Hi John, I think I will have some of that Alice in Wonderland Tea you are serving; while you are at it, pass the hallucinogenic shrooms, and give me a hit off that 100% natural herb tobacco bong. Oops, my American education and Jewish fraternity experience is now on full display:0)
Last night we attended my friend’s traditional leading contra-indicator party. You know, the one that was in the past decade dominated by subjects such as Dragon Economies (9% forever), HK real estate (2,600 sft ocean view apartment @ USD 5 million, with more upside, having already rose from USD 600k just 10 years before), Red Chips (China companies reaching for the heavens because of god only knew what). Then the tradition party turned into a lagging indicator … RedChip Collapse, Indo/Thai Collapse (host said that year, ‘I hope we will all still be here next year’), HK Property Collapse (-60%), DotComing (everybody was a genius in that year, and sushi sashimi was catered from Japanese restaurant), CyberRedChips (Mainland Chinese cyber companies – a truly deadly combination), DotWent, and now, this year of Financial Collapse?
This year’s party, with basically the same set of families (10), served ‘the best I have ever tasted’ steak, truffles, lobster, various pates, wine, and many delicacies that escaped my senses, plus Cuban cigars for those who smoked. The traditional and gracious host, after one year of cooling his heals from the last job, just landed a new one as the Group MD for a multi-billion dollar private company with no line responsibly and a cash hoard of billion plus to baby-sit. No, I do not know where to get a job just like his.
A curious consensus concerning 2002 emerged from the male group after the traditional post appetizer splitting of the husbands and the wives: no idea where to put money to work (including the billion plus dollars of corporate money); good time to practice golf; catch up on sleep.
The complete absence, for all practical purposes, of compelling ideas was Alice-in-Wonderland-isc, given the street-smarts (flim-flam stock market manipulation, VC startups), professional experiences (consultants, metal trading, Vice Chairman of edible oil firm), network nodes (HK, Taiwan, China), capital (up to a billion), and education (Caltech, Harvard) represented at the party. Ideas thrown around were lackluster ones such as Hong Kong and Shanghai Bank preferred, Standard and Chartered Bank Sr. debt, at around 6-7% yields, market neutral (but not risk neutered) merger arbitrage (25% annualized return on 1:1 leveraged basis), and Shanghai residential property (illiquid, yielding a net of 7%, in blocked local currency). Risk-averseness ruled the dark night.
The ex-market maker has all his millions in USD fixed deposits, and is cutting back on spending in line with reduced interest income.
The Global Crossing debt held by the host and I became the funnies and moral story for the evening.
Treating the party as a leading contra-indicator will result in a preyed for strong V recovery of the economies and markets, accompanied by loose money and easy gains. Treating the gathering as mere leading indicator says we are going much deeper into what we are in already.
I do not know and I am not convinced, of what I have no clue, when I have no inkling. A new SUV is out of the question, and a cut of the wife’s allowance seems only prudent.
Oh, FWIW, one idea generated in passing by a bond trader but seemingly dismissed by all except Jay is ‘short gold, and long un-hedged dividend paying gold shares’, possibly afterburner boosted by a short Yen position.
Chugs, Jay |
