So the Dow closed down another 200 points lower as I write. The HSI has also been in a free fall, shedding close to 13% as Asia tracked the dismal overnight close on Wall Street last Friday.

My view on this? It is only going to get worse. Any multi-billion-dollar relief package is only short-lived although it appears that the broad market is bottoming out.

The entire global financial crisis must be taken in consideration and in perspective with past and recent down-turns. No one should be surprised by what is happening now (and will happen) given our Economics 101 understanding of the cyclical economy. What goes up must come down. What's surprisingly is the extent of the damage of this fall-out. Three veritable institutions folded in one year, sky-high credit spreads (which I will talk about later) and a seemingly bottomless equity market. I am so blessed to witness all these (future bragging rights. "I was there in London when Lehman Brothers employees were carrying...").

The decoupling theory has failed and will be some time even anyone uses that. Then again, institutional memory is so short that all the CDOs and minibonds and boom-theories will come into play in a few years. Amid this crisis, UK has been hit hard. Real hard. The sterling has fallen faster than gravity in the last ten months. About 20% since the start of the year and in my bounded knowledge, a level unseen against the Singapore dollar for years. I remember changing a small fortune at Change Alley back in February at the rate of £1 for $2.78; I cursed under my breath and told myself I had to change at this pathetic rate just to manage my SGD-denominated transactions. I should have thrown in everything plus the kitchen sink for that rate, given sterling closed at 2.33 last night! Hindsight review makes geniuses out of us.

If I am an Aussie working in the UK, I would be happy, but not when I am a Singaporean with Majullah Singapura running in my blood. I was on instant messaging with another Singaporean friend (Joyce) last Friday.

Me: What to do now? Sterling is sh!t now.
Joyce: Oh, I hope you are not long on sterling.
Me: I am very, VERY long.
Joyce: gosh, I feel your pain. I can really feel it.
Me: Da Jie, what to do?
Joyce: Bite the bullet and change all now. The end has not arrived.

Change?!?!? I am seeing a paper loss of close to six figures. And FX-changing that will crystallise the loss! Another female colleague asked if I have been using some special face-whitening cream after I exited the IM conversation.

It is not a GBP story, but a USD story - from what I read in FX research. The sterling is pounded for the reason that Britain is perceived weaker than a truly battered America. The power of the Treasury and the intricate ties of the American dollar to the world economy ensures that the dollar will not fail. Will not collapse. In times of crisis and heightened risk-aversion, the dollar and yen will appreciate because they are seen as the safest assets (the US government beh toh?).

Gold, which is largely seen as an alternative safe haven to equities, has not been having a good time. In fact, other than government bonds, almost everything from commodities to equities to credit, is going south. Gold lost $100 in a week and was close to testing the sub-$700 after hitting $706.10 this morning.


Flight to safety has seen people dumping stocks, despite the ban on short-selling. Virtually all markets are down as investors flee equities. Even the legendary Warren Buffet, who was calling for red-hot American patriotism, has failed to ignite the market. What's worse - people has been making money running reversal trades and called the bluff on Buffet.

Normalising four stock indices - S&P500, FTSE-100, Nikkei-225 and STI(?!?!?) - it appears that the fall-out has not been as bad in the west as in the east. And for people who are looking for a kill on the stock markets anytime soon, it is wise to read this.