Ved's Blog

Banker Depressed

2011-11-22T23:15:00.000-08:00

An article from Bloomberg that was depressing. See not all bankers are living large....

Nov. 22 (Bloomberg) -- John Brady, co-head of MF Global Inc.’s Chicago office, was having a vodka cocktail at the Ritz- Carlton in Naples, Florida, overlooking the Gulf of Mexico, on the day his company reported its largest-ever quarterly loss.
"Wow, the sun just set," Brady said to his wife and two colleagues attending a conference with him, he recalled in an interview. "I hope it doesn’t set on MF Global."
A week later, on Oct. 31, the firm led by former Goldman Sachs Group Inc. co-Chief Executive Officer Jon Corzine collapsed. Brady and 1,065 colleagues joined a wave of firings that has washed away more than 200,000 jobs in the global financial-services industry this year, eclipsing 174,000 in 2009, data compiled by Bloomberg show. BNP Paribas SA and UniCredit SpA announced cuts last week, and the carnage likely will worsen as Europe’s sovereign-debt crisis roils markets.
"This is something very different," said Huw Jenkins, a former head of investment banking at UBS AG who’s now a London- based managing partner at Brazil’s Banco BTG Pactual SA. "This is a structural change. The industry is shrinking."
Wall Street rebounded from the financial crisis of 2008 with the help of unprecedented government support, including loans from the U.S. Federal Reserve. Goldman Sachs posted record profit the following year, and bonuses paid to securities-firm employees in New York City rose 17 percent to $20.3 billion, according to New York State Comptroller Thomas DiNapoli.
‘Nothing There’
Now, faced with higher capital requirements, the failure of exotic financial products and diminished proprietary trading, the industry is undergoing what Steven Eckhaus, chairman of the executive-employment practice at Katten Muchin Rosenman LLP, called "a paradigm shift." The New York attorney, whose clients have included former Lehman Brothers Holdings Inc. Chief Financial Officer Erin Callan, said he has stopped giving his "spiel" about inherent talent leading to new work.
In interviews, a dozen people who have lost jobs at firms including Societe Generale SA, Royal Bank of Scotland Group Plc and Jefferies Group Inc. described a grim banking landscape that also includes Occupy Wall Street protests against unemployment stuck above 9 percent and income inequality.
"These are by far my darkest days," said Scott Schubert, 49, who was dismissed in late 2008 as a mergers-and-acquisitions banker at Jefferies, a New York-based securities firm, and has been unemployed since. "It’s harder and harder to look for a job and feel that there’s nothing there."
HSBC, BNP Paribas
Banks, insurers and asset managers in Western Europe have been hardest hit, announcing about 105,000 dismissals this year,
66 percent more than the region’s losses in 2008 at the depths of the financial crisis, Bloomberg data show. The 50,000 job cuts in North America this year are more than twice last year’s and fewer than the 175,000 in 2008.
Almost every week since August has brought news of firings by the world’s biggest banks. HSBC Holdings Plc, Europe’s biggest lender, announced that month it would slash 30,000 jobs by the end of 2013. In September, Bank of America Corp., the second-largest U.S. lender, said it would cut the same number of jobs. Both banks are trimming about 10 percent of their employees. Last week, BNP Paribas, France’s largest bank, said it will cut about 1,400 jobs at its corporate and investment- banking unit, and UniCredit, Italy’s biggest, said it plans to eliminate 6,150 positions by 2015.
"It’s a once-in-a-generation challenge," said John Purcell, founder of London-based executive search firm Purcell & Co. "Everyone who has worked in the City since 1985 will have no idea of how to cope with this level of dislocation."
Panic Attacks
Neil Brener, a psychiatrist whose patients work in London’s City and Canary Wharf financial districts said the stress is contributing to panic attacks, binge drinking and chest pains.
"Because there are fewer jobs, people are unhappy about being stuck," Brener said. "They don’t have options about moving, and there is a sense of feeling trapped."
London hiring could be frozen next year, according to the Centre for Economics and Business Research Ltd. Headcount in the City and Canary Wharf may fall to 288,225 by the end of the year, 27,000 fewer than in 2010 and the lowest since at least 1998, when there were 289,666 jobs, according to the London- based research firm.
Wall Street won’t regain its lost jobs "until about 2023," Marisa Di Natale, an economist at Moody’s Analytics in West Chester, Pennsylvania, said in an e-mail.
Second Time
That’s not encouraging for Michael Reiner, 44, who lost his job in June as a credit strategist in New York for Societe Generale, France’s second-largest bank, whose shares are down 60 percent this year. When he called his wife to tell her the news, she was home watching "The Company Men," a film about corporate downsizing, he said.
It wasn’t the first time Reiner had lost a job on Wall Street. He worked at Bear Stearns Cos. for 14 years until the firm collapsed in March 2008 and was taken over in a fire sale by JPMorgan Chase & Co. He said he was happy to have some time off with his family and go to Little League baseball games.
When he began looking for a job, he "wanted to find a place for the next 14 years," he said. A recruiter brought him to Paris-based Societe Generale. It didn’t last that long.
It’s harder to talk about losing a job the second time, Reiner said. "There are a lot of people I haven’t told."
Opportunities for employment "evaporated" as the European debt crisis escalated, he said. Now he spends his time going to his daughter’s field hockey games and managing his investments.
He’s planning to make maple syrup from the trees in the backyard of his home in Briarcliff Manor, New York.
‘Fruitless’ Search
For Schubert, the former Jefferies banker in his third year looking for work, the longer he’s out of a job, the harder it is for him to tell his 10-year-old son to do his homework, he said.
"It might seem outwardly to him that I’ve given up," he said in an interview this month from his four-bedroom home in Glen Ridge, New Jersey. "I can’t come to the table and say, ‘Well, when you were five, I worked nonstop.’"
Schubert, who received a master’s degree in business administration from New York University in 1989 and was a managing director specializing in middle-market M&A deals at Jefferies, said he wasn’t surprised when he lost his job in 2008 during the financial crisis. He thought unemployment would last
12 months at most.
"The first year out was fruitless," he said. "There wasn’t much hiring going on at all."
By the middle of 2010, more potential employers seemed interested, and he felt "something was imminent," he said.
Nothing happened.
This year, he has become increasingly disheartened by bad news on Wall Street, and it’s more difficult to stay in touch with former colleagues as time goes by, he said.
Hurricane Irene
On the August weekend of Hurricane Irene, training to coach his son’s soccer team alongside younger fathers, being "overly competitive for a man of my age," Schubert twisted his right knee, he said. He aggravated the injury doing yard work and worries how much his health insurance will help, he said.
While his investment choices haven’t been "too terrible,"
he will consider selling his house if he doesn’t find a job.
"God, I hope it’s in the next six months," he said.
Hetal Patel, 44, a foreign-exchange trader who worked at London-based Lloyds Banking Group Plc for more than 20 years until last month, said he doesn’t plan to look for work until early next year, "when budgets become clearer and perhaps conditions improve."
Shares of his former company, controlled by the British government since a bailout in 2008, have fallen 64 percent this year, and the bank has posted a pretax loss of 3.86 billion pounds ($6 billion) in the first nine months. It announced 15,000 job cuts in June.
RBS Cuts
Another lender backed by the U.K., Edinburgh-based RBS, has announced about 30,000 job cuts, including 2,000 this year, since receiving the world’s biggest government bailout in 2008.
Its shares are down 50 percent in 2011, and CEO Stephen Hester said Nov. 4 the investment bank "will have to shrink further."
Tim Leary, 29, a director in high-yield and distressed trading, lost his job there on Nov. 7. After he got the news, he called his wife to say he’d see her and their 4-month-old son for breakfast.
He drove back to Manhattan from his office in Stamford, Connecticut, and put together a resume for the first time in years. He said he plans to spend "a fair amount of time figuring out what the landscape is" before starting his search.
Falling Bonuses
"Unfortunately, the industry always seems to get it wrong and they over-hire," said Philip Keevil, 65, a former head of investment banking at S.G. Warburg & Co. and now a partner at New York-based advisory firm Compass Advisers LLP. "They are over-optimistic and then periodically throw large numbers out."
Morale on Wall Street and London is "probably as bad, if not worse" than it has been in decades, said Keevil.
Wall Street bonuses are expected to fall in 2011 from the $128,530 average last year, DiNapoli, the state comptroller, said in October. Even so, when Goldman Sachs set aside 24 percent less to pay employees in the first nine months than in the same period last year, the amount, $10 billion, was equal to
$292,836 for each of its 34,200 workers as of Sept. 30. That’s nearly six times the median household income in the U.S., where
49.1 million live in poverty, according to Census Bureau data.
Quitting for Quito
Wyatt Laikind, 26, made three times as much in his first year out of college working at Citigroup Inc. as his single mother earned when he was growing up in western Massachusetts.
"It was like winning the lottery to get that job," said Laikind, who worked as an associate on the New York-based bank’s high-yield credit-trading desk.
He got a job on Wall Street because he "was under the impression that it was a more meritocratic environment," and "my hard work and intelligence would be paid off," he said.
At first, he liked the excitement, he said. Then, after financial regulations curtailed proprietary trading, the job became "less appealing." He said he didn’t like smiling at clients while having to figure out how to profit from them.
In July, after a vacation, he called his boss to quit, he said in an interview from Quito, Ecuador, where he is now working for Equitable Origin LLC, a start-up that offers a certification system for oil exploration. His salary is less than 5 percent of what he made at Citigroup, he lives with intermittent hot water, and he was robbed at knifepoint last month, he said.
"I feel happier on a daily basis," Laikind said.
Sagging Mattress
His tone was different in a later e-mail.
"I wasn’t brought up in luxury, so I like to think I can tough it out," he wrote, describing the sagging mattress he slept on in jeans and a hooded sweatshirt to stay warm. "But I may have to give it up and try going back to finance soon."
If he does, it won’t be easy.
"Until now, at many firms, a lot of investment bankers have been convinced that we are living now in a limited period where things are a bit more difficult and afterwards the old world will come back," Kaspar Villiger, 70, chairman of Zurich- based UBS said in an interview this month. "This illusion has now vanished."
Increased capital requirements agreed to by the Basel Committee on Banking Supervision will limit banks’ use of borrowed funds to boost profit, lower their return on equity and likely reduce executive compensation, analysts say. High leverage "was the juice in the system," said Ilana Weinstein, CEO of New York-based search firm IDW Group LLC. "It’s gone."
Boxer Shorts
For Brady, 42, the vanishing point at MF Global arrived after he returned to Chicago from Florida. He thought the New York-based futures brokerage would "weather the storm," even as Moody’s Investors Service cut its rating and shares plunged, he said. He got word that another company would buy the firm while at a Talking Heads cover-band concert and celebrated with a friend by drinking Anchor Steam beer and shots of Jameson.
He woke on Oct. 31 at 4:40 a.m. and searched for deal reports on his phone while standing in his boxer shorts with an electric toothbrush in the other hand. He didn’t find any.
The acquiring firm, Interactive Brokers Group Inc., pulled out of the deal after a discrepancy in client accounts surfaced, and MF Global filed for bankruptcy later that day.
At first, Brady thought his company would survive, he said.
His wife thought he was in denial. His mood changed when he was sitting in the home office adjoining his bedroom, looking at the value of his holdings.
"My Fidelity account looks like my bar tab from just a week ago," Brady said.
All Fired
On Nov. 11, a human resources executive asked colleagues on Brady’s floor to gather by his desk, which looks out on the Willis Tower, the tallest building in the U.S. They were all fired. She told them to show receipts for large personal belongings to the plainclothes security guards by the elevators, and that checks would be sent in the mail, Brady said. Someone asked if the checks would bounce. She said she didn’t know.
Brady, who said he wasn’t aware of the size of the bets MF Global made on European sovereign debt, wrote to clients this month saying he’s looking to join a firm that believes "integrity and honesty are the single most important ingredients to success." He said last week he is optimistic.

My angel, the roar and losing my mojo

2011-09-11T03:57:00.000-07:00

I have been asking myself recently why i cant write or find the spark to write. And when i am honest with myself, i realise that this lack of spark is at work, at home and i am coasting. I hate coasting.

This is effecting how i am interacting with the relationships around me. I am not functioning optimally.

At work, i can do the little but seems sufficient to perform at what is expected of me by my peers and bosses. That does not say much about my bosses that i can coast and still be seen to be performing. I expect more from myself and for the last few weeks or months, i have been drained and slow.

At home, i think i am ok but i realise that i lack patience or the energy to be proactive.

Losing my mojo can be seen at my lack of energy at home, the slow pace i function at home and in my health. Again, i have hit my highs in terms of weight and have yet to take the steps to correct my health, work and home/family matters.

I was lost and coasting.

But yesterday evening, again, my angel has showed me the way. Ilyana's swim teacher has decided to certify all her students. Ilyana had to undergo a swim test and she was very anxious the night before but Yaso told her clearly what she needed to do. And in the morning, Ilyana met with her teacher so she could give her one last lesson on what would be required. Ilyana needed details and a plan and direction on what was expected of her and then she was ready to deal with it. She learnt Planning.

At 6pm, i went to the pool and Ilyana was ready for her swim. Lines were crossed and Ilyana was to have her test at 5pm but we were informed 6pm so she had to do her test with others who were doing the Level 5 assessment while Ilyana was still at Level 4.

She started off with 2 laps (50m) of free style, then 1 lap of butterfly and then 1 lap of backstroke, 25m of dolphin. She looked so tired but she did it all. She paced herself so well. I knew she was tired as on her backstroke, she could not keep her lane and moved from lane 1 to lane 6. She did not stop. She kept on. She was Persistent.

Then there was the pajama test and we realised that we did not bring her pajamas down. We did not Plan well. We ran up to the apartment to get her pajamas but what we rushed to bring was too big and it kept falling off. She had to first wade with her hand above the water at the deep side of the pool (12 - 14ft). The poor girl had to keep one hand above the water and with the other, she held the falling pants up. Then after passing that, she had to dive and retrive a pen from the bottom of the pool. Again, the pants kept ballooning up restricting her dive. She had to retie a knot in the pants and she dove in again and again. She never gave up and finally succeeded after her 5th try. She must have been so tired. She never complained about the pajama or blamed anyone. She fought and Succeeded.

I thought that would be the end but then she had to show her turns. Freestyle and then somersault and push off from the wall. Butterfly to the wall, turn and two strokes back without coming up for air. She came to the wall but she could not make her turn. She kept on and on and in the end the tester saw her will to get it done and stopped her and started talking to her and asked her teacher to also come over and help her. All the other kids had passed and were getting their badges and certificates but Ilyana was still in the pool. It was by far the most stressful 7 minutes i have ever gone thru. But Ilyana did it. It was not as good as the other kids but she never stopped. The tester leaned down and gave her a high five and i started to breath again. She was my angel and i was so proud.

That day i learned that we have to plan, we have to be persistent and we have to fight to succeed.

But that night, i also had one more lesson but this time from my baby doll. When Ilyana and i got back to the apartment, Ilyana was so tired and needed attention. I was with Sahana and when Ilyana came out, she asked for my time and i obliged. What i did not realise was that Sahana felt cut off. Later i found Sahana in her room reading a book by herself and she had her angry and crying face on.

Her normal reaction would have been to throw a tantrum but my baby doll is growing up. She did not whine but when i entered the room, she roared at me and rushed to me. I did not know whether she was going to hug me or punch me. I held her and then she calmed and told me why she was upset. She took Action.

I realised then, Stop Whining and get in Action and ROAR like a 5yr old.

For my Angel,

you teach but you doubt

you inspire, and persevere

you succeed, never easily

You will be my direction

For my baby doll,

you Roar, you shine

you laugh, you are bright

You will make me Roar

Times are a Changing

2011-08-09T22:10:00.000-07:00

Recently, i was asked a very interesting question - if US finances are in such a bad shape, why does USD appreciate in times of risk aversion. This to me was a very interesting question and its a question i have to deal with daily in my role as a local markets trader.

My reply to this friend and to some others are attached but the message is the same - Times are a changing.
____

Your question on why USD up was the RIGHT question. No one in KL got that.

Basically, the speculative money now borrows in USD and invests in risky assets - equity, bonds in other currencies. So when there is risk aversions, these guys sell their risky assets and buy back USD to pay their USD borrowing.

Also, there are two types of risk aversion - Perception and Real (my own terms...haha).

Perception Risk Aversion (PRA) - market panics and risky assets get sold off and USD strengthens but then things move back or bounce back because of some positive moves. This is what happened from 2006 to 2008.

Real Risk Aversion (RRA) - is market panics, risky assets get sold off and USD strengthens but then an event happens (2008 was Lehman failure), and the risk aversion actually led to a funding crisis where banks did not want to lend to one another. When the banks stopped lending, importers and exporters could not get Bank lines or Letter of Credits to facilitate trade, and trade crashed. In RRA, everything breaks, Equity does a big selloff, property sells off and USD flies as capital is pulled back.

Risk Positive (RP) - From 2009, market moved back to a risk positive mode and here people borrowed USD all over again, and started selling USD to buy risky assets in other countries. Also, perception of USD changed where players now felt that USD had only one way to go - DOWN!!!. This carried thru to 2010.

Where are we now?

My view is if we try to put whats happening now into context of that 2006 - 2010 period, we are now in mid to late 2008 where we saw a lot of volatility but news of things getting worse and worse was coming out with occasional bouts of positivity until the EVENT happens. What that EVENT will be, i am not sure or it could just be a multiple of Events - France downgrade, Greece default, massive riots in China..who knows. But the strains are there.

What will happen?

In the near term (say next 3-6mths), markets will be generally negative with bouts of positivity ie you will see volatility but negative moves should be bigger than positive moves. USD should see more strength in the near term. If the Event(s) occur, you will see a big Negative move like we saw in 2008 and govts will try to prop things up as much as possible. My view is that they wont be as successful as they were before. There will be a sharp slowdown in business activity across all boards (worst hit will be financials) and then things will pick up but at slower pace to what we saw in the 2009 - 2010 recovery.

Will Malaysia be different?

My main issue with Malaysia is they lack a credible business plan or business focus. They cant compete as a low cost manufacturer as they dont have a large labour pool. They dont have a strong enough educated pool for high skill manufacturing and their services/tourist sector is growing but too slow to make a difference in the next 5 years. Malaysia's main wealth and growth is now commodities. So if i am right and we go through a sharp drop in buisness activity and then a very slow recovery - commodity prices will stabilise and maybe trend lower. In that situation, Malaysia will not benefit. But if commodity prices recover faster than expected, Malaysia will do well. So thats the call - how will oil and commodities do? That will determine how well Malaysia does. I cant say for sure what will happen on commodities but my bet is on a drop in prices by at least 30%-40% and then a stabilisation of prices.

What you should do?

Focus on growing your customer base and business growth. Coz if you get thru this next 2 years, you will be stronger than ever. This is what happend with business that started in 2007. They nearly went under in 2008 but then did extremely well 2009 - 2010 and now have adequate buffers to get thru the next down move.

Keep liquidity near. try to bring your payment terms close or get long term bank lines and borrowing in place once you reach a size to do that. Keep cash ready and invest only in your business.

Near term, USD will see higher prices but post that Event(s), USD is going to weaken considerably so if you receiving income in USD, try to push for a currency closer to your cost ie MYR or IDR. OR, whenever you receive USD only keep a small proportion in USD, keep the rest in your base currency. I would suggest not keeping more tan 20 - 30% of your cash in USD.

Of course, i could be wrong as like trading, everything is based on what you think will happen and the more info you have, the better your chances to be right. Currently i am 70% sure that the outcome will be as i say - so pretty committed to that view. Will let you know if that changes.

For now, getting liquidity and managing your cash to get thru the next two years will be key as you continue to invest in the business. Its a fine line you will have to face - spend money on the business which reduces your liquidity NOW but adds revenue later. Here, only you can make that call but my bet - go ALL IN......survive the next two years, your business is going to be growing from strength to strength.

Good luck
____

what i am convinced about is that if you see the growth in the last two years, its basically been a growth about financial assets - property, equity, bonds etc. Its been very little about real growth - save maybe for Apple but thats not enough - we need new growth areas, new businesses outside of services. I think the slowdown will be good in the long run but capital has to move away from financial assets and into real business - energy efficiency, increasing productivity, alternate energy.

Its interesting times and thats what i said about 2006 - 2010 but maybe the slump in 2008 was just delayed till now and now we are actually heading to real downturn and real changes. Creation from destruction and when people look back - maybe they will look at 2006 - 2014 as one period.

I am not being pessimistic. In fact i am optimistic about the long term but in the near term, be cautious of finances, focus on your business and build multiple streams of income (if you are in business) and if you are a salaried worker, keep expenses down as i think incomes will actually go down or stabilise at these levels and not move up. My whole goal from here is to build a proper business (ie sustainable income) for this bank and am achieveing that BUT i take nothing for granted and am now keeping at least 1yr of cash as a buffer to cover expenses and maybe even 2yrs.

Upon us all a little rain must fall - Led Zeppelin

_________

be prepared, be productive, be relevant

The Buying & Selling of Others & WHats your Figure

2010-12-06T08:13:00.000-08:00

What's your Figure?

Now that is an interesting question. Recently, i watched Wall Street, the original movie and then i watched the new Wall Street movie. Now, as a trader, both movies struck certain chords with me.

In the original, at the ending, the Charlie Sheen character is heading to the court house where he expects to be put in jail. His father tells him "Maybe this is the wake call you need. Stop living off the buying and selling of others and produce something.". That was a movie released in 1984 and the same conversations in that movie can be had now in 2010 (especially after 2008). In that scene, i remembered a similiar conversation i had with my father. No matter how much i tried, he could never understand what i did for a living or why i enjoy it so much. He could not see what i produce or what i contributed to the world. In his mind, i believe he felt that i lived off the buying and selling of others or as some put it - i use other people's money and skim off the top.

What do i do and what motivates me to do it?

To the first question, i would tell you that i strive to provide a platform for capital (money) to flow into emerging markets and for capital to flow out. I am the bridge or one of the bridges that allows capital to flow from surplus centers to centers that require it. I would tell you that proudly but most people would rather believe i live off the buying and selling of others.

Why? Because i make money as capital flows into countries when they need it. I make money when capital flows out when they dont need it. I make tremendous amount of money when money flows into countries that are having too much capital inflow and i make the most amount of money when capital flows out at points when the country needs it the most. No one complains when they need it but we are easy to blame when the flow hurts. This is only natural.

Especially as its a job that can pay well but in all things, there is no such thing as money for nothing. Your career as a trader can end in so many ways. In 2006, the worst trading year i ever had, if i had not recovered from my losses, i may not have got the transfer to Singapore and my career could have stalled. I have to continuously improve and there is no let up as at some point, you can be made redundant. Recently i heard about 3 or 4 cases of people who have not been performing and have been asked to either leave their banks or are being transferred back to their home countries. Its sad especially when the family is already established here in Singapore. This is what we all face if we become complacent or switch off. There is no off button in this job.

So why do it? It cant be only about the money. Granted there are those that are solely motivated by the money but many of these guys burn out or lose interest or worse they sacrifice their integrity to support lifestyles that require more and more money. In the second wall street movie, the young idealistic banker (in my mind, that could be me...granted i dont look as good in a suit) asks the diabolical and greedy Josh Brolin character - Whats your figure? Everyone has a figure. Their walk away figure. The Josh Brolin character smirks and says MORE.

It cant be about MORE, it has to mean more than that.

To me i love what i do as no job gives you the opportunities to see how each and every one is linked - how for instance, in China, most people save almost 40 - 50% of their income for their child's education and for their own medical expenses. Now China has a slowing manufacturing division and a rising educated degree carrying population (most estimates expect 7m graduates a year will be entering the chinese work force). What can they do? They need to boost the services sector domestically but to do that they need stronger consumption by the people. They see this and now there is a big push to provide education and medical facilities and support for the public. The public then has more to spend to grow consumption. What this means is that there will be a large amount of capital flowing into China in the consumer sectors and in retail and in medical facilities. What should be done - move capital to medical providers, education providers, the CNY must appreciate. Everything is linked and my job gives me a front row seat to how the world is growing for good and bad. Mostly good as i am a optimist.

So i love what i do and it pays but it cant be about MORE.

I have my walk-away figure. The figure that i have in my mind where i am financially free. So many people pluck numbers out of the air saying i want 1m sitting in my account or 1m per child. All good but everyones figure is different and is relative to their income and their spending habits.

My belief which i believe strongly is life is too short for delayed gratification to be your sole motive in life. My motive in life is to provide and to meet long term goals while enjoying and spending the now.

So whats my figure?

Its the amount of money that if i put it in a FD earning 4%, i can comfortably live off the interest earned.

So say you want 20k a month which is 240k a year. Your figure then will be 240k/4% or 6 Million.

My figure - thats a secret but i can tell you this i have only covered 4%, ONLY 96% to go.

What do i do then? Maybe stop living off the buying and selling of others (haha) and Produce, Give it away or build something lasting....i dont know but i am excited at the prospect.

So heres to each and everyone finding their figure and succeeding.

In Memoriam....A toast

2010-06-16T22:34:00.000-07:00

My father in law passed in November and my father passed March 2006. But it is this June month that makes me look back. It is this June that i start listening to a CD my brother compiled. It is this month that makes me think that as we grow up and grow older, it is sometimes what and who we have lost that defines us. It is this month that i value the gifts i have, the lights that will guide me home - my family and my circle of friends.

It is this month that i think of my friend, Anand.

These words strike me - (Mad World by Gary Jules)

Their tears are filling up their glasses
no expression, no expression
Hide my head, i wanna drown my sorrow
No tomorrow, No tomorrow

I find it kind of funny, i find it kinda of sad,
The dreams in which i'm dying are the best i've ever had
I find it hard to tell you, i find it hard to take
People running in circles its a very, very
Mad world, Mad world

These verses are part of the first song in the Anand CD. As i listen to the song, i marvel at my brother's choice as the song sings of being lost and angry and the song flows with deep sadness. As i listen, i keep asking myself, have i felt that lost, that angry or have i felt such sadness fill me. I can never answer myself. There were times when i think i did, realising for the first time that i had to face failure. Failure that my abilities and aptitude was not enough to coast through life. Failure that i nearly did not make it through university. So when i listen to this song, i try to imagine those feelings again and i can never feel it again.

What i feel is blessed and what i remember is the bonds that were strengthened in that 2006. We, my circle of friends, have formed bonds from our losses. In that June 2006, we came together and we supported, we laughed, we cried but through it all we cared. Thats what i remember. I remember my wife standing by me and supporting me and i remember my friends and i remember my daughter sitting in my lap as we spoke of our friend who had made his sad choice. I remember the lights in my life.

As the sadness of Mad World finishes, the second song sings of these lights. Again, my brother had chosen well. These are some of the words -

Fix You - Coldplay

When you try your best but you don't succeed
When you get what you want but not what you need
When you feel so tired but you can't sleep
Stuck in reverse.

And the tears come streaming down your face
When you lose something you can't replace

Lights will guide you home
And ignite your bones
And I will try to fix you

This second song goes loud and rifts with hope and i am struck by how lucky i am to have my lights, my family and my circle of friends.

So this is my toast - In Memoriam

the first time we saw loss,
we sat as a group as our friends, brothers
stood straight and strong for the many
and remembered their mother

the second time,
we stood with the brothers
as their father passed

the next was my father,
and we had the support needed

then, Anand
and that we formed bonds
strong and filled with laughter

then another mother
in that same year

and then a father,
i considered mine as well

and now a father, a new grandfather

to all those we lost and miss, hear our cries soft but hear our laughter LOUD

Take it Like a man and go on

2010-02-09T21:50:00.001-08:00

For the last week I have had the amazing positivity that I felt at the start of the year slowly fade. I love the work I do but the management and organisation drains me. I spend more time managing up than growing the business.

And now I have reached a certain point in my career that I crave the independence and empowerment to run and grow my buisness well. I do not like to have to justify my every action nor be second guessed. If I am wrong I want to be held accountable but i want the space to make both right and wrong decisions.

Yesterday things got heated between me and my boss and I rarely get angry or raise my voice but I was very close. Then overnight we again received queries on how we were managing our risk.

My problem is that I get very focused at work (which is very important as a trader) that it's hard to draw a line when I am home. My unfortunate wife has to deal with that but that's a whole different story.

So this morning I wa truly angry and I went to a friend in the office who I respect as a trader and I vented and said I give up. He knew I was upset.

When I went back to my desk he had dropped me a ib message - relax bro TAKE it like a man and go on.

I just started laughing out when I read that an I realized again everyone of us faces difficulties but the true measure of ourselves is not how we act in good times but how we perform in bad times.

So I started pulling together again and I have my issues but this year is gonna be great. Not because of where I work or who I work for but because I have a great family and I am productive.

So on those days that you feel your motivtion slipping, let me pass the best advice I have received this year - take it like a man and go on.

d.

- iPhone post

The Notebook with alcohol

2010-02-06T19:36:00.001-08:00

I sat on a plane knowing
that I had no meetings
nor work

A quiet dinner a lonely bed
In taipei, that was my night
that was my expectation

I sat on a plane and
Knowing my night,
I decided to drink

Two white wines, three reds
And two single malt whiskies
The 12 year old highland park
No less

And then as I drank, I
watched the Notebook
A wonderful story, it touched

In that story, the life of two
was of fights and passion
And that love is a gift

But the beauty of it
Is more the story of desire
The desire to be in love
At 20, 30 and 60 to more

For me, it touched as
I have loved at 20
I have fallen in love at 30
And I dream of being in love
Till 60 or more

I am lucky to know
Love at 20, to experience
Love at 30, to anticipate
Love at 60

I know, I experience, I anticipate
My iron rose, my anchor
My life

- iPhone post

Live Large with Planning

2010-02-02T05:20:00.000-08:00

Tonight i was asked some interesting questions -

what should my net worth be?
am i saving/investing enough?
should i be debt free?

There is a very interesting book, The Millionaire Next Door that answers some of these questions. It is written by Thomas J Stanley, a professor in Stanford. He studied the wealthy in America and he was surprised that he found the most number of millionaires NOT in swanky desirable addresses but living in middle class areas and most likely neighbours that no one suspected as wealthy. He studied these millionaires and their living and spending habits and published his findings in this book. Not surprisingly, frugality and a strong saving/investment habit was a common finding. Both are wonderful habits but i also believe that life is meant to be lived and the goal should be balance. So i wont focus on the books findings but use one key ratio that was used in that book to answer the above questions. (i do recommend everyone read this book as well. On the path to financial freedom, this is definitely a must read).

Wealth Ratio = Net Worth divided by (Age x Annual Income)/10
Net Worth = Total Assets - Total Liabilities

So if you are age 35 and your net worth is 350,000 and your annual income is 100,000, your wealth ratio will be 1.

This ratio is valuable because it links 3 very important factors in financial freedom - your age, your annual income and your net worth. Breaking this down further as we know that Net Worth = Total Assets - Total Liabilities, we immediately also can link this ratio to the assets we own and the debt outstanding.

Now if your wealth ratio is under 1, the books terms you as a UAW, under accumulator of wealth. If you can exceed 1, you are termed an AAW, average accumulator of wealth. If you are one of the lucky few that score above 2, you are termed a PAW, prodigious accumulator of wealth. I love this ratio as it can be applied universally no matter what your income level is. Your goal is to become a PAW at any income level.

So how do you become a PAW?

Just looking at the ratio, it becomes obvious, increase your net worth (increase assets or reduce liabilities). This ratio can immediately be used to answer all 3 questions above. When your wealth ratio hits 2, you have adequate net worth if you sustain this ratio, you will definitely be saving/investing enough and your debt is adequate. To me debt is not a bad thing BUT it must be managed. The key criteria that you have to ask in increasing your net worth is if i buy the asset is it going to generate a better return than reducing my debt. SO with credit card debt its easy - cost of credit card debt is 12 - 18% p.a and unless my investments can exceed that rate, i would definitely increase my net worth by reducing credit card debt. But, if i have a property that is earning 8% and i have debt at 6%, i would buy the property and keep the debt. The real question is do i have adequate cashflow to maintain that debt and to grow my net assets. The next ratio helps to manage cashflow as well as grows your chances of becoming a PAW.

Savings Ratio = Total Amount Saved/Total Income earned

If you use an annual savings amount, then use annual income but the ratio also works for monthly figures as long as both denominator and numerator use the same base ie annual or monthly.

Now the key here is to have Savings rate above 25%. This means if you earning 10k, you need to save/invest at least 2.5k. This includes your EPF contributions which should be 9 - 11%, so you only need an additional 14 - 16% to be saved/invested. As you track this ratio and the Wealth ratio, you will find that a Savings Ratio at 25% will only let you become at the most a AAW. To be a PAW you will need to be saving/investing at least 35% of your income. This ratio will immediately ensure that you are not taking on unnecessary debt as well as controls your monthly spending.

Its a very simple ratio but very effective in becoming financially free. This ratio also answers the 3 questions above very well.

The next financial tracker answers question 1 and i use this as my long term goal. This tracker is the final piece and ties everything together in financial freedom. The goal is to be financially free. This means a lot of things to many different people but to me, it means not needing my income from my job to sustain my lifestyle.

People ask me when i plan to retire and i answer honestly 45. By the time i reach 45, i will have enough passive income to maintain my lifestyle without my job income. At that point, i will start my own financial advisory firm with the goal of helping others achieve financial freedom as well as to enjoy their lives now. To do this convincingly, i need to achieve financial freedom myself. I enjoy my life as well with the family holidays and appreciating things now. I can do this because every month, i work on ensuring i meet this goal at 45.

Financial Freedom (FF) Net Worth = (Ideal Annual Income - Passive Income) / Rate of return

Now for FF Net Worth, i use a very conservative rate of return, say 4%.

So for example, say Ideal annual income say 240k (20k a month) and passive income (from net rental, share dividends etc) is 60k (5k a month). Then FF Net worth (the net worth required to be financially free) = (240k - 60k)/0.04 = 4.5m.

This means that if i invest 4.5m at a conservative rate of return of 4% and i have passive income of 5k a month, i will be earning 20k a month, my ideal annual income, the income i require to maintain the lifestyle i want.

So in short these should be the goals -

Wealth ratio > 2
As you start your FF journey, dont be discouraged as you will see wealth ratios well below 1. I started at 0.3 and grew to 1.2 and then down to 1 which was a sign that i was spending too much and that my lifestyle had changed with my income level. Its a journey and i am striving to be a PAW as well.

Savings ratio > 25%
25% is the minimum goal. 35% will be ideal. I was hitting over 30% at one time but now it has dropped to 28%. Again, signs for me to control spending and grow investments/savings.

FF Net Worth
Here FF Net worth gives you the actual net worth required to be financially free. Again dont be discouraged by the amount. Even after years of striving, i have only achieved 14%. But, the good news is that as you grow investments (property/shares etc), your passive income grows and the FF Net Worth will actually fall.

Before striving for these ratios - there are three very important goals to achieve first. 1) Cash buffer account of at least 6mths - 1yr and 2) life insurance coverage when you have dependents and 3) medical insurance for yourself and family.

1 is to ensure you dont cut investments too early because of cashflow constraints.

For 2, use the same calculator under FF Net Worth but ideal income is your annual expenses for your family. First calculate what your job already gives you. You just need to get the balance. I recommend TERM life policies. These are the cheapest form of insurance and basically they cover you only if you pass before a certain age. If you are alive at the contract expiry, it is worthless. The good news is that it is cheap and a good way of getting high coverage. Remember if you are paying monthly insurance premiums above 10% your monthly income, you are paying TOO much.

For 3, this is very important. The greatest threat to FF is the inadequacy to handle a serious illness that you or your family may face. Currently, including what my firm provides, i have close to 1m medical coverage with 500k for critical illness.

I hope the above helps as it has helped me on my journey.

Please feel free to drop me a mail at Ramukavisved@gmail.com if i can help further or to even create spreadsheets for you to map the above.

Don't Call it a Comeback, I've been here for years

2010-01-08T08:53:00.000-08:00

This month i turn 35.

Thats an interesting age. Young enough to view the world going forward with excitement but old enough to know that the path will be not be easy. At this age, i have seen a friend die. I have had my wife hold my hand as my father passed and i have held hers as she said goodbye to hers. At the same time, i have seen my two beautiful daughters grow, my elegant angel and my fiery princess.

I have had successful years and hard years. I have had mornings where motivations are low and then perfect days. I have learnt to dream and to realise and to let go. I know never to make policy statements. I know support as i have the strongest, my iron rose. I have fought and compromised.SO many lessons and the most important, i know what it is to be adored and to adore.

2009 was the year of insecurity and it struck me very personally and i forgot these lessons. I heard but did not listen. I laughed but quietly.

Then i held a candle as my godson was baptised and touched his forehead with a cross. I celebrated Christmas the way it was - surrounded by laughter and noise and with family away from our lives and in holiday. I returned to this home but not home and the New Year was here with friends and family and a perfect night. I was recharged.

2010 will be an extremely hard year. In Korea this year marks the turn of a 60yr cycle, and they refer to this year as the White Tiger and its an auspicious year. I feel it and i believe it will be a great year. I start every year with a motto and this is my 2010 motto - "Don't call it a comeback, i've been here for years".

All my experiences, good and bad has brought me to this very point - this excitement to face 2010 and to overcome every obstacle. Bring it on as i am recharged, on fire and motivated. This ain't no Comeback, i've been here for years.

d.

_______

happiness sometimes does not come with money or fame but sometimes with just the quiet nobility of knowing you have led a good life. - Peyton Sawyer Scott

My haircut

2010-01-02T19:50:00.001-08:00

Recently a friend of mine was thanking me for a book I had given him called the Millionaire Mind. This book was written by a Stanford professor who was researching the habits of the rich, the truly rich. He first started looking at affluent neighbourhoods, the neighbourhoods with the lawyers, doctors and bankers with their designer homes and fancy cars. His findings surprised him as most of these households had amazing income levels but in terms of net wealth ie assets net of liabilities, these households did not rank high.

He decided to widen his search and what he found astounded him. In middle class neighbourhoods, he found modest income earners with huge net wealth. In most of his research, he found the number of millionaire's per neighbourhood predominantly higher in middle class neighbourhoods. He had found the basis of his book.

He continued working on his research focusing now on the habits of those modest income earners who were truly rich and comparing those habits against the high income earners who he found sorely lacking in wealth.

Now I was pleased that my friend was enjoying the book and more importantly he was relating to the stories in the book just as I had. But then my friend went on to say, you are not really following the tenets of the book. Now this surprised me and I asked him why? He raised his eyebrow and eyes widening as he normally does when he thinks he is about to say something witty, he replied, your haircut.

Of course he was referring to my 75 ringgit haircut where I get a scalp massage, shampoo and a stylist cut. And he was spot on. In that book that was the sin of the high income earners where they spent as much as they earn.

So yesterday I went for a 35 haircut and let me be honest I absolutely hated it. The cut was poor and I left dissatisfied. As I spent last night thinking about this (and everytime I saw my reflection), I realised I liked my 75 haircut experience and now I was left with this problem - how to reconcile my desire to be financially free while enjoying these luxury comforts.

This has always been my goal. I believe financial planning is not about delayed gratification but immediate gratification knowing and secure that your long term financial goals are being met each day. If I ever write a book that's the byline Immediate Gratification with financial planning.

The trick to this is to define your major goals. For me is to have sgd300k for each of my kids when they hit 18 for university fees, having buffers built up to cover my daughters' current and future school fees, having adequate insurance for my family to maintain their current standard of living and lastly retirement income for my wife and me when we hit 45.

Four major goals and every month we get closer to completing all four. Post that, we enjoy our time and certain luxury comforts. I believe my friend also gets this.

So here's to 75 haircuts and a Tiffany ring and snowflake pendant. Nice!!!!

d.

- iPhone post

My watch stories

2009-12-09T07:54:00.000-08:00

Recently i was talking to my brother in law about watches and it made me think about the watches i have and more importantly the stories behind each watch.

Tag Monza - the watch that started it all

When i was 15 (or 17), at one of dad's dinners, there was this sharply dressed young guy that came and he had presence. I saw his watch and it was a tag (those days i did not know what tag was). He told me he was 28 and he looked successful. I told myself on that night that i would buy a Tag before i was 30. At 27, i had my first successful year at work and i realised i had found my career path as a fixed income trader. I bought this watch then and it will always be special for me.

Rolex Oysterdate Perpetual -

This one is heritage. My grandmother bot this watch for my grandfather for MYR162 or 167 in 1962 or 1967 (i get mixed up on the 62 and 67). My dad told me about this watch that was just sitting at home as it was not working. I saw the watch and knew that it had to be fixed. I asked my dad for that watch and i spent the 2k to fix it. Recently i was in Korea and walked into a vintage watch shop and found the listed price at USD3500. If you price that, that is a 40 yr investment with a 9% return. Truly amazing.

Maurice Lacroix 3 time zone GMT with alarm -

I remember going for a cortina sale and I saw a Baume & Mercier watch that had 3 time zones and an alarm. It had a grey face and was classic. It was 6k (from retail price 10k). I remember the guy telling me that it had a GP movement and that GP had stopped supplying the movement a few years back. I knew the watch had collectibility but i just could not pay the 6k. I wish i did coz that watch spoke to me. So awhile later, walking in BSC, i do my normal run thru at the watch shop there and that guy Leong shows me a Maurice Lacroix watch with a white face and its the exact face - 3 time zone GMT with alarm, except thats a white face. It was 10k. Every month for a year i went there and saw that watch. The next year i bought that watch. I wished there was a reason for the purchase but there was none. I just saved to get it as it spoke to me as well. Most of the websites list the sale price at USd4500, thats more than 40% what i paid.

Sinn U1 -

I bot this when we covered Ilyana's uni fees. I was targetting MYR450k (currently have upped this to SGD300k now) at that time for 3yrs uni fees in UK and with EPF and all, we succeeded. I was proud and needed to mark that success and i bot the Sinn. The best watch i have for the money i paid. This was the start of buying watches to mark points of financial success. I have seen listed prices from GBP1000 to USD1600. About 25% higher than what i paid.

Vulcain Diver Cricket Alarm -

This is my worst buy to date. I liked how the watch looked and the cricket alarm was interesting but now the face has a scratch and i hardly wear the watch and the time keeping was poor. I got this watch in Singapore when we knew that we had a buffer account up to 6mths our expenses in Singapore. In 2008, i moved this target to 1yr and in 2009 to 2yrs (am still working on that target).

Tag Monaco Gulf Ltd edition -

This is my favourite watch now for two reasons 1) i did not buy it (Yaso got it) and 2) it marks 15yrs of us being together and 10yrs of being married. Its a great watch and its fun to look at.

The new one -

i have narrowed down that the next watch i get is a Rolex DeepSea Dweller. I like the look and its slighlty more unique than a submariner. This one i am going to get only when we have covered Sahana's uni fees of at least SGD300k. We have been working hard for this and if you see me with this watch then you will know the reason.

The song i wish i could sing

2009-12-07T09:33:00.000-08:00

Somebody by DM

I want somebody to share
Share the rest of my life
Share my innermost thoughts
Know my intimate details
Someone who'll stand by my side
And give me support
And in return
She'll get my support
She will listen to me
When I want to speak
About the world we live in
And life in general
Though my views may be wrong
They may even be perverted
She'll hear me out
And won't easily be converted
To my way of thinking
In fact she'll often disagree
But at the end of it all
She will understand me
Aaaahhhhh....

I want somebody who cares
For me passionately
With every thought
With every breath
Someone who'll help me see things
In a different light
All the things I detest
I will almost like
I don't want to be tied
To anyone's strings
I'm carefully trying to steer clear of
Those things
But when I'm asleep
I want somebody
Who will put their arms around me
And kiss me tenderly
Though things like this
Make me sick
In a case like this
I'll get away with it
And in a place like this
I'll get away with it
Aaaahhhhh....

Financial freedom is Essential

2009-11-11T08:56:00.000-08:00

From June 2007 i have been on the financial roller coaster. We moved to Singapore and that first year, juggling two households in Malaysia and Singapore took the toll on our finances. Then as we adjusted, we grew in comfort and i was doing well in my bank. Then my bank gets bought over in the largest merger deal in the world.

We were given assurances that all was well within the combined entities and then by June 2008, things started to get shaky with the trigger being the subprime mortgage market in the US. That was the start of this blog and my first entries spoke about this trigger.

Later that year we had Lehman go bankrupt and the world got real scary. Soon after my bank received govt aid and again we were given assurances that all will be well. My wife and i quickly applied for our PRs fearing that if i lost my job, we would have to pull the kids out of school. For those of you who know me, you will know that i plan for the big picture. And i reward myself everytime my wife and i achieve a major milestone - like having Ilyana's university fees covered or the kids school fees or having buffers in place.

That September 2008, i realised that all my planning did not take one big factor into account - a depression like scenario where unemployment could hit more than 20%. Now people all say that would never have happened but i saw it. I saw trade just shut down between countries and banks freeze all lending and the worst we saw was in Sep 08 to Mar 09. If the govts of the world did not step up and open their gates to stimulus and bail outs, we would have definitely seen a global depression.

I believe that a depression at this time will not happen but a slowing global economy and a shrinking banking system might.

With all this i reassesed our finances and i realised that for me having 6mths buffer was not enough as if i lost my job, there would be no guarantee of a replacement job. So from Sep 08, my wife and i have been on a mission to make sure we dont feel as insecure as we did then.

So all this makes me think about how valuable financial planning is. Let me make it clear, my goal one day is to start a firm back in Malaysia and the goal of that firm is to teach financial freedom. I dont believe in delayed gratification ie i dont believe in working 30yrs to enjoy the remaining 30. Financial freedom to me is the ability to know that my future is being addressed while i enjoy the present. Planning for the future, enjoying the now.

The trick to this is to define your major goals. For me my goals are 1) to have Uni fees covered for both my daughters when they turn 18, 2) to have their school fees covered, 3) to have a 2yr buffer account, 4) to have enough insurance to ensure that my family is taken care off and 5) retirement capital. Thats it just five goals.

I track how i am doing on each of this 5 goals every day. Now as long as i see progression in this 5 goals, i know that its ok to spend money and enjoy life as well. Coz i know the big picture is being taken care of.

Everytime i achive a goal, i buy myself a new watch to remind me of what my wife and i have accomplished.

I may write more on this topic as we go on as i truly believe that Financial Planning is essential to feel secure and happy. Its what i strive for and i wish you the best if you are on similiar journeys as me.

d.

1h 15m 12s

2009-10-24T03:24:00.000-07:00

DEV KUMAR M 1052 Elite Men Msi 10 K 1:15:12

http://www.borneomarathon.com/home/pix/Elite_Men_10K_result.pdf

1 hour 15 minutes and 12 seconds.

Thats the time i took to complete my 10km run in KK. I was hoping to do it under 1h 10m but am very happy for my first time. Initially if you have read my earlier posts on how i started on this journey you will know that the goal is a half marathon 21km by Dec 2009. I have to be honest, my body was really tired after the 10km and at this stage i am hesitant to try a 21km.

Since the run almost two weeks ago, i have been on holiday and have not been training. I even put on 1.5kg with the euphoria of completing the run. It was an achievement for me especially in late february when i started, i could barely complete 1km.

Will be starting work and also training again on monday. I would like to say i am ready for the 21km which is still a goal but time to first show that i can train regularly to hit 10km.

One thing is for sure i will definitely be running again.

Asset Prices vs Real Prices - A personal view

2009-09-22T07:52:00.000-07:00

For a long while i have refrained from writing my views about the economy and market conditions. Firstly, work picked up or more importantly i picked up. I focused on what was within my control and i was striving as many were slowing. It felt good. Secondly, it was so much more fun and meaningful to write about things that was important to me.

Let me stress, Work is not Life and its good to understand that. I am still driven and still feel a need to accomplish and influence at my chosen field but i understand that my main accomplishment is my family.

So why now do i feel the need to write again on market conditions?

In one word - Caution. And as i have been asked " Is this rally real?"

I have found the hope that people are feeling is reassuring and right. BUT, it is wrong to believe that all is well. Market conditions are far from well and we need to clearly define a line between asset prices and real prices. I am no economist and its not my goal to be perfectly accurate but to understand this difference in how it relates to me and to you.

Asset prices = the prices of the stocks (equity) we own, the property that we own, the cash that we have in FD (cash). For simplicity lets say Asset Prices (AP) = Equity (E) + Property (P) +
Cash (C). In short , we could relate asset prices to our Wealth. If the E we own appreciates, we are wealthier and that applies to P as well. And if we are accumulating C at a faster rate than we spend, we are also getting wealthier. So lets say AP = Wealth and is the right hand column in a table and needs a left hand column to balance it.

I view the left column as Real Prices = the prices (earnings) we charge for our goods and services net of the prices (cost) we pay for goods and services. IN simple terms Real Prices (RP) = Salary (S) - Cost (C).

So the conditions we have is 1) RP growing and AP growing, 2) RP growing and AP shrinking, 3) RP shrinking and AP growing and 4) RP shrinking and AP shrinking. The key is to understand where we are in this four conditions.

Personally, the condition i would like to be in is 2. When i know that my RP is growing and AP is shrinking, this to me is the perfect time to invest and maybe finally buy our place in Singapore. For now though, i am certain AP is growing but am uncertain about my RP. In short, i have no confidence that my S will grow faster than my C. Cost of food is rising as well as energy prices which will increase my C but will my salary (S) grow as fast. This is i am not certain.

Please forgive the maths as i do see myself as a math geek but the point i am making is that asset prices cannot grow without real prices growing. This to me is my main reason i am still negative and continue to maintain a huge 2 year buffer in cash as i feel that in general markets and individuals are in stage 3, where RP is shrinking but AP is growing. This to me is not sustainable.

So how do you know which stage you are in coz it is wrong to assume that everyone is in the same stage. So here are the questions you should be asking?

1) if you in shipping, have you seen shipping rates rise
2) if you are a lawyer, have you seen your billings rise
3) if you are in business, are you seeing your business grow
4) if you renting, is your rent increasing
5) is your grocery bills rising

Basically, look to your personal lives and make an assessment whether 1) your salary/earning are increasing and if so 2) is it rising faster than your cost of living and 3) are you seeing your business improve.

If the 3 assessments above give you the impression than your RP is rising, then you are a lucky person indeed. AND if AP is low or falling, you have the perfect opportunity to invest. IF AP is rising and you are invested or own a property, you get to ride it with no worries. You should sell only when you feel your RP is turning down.

If you are like me and the assessment makes you feel that RP is falling or you are uncertain, then caution is probably advised. I am not advocating you sell your investments especially property BUT i do advocate having caution and having buffers in place to protect you from unnecessary losses and grief. My family now has 2yrs buffer in place. Some view this as overly cautious but i have seen what its like to fear losing your job and doubting your ability to maintain your quality of life. To me 2yrs buffer lets me sleep comfortably knowing that we can withstand most knocks.

The above is not negative. I apologise if it comes off as such. I am actually very hopeful and i now have a clear plan of action to manage come what may. The buffers protect me from risk to the downside. Prices rising now (especially as i would like to buy a place in singapore) when i feel RP is uncertain or falling, makes me cautious and uncertain to buy. BUT, i am waiting and am truly hopeful that we will see RP rise and when it does i will be BUYING.

d.

a Good Life

2009-08-23T09:53:00.000-07:00

Recently, i was asked a very surprising and humbling question "Would i be godfather to their child that they are expecting in September?". The couple that asked this question are friends that we met over the last year as our daughter's were classmates. Their request honoured me but i felt a need to express clearly my belief systems growing up as a Catholic with Hindu influences as well. Their answer to me was that for them, they wanted a guide for their child, someone the child could turn to when he or she could not turn to them. They felt i would be a great guide. I know no bigger compliment and i was truly happy to say yes.

The answer they gave me made me look back at the guides in my life and specific moments that have shaped me. One such moment was a question i was asked 17 years ago......

My father once asked me "How do you define a good life?".

I think i was 17 years old and i was driving as we headed to temple. My dad was a secure and comfortable Hindu who married a strong faithful and loving Catholic. He once told me that he married my mum because he knew she would be a great mother. He knew he wanted a big family being an only child and in the end he had four kids. He was not a religious man but he had a strong faith system. He knew that my mum would want us to be raised Catholic and he had two conditions - 1) we had to be 15 before we were baptised and we would be given a choice and 2) one of us four would rotate and follow him to temple every fortnight sunday.

We grew up with every sunday being Church day. We would get dressed and head to morning mass followed by Sunday school. We would finish just before lunch and mum would take us for branch. In all honesty, i loved those mornings. I am not especially religious but i found deep comfort in those mornings and the stories at sunday school and learning the Our Father. I think that is the first group of words that i memorised. I did not understand all of it but it calmed me. It still does.

Every 2 weeks, would be Holy Sunday. Mornings was church but on those special sundays, one of us would follow my dad to temple. Those temple journey's was where my father and i talked. As he drove, he would ask me questions and give me his thoughts. At the temple, i would light all the lamps and he would bring his hands together three times above the flame and each time raise his hands to his head. Then i would follow him always second no matter who was with us. I was comfortable with both religions but i chose to be baptised at 15. Though even at 15, i questioned the Church and its history, i found the christian concepts of universal acceptance and forgiveness appealing. At the same time, i found the Hindu concept of Karma elegant and true.

One day as i was driving (i had my license), he asked me the question above "How do you define a good life?". I cannot remember my answer and at 17 i was too impatient to hear his clearly. But i remember the question and now as i turn 35, the question motivates me. I cannot remember clearly his answer but i remember the sense of the answer - that life was about balance, commitment and growing.

But now when i think of my father's life and also my father in law i have a better understanding of that question and the answer. Both were imperfect men with imperfect lives but they LIVED. They lived by a code that was individually their own. They believed in family. They never made excuses and they lived their life the best way they knew. When they passed, they were surrounded by family, friends, staff and colleagues that shared genuine loss and respect at their passing.

Both had lived a Good Life.

As i contemplate my role as a father and godfather, i only hope that at the end of the day - i can say i HAD a Good Life.

d.

The Chinese are Coming

2009-06-03T09:41:00.000-07:00

I recently made a business trip to China. Shanghai and Beijing to be precise. This was my first trip to China and it was staggering.

It was a business trip and my first two nights i stayed at the Grand Hyatt which is in Jin Mao Tower. Jin Mao is a beautiful tall gothic looking building which just screams Gotham City but a bright lit Gotham City. Jin Mao was the tallest building in the world but then they built the World Financial Center which is to the right of Jin Mao. The WFC is an ugly straight lego like building with a handle type structure on the top and it surpasses Jin Mao by a couple of feet. Now they are building another building to the right of Jin Mao which will be even taller than both these buildings. Effectively the three tallest buildings in the world will sit in a one km radius in Shanghai. This is not what AWED me.

What scared me and inspired me was the people - in the hotel i found staff that were both efficient, friendly with strong command of english. The hotel staff were extremely driven and efficient. My first thoughts were, how i wish these people were working in our service sectors in Malaysia, Singapore.

The next day i met my office people at the Shanghai office and one young management trainee that i met really impressed me. His name is David. David is well dressed and although he only studied english from the age of 14, his english is flawless. His parents saved 40% of their income to ensure he had the best education possible. He graduated from a top local university and immediately did a masters in operational research (a math geek like me) in London. When he came back to Shanghai, he saw an add for the management trainee position and applied. His application was one out of 20,000. And we hired only 5. Do the maths - thats 0.025% of the number of applicants. And what did we pay? The grand amount of SGD1k a month.

Now thats possibly half what a basic grad will get in singapore and comparable to Malaysia and many other places.

The same day, i met up with the teams from the back office, credit admin and finance departments. I went into a meeting and in 30m, we had accomplished everything. The staff were prepared and precise in their questions and feedback. They did not waste any time and were very well informed in their respective areas. All spoke fantastic english.

The quality that i saw in David and these others, that was staggering. Then i found out there are 1 MILLION graduates who are looking for jobs. NOW, that is scary.

My first question, i asked myself was there enough jobs now for these well educated, cheap and extremely driven graduates. And for now the answer is NO. China is spending huge amounts to continue the building bonanza to keep workers happy but at for services, its still not possible to generate enough jobs for graduates. So then i asked myself - WHat is China going to do to prevent these graduates from losing hope and turning discontent.

The answer is obvious - they are gonna start allowing a bigger amount of Chinese to work outside of China. First step, they will push English in schools (being done), they will sponsor more students to finish masters programs in UK, US and Australia. Then, they are gonna unleash this herd to the world.

So my advice to all - be prepared to fight for your jobs and value add to your jobs coz the Chinese are coming and they are cheap but so very IMPRESSIVE.

I Got A letter today

2009-05-20T09:16:00.000-07:00

For awhile now i have had many things to say but no motivation to write then today i got a letter - a card actually written by Ilyana. She had written it and placed it inside my laptop. She wrote Dev on top of the card and underlined my name and she went on "thank you Acha you have been working so hard and thank you for saving money and buying a good school and I Love (actually was a heart) U Acha I'l see you at the night".

Oh Ilyana how i wish i was buying you a school....

And true to form i did the Kumar thing (actually its the C Gonzago gene) and teared.

I wrote a card for Ilyana thanking her and telling her how proud i am. I put it in her school bag and i hope she reads it tomorrow.

I was starting to focus again at work and unfortunately that means i lose some of my social graces (poor Yaso) as i completely get obsessed about my work. I blame the fact that i cannot multi task. But then i get a note like this which just fills me up with so much satisfaction. As i write this i smile and unfortunately feel like tearing again.

Yaso and i debated and agonised for many months before deciding to enrol Ilyana in international school and then another debate when we moved her to United World College (UWC). I was worried about her peers. Would they be too rich? and a whole lot of other questions? But as i see my beautiful girl grow not just in aptitude but more in confidence and caring, i am a very happy father.

Yaso, the school may be great but you are amazing.

d.

p/s i did finish the 5.6 in around 37 minutes. And am planning to run the 10km in KL on 28 June 2009

i ran a slow 5.44km

2009-04-08T09:22:00.000-07:00

http://www.mapmyfitness.com/run/singapore/singapore/151123920905687006

The above is the route and i did it in a slow 36 minutes. That means i was averaging about 7m for every km. A far from superior run but i must say i am proud. I started running 2 mths ago after CNY and in my first run i could only make 1km and now i have improved.

In the next week i am gonna run in the 5.6km run. My first try in an organised run.

Wish me luck

Where is your CV?

2009-02-09T07:19:00.000-08:00

Its 1.48am and i have just finished updating my CV. It has taken me 5 months to complete it. So as i sit here feeling a sense of accomplishment i ask myself - Why the f*&k did it take so long???

From September 2008, i have had a growing sense of unease about markets and the real economy. My fears are starting to be realised. In my previous entries, i wrote about asset values falling and this has happened and it will continue to fall as long as the real economy fails to adjust to the new reality - CREDIT will not help.

What i feared the most was a massive contraction in exports and a standstill in production. This is now happening and Malaysia will face some serious negative numbers in the coming quarters. Unfortunately our politics dominates our leader's time and so many are going to be surprised by the speed of our downturn. One friend in the finance industry in Malaysia told me that he was glad that he was not in manufacturing and was in the finance industry due to the massive losses in manufaturing. This shocks me. The finance industry is an intermediary. It survives and grows because of the real economy (the years of financial engineering as a tool of growth is over as it should be). Watch as the next round of cuts in the next 3 months actually hit the service sector.

Knowing all of this and praying i am wrong - i ask myself - what do i need to do? And the answer is always the same - expect the worst, hope for the best...and BE PREPARED.

I have been focused on the financial aspects of being ready and my wife and i are striving hard to not only cover our expenses for 2009 but also 2010. BUT, thats not enough. I met a fellow banker in Singapore and on Monday, he was talking to his boss, on Wednesday his bank reported shocking numbers and on Friday he was made redundant. He had expected the worst but he was not PREPARED emotionally nor had he a plan to work from.

I met him on Monday and he told me that he had a feeling of grief and despair wash over him thru that weekend. On Sunday he woke and said i cannot let this keep me down as i have a wife, a daughter and a son. When i met him, he had a briefcase with him and he said it was full of printed CVs. Luckily, he had some internal jobs to interview from but it was a humbling experience. He proudly told me how his wife had immediately started taking action - renegotiating their lease and other measures. They both were an inspiration.

So even after this, i had asked myself what i need to do and the answer again was be prepared. In my case, moving jobs at a time like this is a risky proposition as most banks in my opinion will continue to cut head counts as economies continue to get worse. BUT, i knew i needed to know what options are out there to ensure that when the time comes, i have a plan of action. So the answer was obvious - update my CV, send it out and see what options are available if any. Be prepared.

So again, as i sit here, i ask myself why has it taken so long for me to update my cv. The simple answer is i was floating along with no direction, no plan and more importantly - i was emotionally not prepared to contemplate change when i had given so much of myself in these last 3 years.

Then tonight as i lay in bed with my wife, she asked me about my work situation and i expressed the worst case scenario that could happen. As i spoke all i wanted was for her to listen BUT she (as usual) immediately focused on the plan of action that needed to be done and asked me - 'Where is your CV?'. I was irritated, and as most married couples will tell you, that is the worst and best time to discuss issues. It was the worst because she innocently said "We all came here because of you". Anger coursed through me even as i knew that she had not meant it badly as i needed an outlet. In my anger, i grabbed my laptop, my iPod from my shelf and went out to the hall. I plugged my iPod into my player in the hall. I set up the laptop but realised i needed the charger. I went back in and being calm i went over to my wife, kissed her and she asked where you going and i replied "To finish my CV".

And so its 2.15now and i have finished my CV. Feeling this sense of calm knowing that i have now a plan in motion, i feel a great sense of gratitude to my wife. She infuriates me, she motivates me.

I am not advocating changing jobs for everyone but as we go into this period of great uncertainty i hope everyone gets asked a question that forces us to be prepared. For me it was "Where is your CV?"

WHERE WE AT?

2009-02-04T08:17:00.000-08:00

I believe i am at fear/depression and so are markets. Where do you think we are?? Please answer in the poll on the left.

I Teared

2009-01-20T09:43:00.001-08:00

I teared as i saw the crowds in the cold
as they stood at the foot of Lincoln
as they the faced the House as one man
faced it and said "I have a dream"
i saw hope

I teared as i saw two beautiful girls
one in regal blue and another in orangey pink
with bright smiles and joyous walk
the older slim and curious with camera
the younger bright and striking face
i saw my daughters

I teared as the Lady reached a hand
to squeeze the shoulder of the one
in love and in support as prayers were
thrown to protect their greatest gift,
their family
i saw my family

I teared as he recited the oath
with nervousness as the Lady smiled
next to him, a knowing smile
knowing him
i saw my wife

I teared as i heard him take the oath
as the words, i have heard before
as my father recited for me to follow
in fraternity, we shared
i remembered my father

I teared then when he spoke not as
a politician should, but as a Leader
that as we face crisis where data so
shocks and numbs, the greater loss
is the loss of hope, and the failure to overcome
i thought of friends who have lost jobs

i teared when he spoke with force, that
the time for hard choices is at hand
the time for leisure has passed
that we can hope, we can overcome
with belief in you, your family and together
with compassion and love, gifts all
i cherish my mother

i teared as his intelligence and strength
flowed with eloquence and detail
with words for a nation to be proud
and for nations to admire and hope
words to share, but not there to hear
i missed my father and father

i teared for it was a historic day
a great day, a wonderful dawn

d.

I am running a half marathon?

2009-01-09T07:39:00.000-08:00

WHAAATTTT...you say?

Well it started with a conversation with my wife where she related how her friend's husband was gonna run a marathon. Then this guy trains and makes only 27km in his training. On the day he runs the full 42km in 5 and half hours...a very decent time. I jokingly said i could run a half marathon and she scoffed. She scoffed!!!!!

So i told her i would run the half marathon in 2009....why the hell did i say half marathon...there is a 10km which would have been fine. But half marathon it is.

Then a few days ago i mentioned to a friend at work that i would run the half marathon. Another guy heard this and found it so amusing he posted it on our regional chatroom. It became a topic of discussion for a full hour. Then my big boss saw the posting and after laughing he came up to me and said I WILL TRAIN WITH YOU.

So on Wednesday we set up a run for friday from the office. We used this cool website called MapMyRun that mapped our run and gave us the distance the run covers. A glorious 5km.

Well today i ran.

My brain told me i had the confidence to complete, my heart said i had the courage,....too bad they could not convince my overweight body and asthamatic lungs. Well the good news is made 2km and then my calfs tightened and i felt like someone had grabbed the muscles in my lower back and was twisting it (like squeezing water out of a towel). TO put it bluntly, a very unpleasant experience.

Thankfully my boss did not make it. I was with my chain smoking colleagues Kevin S and Kevin C. As we ran, i was breathless and these two jokers were talking about work and they just ran and ran. Bloody singaporeans. They ran 6km, finished, drank their 100 plus and had two smokes each and said lets go. Bloody singaporeans.

So i have told my daughter, its ok to find things tough but you keep going...so the good news is i now know i am seriously f&)*ed in terms of my running capability and am fully motivated to complete this run.

So next friday, i run again with the two kevin's.

Can you name your top 10?

2008-12-08T07:35:00.000-08:00

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.

The Horizon

2008-11-26T06:46:00.000-08:00

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 :

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 a great economy. If only our leaders started focusing on it making it even greater.

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

What needs to be done?

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 have the makings of a great economy but we need to be more efficient and we need to develop our own sustainable economy. The only way to do this is to ensure the wealth created filters down throughout the system.

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.

The Pain is Shared (or will be)

2008-11-25T18:47:00.000-08:00

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?

Citibank & Malaysia - The Good, the Bad and The Ugly

2008-11-25T06:01:00.001-08:00

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.

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.

The Ugly

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

I paint a bleak picture and somehow feel i must constantly apologise for this but like i said - my goal is to show the really worst case scenario. I pray 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

Four Bad Bears

2008-11-20T22:21:00.000-08:00

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

2008-11-20T09:00:00.000-08:00

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.

Crisis - Lawyers, Rentals and the Vicious Circle

2008-11-18T07:25:00.000-08:00

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.

What do i do?

2008-11-15T09:15:00.000-08:00

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

2008-11-13T09:27:00.001-08:00

Subprime deconstructed

2008-11-13T09:04:00.001-08:00

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 -

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

2008-11-13T08:17:00.000-08:00

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

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 malaysia will first restruct its lending to corporates and to individuals. this will lead to tightening of credit. Some Good borrowers will go to 2nd tier banks like ambank. Ambank now gets to service a higher grade of clients and reduces its lending to the lower rated corporates and individuals. Ultimately corporates will not be able to pursue growth strategies. Their income drops and some will default and the cycle gets worse and once they start cutting jobs - recession will become a reality. At the same time, citi hq will request citi malaysia to return excess capital. So at the end of every quarter, citi malaysia will retain the min earnings requires to maintain their regulatory capital. The balance will go back to their hq's and less for the domestic economy. Everything is linked