Crisis

Do you have a sense of crisis?

The financial market is usually the leading indicator of any economical movement, because our forecast is based on a 12 month horizon, we are exposed to different industries and sectors, we look at macro factors in a collective effort, we look at trends more than anybody else.

The recent market turmoil triggers a lot of concern over the uncertainty in front of us. The market downturn, the US recession, liquidation problem spills over Asia and as a result the HK stock market got a punch in the head, most of the stocks were traded down from 30sth times multiples to 20times. Investors are switching from growth to value, everybody is parking their money in the safe haven or just holding cash with an attempt to preserve capital amid market downturn.

Citing my firm as an example. In a matter of 2 yrs, our AUM has grown from 9 bn USD to 17bn, our profit was double every year, and so as our investment team, we have expanded from 20 headcounts to almost 30 now. Just because we have over-achieved our budget over the past few years, we spent money with our eyes closed, hiring expats, commissioning meaningless renovation works, over-expanding back office which is ironic because most firms would outsource back office to manage cost and improve efficiency. So what is happening now? Our AUM has dropped from 17bn to 14bn now, that's a combination of redemption and investment being devalued. The devaluation would lead to under-achieve our budget, which is an ambitious goal set last year, lost in performance and management fees, directly affect the top line negatively. We will start cutting cost to salvage our bottom line, laying off the redundancy, cutting the expensive but under-performing staff, slashing the unnecessary benefits ie. free coffee and coke and the weekly fruit distribution. We probably will not get any raise this year even though the inflation is more than 4pct and HKD is depreciating 8% against Rmb, and we shouldn't be opportunistic about our bonus this year either...

And we are not alone here, because the impact would be even more prominent in the sell side. One firm has gone bust already and who knows who is the second one. Rumors had it that the next one is ML or Lehman (don't quote me on that), and now MS seems to fair better than any other firms. Some has already started laying off analysts, even the warm seats and the untouchables can be at risks.

Just a week ago, my older colleague gave me his precious two cents, which I agree 100%. "Don't think you can keep your hands fold because the market is turning south and it's difficult to make a call, you should work extra hard to prove your existence." The most vulnerable is who are still living in the comfort zone, without a sense of crisis can be dangerous. Even the market may not be as bad as we think, the problem is a chronic illness that can prolong for years.

Unarguably US is going down, are we seeing HK peaking out? China is still flourishing at least domestic demand and fixed investment are still strong, TW will see stronger tie with China with Ma winning the election, transpacific trading activity is going to come off as US consumer demand weakens, China's financial market sooner or later will become more sophisticated, and H shares turning back to the domestic market for financial fundings... HK position seems to be very vulnerable, the story of its being the window for China will eventually play out, our currency is a baggage instead of a safe haven, our political system is more a detriment than freedom.

Speaking of living life to the fullest, I enjoyed 1994 Chateau Mouton Rothschild with abalone and sea cucumber last night. This is probably one of the best that I have tasted, its full bodiness and aroma is distinct in nature, impeccable balance and density of flavor, the flavor transforms itself from the first sip to the last. I don't like to use its price tag to value wine. The best wine should represent an experience, a fantasy, not just a drink to go with your meal.

Went to Maroon 5's concert during the week, although not a big fan of their music, it is still fun to hang out with people, seeing crazy teenagers gone buzzed, drinking beer out of the jar.