Starting A Chinese New Year Part 1 – Confessions & Doubts

Chinese Year of the Snake starts on the same day as the most auspicious day of the Hindu religious festival of Maha Kumbh Mela with an estimated 20 million expected to take a dip in the River Ganges today.

The year of the Snake is expected to be a troubled, disastrous year.

Asian feng-shui masters predict scary stuff for year of the venomous “black water snake”

Do you believed that troubled times make people seek out religion ? Just a thought.

In a world of lost trust, the struggle with truths or half truths and betrayals has swollen to epic proportions. My skepticism of the markets and global leaders grow daily replacing the greed that has been the main driver of my trading philosophy.

I cannot say I have been right.

Today I would recollect an important event in my career in the early 2000’s. As a credit trader then, in a bank, I was roped into help out with constructing a savings cum insurance product to be sold to at a retail level at the bank’s branches. Pulling out a long list of BBB credits that were considered investment grade, we projected an initial tranche of 50 mio.

It was hardly a palatable yield then, paying over 20% after 8 years, principal protected and life insurance coverage of the same amount during that time. Knowing how much cut the stakeholders took out of the yield hardly helped in an enormous sense of guilt I accumulated because investing in a government bond of the same tenor, then, would have netted them just about the same return.

The product turned out to be a success and investments in excess of 200 mio was collected from retail investors, some of whom turned out to be acquainted to 1 degree of separation from myself.

I left the bank shortly after concluding the deal, driven partly by self inflicted remorse and for other reasons.

Some of the bonds included in the portfolio suffered in the ensuing years. Bonds like Ford and GM motors. People may not remember the 40 cent drop in Ford 2032 to 80 cents over 2 years and down again to 20 cents during the Global Financial Crisis.

Little did I know then how I was worrying in vain. For the product was successfully redeemed to the man on the street and none suffered detrimental harm. In fact, I helped do the savers a favour for the return was generous in the QE years of zero yields.

And Ford 2032, as a testimony to that, is trading at 144 last.

How quickly we forget and how quickly we adapt. The markets endure on but people are lost along the way.

Tuning into the current market euphoria, I cannot find any euphemism to replace the angst-y doubts that has been plaguing me since the start of this year and the sudden change in sentiments around me.  Doubts on valuations, doubts on the integrity of credit ratings, doubts on world leaders and doubt on horsemeat burgers and lasagna.

George Melloan: The Fed’s Asset-Inflation Machine : WSJ
Global ‘credit supernova’ turns 2013 bull to bear : MARKETWATCH
Spain’s Rajoy says corruption allegations are false : REUTERS
Spain PM publishes tax returns amid corruption scandal: REUTERS

New York attorney general probing three major rating firms: REUTERS

Beef lasagna contained more than 60 PERCENT horsemeat : HUFFINGTON POST
More British meals are expected to be found to be contaminated with horse meat within days, the Government has warned : Telegraph News

How long can this sustain ?

In Hong Kong, Rich People Live In Mountain Mansions And Poor People Live In Cages
In China, a Vast Chasm Between the Rich and the Rest – New York Times

Is this the wettest Chinese new year you can recall ? It certainly is for me. Devoid of much spirit now that my mother is not around which explains why I am home.

I just got back from buying pizza for dinner at a pizzeria, where horses would be found, that I cannot advertise for. 6.9 mio people in Singapore, huh ? I was definitely a minority there amongst the foreigners and the few Singaporeans who would be foreigners (couldn’t really tell). Incidentally, I choose the Banker pizza for my son’s dinner. Banker should be the last thing I could wish upon him, news reader and zoo keeper being my top choices. Better eat up the idea then.

What would I know anyway ? The markets are roaring, its one of those days you try to wash your face with toothpaste, and, best of all, I lost sleep (sometimes) for 8 years and the bonds turned out fine.

More to come tomorrow on trade ideas.