than they sell of our shares/bonds, we have money flowing into our savings (these are called Portfolio Funds). When foreigners invest in our country to build factories and call centers, money flows in (FDI - foreign direct investments). So what happens when US is now worried about jobs in their country.
Firstly, let me say i am a fan of Obama. BUT, Obama's priority will be to help Americans first and not the world. So say, he announces that any company that sets up factories in America will be granted a 5yr tax holiday (sound familiar...this is exactly what Malaysia and other Asian countries did to push FDI). So a company that runs a factory in Malaysia decides to close the factory in Malaysia and opens in America. FDI not only stagnates in Malaysia, it may actually flow out.
As this happens, portfolio funds who are opportunistic see this as economically negative for Malaysia, they will choose to exit the country. They will sell our shares and our bonds and sell our currency. This leads to massive wealth destruction in our country. On top of that, our currency now gets weaker (this may help initially as our exports become more attractive BUT if the world continues to slow), our weak currency will force imports up and this may lead to rising costs in our living expenses.
Our reserves (savings) will fall dramatically while US corrects itself.
The more i see and read, the more i am convinced we are entering a period of great rebalancing. Destruction before creation. The pain is yet to come for a lot of us but if you look around, you will see the pain being felt already among the lower income groups.
So get your reserves to carry you through 2009 on the assumption that you lose your job and you cannot find another. As you continue working, build on those reserves. If i am right, this could be the best advice you ever receive. If i am wrong (which i hope i am), you will have accumulated some fine reserves to buy a new property, or a car you like or even take your family for a grand holiday.
In my world, this is a limited downside trade with a greater upside. I would rate it a 10 to 1 trade and at those odds....why would you not do it?
i can see the points he makes. BUT, its scary to see so much pain and this pain is being felt the worst by the working class.
and again, the only clarity i get is - ensure you have excess resources/liquidity to take you through 2009 and maybe even 2010.
Everything is connected.
A worker in a firm that supplies grills to General Motors loses his job along with another 1000 workers. He has tremendous amount of credit that he cannot pay without his job. He defaults on his loans. The banks take his house and car. The bank freezes all credit in that town.
The worker now stops spending and consuming along with another 1000 families. Assuming that each of these 1000 workers have 4 friends who feel their pain and immediately change their consumption habits. Thats 4000. If those 4000 have another 4 friends, thats 16000. At the next level 96000 stop spending. And this continues. Now imagine if 10000 people have lost jobs or even 100000....the change in spending habits will be huge.
As America stops consuming (the biggest consumers in the world) all the countries that are dependent on exports to US (or even Europe) will suffer major drops in trade income. Malaysia is no exception.
Again i am no economist but look at our reserves as our savings account. As we export more than we import, we make excess income which we place in savings. When foreigners buy more than they sell of our shares/bonds, we have money flowing into our savings (these are called Portfolio Funds). When foreigners invest in our country to build factories and call centers, money flows in (FDI - foreign direct investments). So what happens when US is now worried about jobs in their country.
Firstly, let me say i am a fan of Obama. BUT, Obama's priority will be to help Americans first and not the world. So say, he announces that any company that sets up factories in America will be granted a 5yr tax holiday (sound familiar...this is exactly what Malaysia and other Asian countries did to push FDI). So a company that runs a factory in Malaysia decides to close the factory in Malaysia and opens in America. FDI not only stagnates in Malaysia, it may actually flow out.
As this happens, portfolio funds who are opportunistic see this as economically negative for Malaysia, they will choose to exit the country. They will sell our shares and our bonds and sell our currency. This leads to massive wealth destruction in our country. On top of that, our currency now gets weaker (this may help initially as our exports become more attractive BUT if the world continues to slow), our weak currency will force imports up and this may lead to rising costs in our living expenses.
Our reserves (savings) will fall dramatically while US corrects itself.
The more i see and read, the more i am convinced we are entering a period of great rebalancing. Destruction before creation. The pain is yet to come for a lot of us but if you look around, you will see the pain being felt already among the lower income groups.
So get your reserves to carry you through 2009 on the assumption that you lose your job and you cannot find another. As you continue working, build on those reserves. If i am right, this could be the best advice you ever receive. If i am wrong (which i hope i am), you will have accumulated some fine reserves to buy a new property, or a car you like or even take your family for a grand holiday.
In my world, this is a limited downside trade with a greater upside. I would rate it a 10 to 1 trade and at those odds....why would you not do it?
Citibank & Malaysia - The Good, the Bad and The Ugly
The Good
Firstly i have friends who work in Citibank in both Malaysia and Singapore. Last Friday, it became clear that without the US govt intervention Citibank would have actually faced bankruptcy. The repercussions of that would be endless. And, the impact to Malaysia severe. More to that later. On Monday, plans were announced to assist Citibank. I will not bore you with details but it was a huge package and rightly so Citibank shares rebounded an amazing 50% in one day. The future of the firm is more secure.
But are the jobs at citibank safe? Will Citibank be lending in Malaysia? Unfortunately, the answers are no for both.
The Bad
Let's start with the most obvious. Job cuts.
Now if you are thinking that my job is far removed from what is going on Citibank, you fail to realise that everything is connected. Again, it is not my intention to be extremely negative (nor do i claim to be an expert on Citi's business) but more to show how bad things can get with the sincere wish and hope that i am wrong.
Apologies (AGAIN) for throwing advice but i cannot stress enough the importance of building your cash reserves now....defer spending until you know you have resources that carry you through 2009. Once you have that, spend/invest knowing you are ready for the downturn. If i am wrong, you just deferred your spending for a few months. If i am right you would have saved yourself and your family a great deal of pain.
peace
ved
Firstly i have friends who work in Citibank in both Malaysia and Singapore. Last Friday, it became clear that without the US govt intervention Citibank would have actually faced bankruptcy. The repercussions of that would be endless. And, the impact to Malaysia severe. More to that later. On Monday, plans were announced to assist Citibank. I will not bore you with details but it was a huge package and rightly so Citibank shares rebounded an amazing 50% in one day. The future of the firm is more secure.
But are the jobs at citibank safe? Will Citibank be lending in Malaysia? Unfortunately, the answers are no for both.
The Bad
Let's start with the most obvious. Job cuts.
- You are an employee of Citibank and you are made redundant. You receive 6 months of compensation. Will you be spending? NO - Bad for Malaysia. Will you be selling assets? YES if you cant afford to pay your mortgage or car loans. This depresses the asset markets and is BAD for the economy as it speeds up the drop in asset prices. Will you accept a lower wage in the next job? Again, depending on how much you have saved, you might do so. This leads to declining wages as employers face slower growth they look to hire less and for the same money they get experienced labour. New graduates will find it harder to find jobs. This is direct contraction in spending with possibilities of forced selling of assets. This is just one person....but what happens with his friends and colleagues.
- Both will also immediately stop spending. This leads to further contraction in spending and investments. Savings, spending and investments are all engines of growth and if people fear for their jobs, they react defensively (a truly understandable reaction). The irony here is that this contracts the overall economy as people stop buying cars, houses. They stop travelling, eating out. Hence the natural individual reaction to be defensive actually accelerates the drop in economic activity. Malaysia (unlike Singapore) has yet to feel this contraction. I hope i am wrong but i sense it is coming and unfortunately i think very few are ready for this.
Now if you are thinking that my job is far removed from what is going on Citibank, you fail to realise that everything is connected. Again, it is not my intention to be extremely negative (nor do i claim to be an expert on Citi's business) but more to show how bad things can get with the sincere wish and hope that i am wrong.
- Citibank has been a lender to many major corporates and also to the SMI (small medium industries) sector. Now Citi NY (the parent and HQ) has just taken capital from the US govt in the form of preference shares. These shares rank ahead of normal shares. So if you own shares, you wont see a penny till the US govt is repaid (pref shares redeemed). The US govt now restricts dividend payments (no payment to shareholders) until the pref shares are redeemed. On top of that the management of Citi is restricted on the amount they can pay themselves ie bonuses and pay packages will be subject to govt overview. So shareholders get nothing and management works with big brother watching. No one is happy. The first goal of the management (and wholly supported by the shareholders) is to repay the US Govt. To do this, they need first to cut costs (job losses, defer capital spending) and to reduce their balance sheets (leverage) to more sustainable levels. Unfortunately, because the US Govt's goal is not only to save the US financial system but also to revive the ailing US economy, Citibank will be restricted from contracting business in US. They will contract business globally. In Malaysia, this means they will not be growing their balance sheet (lending) and they will use any excess capital or profits to send it back to the HQ.
- so now they stop lending to major corporations and to SMIs who need cash. These companies scramble to get funds from other banks. These other banks initially love the new clients and soon reach their maximum lending limits. BUT since acquiring these new clients, they have lent less to their old clients. These older clients need the cash even more urgently. They start paying more and more for their loans and loans become more expensive. BUT, at some point if that credit dries up and their own cash is not sufficient, they face bankruptcy. This leads to even more pain with greater job losses and a spiral forms contracting the economy even further. Malaysia is lucky as we seem to be doing ok but in Korea, Indonesia, China and India - this is happening fast.
- imagine you are a lawyer working for a law firm where 50% of your income comes from legal work generated from Citibank. Within the next few months, you are going to see your income stream dry up. As a partner of the firm you start to worry and push your staff to generate business elsewhere. At some point your margins will erode and soon you will be pushed into negative. You have no choice but to layoff staff.
- you own a restaurant frequented largely by bankers and lawyers who stop coming in regularly. You recently spend a huge amount on renovations and your business drops 30%. Unfortunately, you will cut staff or go bankrupt.
- you own a car dealership and now you find citibank is not granting your clients access to credit and other banks are following as well. Your business falls 50%. You lay off staff.
- and the domino's keep falling
Apologies (AGAIN) for throwing advice but i cannot stress enough the importance of building your cash reserves now....defer spending until you know you have resources that carry you through 2009. Once you have that, spend/invest knowing you are ready for the downturn. If i am wrong, you just deferred your spending for a few months. If i am right you would have saved yourself and your family a great deal of pain.
peace
ved
Thursday, November 20, 2008
Four Bad Bears
key question now...are we heading down or up from here.
i pray up but my gut tells me down.
But if we are going down, i hope its in a slow grind. This accelerated fall is just too painful
Asthmatic Clarity
The last few weeks have been the most stressed periods i have ever faced. My job is both taxing and exciting. Its not a job where you can shut off. As i shower, or ride a taxi or MRT, i am continuosly thinking...what can go wrong...what do i need to do to manage the risk i take on for the bank. Office hours have been hectic and relentless due to market volatility and the shutting of liquidity. As such i used to come in Saturdays for a few hours as well. It has been a great learning curve BUT it drained me.
At the same time, the bank faced bankruptcy at one point. We seemed to have past that corner but we have a long way to go. In the first week of December, the bank will lay off 15% of its staff. I am safe this round. My job continues to grow and my skill set over this last year has been strengthened considerably. BUT, there is no certainty in any job especially in the financial sector.
This year alone i helped my unit make EUR21m (MYR100m). I am very proud of this and in any normal year, my bonus would have given Yaso and me great freedom. But now i am happy to just to keep my job.
I was stressed and drained and felt so dissaponted at the situation. We also need to move house by end this year and we were so looking forward to moving to a bigger place. I worried about doing this in case i lost my job and i worried about whether i could afford Ilyana and Sahana's school fees. Their school fees combines will average 40k sgd a year. I worried about everything and i stopped enjoying work and my energy levels were low even with the girls.
Then two weeks ago i got a viral fever which led to the worst asthma attack of my life. On wednesday i left work as i was breathless and that night i was wheezing badly with bouts of high fever every 4 hours. On thursday i went to see Ajit and for the first time i was given steroid pills. I will never forget that night. I had fever every four hours and i was breathless and wheezing and could not sleep. Usually when i have an attack, sleep is easy as i am so tired just labouring to breathe. But that night, sleep never came. I thought of dad and the pain he went through. I thought of mum and how she was coping now. I thought of Uncle Chandran and Aunty shobana and how they helped. I remembered Aunty Shobana's call and what she told me. But most of all i thought about Yaso and the girls and how lucky i was.
Typical Dev drama - overthinking and overanalysing.
By saturday the steroids were kicking in and i was feeling great. I took Sahana out for a walk in her stroller and as i walked, i realised i had stop worrying. The asthma gave me clarity. Life is messy and there are setbacks but its all worth it when you get the time and choice to enjoy the simple pleasures. I never understood dad and how he always believed "Everything will work out". But now when i think about it dad had it right. Enjoying time with friends. Spending time with his kids. Being proud of us and extending himself and mum to give us the best education he could. Everything did work out.
So now i still have a hectic day and i still go in Saturdays but i also am happy and energised. And today was a good day.
Yaso and i have have put away money for the girls fees already with 2009 and 2010 covered. We are in austerity drive mode and are saving aggressively each month to get at least 1yr of our expenses covered.
We have also made the decision that we are still gonna move to the bigger place and we are gonna enjoy it.
Hell..life is short and EVERYTHING will work out.
At the same time, the bank faced bankruptcy at one point. We seemed to have past that corner but we have a long way to go. In the first week of December, the bank will lay off 15% of its staff. I am safe this round. My job continues to grow and my skill set over this last year has been strengthened considerably. BUT, there is no certainty in any job especially in the financial sector.
This year alone i helped my unit make EUR21m (MYR100m). I am very proud of this and in any normal year, my bonus would have given Yaso and me great freedom. But now i am happy to just to keep my job.
I was stressed and drained and felt so dissaponted at the situation. We also need to move house by end this year and we were so looking forward to moving to a bigger place. I worried about doing this in case i lost my job and i worried about whether i could afford Ilyana and Sahana's school fees. Their school fees combines will average 40k sgd a year. I worried about everything and i stopped enjoying work and my energy levels were low even with the girls.
Then two weeks ago i got a viral fever which led to the worst asthma attack of my life. On wednesday i left work as i was breathless and that night i was wheezing badly with bouts of high fever every 4 hours. On thursday i went to see Ajit and for the first time i was given steroid pills. I will never forget that night. I had fever every four hours and i was breathless and wheezing and could not sleep. Usually when i have an attack, sleep is easy as i am so tired just labouring to breathe. But that night, sleep never came. I thought of dad and the pain he went through. I thought of mum and how she was coping now. I thought of Uncle Chandran and Aunty shobana and how they helped. I remembered Aunty Shobana's call and what she told me. But most of all i thought about Yaso and the girls and how lucky i was.
Typical Dev drama - overthinking and overanalysing.
By saturday the steroids were kicking in and i was feeling great. I took Sahana out for a walk in her stroller and as i walked, i realised i had stop worrying. The asthma gave me clarity. Life is messy and there are setbacks but its all worth it when you get the time and choice to enjoy the simple pleasures. I never understood dad and how he always believed "Everything will work out". But now when i think about it dad had it right. Enjoying time with friends. Spending time with his kids. Being proud of us and extending himself and mum to give us the best education he could. Everything did work out.
So now i still have a hectic day and i still go in Saturdays but i also am happy and energised. And today was a good day.
Yaso and i have have put away money for the girls fees already with 2009 and 2010 covered. We are in austerity drive mode and are saving aggressively each month to get at least 1yr of our expenses covered.
We have also made the decision that we are still gonna move to the bigger place and we are gonna enjoy it.
Hell..life is short and EVERYTHING will work out.
Tuesday, November 18, 2008
Crisis - Lawyers, Rentals and the Vicious Circle
Someone once asked me recently how does the global crisis impact Malaysia. We dont have a subprime problem. We have oil. Why should Malaysia be impacted?
The one thing i have learnt in the last year - everything is connected. I wont talk about slowing exports, drop in oil prices, portfolio funds exiting, the non existent Foreign Direct Investment. All these will impact Malaysia negatively even if our leaders refuse to acknowledge these problems.
I want to show how the world is linked in the most surprising and simple ways.
This is a true conversation and a true story (or at least some parts). Names have been changed of course.
Nick Cheah is a 28 year old Malaysian lawyer. He recently got married to the beautiful Jane Wong who worked for a local investment bank in KL. At their wedding, bathroom conversations revolved around the question - WHY did she marry him? She was too nice for him. She was beautiful and some referred to her as the Baywatch banker for obvious reasons.
A few months after their marriage, Nick got a call from a head hunter who told him that Allen & Payne (a well respected New York law firm) was setting up offices in Singapore. Nick was thrilled. He was flown down to Singapore where he had lunch with Mr Allen himself and the local head, one Ellen Chen, a 37 year old unmarried and stunningly sexy lady with 3 inch heels.
Nick got the job. His wife Jane applied to Citibank Singapore and immediately got the job with minimal effort. They were ecstatic as they were gonna be paid 1.5x what they were earning and more so, it would be in SGD.
Life looked amazing and they decide to stay in the swanky waterside apartments. They decided to pay 7k for a 2000 sq ft apartment. Nick was amazed at how cheap cars were and immediately bot a 3 series BM for 100k sgd. Jane tried convincing Nick to ease off on the spending but Nick felt he needed to keep up appearances at his posh office where a Toyota was the security guards car.
This was Nov 2007.
Now its Nov 2008.
For the last year Nick has been involved in cross border legal work. His primary function is to act as external legal counsel for financial institutions. He had three big clients - StanChart, CSFB and Lehman Brothers. He uses his expense account liberally.
In June, his bosses were pleased with the revenues that Nick had generated and there was talk of him being promoted as he had consistently hit his numbers. He actually exceeded it. But Nick in September was noticing that deals were starting to dry up. Then Lehman went bankrupt and Nick realised that he had outstanding invoices for legal work for the last 6 months. He reported this to his bosses who were less than pleased.
Then OCTOBER came and Nick suddenly got calls from StanChart and CSFB that they were freezing all loan and trading businesses. Nick tried to get as much as his invoices out but StanChart told him that they cant pay the invoices as they need to bill their loan clients who now refuse to pay.
Nick's revenue numbers drop 90% in less than two months. Ellen gets a call not only from Mr Allen but also Mr Payne. They say to Ellen you better be self sustaining or we are shutting you down.
NOVEMBER comes and Ellen has no choice but warns her people that they will be downsizing. Nick is depressed and comes home Nov 18th and finds Jane his wife crying. She works at Citibank and it has just been announced that globally they are firing 52,000 people. Jane has been warned that she will lose her job.
Nick immediately tries to break his lease on his apartment and tries to sell his car. His landlord tells him you will have to pay penalties and his car has dropped in value and cannot cover his outstanding loan.
They both lose their job and have combined 6 mths reserve from their retrenchment. Thankfully Nick finds a job at a local law firm which pays him half his previous salary. Jane cant find a job as all banks have frozen hiring.
They wait till their lease is up and immediately move to 1200 sq feet apartment where they pay rental 3k. They keep the car because the loss on the loan is too big. BUT, they now SAVE and not spend.
>>>>
The above is a story that fictional (to a certain degree) is unfortunately happening. In some cases the Nicks are not finding new jobs. Everything is linked. The reason things are getting so bad is that CREDIT (the money banks lend is freezing).
BANK loses money, they freeze lending. The lawyer who was dependent on the income from banks loses his job security. HE stops spending and rents at a cheaper place. His previous landlord now has to rent at a discount to his loan payments. He stops spending. Sales in stores drop. The salespeople there get laid off. They stop spending. This is the VICIOUS circle and it is happening globally.
What needs to be done?
Rectify the bank's problem as the banks need to perform its function of allocating capital to business and individuals. If the banks cant do it, then alternative forms of financing is needed. One way is to allow greater access for cooperatives to be set up. This is a group of people coming together and pooling capital to grant loans to their members. Currently this is very restrictive.
There are numerous Nick and Jane stories going around. Here's hoping our leaders can understand their pain (although they did deserve some of it) and they really believe that their role is not to serve themselves but to protect Nick and Jane.
The one thing i have learnt in the last year - everything is connected. I wont talk about slowing exports, drop in oil prices, portfolio funds exiting, the non existent Foreign Direct Investment. All these will impact Malaysia negatively even if our leaders refuse to acknowledge these problems.
I want to show how the world is linked in the most surprising and simple ways.
This is a true conversation and a true story (or at least some parts). Names have been changed of course.
Nick Cheah is a 28 year old Malaysian lawyer. He recently got married to the beautiful Jane Wong who worked for a local investment bank in KL. At their wedding, bathroom conversations revolved around the question - WHY did she marry him? She was too nice for him. She was beautiful and some referred to her as the Baywatch banker for obvious reasons.
A few months after their marriage, Nick got a call from a head hunter who told him that Allen & Payne (a well respected New York law firm) was setting up offices in Singapore. Nick was thrilled. He was flown down to Singapore where he had lunch with Mr Allen himself and the local head, one Ellen Chen, a 37 year old unmarried and stunningly sexy lady with 3 inch heels.
Nick got the job. His wife Jane applied to Citibank Singapore and immediately got the job with minimal effort. They were ecstatic as they were gonna be paid 1.5x what they were earning and more so, it would be in SGD.
Life looked amazing and they decide to stay in the swanky waterside apartments. They decided to pay 7k for a 2000 sq ft apartment. Nick was amazed at how cheap cars were and immediately bot a 3 series BM for 100k sgd. Jane tried convincing Nick to ease off on the spending but Nick felt he needed to keep up appearances at his posh office where a Toyota was the security guards car.
This was Nov 2007.
Now its Nov 2008.
For the last year Nick has been involved in cross border legal work. His primary function is to act as external legal counsel for financial institutions. He had three big clients - StanChart, CSFB and Lehman Brothers. He uses his expense account liberally.
In June, his bosses were pleased with the revenues that Nick had generated and there was talk of him being promoted as he had consistently hit his numbers. He actually exceeded it. But Nick in September was noticing that deals were starting to dry up. Then Lehman went bankrupt and Nick realised that he had outstanding invoices for legal work for the last 6 months. He reported this to his bosses who were less than pleased.
Then OCTOBER came and Nick suddenly got calls from StanChart and CSFB that they were freezing all loan and trading businesses. Nick tried to get as much as his invoices out but StanChart told him that they cant pay the invoices as they need to bill their loan clients who now refuse to pay.
Nick's revenue numbers drop 90% in less than two months. Ellen gets a call not only from Mr Allen but also Mr Payne. They say to Ellen you better be self sustaining or we are shutting you down.
NOVEMBER comes and Ellen has no choice but warns her people that they will be downsizing. Nick is depressed and comes home Nov 18th and finds Jane his wife crying. She works at Citibank and it has just been announced that globally they are firing 52,000 people. Jane has been warned that she will lose her job.
Nick immediately tries to break his lease on his apartment and tries to sell his car. His landlord tells him you will have to pay penalties and his car has dropped in value and cannot cover his outstanding loan.
They both lose their job and have combined 6 mths reserve from their retrenchment. Thankfully Nick finds a job at a local law firm which pays him half his previous salary. Jane cant find a job as all banks have frozen hiring.
They wait till their lease is up and immediately move to 1200 sq feet apartment where they pay rental 3k. They keep the car because the loss on the loan is too big. BUT, they now SAVE and not spend.
>>>>
The above is a story that fictional (to a certain degree) is unfortunately happening. In some cases the Nicks are not finding new jobs. Everything is linked. The reason things are getting so bad is that CREDIT (the money banks lend is freezing).
BANK loses money, they freeze lending. The lawyer who was dependent on the income from banks loses his job security. HE stops spending and rents at a cheaper place. His previous landlord now has to rent at a discount to his loan payments. He stops spending. Sales in stores drop. The salespeople there get laid off. They stop spending. This is the VICIOUS circle and it is happening globally.
What needs to be done?
Rectify the bank's problem as the banks need to perform its function of allocating capital to business and individuals. If the banks cant do it, then alternative forms of financing is needed. One way is to allow greater access for cooperatives to be set up. This is a group of people coming together and pooling capital to grant loans to their members. Currently this is very restrictive.
There are numerous Nick and Jane stories going around. Here's hoping our leaders can understand their pain (although they did deserve some of it) and they really believe that their role is not to serve themselves but to protect Nick and Jane.
Saturday, November 15, 2008
What do i do?
i am a Asian Local Markets Trader
Contrary to popular belief - i do not use other people's money to invest and then skim off the top.
My role is to facilitate the flow of funds to the most dynamic and growing country in the Asian region. I create and maintain the process and access required for investment funds to flow freely into these countries.
I use the bank's capital to create that access and push investment monies into this countries when opportunities arise. At the same time, we provide that same access when capital is repatriated.
To ensure efficiency and to continue growing that access, my business is continuosly assessed on the returns we make against the capital allocated.
I feel that the bigger purpose of what i do is ensuring that countries with the greatest potential receive the greatest funds to grow and to prosper. In the last 10 years, i think Asia's growth has been fueled by this huge amount of capital that has flowed in. My buisness helped that growth.
Unfortunately, my role is a two way bridge. We provide access when opportunities arise BUT we continue to provide that access when capital leaves. Hence the poor reputation we get.
As we go into the hardest year the world is about to face...it is my greatest hope that my business continues to grow. If it grows, it means globalisation continues and Asia grows to the potential it is meant to grow to - a global power with prosperity continuing to spread along every country is Asia.
here's hoping for the best.
ved
Contrary to popular belief - i do not use other people's money to invest and then skim off the top.
My role is to facilitate the flow of funds to the most dynamic and growing country in the Asian region. I create and maintain the process and access required for investment funds to flow freely into these countries.
I use the bank's capital to create that access and push investment monies into this countries when opportunities arise. At the same time, we provide that same access when capital is repatriated.
To ensure efficiency and to continue growing that access, my business is continuosly assessed on the returns we make against the capital allocated.
I feel that the bigger purpose of what i do is ensuring that countries with the greatest potential receive the greatest funds to grow and to prosper. In the last 10 years, i think Asia's growth has been fueled by this huge amount of capital that has flowed in. My buisness helped that growth.
Unfortunately, my role is a two way bridge. We provide access when opportunities arise BUT we continue to provide that access when capital leaves. Hence the poor reputation we get.
As we go into the hardest year the world is about to face...it is my greatest hope that my business continues to grow. If it grows, it means globalisation continues and Asia grows to the potential it is meant to grow to - a global power with prosperity continuing to spread along every country is Asia.
here's hoping for the best.
ved
Thursday, November 13, 2008
Subprime deconstructed
Leverage -
Lets say you buy a house for 500k, you pay 10% downpayment and you get leverage 450k. So for 50k investment (capital) yo own a 500k (asset). Now we are restricted from using that same asset and pledging it get a new loan (ie, we cant go to another bank and ask for another loan using the same property as collateral). But in most banks, hedge funds - there was no such check.
So fat-greedy-greek-man (als soros) has 100m (capital). He buys an asset (bonds/shares) for 100m. He now takes the asset and pledges it to Bank A for new cash of 100m. Fat-greedy-greek-man now takes the 100m of new cash and buys another 100m of assets. He takes the new assets and pledges it to Bank C for another 100m. So on and so on. He does this 10x. So for 100m capital, the fat-greedy-greeek-man has now a portfolio of 1 billion. So a 10% move in his portfolio gives him a 100% return on his capital. The beauty of leverage.
Now leverage here would have been fine if it was only among the hedge funds...hell fat-greedy-greek-man could go bankrupt for all i care. BUT, banks became greedy.
Greed -
Bank A has a CEO, Mr-Dammit-i-want-to-be-the-fat-greedy-greek-man (Mr Dammit, for short). Mr Dammit says lets grow our hedge fund business (giving liquidity and leverage to hedge funds). This business is given the cool name - Prime Brokerage and it makes tons of money for the bank. Then Mr Dammit's greed twinkles and he says if hedge funds are making so much money, we should start our own hedge fund within the bank. This business is called proprietary trading (the business i am in BUT i manage responsibly, i promise). So Bank A - got 100m of capital from fat-greedy-greek-man, they use this 100m and lend the asset to bank b for new cash 100m, buys new asset and pledges again and again. He makes tremendous profits and Mr Dammit is happy as he is now making as much as fat-greedy-greek-man. Bank B CEO, Mr I-Cant-be-a-Loser (Mr Loser for short) sees Mr Dammit making so much and says....i wanna be like Mr Dammit. So Mr Loser uses the 100m tat Mr Dammit gave him and borrows money from Bank C, buys new asset, pledges and borrows more. He aslso does this 10x. You get the picture....
So if fat-greedy-greek-man leveraged 10x on his 100m, he has a 1billion portfolio. And if all the banks he borrowed from leveraged 10x as well, we now have 10 billion portfolio at stake. 100m has now become 10 billion.
That was the story of leverage which then led to the story of the CDO?
A CDO is a collateralised debt obligation - fancy words that just means that it is a portfolio of assets that have underlying collateral. The easiest and oldest loan in the bank's books is property loans to retail clients. In the old days, Citibank would underwrite a loan and do a proper due dilligence on the asset value, the ability of the borrower to repay his loan and the legality of his ownership (title and so on). But we are in the world of financial engineering and as we get more sophisticated, more risk/leverage is needed to make the same returns - hence the Subprime CDO was born. Subprime is a loan term to lending to the financially distressed and poor. It is the most risky retail lending that can be done.
The story of the Subprime CDO?
LeRoy Johnson is sitting on his crack-head girlfriend's porch drinking a bottle of 4D. A man, John Smith, who is a real estate broker comes up and says politely, "Sir, if you dont me asking, how much rent you paying on this house?". LeRoy says 300 bucks a month. John Smith tells him "I got a wonderful deal for you". For 250 a month, and no downpayment plus a 5000 upfront bonus, you can own this house. He pulls out a paper and tells, LeRoy sign here. Then tells LeRoy, round up your ho's and homies, they can get the same deal. John Smith, rounds up 100 borrowers who all sign for house loans worth 200k each telling them the bonus will be on the way. He now has a portfolio of USD20m.LeRoy just got paid 5k to borrow money for a house he does not even know. John Smith does not check the ASSET VALUE, the BORROWER's ABILITY TO PAY nor does he perform LEGAL DUE DILLIGENCE.
John Smith now takes his 20m portfolio and goes and has dinner with Jacky Lee. Jacky Lee is a beautiful Chinese American mortgage sales Manager at Shittibank. She is in a frustrating marriage and loves to have dinner with John Smith. Jacky Lee has also been very stressed at work as she has failed to meet her sales target that month. John Smith calls her and says i got a 20m loan portfolio for you. Jacky Lee is so happy she gets her boss (Shittibank) to agree to pay the 2% brokerage fee to John Smith. So John Smith sends her the forms and 2 weeks later he gets his check of USD400k (2% fees) in the mail. He calls and after a night at the motel with champagne and nudity, he tells Jackie Lee "See you next month" and Jackie dreamily replies "Be Looking forward to it".
Jackie Lee, the following Monday, compiles the 20m loan portfolio in a nice tidy package with a Citibank stamp and calls Amanda Stevens, her friend from their college sororiety days who now works at GOLDIE SAX as an investment banker. She tells Amanda she has got a new loan portfolio to sell to Goldie Sax. Amanda is thrilled and says lets meet. So after a night at the motel of whipped cream with strawberries and nudity, Jackie Lee says "See you next month" and Amanda dreamily replies "Be Looking forward to it:".
Jackie Lee does not check ASSET VALUES, the BORROWER's Ability to PAY nor does he perform LEGAL DUE DILLIGENCE. Jackie lee becomes a top performer in Shittibank and is given a huge pay rise and a 1yr bonus payment.
Amanda now has 20m of Shittibank's loans and she add this to a pool of 180m of other subprime assets. She now has a nice portfolio of 200m to sell. So she does financial engineering and places the 200m in a CDO portfolio and splits the asset into 3 tranches. She calls a big meeting at Aspen for her insurance clients and there she gets the rating agency to confirm that tranche 1 is a beautiful risk free AAA asset. The rating agency makes this claim citing Amanda's brilliance by making tranche 1 super senior to the other trances. This means, that tranche 1 will only lose money if more than 40% of the borrowers default. But the rating agency tells the insurance companies "Dont worry though, based on our superior models, default rates have never been more than 8% per year, hence our confidence in giving Tranche 1 the AAA rating. The insurers all clap and sign up (especially as they want to be invited to Aspen the next year).
Amanda, the Rating Agency and the insurers do not check ASSET VALUES, ABILITY TO PAY and no LEGAL DUE DILLIGENCE is performed.
Amanda then calls a meeting in Paris for all her asset management clients and the same Rating Agency guy tells the asset management company, Tranche 2 is rated AA1 (one notch lower than our AAA rating) and you will only lose money if more than 15% of the underlying borrowers default. But dont worry, based on our superior models, default rates have never exceeded 8%. Everyone stands and claps and signs up as they love the Paris meetings.
Amanda, Rating agency and Asset Managers do not perform....ASSET.....you get the drill.
Now finally Amanda calls for a meeting in Macao for her hedge fund clients. The rating guy is still around and tells the hedge fund guys, Tranche 3 is fantastic as you are going to be paid 15% to take the riskiest tranche in the whole portfolio but dont worry you only lose money if more than 8% of borrowers default. After a night of champane, cream, strawberries, and nudity, the hedge funds all sign up. Hell, wouldn't you its Macao.
Again not one person has checked ASSET VALUES.....blah blah....by the way Amanda gets a 1m bonus and drives a maserati.
So there you have the story of Leverage and the story of the CDO and when those two worlds collided, we have the Crisis we are now facing - the lack of ACCOUNTABILITY driven by GREED and the ease of LEVERAGE gave rise to 10years of continued growth gloabally and now we will face at least 2 years of hard times.
So where are we now -
Lets say you buy a house for 500k, you pay 10% downpayment and you get leverage 450k. So for 50k investment (capital) yo own a 500k (asset). Now we are restricted from using that same asset and pledging it get a new loan (ie, we cant go to another bank and ask for another loan using the same property as collateral). But in most banks, hedge funds - there was no such check.
So fat-greedy-greek-man (als soros) has 100m (capital). He buys an asset (bonds/shares) for 100m. He now takes the asset and pledges it to Bank A for new cash of 100m. Fat-greedy-greek-man now takes the 100m of new cash and buys another 100m of assets. He takes the new assets and pledges it to Bank C for another 100m. So on and so on. He does this 10x. So for 100m capital, the fat-greedy-greeek-man has now a portfolio of 1 billion. So a 10% move in his portfolio gives him a 100% return on his capital. The beauty of leverage.
Now leverage here would have been fine if it was only among the hedge funds...hell fat-greedy-greek-man could go bankrupt for all i care. BUT, banks became greedy.
Greed -
Bank A has a CEO, Mr-Dammit-i-want-to-be-the-
So if fat-greedy-greek-man leveraged 10x on his 100m, he has a 1billion portfolio. And if all the banks he borrowed from leveraged 10x as well, we now have 10 billion portfolio at stake. 100m has now become 10 billion.
That was the story of leverage which then led to the story of the CDO?
A CDO is a collateralised debt obligation - fancy words that just means that it is a portfolio of assets that have underlying collateral. The easiest and oldest loan in the bank's books is property loans to retail clients. In the old days, Citibank would underwrite a loan and do a proper due dilligence on the asset value, the ability of the borrower to repay his loan and the legality of his ownership (title and so on). But we are in the world of financial engineering and as we get more sophisticated, more risk/leverage is needed to make the same returns - hence the Subprime CDO was born. Subprime is a loan term to lending to the financially distressed and poor. It is the most risky retail lending that can be done.
The story of the Subprime CDO?
LeRoy Johnson is sitting on his crack-head girlfriend's porch drinking a bottle of 4D. A man, John Smith, who is a real estate broker comes up and says politely, "Sir, if you dont me asking, how much rent you paying on this house?". LeRoy says 300 bucks a month. John Smith tells him "I got a wonderful deal for you". For 250 a month, and no downpayment plus a 5000 upfront bonus, you can own this house. He pulls out a paper and tells, LeRoy sign here. Then tells LeRoy, round up your ho's and homies, they can get the same deal. John Smith, rounds up 100 borrowers who all sign for house loans worth 200k each telling them the bonus will be on the way. He now has a portfolio of USD20m.LeRoy just got paid 5k to borrow money for a house he does not even know. John Smith does not check the ASSET VALUE, the BORROWER's ABILITY TO PAY nor does he perform LEGAL DUE DILLIGENCE.
John Smith now takes his 20m portfolio and goes and has dinner with Jacky Lee. Jacky Lee is a beautiful Chinese American mortgage sales Manager at Shittibank. She is in a frustrating marriage and loves to have dinner with John Smith. Jacky Lee has also been very stressed at work as she has failed to meet her sales target that month. John Smith calls her and says i got a 20m loan portfolio for you. Jacky Lee is so happy she gets her boss (Shittibank) to agree to pay the 2% brokerage fee to John Smith. So John Smith sends her the forms and 2 weeks later he gets his check of USD400k (2% fees) in the mail. He calls and after a night at the motel with champagne and nudity, he tells Jackie Lee "See you next month" and Jackie dreamily replies "Be Looking forward to it".
Jackie Lee, the following Monday, compiles the 20m loan portfolio in a nice tidy package with a Citibank stamp and calls Amanda Stevens, her friend from their college sororiety days who now works at GOLDIE SAX as an investment banker. She tells Amanda she has got a new loan portfolio to sell to Goldie Sax. Amanda is thrilled and says lets meet. So after a night at the motel of whipped cream with strawberries and nudity, Jackie Lee says "See you next month" and Amanda dreamily replies "Be Looking forward to it:".
Jackie Lee does not check ASSET VALUES, the BORROWER's Ability to PAY nor does he perform LEGAL DUE DILLIGENCE. Jackie lee becomes a top performer in Shittibank and is given a huge pay rise and a 1yr bonus payment.
Amanda now has 20m of Shittibank's loans and she add this to a pool of 180m of other subprime assets. She now has a nice portfolio of 200m to sell. So she does financial engineering and places the 200m in a CDO portfolio and splits the asset into 3 tranches. She calls a big meeting at Aspen for her insurance clients and there she gets the rating agency to confirm that tranche 1 is a beautiful risk free AAA asset. The rating agency makes this claim citing Amanda's brilliance by making tranche 1 super senior to the other trances. This means, that tranche 1 will only lose money if more than 40% of the borrowers default. But the rating agency tells the insurance companies "Dont worry though, based on our superior models, default rates have never been more than 8% per year, hence our confidence in giving Tranche 1 the AAA rating. The insurers all clap and sign up (especially as they want to be invited to Aspen the next year).
Amanda, the Rating Agency and the insurers do not check ASSET VALUES, ABILITY TO PAY and no LEGAL DUE DILLIGENCE is performed.
Amanda then calls a meeting in Paris for all her asset management clients and the same Rating Agency guy tells the asset management company, Tranche 2 is rated AA1 (one notch lower than our AAA rating) and you will only lose money if more than 15% of the underlying borrowers default. But dont worry, based on our superior models, default rates have never exceeded 8%. Everyone stands and claps and signs up as they love the Paris meetings.
Amanda, Rating agency and Asset Managers do not perform....ASSET.....you get the drill.
Now finally Amanda calls for a meeting in Macao for her hedge fund clients. The rating guy is still around and tells the hedge fund guys, Tranche 3 is fantastic as you are going to be paid 15% to take the riskiest tranche in the whole portfolio but dont worry you only lose money if more than 8% of borrowers default. After a night of champane, cream, strawberries, and nudity, the hedge funds all sign up. Hell, wouldn't you its Macao.
Again not one person has checked ASSET VALUES.....blah blah....by the way Amanda gets a 1m bonus and drives a maserati.
So there you have the story of Leverage and the story of the CDO and when those two worlds collided, we have the Crisis we are now facing - the lack of ACCOUNTABILITY driven by GREED and the ease of LEVERAGE gave rise to 10years of continued growth gloabally and now we will face at least 2 years of hard times.
So where are we now -
- LeRoy got shot in a drive by and is now claiming Medicare and has stopped paying for his crack-head girlfriend house.
- His crack-head girlfriend is now thrown out of her house
- LeRoy's ho's and homies are all in the same boat
- John Smith used his collected fees and bought a ranch and fishes regularly
- Jackie Lee has been fired from Shittibank as her last portfolio of 100m subprime loans went bad and she could not sell it to Amanda. She does not talk to Amanda anymore and has lost contact with John Smith.
- Amanda met John Smith after being fired in a downsizing from Goldie Sax. She runs the ranch with John Smith.
- The rating agency guy is waiting to see whether all rating agencies will be regulated and he may lose his job plus may be charged in court
- The insurance companies are losing tons of monies on these structures and know that its gonna be a long time before they go to Aspen again
- The asset managers will soon see massive outflow of funds
- 60% of hedge funds will lose their clients and business. The balance 40% will become even stronger and rule the financial world
- MR Dammit has been fired
- Mr Loser is waiting to be fired
- Fat-greedy-greek-man writes a book, supports presidents and is a regular on talk shows. He has 70% of his money in cash. He is smiling
Malaysia Impact Part 1
The question -
Is malaysia safe from the global crisis?
The answer -
Yes if steps are taken now and we acknowledge the problems and not hide
behind a false sense of security.
To answer the above I will try to show how we are linked using a few
examples. My first example involves citibank.
Citibank globally lost billions of usd on subprime losses. Now they are
forced to reduce assets globally to stay afloat. The first thing they will
do is restrict lending, secondly they will look to pull as much available
capital back to their head office and finally if all else fails - they will
sell assets.
So in malaysia, citi mala
Is malaysia safe from the global crisis?
The answer -
Yes if steps are taken now and we acknowledge the problems and not hide
behind a false sense of security.
To answer the above I will try to show how we are linked using a few
examples. My first example involves citibank.
Citibank globally lost billions of usd on subprime losses. Now they are
forced to reduce assets globally to stay afloat. The first thing they will
do is restrict lending, secondly they will look to pull as much available
capital back to their head office and finally if all else fails - they will
sell assets.
So in malaysia, citi mala
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