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

It has been almost a week and this is the first day I have the energy to write about it with a semblance of mild sanity after the the shock and incredulation which has overcome me for the past week.Friday the 12th should have been the happiest day of my life. Before everything came crumbling. Life was good then. I had gone for lunch with the boys at Old Airport Road, eating a mighty feast of hawker fare. Then adjourned to buy the F1 shirts for the rally next week.Friday was good. I woke up at 3 am Saturday and checked that the Dow had rallied overnight and the Fed was holding talks to sell Lehman Brothers over the weekend. Bonds had sold off and all was good. Praise the Fed.

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 ??

I went in to work early, still hoping. Heart was dead lead.Merrill Lynch was bought by BOA for almost twice its closing price on Friday. Cheers from the market. Calm before the storm.We had until noon on Monday before we would know if Lehman was filing for Chapter 11. Struck a dead chord in my heart. I waited till 1210 before heading out to lunch with R. Stomach in knots unable to eat and dimly aware of the world around me. Sms came from E while I was sitting by the river that Lehman had filed. I could not finish my noodles.

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.