Corporate Bond Yield Spreads - Unbelievable!!!

RGE: The comparison of cash bond and CDS indices shows that the real action in corporate credit markets is taking place in the cash bond markets, in both the investment grade and the high yield segments. After Lehman’s default, a heavy selloff in both investment-grade and high yield bonds took place that sent cash bond spread higher than their CDS counterparts (‘basis’ definition = CDS spread – asset swap spread rather than bond spread, but results are similar) in a reversal of fortunes since the start of the credit crisis. A negative basis used to be common in the good old days when the building up of leverage in structured products required the sale of large amounts of credit protection. The unwinding of these structures instead sent CDS spreads higher than cash bonds during the crisis. Until mid-September.

Brazen Commentary By BIS

The latest commentary by the highly respected Bank of International Settlements:

Overview: global financial crisis spurs unprecedented policy actions Financial stability concerns took centre stage once again over the period between end-August and end-November. In the wake of the mid-September failure of Lehman Brothers, global financial markets seized up and entered a new and deeper state of crisis. As money market funds and other investors were forced to write off their Lehman-related investments, counterparty concerns mounted in the context of large-scale redemption-driven asset sales. The ensuing sell-off affected all but the safest assets and left key parts of the global financial system dysfunctional. With credit and money markets essentially frozen and equity prices plummeting, banks and other financial firms saw their access to funding eroded and their capital base shrink, owing to accumulating mark to market losses. Credit spreads surged to record levels, equity prices saw historic declines and volatilities soared across markets, indicating extreme financial market stress. Government bond yields declined in very volatile conditions, as recession concerns and safe haven flows increasingly outweighed the impact of anticipated increases in fiscal deficits. At the same time, yield curves steepened from the front end, reflecting repeated downward adjustments in policy rates.

Emerging market assets also experienced broad-based price declines, as depressed levels of risk appetite and associated pressures in the industrialised world spilled over into emerging financial markets. With confidence in the continued viability of key parts of the international banking system collapsing, the authorities in several countries embarked on an unprecedented wave of policy initiatives to arrest the plunge in asset prices and contain systemic risks. Market developments over the period under review went through four more or less distinct stages. Stage one, which led into the Lehman bankruptcy in mid-September, was marked by the takeover of two major US housing finance agencies by the authorities in the United States. Stage two encompassed the immediate implications of the Lehman bankruptcy and the wide-spread crisis of confidence it triggered. Stage three, starting in late September, was characterised by fast-paced and increasingly broad policy actions, as responses to the crisis evolved from case by case reactions to a more international, system-wide approach. In the fourth and final stage, from mid-October, pricing patterns were increasingly dominated by recession fears, while markets continued to struggle with the uncertainties surrounding the large number of newly announced policy initiatives.

Lehman Brothers bankruptcy triggers confidence crisis In this environment of tension over the continued viability of Lehman Brothers, financial market developments entered a completely new phase. The spotlight was now being turned on the ability of key financial institutions to maintain solvency in the face of accumulating losses. The trigger for this new and intensified stage of the credit crisis came on Monday 15 September. That day, following failed attempts by the US authorities to broker a takeover by another financial institution over the weekend, Lehman Brothers Holdings Inc filed for bankruptcy protection, one of the biggest credit events in history.

p/s photos: Janet Hsieh Yi Fen

A New Must In HK - Bo Innovation

If you are like me, having to go to HK a few times a year, here is a new, something brilliant, decadent, yet enthralling place for your senses. The restaurant is called Bo Innovation. It was featured elaborately in Anthony Bourdain's show when he visited HK.

The place is not easy to find if you are not familiar with HK. Ask your concierge, its on Ship Street, off Johnston Road. The restaurant basically is similar in many ways to the brilliant molecular gastronomy expert Adrian Ferria - Ferria operates El Bulli in Spain, also featured by Anthony Bourdain. Some of Ferria's creations: skinless ravioli, the carrot and parmesan foam, etc...

Yes, it is bloody pretentious. Those who support the movement says it is deconstructing a dish and its ingredients, and rebuilding the ingredients in another form - but why??? OK, I can understand the fun of it, playing around with your food. I think once in your lifetime is sufficient, just to say you have sampled it before. Try not to take it too seriously, its fun with friends.

Trickery and surprise aside, the food is very good. I mean if you like hairy crab, which goes well with Jiangsu vinegar... but you will never get it in the form of a Hairy Crab Souffle with the vinegar. It surprises you, and because when you deconstruct, you are basically "alienating and preserving" the vital essence of those ingredients, thus when you reconstruct the dish in another format, the flavours and tasting experience are "enhanced"... i hope I am putting this correctly.

Bo Innovation is helmed by Alvin Leung, my kinda guy, cooking and supervising with a cigar lighted up. Irreverent and noisy, and Alvin is a pretty funny and loud guy which adds to the atmosphere, and service is par excellence. The food is a fixed menu de`gustation @ HK1,080 pp or HK1,680pp with wine pairing. When you are paying those prices, pleaasseee go with the wine pairing for a complete experience.

Awarded 5 Stars - By South China Morning Post

Awarded 5 Stars - BC Food Guide

Best New Restaurant in Hong Kong - Food and Wine Magazine

I doubt I will be going to Spain to purposely sample Adrian Ferria's concoctions. I am quite fascinated with Alvin's presentations though, not too out there or weird like Ferria. His is more a deconstruction and reconstruction process, showing his innate understanding of ingredients and how they interact. If you click on his menu, you will find a dazzling array of dishes being served your way the whole night.

Is it pretentious? Yes, certainly. Is the food good? Pretty exceptional, considering the hype. In fact, Alvin could do very well as a traditional chef probably anyway. Its fun, its a celebration of human ingenuity and creativity - live a little.

US Treasury Yields Near Zero

WASHINGTON - THE panic in global financial markets has sparked an unprecedented rush into safe US Treasury securities, driving yields on short-term government notes down to almost zero.

Due to stampeding demand for safe short-term investments, the US Treasury's four-week and three-month bills on Friday yielded an effective rate of 0.01 per cent - down sharply from 1.515 per cent and 1.785 per cent, respectively, in early September.

Other Treasuries are also showing record low yields. The 10-year bond yield fell as low as 2.505 per cent and the 30-year bond yield slid to 3.005 per cent at one point on Friday. The six-month bond yielded a mere 0.20 per cent.

The low yields reflect a surge in demand for these instruments, seen as the safest in the world during times of turmoil.

'Investors seem to be content to sell stocks and park into the bonds for now,' said Mr Greg Michalowski of the financial website FXDD.

Analysts say the fear factor has pushed up demand for Treasuries, since investors are virtually certain the US government will not default.

Other factors include worries about deflation and the overall trend in interest rates, with the Federal Reserve having cut its base lending rate to a historic low of 1.0 per cent, and further reductions possible.

But Mr Bob Eisenbeis, analyst at Cumberland Advisors, said the unprecedented low yields are a sign of 'dysfunction' in markets.

Eisenbeis said US municipal bonds are paying upwards of 6.0 per cent tax-free and corporate bonds even more, but that fears of default and a lack of knowledge about underlying bond quality have led investors to shun these alternatives.

One reason for the surge in demand for Treasuries, said Mr Eisenbeis, is the Federal Reserve's decision to flood financial markets with liquidity including through other central banks.

Many central banks and commercial banks are reluctant to use this cash for traditional lending, and are buying Treasuries to ride out the storm, Mr Eisenbeis added.

A big question for the market is whether the Treasury market has become a bubble that will burst.

Although the low rates allow Washington to borrow money cheaply, Mr Eisenbeis said such a scenario could be perilous for the economy and the dollar.

'When you have this huge flood of liquidity into the marketplace, that can't last forever,' he said.

A bursting of this bubble could mean a rush out of Treasuries, forcing the government to pay higher rates on an unprecedented amount of debt.

'We would have huge increases in our costs and people wouldn't want to hold Treasury obligations anymore because of the capital losses,' Mr Eisenbeis said.

'You could have a huge switch in interest rates very quickly.' Mr Mike Larson, an analyst at Weiss Research, says the long-term bond market could be 'the biggest bubble of all', worse than the dot-com and real estate bubbles.

'Treasury bonds almost never move this far, this fast. And interest rates, which move in the opposite direction of bond prices, almost never fall this far, this fast,' Mr Larson said.

Mr Larson said the yield on the 10-year Treasury bond plunged from a mid-October high of 4.08 per cent to nearly 2.5 per cent this week, 'yielding lows not seen since the mid-1950s'. 'There are lots of reasons to believe this Treasury rally is unsustainable, and that a day of reckoning is fast approaching,' he said.

Mr Sal Guatieri, economist at BMO Capital Markets, acknowledged that 'investors are throwing money at Uncle Sam with the same conviction that they bought houses and dot-com stocks in their heydays'. But he argued that if inflation is quashed and investors retain confidence in the US government, the dangers have not yet hit a boiling point.

'While Treasuries may be overpriced, they probably are not yet in a bubble,' he said.

Comments: The continued buying of US Treasuries indicates a few major conclusions:

a) the aversion to corporate bonds, the risk in corporate defaults is still high

b) the aversion to risk is very high, many are willing to accept 0% yield to be in USD

c) that the markets are unconvinced on the measures promoted by the government so far

d) the anticipation of more major corporate collapses, and maybe even more bailouts to come

e) the aversion to stocks of any kind, even US stocks, hence we are seeing no flow of funds to emerging markets for now

f) the zero yield is the most important indicator that financials and credit markets are not working properly

g) corporates will have enormous difficulty to raise funds or even renew their funding

h) the pressure has mounted significantly for governments to do a lot more to unfreeze credit markets

i) this will cause most companies to hoard cash rather than reinvest, in other words companies will be cutting back operations and capacity further, a priority will be to push down inventory

j) If investors are willing to hold zero yield Treasuries, its a telling sign that people want to be in CASH but not in a bank as they do not trust their money within any banks

doraiddd has left a new comment on your post "US Treasury Yields Near Zero":

k) this notion that us treasuries are also the safest asset class to be in will be soon proven to be the ultimate fallacy... and fantasy...

l) us treasuries are the last remaining asset bubble left. Expect the chinese, arabs and the japanese to unload soon....

m) when the panic stampede starts outta us treasuries, where u gonna hide? where u gonna run? who's gonna save you??

n) maybe perhaps king midas himself...?


Expect a trying week for stock markets globally. Not a nice way to end 2008.

p/s photos: Zhou Wei Tong

Bangkok Update

BANGKOK - LOYALISTS of exiled former Prime Minister Thaksin Shinawatra met on Sunday to counter a sudden bid by the main opposition party to form a new government it says will lead Thailand out of political chaos.

The move comes after protesters recently paralysed the capital Bangkok and shut down its main international airport, stranding more than 300,000 travellers and dealing a heavy blow to the country's tourism-dependent economy.

The government was dissolved by a court order on Tuesday for election fraud. A number of members of ousted Prime Minister Somchai Wongsawat's People Power Party, who owe their allegiance to Thaksin, regrouped in a new one, the Pheua Thai Party.

Phuea Thai members selected Yongyuth Wichaidit, a former senior Interior Ministry official, on Sunday to head its ranks and grapple with the opposition Democrat Party for the job of prime minister.

The Democrat Party announced on Saturday it had mustered 260 lawmakers in the lower house, enough to form a government with Oxford-educated party leader Abhisit Vejjajiva as the new prime minister.

The house has 400 members from single constituency elections and 80 party list members. At present, 441 seats are occupied with the remaining vacant, which means a coalition needs 221 members to form a government.

Surapong Tovichakchaikul, a Phuea Thai lawmaker, said the party can muster a coalition of at least 226 lawmakers. The counter-claims by the Democrats and Phuea Thai indicated that either party was exaggerating its strength, or some coalition members promised support to both sides.

The political wrangling, taking place during a still chaotic situation after Bangkok's Suvarnabhumi airport reopened on Friday, will not be resolved until Parliament meets within the next 30 days, and the two coalitions will have to prove their majority. No date has been set for the assembly.

The former ruling party said it would not give up the fight and warned of renewed violence.

'Right now the Democrat Party still can't form the government.

Things still haven't settled down. If Phuea Thai forms the government, the yellow-shirted people won't stop. They will come back,' said Chuvit Pitakpornpallop, a Phuea Thai Party MP referring to supporters of the anti-Thaksin People's Alliance for Democracy who wear yellow clothing at demonstrations.

He said a government by the Democrats would in turn inflame the 'red shirts,' followers of his own party.

The Democrat Party is supported by the alliance, an activist group that headed mass demonstrations against several recent governments led by Thaksin and his allies. The protests culminated in a weeklong siege of the capital's two airports.

Democrat Party Secretary-General Suthep Thaugsuban told reporters that negotiations with the other parties had been 'the smoothest discussion' he has ever had because everyone realised the country's stability was at stake.

'This was the hardest decision we have made, but the country needs to move forward. We have to think of the country's survival and so we apologise to our MP friends and the people who support us, but we can't work with them anymore,' said Boonjong Wongtrairat, a representative of a faction of 37 MPs who defected from the government camp.

Sombat Chanthonwong, a political science professor at Bangkok's Thammasat University, said many would find it difficult to accept Abhisit as the new prime minister because he did not emerge from an electoral contest.

'How can we have a prime minister who doesn't come from a democratic process? I don't get it,' he said.

British-born Abhisit, 44, is an articulate, sophisticated politician but critics say he is out of touch with ordinary people, particularly the rural majority, and lacks charisma.

His party's supporters include Bangkok's middle class, influential military figures and foreign investors who see him as a stabilising force.

Thaksin is still popular among the rural masses, reflecting the deep divide between the urban elite and the country's poor.

The political developments came as the country's main international airport was being restored, although an airport public relations official said on Saturday it could be at least a month before traffic was back to normal. The official spoke on condition of anonymity because she was not authorised to speak to the media. -- AP

p/s photos: Amigi Feng Yuan Zhen

Some Respite For Thailand

AP: Thailand's opposition Democrat Party said Saturday it has gathered enough support to form a new government, raising hopes that the country can emerge from a paralyzing six-month political crisis.

Democrat Party Secretary-General Suthep Thaugsuban gathered with other Thai members of Parliament for a meeting Dec. 6 in Bangkok.

Party Secretary-General Suthep Thaugsuban announced that his party has the backing of 260 lawmakers in Parliament's 400-seat lower house, giving it a majority and allowing it to form a government.

But given the chaos of recent months and deep political and social rifts, the apparent Democrat triumph will not be assured until Parliament meets within the next 30 days to vote on whether to endorse party leader Abhisit Vejjajiva as the new prime minister.

An activist group, the People's Alliance for Democracy, has spearheaded mass demonstrations against several recent governments led by exiled former Prime Minister Thaksin Shinawatra and his allies which culminated in a weeklong siege of the capital's two airports.

The Democrat Party remained on the sidelines of the protests, but sided with the alliance.

The sudden rise of the opposition party came amid anxiety over the illness of 81-year-old King Bhumibol Adulyadej, regarded as a cornerstone of stability, and fears that a new prime minister close to Mr. Thaksin could again ignite mass protests.

Mr. Thaksin, a former telecommunications billionaire who was ousted by a 2006 military coup for alleged pervasive corruption and abuse of power, remains at the center of the country's instability.

Politicians who switched from the pro-Thaksin camp to the Democrats said they did so because the outgoing government was clearly unable to run the country.

"All parties agreed that this is the best way for tackling the national crisis. We have selected the best choice for Thailand," said Ranongrak Suwanchawee from the Phrua Phendin party, one of four in the former ruling coalition to join the opposition.

Thailand Seeks a Way Out

As political unrest has grown in recent months, Thailand's economy has suffered.

Mr. Abhisit, 44, born and educated in England, is an articulate, sophisticated politician but critics say he is out of touch with ordinary people, particularly the rural majority, and lacks charisma. His party's supporters include Bangkok's middle class, influential military figures and foreign investors who see him as a stabilizing force.

Friday's official reopening of Bangkok's Suvarnabhumi international airport, still partially crippled after the siege by anti-government protesters, had raised hopes Thailand was emerging from the chaos of the past months. However, many Thais were also following with trepidation the health of the revered monarch. The palace announced Friday night that the king was suffering from an inflamed throat and fever after he failed to give his annual birthday address.

The siege of the capital's two airports by the protest alliance trapped more than 300,000 travelers and dealt a heavy blow to the country's tourism-dependent economy. Suvarnabhumi was operating at only about 50% capacity Friday. An airport public relations official said operations were stepped up Saturday, but it could be at least a month before all flights were back to normal. The official spoke on condition of anonymity because she was not authorized to speak to the media.

A number of members of ousted Prime Minister Somchai Wongsawat's People Power Party have regrouped in a new party, Pheua Thai, which called an emergency meeting Saturday evening when it learned that some of its members were switching to the Democrat camp, The Nation newspaper said on its Web site. It quoted a former People Power Party member as saying 37 of the party's lawmakers would support the Democrat Party in its effort to lead a coalition.

Thaksin and his ex-wife, a highly influential figure during his years in power, are hated by many of the country's elite, who charge that they were trying to usurp royal authority. Their November divorce is widely regarded as a ploy to reduce their individual legal liabilities and preserve the family fortune.

But Mr. Thaksin is still popular among the rural masses, reflecting the deep divide between the urban elite and the country's poor.

Friday night's celebrations of King Bhumibol's birthday -- marked by fireworks and crowds of people holding candles -- were dampened by the news of his illness. The king's traditional birthday remarks had been eagerly anticipated this year because of sharpening social and regional divisions fostered by the militant campaign to purge the country of Mr. Thaksin's influence.

The monarch has historically been the country's sole unifying figure in times of crisis. The protesters have repeatedly claimed defense of the throne as one of their motivations.

p/s photos: Kou Shibasaki

Bangkok Still Very Dangerous

Anti-government protesters ended an eight-day siege of Bangkok's two airports yesterday but warned of more crippling protests if ruling MPs form a new government. But ruling MPs moved to reconvene parliament next week to elect a new prime minister, likely to be the next flashpoint in the three-year battle between a democratically empowered rural majority and Bangkok's influential middle-class elite.

Bomb squads, cleaners and technical staff have moved into the international airport to make it ready for a partial resumption of flights tomorrow morning, the 81st birthday of Thailand's King Bhumibol Adulyadej.

Sondhi Limthongkul, a prominent anti-Government leader, said he is ready to call thousands of protesters in the People's Alliance for Democracy back to the streets at any moment, regardless of Tuesday's dismissal of the country's prime minister, Somchai Wongsawat, and his party.

"It means no proxy government of the Thaksin regime," said Mr Sondhi, referring to the ousted and exiled former prime minister Thaksin Shinawatra, who has been convicted of corruption. Mr Somchai is Thaksin's brother-in-law. Mr Sondhi, a wealthy media proprietor, repeated demands for the creation of "new politics" that would see a winding back of democracy in the country.

"The PAD will return if another proxy government is formed or anyone tries to amend the constitution or the law to whitewash some politicians or to subdue the monarch's royal authority," he said.

Analysts in Bangkok say the court's decision to dismiss Mr Somchai and his party over electoral fraud gave the anti-government protesters a face-saving way of ending their occupation of the airports after they had come under intense pressure from business groups losing an estimated $130 million a day.

The protesters also wanted to lift the blockades before King Bhumibol's birthday. Many Thais hope King Bhumibol will call for an end to increasing bloodshed in the country in a speech to the nation on the eve of his birthday.

The airport blockades and Mr Somchai's dismissal have further polarised Thai society. One of the greatest risks to stability, they said, is if pro-Government "red shirts" who are angry over Mr Somchai's dismissal lash out violently against the alliance. PAD protesters have been the target of a series of recent bomb blasts.

Government MPs continue to have a huge parliamentary majority - 282 MPs to the opposition's 165 - and have the numbers to form a new government.

The outspoken Health Minister, Chalerm Yoobamrung, has emerged as favourite to be elected prime minister under the banner of a new party, Puea Thai (For Thais).

Whatever new government is formed is likely to be loyal to Thaksin, making it unacceptable to PAD protesters. That is why this Thailand turmoil is unlikely to be over. The situation in Thailand is mind boggling. You can have as many elections as you want but it is likely that the government elected will be the one still linked to Thaksin. That's because the rural voters still see Thaksin as "good" and a "hero". He has wisely won their hearts by catering to the whims of the rural population. Speaking as an independent party, Thaksin is a crook, and of the highest order. Hence city folks do not want anything in government that still has links to him. Its a sticky situation because here is one instance where a democracy should not work as the bad guys will still get in.

What are the chances that the PAD will get elected? Its not very good unfortunately. The rural folks will need to vote differently for PAD to get in. Government MPs continue to have a huge parliamentary majority - 282 MPs to the opposition's 165 - and have the numbers to form a new government.

Even the respected King can do very little, he has to respect the democratic elections. I do believe that the King would like to support PAD in this matter. But that would compromise his position. If the ruling government is re-elected, expect bigger protests which will come to an even greater boiling point. One way which I can suggest to overcome the current turmoil is for the King to speak out and ask the rural folks to vote in PAD - how likely is that??!!!

The Bank of Thailand delivered its biggest ever interest rate cut Wednesday in an aggressive move to buoy economic growth that has been hurt by domestic political turmoil and the global financial crisis. The central bank slashed its policy interest rate by 1% to 2.75% Wednesday. The rate cut was bigger than analysts expected. The rate cut comes a day after Thailand's constitutional court ordered the dissolution of Prime Minister Somchai Wongsawat's ruling People Power Party and banned the premier from politics for five years.

The anti-government alliance claims Thailand's rural majority — who gave landslide election victories to the Thaksin camp — is too poorly educated to responsibly choose their representatives and says they are susceptible to vote buying.

It wants the country to abandon the system of one-person, one-vote, and instead have a mixed system in which most representatives are chosen by profession and social group.

Pro-Thaksin politicians have been pushing to amend the constitution to allow Thaksin, who is also banned from politics and convicted on corruption charges, to make a comeback.

p/s photo: Aum Patcharapa Chaichua

Singapore & HK

Singapore is likely to be the Asian economy that is worst affected by a United States recession, said economists. This is because it is one of the most open economies and has a large manufacturing sector.

Unusually, the NBER does not define a recession as two straight quarters of shrinking economic output. Instead, it looks for a decline in economic activity, spread across the economy, and lasting more than a few months. The figures it uses include overall economic output, industrial production, payroll employment, personal incomes, and wholesale and retail trade.

CIMB-GK regional economist Song Seng Wun said that among Asian economies, Singapore and Hong Kong would feel the biggest impact from a US slump, as they are 'the most exposed, most trading-oriented, with the least shelter from domestic consumption. Singapore also has a slice of manufacturing, unlike Hong Kong. We will get a double whammy from a slump in manufacturing and services.'

DBS Bank chief economist David Carbon said: 'Singapore and Hong Kong are bearing the brunt of the impact in Asia. Singapore is being hit as it is very small and extremely open.' But he was quick to point out that the impact of a US recession on Asia is less significant than in previous downturns, as 'Asia is now more capable of standing on its own'.

The US is Singapore's third-largest trading partner, with total trade hitting S$88.2 billion last year. Economists identified the technology sector, electronics sector and certain parts of the services sector as those that will be the most severely hit by the US downturn.

OCBC Bank economist Selena Ling said: 'It will be a bumpy ride going ahead for Singapore, especially for manufacturing and export-related industries. Moving forward, the services side will feel the impact of a slowdown, as we are talking about job and wage cuts.'

DBS economist Irvin Seah said manufacturing would be the worst hit, with electronics dragging down sectors such as precision engineering. Sentiment-driven sectors such as financial and real estate will be affected by the continued weakness in investor confidence, as will externally oriented services like tourism and hotels and restaurants.'

Economists anticipate the fourth quarter of this year to be the worst for the US, with some predicting as much as a 5 per cent contraction. Many of them believe the current downturn will be the most severe since the 1981-82 recession. But some feel that the lower base numbers will provide room for an economic rebound next year. The best-case scenario? Recovery in the first half of next year, with the end of recession in the second half.

OCBC's Ms Ling said: 'It will probably be a U- or L-shaped recovery. But we are not heading for a Great Depression kind of scenario due to proactive, more aggressive policy responses from the US government.'

However, some were more pessimistic, predicting that this could become the worst economic crisis since World War II.

Mr Jeffrey Frankel, a Harvard University economist who sits on the NBER's committee, told CNBC television: 'This is going to be probably a deep and long recession. It could be the worst post-war recession.'

WHY THE UNITED STATES IS IMPORTANT TO SINGAPORE

The US is Singapore's third-largest trading partner by country.

It is also Singapore's largest foreign investor by country.

The US economy has a vital bearing on investor sentiment here, and affects the financial and real estate sectors.

KEY U.S. RECESSION FACTS

The National Bureau of Economic Research said the US economy entered a recession in December last year, which would make it the longest contraction since 1982. The last time the US was in a recession was in 2001.

If the recession lasts for another five months, it will become the longest since the Great Depression.

The euro region and Japan both fell into a slump in the second quarter of this year, making it the first simultaneous recession in the three regions in the post-war era.

The US economy shrank 0.5 per cent in the third quarter after expanding 2.8 per cent in the previous three months. Some economists predict that the US economy will contract by as much as 5 per cent in the current fourth quarter.

Other economies officially in recession: Singapore, Hong Kong, Japan, New Zealand, Ireland, Italy, Germany and Britain.

Comments: If you want to assess how a country is going to be affected by the US led turmoil, one should consider:

a) the level of open-ness of the economy to trade

b) the level of trade with the US and Europe

c) whether the country has substantive domestic economy (I would classify those countries with at least a 60m population to be able to negate global repercussions)

d) the degree of reliance on FDIs

e) Competitive advantage & shortcomings

f) Responsiveness by government

Then make your own conclusions.

p/s photos: Pace Wu Pei Ci

Listening To Robert Reich

Robert Reich is America's 22nd Secretary of Labor and a professor at the University of California at Berkeley. His latest book is "Supercapitalism."

The Great Crash of 2008 by Robert Reich (2nd December 2008)

If this isn't a Great Crash I don't know how to define one. Stocks were down another 7 percent today. Since the peak of last year, major stock indexes have dropped 47 percent. We're in range of the Great Crash of 1929.

Taiwan Singers Yearly Earnings

Ever wondered how much the top singers earn in Asia? I don't think they get the full amounts below as they have to pay their managers and staff as well but its a pretty good estimate. Mind you, these are the top Taiwanese artistes. Many have to slog without payback for a very long time.

No. 1: Jay Chou (周杰伦) Endorsements: 11, earning 4.2 hundred million Songs revenue: 10 million Concerts: 23, earning 2.3 hundred million Singing gigs: 4,earning 13 million
Total earnings (for this year – 2008): 7.03 hundred million (US$21m)
Last year’s earnings: 2.43 hundred million (US$7.2m)

No. 2: Emil Chau (周华健) Endorsements: 5, earning 97.56 million Concerts: 22, earning 3.2196 hundred million Singing gigs: 15, earning 40.24 million
Total earnings: 4.5976 hundred million (US$13.7m)
Last year’s earnings: 2.63 hundred million (US$7.8m) 　

No. 3: Jolin Tsai (蔡依林) Endorsements: 12, earning 2.63 hundred million Song revenue: 15 million Concerts: 10, earning 39.85 million Singing gigs: 10, earning 34.02 million
Total earnings: 3.6 hundred million (US$10.7m)
Last year’s earnings: 3.5187 hundred million (US$10.5m)

No. 4: S.H.E Endorsements: 13, earning 2.5 hundred million Singing gigs: 15, earning 4.5 million
Total earnings: 2.95 hundred million (US$8.8m)
Last year’s earnings: 3.14 hundred million (US$9.4m)

No. 5: Show Luo (罗志祥) Endorsements: 16, earning 1.56 hundred million Song revenue: 6 million Concerts: 7, earning 18.6 million Singing gigs: 5, earning 7.29 million Hosting fees: 15 million Drama fees: 2 million
Total earnings: 2.498 hundred million (US$7.5m)
Last year’s earnings: 1.11 hundred million (US$3.3m)

No. 6: Wang Leehom (王力宏) Endorsements: 10, earning 1.65 hundred million Concerts: 4, earning 15 million Singing gigs: 5, earning 10 million
Total earnings: 1.9 hundred million (US$5.7m)
Last year’s earnings: 1.94 hundred million (US$5.8m)

No. 7: Mayday (五月天) Endorsements: 10, earning 77 million Song revenue: 19 million Concerts: 5, earning 77.5 million Singing gigs: 7, earning 10 million Released 2 books: 5 million
Total earnings: 1.89 hundred million (US$5.6m)
Last year’s earnings: 1.18 million (US$3.5m)

No. 8: A-Mei Chang (张惠妹) Endorsements: 4, earning 38 million Concerts: 13,earning 43.4 million Singing gigs: 10, earning 33.4 million Song revenue: 45 million
Total earnings: 1.6 hundred million (US$4.8m)
Last year’s earnings: 2.51 hundred million (US$7.5m)

No. 9: Fahrenheit (飞轮海) Endorsements: 9, earning 95 million Song revenue: 12 million Concerts: 4, earning 12 million Singing gigs: 10, earning 15 million
Total earnings: 1.34 hundred million (US$4m)

No.10: Angela Chang (张韶涵) Endorsements: 9, earning 87 million Concerts: 1, earning 3 million Singing gigs: 20, earning 40 million
Total earnings: 1.3 hundred million (US$3.9m)
Last year’s earnings: 96.5 million (US$2.8m)

p/s photos: Vivian Chow Wai Mun

The Men With The Golden Gun

Readers of this blog will know that I have a long position still in gold as I expect real assets to come to the fore in the wake of excessive liquidity injection and the upcoming decimation of value in major currencies. There have been two parties who have just come out with bullish calls on gold, namely Citigroup and Marc Faber. While I am certainly not as bullish as Citigroup, which said that $2,000 for gold is possible, I do think $1,250 is probable by end 2009.

The bank [Citigroup] said the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before. This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist. "The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock. Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don’t think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes,” he said.

“This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.”

“What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We’re already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore,” he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. “If true, this is a very material change,” he said.

Celebrated contrarian investment advisor Dr. Marc Faber told Bloomberg television last weekend that he was buying gold exploration stocks as well as gold producers because prices were ridiculously cheap.

Dr. Faber wrote the book Tomorrow’s Gold earlier in this decade and has long been a holder of physical gold as a hedge against inflation and a meltdown in the global financial system. But he has previously not recommended buying exploration stocks, arguing that they could fall in price and that many companies could go out of business.

Given the huge slump in the values of gold exploration stocks over the summer he has, once again, been proven correct. However, the investment guru is now preaching with all the enthusiasm of a convert to the cause. Gold exploration stocks are leveraged to the gold price. Last week Citigroup - which Dr. Faber says should have been left to go bankrupt and not bailed out by the US government in a $306 billion deal last week - said gold may go to $2,000 an ounce in 2009.

Granted the link between the gold price and exploration stocks - remember the latter own the rights to potential future gold field development rights or claims - then such a price hike would mean an even bigger increase in the value of exploration stocks. That these stocks have been beaten down to almost nothing in the recent stock market crash just makes them a better buy. Dr. Faber is the first major commentator to make this call - and it comes against the worst performance in this sector in 40 years.

p/s photos: Kae Chollada

Aromatherapy & Rolfing

I have highlighted my favourite massage place before, its Cha'ya at Mont Kiara. Some of you might have come across "rolfing" which was featured in an Oprah show featuring Dr. Oz. Rolfing or Structural Integration is a hands-on manipulation developed by Ida P. Rolf 50 years ago. It works on the connective tissue to release, realign and balance the whole body. Rolfing enhances your posture and freedom of movement. It can resolve pain and discomfort from many different causes, including back pain, repetitive motion injury, trauma, and aging. Rolfing is also an excellent foundation for and complement to yoga, pilates and other personal wellness practices.

Why am I mentioning this? Well, there is now an expert (properly qualified) at Cha'ya. I think her name is Cindy. You should go there for a normal aromatherapy massage and you can ask for a free consultation on rolfing. Most of us have bad posture from the way we sit, we sleep ... the end result are some niggling pain and just bad posture, which will aggravate the muscles if we were to work out or do sports without proper rolfing. The best part is the realignment of your spine. Please note that rolfing is NOT like visiting a chiropractor (who has more to do with bones). Rolfing has more to do with re-educating muscles. I tried it, my posture improved and it is something we should do once every few months. Give it a try.

Cha'ya - My Favourite Massage Place

Considering the number of professional and authentic massage places available in KL alone, its very hard to stand out. I'm just basing my choice on the massage quality, ambience and end result. I don't want excessive service, or excessive pampering ... or walking through stone pebbled paths with Bali waterfalls, followed by a few people bowing at you... blah-blah. I am just here to get rid of stress.

Cha'ya get all the ticks in my book. It uses aromatic oils, but everyone should beware of places that offer "cheaper" prices because using authentic aromatherapy oils will not be cheap. I believe they source theirs from NZ and Australia. Poor quality oils will do you more harm and clog pores. The massuers, well, they are the best, "strong and firm" ladies from Sarawak/Sabah only.

Its not a big place, it has about 5 rooms, so reservations are necessary. The place is certainly not intimidating and very welcoming for first timers. They have a menu using different aromatic oil combinations for different persuasions - e.g. stress, insomnia, high blood pressure, pre-natal, post-natal, fatigue, etc. They take the medicinal effects of these essential oils seriously.

Its not exactly cheap, but to me its well worth the no-hassle policy. At least you are not paying for over-the-top pampering and knick-knacks. 1.5 hours massage will set you back RM150, but they have good packages on offer. Its great for the weekend, pre-book your self a massage, have coffee at Starbucks, roam the weekend market stalls at Mont Kiara courtyard, then go for your massage, come back out, tapau' food from the stalls for dinner...

Cha'ya Remedial Touch Aromatherapy Centre 3rd Floor, Suite B-03-01, BLOCK B, Mont Kiara, Jalan 1/70C
Tel: 03-62034500

p/s photo: Ruby Lin Xin Ru

National Service Part Deux

Saw Rocky Bru's latest postings on the speculations and movements involving the senior management of GLC top dogs:

Rocky Bru: Ismee Ismail, the group managing director and chief executive of Tabung Haji, is tipped to leave for TNB while Che Khalib, the current Tenaga boss, is said to be eying a Petronas job. Like I said, it's market talk. We've also heard that Amokh or Azman Mokhtar, the Khazanah boss himself, is keen on Hassan Merican's job. Never mind if Hassan's shoes may be many sizes too large, even for both of them combined! I won't rule out anything, especially after learning the other day that Kalimullah Masheerul Hassan had proposed to the NSTP Board to bring in Kamal Khalid, the PM's 4th Floor chief operative, as the new CEO! And when the Board turned this down, Kali, who is the outgoing NSTP deputy chairman and editorial advisor, had then proposed that a position of Deputy CEO be created for the PM's special officer! I'm not sure if Kamal even knew that his name had been dropped like that. Syed Faisal Albar, Kali's trusted friend, left NSTP to head Pos Malaysia. Syed Faisal's right hand man, Jezilee, is leaving his COO post at NSTP for the equivalent in Pos Malaysia. A couple of other top execs from NSTP are expected to leave and join Syed Faisal at Pos Malaysia, too, leaving Anthony Bujang, the new NSTP chief executive, a big hole to fill. Kamal Khalid may still find an executive's position in Media Prima (the international side, I heard). Another 4th Floor op, Zaki Zahid, is expected to head for MRCB. If this was a game of chess, someone's moving around his pieces in a desperate attempt to save the old King's reign. Perhaps Nor Mohamed Yakcop, the MoF ll, can shed some light on these moves, starting with his friend's attempt to put Pak Lah's chief press attache as the NSTP boss.

Comments:

a) Did we not learn anything from the past 12 months? Why are these senior management jobs only available to a select group of people? Why are these jobs only "given" or "appointed" when "kingmakers" make their chess moves?

b) I don't know about you, but there are very few Louis Gerstners in the world (Gerstner came from American Express, and then McKinsey, followed by his remarkable stint as CEO of RJR Nabisco, that food and ciggies giant, before ending up at IBM and then building up IBM a few levels higher in terms of strategy and sustainability of operations). But apparently, we have truckloads of Louis Gerstners running around in Malaysia. Apparently we have a huge number of them being able to run a newspaper one day, and then the national postal company, and then the national utility company, heck maybe even the national oil company.

c) These jobs ARE NEVER advertised. These positions need to be advertised and the selection process be transparent - come on, did we learn anything on transparency at all over the past 12 months? How do you think the young and upcoming smart, diligent bumiputra graduates are going to feel? They feel like crap because these jobs only circulate among those young upstarts who know the right Datuks and Tan Sris. Naturally you are creating a new multi level caste system among the bumiputras. (I am not even going into the bumi/non-bumi issue in GLC CEOs, just at least be fair and transparent to bumiputras from all ranks and "classes").

d) There has been a silly predisposition towards "giving" plum jobs to the people who have the right degrees. I think good degrees from high ranking universities are all good things to start with. Look at all the investment bankers from Stanford, Yale, London School of Business, Oxbridge, Harvard... yes, the degrees can only get you so far - a degree only tells me you know how to read and write in English, and maybe do a power point presentation - that's it. This kind of "preselection" in appointing top candidates in GLCs is OK, but do not let it be the determining criteria. That's because this preselection criteria naturally benefits the well to do and connected. I am not saying that you cannot go to Harvard on government scholarships, its rare.

e) The musical chairs have to stop. One must evaluate the requirements of CEOs carefully and appoint candidates that have proven themselves. I do not see how the NSTP top dogs for the past 5 years have proven themselves, but they still get posted to good jobs.

f) Khazanah and the powers to be seem to think that you can be the CEO of any industry as long as you manage by the metrics and ratios set up. As long as you have enough data on anything, you can manage them - that seems to be the new school of thought that is pervading the corridors of MBAs and the likes. Yes, I agree that a good CEO can probably shift to manage in another industry provided that he/she has a good handle on the new industry critical success factors and critical industry developments. We are operating AS IF ALL our top management have that ability... come on!!!

g) The corridors of power must not be arrogant. They must be open and be accountable to the people. I like some of the transparency measures and metrics management imposed by Khazanah over the last 5 years. I am also aware that Khazanah may be more than willing to push the envelope in transparency and accountability but is always "asked" to go a certain way by hundreds of "politically connected or politically important" people - by imposing strict transparency procedures, it moves the entire process beyond the reach of these so called "kingmakers". Do not ruin it all by leaving this stone unturned. It is the spinal cord of what is wrong with the system, it is the pink elephant in the room that pisses the broader nation, it is the 64,000 dollar question that everybody do not want to confront. Its just not cricket!

p/s photos: Shu Qi