photo courtesy of Mr Percy T., Poland 2017.
2017 has been a year of epic proportions and no storm, wind, hail, flood, fire or Godly wrath of any sort has been large enough to roil the good times as markets continue to party like its 2017, as if 2018 has not yet begun.
With the Northern hemisphere, UK, US, China and Canada sinking in their wintry depths, battered by bombogenesis (or bomb cyclone), typhoons lashing at part of Asia and volcanoes rumbling around, we pack up those Christmas trees on Epiphany in trepidation for 2018 because we have thousands of stupid people on Twitter (including the President of the United States) asking for global warming when global warming is precisely the root cause for the hot enough currents that is making Florida colder than Alaska, causing geckos to fall out of trees, frozen sharks to wash ashore in Cape Cod and the coldest night in history of the US while roads are melting in Australia as bush fires burn.
As we did our report card last week on 2017, it was a year for the mad, stupid, evil and greedy as we notice no there is no section devoted to logic, reason, altruism or compassion.
It has been a disruptive blitz in technological advances that left us breathless with all the changes, stressed for our livelihoods, helpless against global powers or corporations, vulnerable to hacks and overwhelmed in our finances. Learning invaluable lessons from 2017 and about all the injustices in much of the broken world where mental health problems are on the rise, what will happen to us in 2018 ?
There were the 2017 themes we have been right and wrong about, predicting violence, terrorism, climate change effects, hacks and malware, the rise of demagogical leaders, fake news, populism and nationalism and the end of cash in a new era of paranoia and fear with the rise of mental anxiety and stress.
Those themes still hold into 2018, setting the stage for the new normal in our daily lives. Fear and fatigue will set in for 2018 as we tire of reading about Bitcoin, Blockchain, Donald Trump, terrorist attacks, hacks from the new Meltdown and Spectre bugs, natural disasters and all that.
What sort of world and role models are the children of today seeing in their eyes ? And what do they think of it ?
Or does it matter at all, because everyone is getting dumber from using their smartphones ?
Source : Globe and Mail
All The Stuff We Wanted To Talk About But Changed Our Minds
When thinking about 2018, one gets virtually overwhelmed because 2017 has been one big mad disruption which went by like a bull on rampage, stock markets setting record highs and life truly got better for more people in the world.
Source : NY Times
We changed our minds because it would not make a difference just as if we spent too much time dwelling on stuff out of our control, like asteroids, climate change disasters, epidemics and the global population explosion.
Who would have thought that Singapore could register a 21 degree Celsius temperature in January 2018 ? Or the stuff that Elon Musk and Stephen Hawkings think will be the end of civilisation – artificial intelligence. Or all those other threats to the planet that is making nearly every single intellectual feel dismal about the future.
We would have liked to write about the all the information we cannot keep up with, the daily disruptions as A.I. takes over our lives and how the Internet of Things, Amazon’s Alexa in our lives will give us more time for online shopping, exercise apps, reading Chinese literature (772 HK) on an app, watching Netflix, listen to KPop, sexdolls and all those stuff that is good for economic growth that we wrote about last year.
We wanted to ask why Stephen Hawkings, Joseph Stiglitz, Elon Musk, Jack Ma, Salman Rushdie and all the top brains see the end of the world as we know it, in their own ways, when the global economy is running on run steam and there wealth is in the air we breathe as we smell prosperity in everything from Bitcoin to oil to taxi-hailing apps.
It would be good to talk about politics, the rise of autocratic leaders as Donald Trump which has emboldened the other dictators worldwide, and that all global citizens live knowing they are being watched by their phones, TV’s, laptop cameras, fridges, cars, Alexa, Siri, Google Assistant and Microsoft Cortana, by China, Russia and the NSA. Facial recognition, voice recognition and all that, with the rise of the “thought police” in totalitarian China ?
We cannot forget to mention the refugees as xenophobia, racism, ethnocentrism, intolerance and nationalism grows with Donald Trump publicising the silent thoughts of many silent fans, calling out the “shit-hole” countries as he prefers to deport the Dreamers that the richest man in the world, Jeff Bezos, has just set aside $33mio in scholarships for even as more Rohingyans trickle into Bangladesh, with 50,000 refugee births expected in 2018.
Instead, we would like to talk about us.
How 2018 will be a year where we will still go on with our daily lives, eat, sleep, sh*t and shop as usual, but we must remember to set aside that time to breathe and think even if we feel time is running out for us to make money with each passing day, to grab a bigger share of the wealth pie before another $2.8 billion in wealth is created when they list the next vegetable-selling-app in China, while we cling to our dream of producing a toilet-cleaners-app for our own billion.
Let’s Breathe and Think
“The principle is that you must not fool yourself, and you are the easiest person to fool.” Richard P.Feynman
$5 million is the new $1 million.
It gets scary when you do not know anyone in your social circle who is not a millionaire or close to a millionaire or would-be a millionaire with their inheritances on the way. As we said last week in 2017 Into 2018, For All The Mad, Stupid, Evil and Greedy People in the World, $5 million is the new $ 1 million with over $20 trillion in wealth added to the world since 2017.
Until you realise it is because you happen to live in Singapore, where the 3rd largest concentration of millionaires in Asia have amassed.
Source : Knight Frank
Maybe it is time to give ourselves a break compared to rest of the world even if the wealth gap continues to grow with Ripple-coin surging some 10,000% in the past month, making a handful of people extremely wealthy to join the class of 160,000 UHNW (ultra high net worth) individuals in the world with $30 mio or more.
For you see, Bitcoin and @coins created value out of air for the common chap. Yet with 40% of Bitcoin held by just 1,000 people and the co-founder of Ripple Labs owns 17% of the company, we cannot say that these ICO’s are helping millions out of poverty than they are widening the wealth gap.
Nevertheless, fortune favours the brave . Who would have though to buy Ripple-coin instead of the other one that went bust last week and who would have thought to buy any of those coins with every single central bank in the world coming out to warn about them (latest being Bank Indonesia) and their limited use in the real economy at this time ?
Breathe and Think.
We can attest that we are dumber this year because this post is taking twice as long to write with more mental effort to tear ourselves away from the phone, Netflix and online shopping for everything we do not need from Redmart, not to mention all those websites that deliver clothing from Norwich to you in 3 days.
It will get harder this year because MiFID II laws were launched on 3rd Jan 2018 which will take away a lot of free research away from our in-boxes and decent opinions will be harder to come by in an internet that is already stuffed with fake news like the latest misleading ICBM alert sent out to citizens in Hawaii due to a fat-finger accident by an employee.
Source : ABC News
There is really only 2 big themes for the markets we have for 2018. Something we would be able to grasp as easily if there was no other major disruptions in our lives except that enterprising folks are handing out pamphlets in Whampoa estate to elderly for smartphone tutorial classes while the rest of us are busy figuring out how to set up our Bitcoin wallets and others are scouring internet forums for the next big stock to buy to get those Chinese Literature 100%-returns (because 30% is the baseline expectations these days for any IPO).
Breathe and Think.
Every single commentary in the past 2 months from every single market guru has inflation on their radar …besides buying insurance by sounding heightened caution on the highest stock market levels we have seen in history so they can safely say, “I told you so”
Asset inflation is easier to imagine than ever because we firmly believe that 2018 will see major repricings ahead.
- Wealth Created Needs A Home
Imagine over $20 trillion in wealth created for 2017 and even more for the early days of 2018, we will have lots of money looking for a home which the bond market is providing for at the moment.
- Singapore Real Estate Rebound
21 en-bloc sales in 2017 raising $7.323 bio according to sgpropertyhome.com, means there is chunk of money to be deployed. 7 out of 10 people we spoke to in the past 3 months have bought an investment property or are seriously looking for one.
There is a lot of catching up to do for Singapore because HongKong suburbs are already valued at S$3k psf and those are all leaseholds.
Stamp duties do not work because the rest of the world have something similar.
- Equity Gains
Market capitalisations have added S$130 bio to the STI Index as stocks closed the year nearly 20% higher. That is money to be deployed if desired.
- Bonds Gains and Lower Interest Rates
Bonds have given average capital gains of 2-4% besides their coupons as interest rates have fallen substantially for 2017, bucking the global trend. Cost of funding has stayed minimally low which has buttressed lending towards asset investments.
Consumer price inflation is something Singaporeans do not worry about with one of the highest levels of income in the world, 2 dollars for a cup of coffee does not hurt with the median household income at S$ 106k (in 2016). Unlike her neighbours, the central bank is committed to keeping a strong currency which keeps imported inflation low.
Granted Singaporeans are to expect higher taxes ahead, it is still too early to speculate about anything drastic because of the caring for-the-people government committed to prosperity and equality.
Globally, the inflation picture may threaten to implode, for all the right reasons because just this week, we saw the 3rd largest employer in the world, Walmart, raise minimum wages for 600,000 out of the 2.1 mio people in her employ to US$ 11 an hour from as low a base as US$ 8 in some vicinities, in addition to giving a US$1,000 bonus to hourly staff.
China has been stealthily raising their minimum wages over the years and we can see the trajectory difference in recent years, boosting the average Chinese’s spending power to keep AliBaba on track to becoming the most valuable company in the world after gaining their Asian crown after briefly unseating Amazon in Oct 2017.
Graph depicting the path of growth of total wages in China and the US in the last 50 years.
With 83 million new births in 2017 and urban population hitting a new record of 54.4% (exp 54.9% in 2018), commodity prices have started the year on their biggest winning streak in history, given 2018 inflation cause for celebration.
Source : Bloomberg
It is understandable that sugar prices have fallen 32% in the past 12 months with every government demonizing the condiment, but as populations prosper, meat prices will rise while weather patterns have kept the other essentials on their toes. Crude oil prices surging over 40% in the past 6 months will ultimately feed into industrial costs as with base metals to feed the growing middle class’s ever increasing need for new electronics (that are not built to last these days).
Fruit fly larvae meatballs in Singapore, lab-grown meat from Israel and closed loop farming to the rescue ? Electric cars, alt fuel sources, wind farms ? Now, what about water ? Can we forget about gold as an inflation hedge when it is one of the harder ones to hack ?
Lastly, it is about time that pollution costs are meted to the carbon footprints of ours as the rest of the world cleans up along with China. U.K.’s coffee cup tax (Latte levy), the ban on plastics starting with straws coming from countries, cities and corporations like Pernod Ricard and Diageo, and much more to come as the world wakes up to the climate-change induced natural disasters of 2017. Say hello to higher costs and a cleaner Singapore River.
Breathe and Think.
The second theme for 2018 that we drummed up after reading dozens of outlooks would be the issue of complacency.
There is no doubt that the mood is one of heightened euphoria and extreme optimism (or substitute with greed). Folks think 30% is the baseline profits these days after Razer Inc and gang’s IPO’s.
No one can imagine a single scenario that would lead to a market correction in the near term with the sky as the limit for profits to be made from being fully invested in stock markets which may prove to be the new safe haven with bonds on a wobbly start in 2018.
Source : Bloomberg
Over $2 trillion has been added to global market capitalisation in the first weeks of 2018, as the US tax cuts gave investors a reason to rejoice before its effects can be comprehended and profits recognised and realised.
It is the anticipation of regret that affects decisions ?
We have sat through hurricane, missiles and terrorist strikes, 12 months of a US leader that is looking more lunatic and dangerous by the day, Brexit, rate hikes and martial law in parts of the world, who is stupid now for calling a Bitcoin and real estate bubble, stock and bond market top ?
The complacency of the “Buy The Dip” mentality has been so well ingrained into our heads and all the algorithms out there that there were no dips left to buy in 2017 (except for those Bitcoin moments).
Not to throw cold water on the party, but the same tax cuts that the world (not just the US) is cheering for will see a drastic reduction in stock buy-backs in the months ahead which is not that euphoric for the stock market ?
Breathe and Think.
Tax cuts in the US means the government will be chalking up huge initial deficits (more debt required) while waiting for the positive effects to materialise.
At the same time, all the major central banks are finally on the same page, recognising the need to normalise interest rates.
Governments are not making money from most of the wealth effect and President Trump has been on a rant against Amazon for getting “cheap postage” for US postal services (loss making) as the government looks to revive an “internet sales tax”.
Amazon is not the only FAANG member feeling the heat as Apple sales disappoint, governments and shareholders around the world are warning on the dangers of smartphones, Facebook comes under fire from reulators as it overhauls in 2018, Tesla struggles to deliver cars even as sales missed expectations, Netflix is facing competition from giants like Disney and Amazon, it calls for a hmmmm.
Intel and Microsoft, while not part of the club, has fundamental chip design issues to face in 2018 that has become a global problem.
With 5% as the new threshold to qualify as high yield versus a pre-crisis 6%, complacency seems to have enveloped the marketplace.
Chart of the dividend returns for HYG US (iShares iBoxx US$ High Yield Corporate Bond ETF)
Who is to blame when $5 mio is the new $1 mio, with too much money (with an extra $2 trillion in the first 2 weeks of 2018) chasing too few assets ?
Will governments and central banks sit by and watch majority of their voters without the $1 mio kill themselves trying for $5 mio or will they just legislate marijuana globally to give everyone happy highs? And watch charitable donations collapse at the same time with not enough tax incentives ……
That is something to breathe and think over.
We Are Not Done With 2018 Yet
We started 2018 as if 2017 has not yet ended, unwilling to take a break to milk as much profits as we can from the euphoric new highs as we also dislike to confess that we barely have time to breathe or think, in between shopping with our profits.
There is much to think about if we had the time and there will be so much for us to write about in the weeks ahead.
The digital disruptions continue as we write with the first e-sports league, Overwatch League, starting its first global season in Jan 2018 with a small prize pool of US$3.5 mio, complete with professional gamers ala footballers style.
E-sports will continue to take over mainstream sports even if governments are warning that overplaying is dangerous (read the Straits Times) and we find out that tech billionaires like Bill Gates and Steven Jobs raised their kids tech-free which is an easy feat for billionaires.
Heck. Singaporeans spent most time hunting for Pokemon in 2017 while Hongkongers spent the year goggling TV dramas, according to Google search which is a lot less profitable than Koreans and their Bitcoin craze.
More wealth will be added as we monetise more Blockchains, vegetable apps and perhaps someone will beat us to that toilet cleaner one. Yet as we get more alienated, some industries like Kpop and sex-bots will thrive, along with mental health related companies.
We want to think about why Stephen Hawkings, Elon Musk and gang see the end of human civilisation and talk about the impact of “predatory capitalism” that is inflicted on us by the digital monopolies that have become more influential and powerful than governments.
Is it possible for the new level of artificial intelligence to learn morals or stupidity ? Is it possible for a rogue A.I. to be developed to challenge markets ? We need to find out what Warren Buffet thinks of A.I. next.
We would wonder if those economic numbers and metrics that we have long relied upon are reliable as we wonder why GDP grows and people feel worse off, as ANZ chief economist, Richard Yetsenga, and former Greek Finance Minister, Yanis Varoufakis observed ?
“Europe has become a place where numbers are prospering and the people are suffering.” Yanis Varoufakis
Is it because “all metrics will be gamed” ? Have GDP and CPI lost their lustre as measures of human well-being ?
Source : Bloomberg
We see ourselves suffering from tech-fatigue in 2018 when the next Spectre bug attacks and we get tired of those voice and facial recognition/transgressions on our privacy.
We will question those central banks like the Swiss exchange-listed Swiss National Bank with its US$ 800 bio in stock (and some bond) holdings (profit of $55 bio in 2017) which makes the Bank of Japan’s stock price look pathetic. Who would invest in the Bank of Japan when they are getting negative returns on their holdings which explains their stock price, naturally.
5 year stock price chart of the Swiss National Bank vs Bank of Japan