A View on the Credit Crisis

Over the past 12 months, we have seen the financial markets around the world take a beating. At first, many thought it was only going to be a US problem but as the crisis began to unfold, it looks like everyone is going to be affected in one way or another.

The world’s financial markets is so interconnected that it is hard to imagine Asia being spared the carnage.

Now, the US government has put together a bailout package worth US$700 billion dollars. The question in my mind is whether this amount is enough. I think the financial markets may have dug a hole so big, that it will take a long time to pull the markets out of that hole.

The scary part is, have we really gotten a grip of how large the problem is for the financial markets. My own take on this matter is that we have not. We are only looking at the fallout of the mortgage market. There is another “financial instrument of mass destruction” call CDS (credit default swap). As a layman, we are only beginning to hear rumblings of this instrument.

Basically, a CDS is a credit derivative that resembles an insurance policy. The swap is basically an instrument that gives a payout when there is a default or “credit event”. However, it is in a part of the financial markets that is not regulated or monitored. With so many CDOs and bank failures, I am sure a lot of calls would have been made on these CDS. But can the issuers of these CDS pay? Looking at the amount of CDS issued, I am not sure. It is estimated that the total outstanding CDS is about US$45trillion. Even if 10% were to go bad, the amount would be in the region of US$4.5 trillion. Looking at the bailout package, it is hardly going to make a difference.

I feel the need to write this entry as I hold the opinion that our markets will head a lot lower before it bottoms out. Only time will tell if I am right.

Travelling Alone

Travelling alone can be quite intimidating at times if you are not used to it. Over the years, I can safely say that I have travelled quite a bit. Having studied in the US during my college days, flying long distances has also never been a problem for me. However, it was only in the past few years that I began to like travelling on my own; especially to regional cities like Hong Kong.
This brings me to the present, sitting here at the airport lounge in Hong Kong, waiting for my flight back home to Singapore. Looking back at the last 24 hours, I must say it was rather fulfilling. My colleague took an earlier flight back to Singapore the day before.
Being alone is not that bad. The only problem is food. It is hard to order for one person, especially with Chinese food. I have gotten over the eating alone bit sometime back.
Well, I decided to walk into one of my favorite restaurants in Hong Kong, the famous Yung Kee.
I stared at the menu for sometime before deciding to order myself a plate of roast goose rice and a plate of green vegetables (por choy) cooked in chicken broth. True to form, the roast goose was cooked to perfection. The skin was crispy and the meat was juicy. The vegetable was good but the portion way too big for one person to finish. Nonetheless, it was a very good meal. Well, at least now I know what to order when I am alone.
I best get going since it is the last call for my flight. I will most likely post this entry up when I get back to Singapore.