Bond Revolution In Singapore : Remembering 2008
Reading something I wrote 6 years ago feels like I am reading something for the first time.
By a stroke of luck, I found an old blog of mine with an entry back in 2008 during the time of the Lehman collapse.
More entertaining than educational, I thought it would be a nice touch to share with readers how I was feeling then, as faint a memory as it is to me now in 2014 and as melodramatic as I was then.
Minimal editing done, took out the word God etc. and names have been replaced with initials.
I hope you enjoy the read for I daresay you not will find another Singaporean market experience documented for that time and thus, it shall be quite unique.
Let me know if you want to read the rest. I managed to find a few more posts if readers are keen.
Saturday, September 20, 2008
Ground Zero – Financial Catastrophy
Saturday was good too. Rushing around and celebrating the Mid Autumn festival at my mom’s grand party. The beauty of the full moon in her splendour and my mom’s orange balloons drifting off into the night sky.
I felt a certain premonition on Sunday afternoon when M had a call from New York urgently requesting for his bank’s exposure to Lehman in a report. Hmm… something slack about his bank for mine had already compiled that report.
It was an sms on Monday morning 530 am which was the beginning of the nightmare. It could not be true. Lehman did not manage to get itself sold ??
As if it wasn’t bad enough. AIG was next. Is there no end to this turmoil ??
Run on AIG next. Goldman, MS and GE under pressure. Next day HBOS. Then Macquarie. Total mayhem.
I was a robot. Call after call. Each lower price was hit. My positions dying. Lost a third of my Pnl for the year. It is not over yet. More calls and I saw my hard earn profits shrinking. Mark to market losses mounting. There is real suffering out there.
Its been 2 years since I saw the deadly toxins in the CDOs and CPDOs which everyone had lauded. I felt stupid when I did not understand their complexities as I failed to understand the logic behind the product. I thought it was a frail structure indeed. Yet the world bought it and is there not wisdom in masses ?
I had shorted the markets last year. Seeing that the financial system could not support exponential growth on such high levels of leverage. I was wrong then. I had turned long recently thinking that the worst much be over after calamity had struck Bear Sterns. I was wrong again.
11 years ago, I joined the market during the Asian crisis. I had not fully comprehended the scale of the disaster then. I sat through Sep 11 supported by an experienced boss. SARS and Iraq war too. Now I am alone. I had to be the calm voice of reason to the rest of the team, depending on me to make the prices in the face of their desperate customer calls. I had to manage my rate positions alone and try to reduce credit risk. Its all too overwhelming. Holding the composure when my own personal wealth was being decimated. It does not hold to reason that I was aware of the crisis and yet cannot help myself out of it.
No one will be spared.
While the Asian crisis did not affect me years back as I had nothing. It did affect my career. It did create years of low payouts and small pay rises. While the investment bankers benefited, now they are mostly last to lose out which is so unfair.
Will it get worse from here ?
Yes. Like every tsunami, there are waves. We have just seen the first shock. The second wave will be the full blown one, which we will expect, as our economy sinks with the banks, the lifeblood of the system, then the smaller waves will batter us still. Till it all dies down.
Now that the US has created a superfund. Yes. Its good but I am already squared for my losses. I will not rush in to put on a trade yet. Personally ? I am sore that I had cut my longs which would have returned the money to my pockets. But is it too late ? No. Never too late. No rush.
One lesson I have learnt. No mercy. No mercy till the pain is too much to bear. Everyone is selfish and self centred. From Dick Fuld to KDB to AIG to the FED. They all were waiting for someone else to make the first move. Could this have been averted ? No. Because then, no one would learn anything. And this is the way life works. Lessons would never be learnt and gratitude would never be earned if nobody gets hurt. So who made the first move ? Yeah .. the man on the street did. The bank runs, the insurance runs and the money market fund runs.
Financial systems were never made to handle a crisis. It works like a well oiled mechanism. But if one wheel breaks, the entire chain fails. We have all been living off a ship leveraged from a lifeboat. Whole world inflated on human greed and ignorance. When the ship deflates, many lives will be lost as the lifeboat sinks.
I know things will be different tomorrow. I know the self centred world has yet to show their cards. I dont know how many more cards they have left to play and whether China and gang will come out to help. Or help themselves ?
Asia will definitely weather through this. They have learnt – no mercy and save for a rainy day.
I just know that I better adhere to the strictest of risk management disciplines now. I have not missed the boat and all this is happening for a reason. This brings to mind the fact that I missed out on becoming an big wig Asian credit trader in 2003 because of my big loss after the crisis. Miss Skeptic here had lost money when the rates went to zero and again when she changed her mind and rates went up after that. I had been right all the long. Same as now.
But was it not a good thing ? I would not have made it as an Asian credit trader and in these times, they are a dime a dozen, all looking for jobs. I am a niche market trader of SGD corps. That is worth a bit more. Big picture outcome so far – good.
My deep gut feel now is that the world will drag through this like a wounded animal. A wounded animal is a dangerous one because they have nothing to lose. We may see the end of globalisation and we may even see a war. I have never experienced a war before and never imagine I may in my lifetime. But then again, I never dreamt that the financial crisis would erupt into this mess.
For once, I am not so sure anymore. Just wait for healing.
Thanks for sharing this post.. the emotions are so real.. so raw.. a good reminder that the exuberance of the market will end some point in time.. prob when we are the most complacent.
Could you send me the other posts too? thanks:)
Thanks for the post. Definitely keen to read the others for educational purposes. I’ve read “Too Big To Fail” so have an idea of what happened at a high level, but your narration definitely put things in a different light of the guys at the trading desks.
Were you doing fixed income trading at 1 of the international banks in those days?
What I remember about end 2008 (it must have been around November, cos I was working in Geneva then and the sky was dark by the time I left the office most days at 5pm), I go home, switch on CNBC, and day after day the indices were down by 3-digit figures… crazy stuff…
To the extent that you can respond: at the trading desks, rumors are a dime a dozen – how do you “discern” what is believable / actionable and what is not? I mean, on pretty much every investment website (Marketwatch, CNBC, etc.) there are people calling a crash every other day, so someone’s bound to be right at a certain point.
I feel that, to some extent, we overly demonise the guy (Chuck Prince?) who said that when the music is playing, you gotta dance – if you don’t join the dance, there is no money to be made. Of course the million dollar question is to know when to stop…
I cannot believe I thought of writing all that down for posterity for a time like now when I barely remember any of it.
Yes, I was on the trading desk of a global bank then.
CDOs were all the rage and it was a game of following the Jones for the banks to jump in when their competitors started doing the same.
Will dig out the rest and put to print.
Wow, what an article man…. Looks like a scene from the wolf of wall street….
Just wanted to ask you. You recently indicated that S&P would go for a rally (the story of the bears), do you still think so, or the correction and so the bear market has already started for the equitites…. Reading this above article makes me ask this.
It would be great if you can write an article on your views of 2015 equity market now (after the correction in S&P started) and also, the Singapore property market in 2015 – 2017.
Latest view http://126.96.36.199/market/equity-monday-fomc-the-5-diamond-edition/
Buy on dips and I am going by my buy new moon – sell full moon hypothesis (new moon this weekend, I think).
All positions are short term and trading only.
There will be no clarity.
Will find time to write the outlooks. Too busy baking fruitcakes daily now till Xmas !!!
Merry Christmas TH