Note: 2 weeks worth of rambling here

Models

There’s been a lot of chatter online, especially in the US and Europe regarding the forecasting of the wuhan-virus and the changes in forecasts on infections/deaths. Having built more than enough financial models in my career attempting to forecast the potential revenues/cashflows/profits etc of a company/industry my viewpoints on this are that

  1. With multiple variables its close to impossible for a model to be accurate.
  2. I can count the number of times my quarterly or annual forecasts were 100% accurate.
  3. As we get more information about a company/industry we update the models thereby reducing the range of outcomes – i suggest reading Superforecasting by Philipp Tetlock, personally I found it a simple read but for those that aren’t used to think about the future in terms of a range of outcomes and modeling it will be enlightening. 
  4. At the end of a day model is to give a range of scenarios, and in the current case regarding this virus the governments are acting based upon the worst case scenario, if they don’t they’ll lose future elections should enough people die. That’s the world we live in, then again in Thailand elections don’t matter perhaps this explains the delay in action by this government. (I just can’t help myself) 

Signals

What signal do you trust? I’ve been asking friends and family over the past few weeks what signal would they trust to do the following:

  1. Send their kids to school again
  2. Fly from Bangkok to Singapore (or anywhere within the region)
  3. Fly across regions (i.e. Asia to Europe/US and vice versia, US and Europe) 
  4. To accept tourists in your backyard? 

Why this question? Well the WHO has failed, in the Western media, as its core function of being a trusted health organisation. So then what about trusting the signals from China? Well, China may have lied about the impact of the Wu-Flu/Covid19/SARS MERS 2, so the populous probably will not trust them. Thus do we have to see a combination of multiple governments, people in Asia probably trust South Korea, Japan, and Singapore governments’ for the facts. In Europe – my personal viewpoint is to trust Germany, Belgium (bias!), Netherlands, and the Scandinavian countries over the Southern countries. In the Americas – The US controls the media so they are probably going to the be ones there. 

Oil

20 countries getting together over Skype or whatever conference they are using trying to make a deal? I’ve always found this easier in person, I just don’t see how this is going to work out positively, still think there’s the risk of a further fall in oil but that it will be a generational low and this decade is going to be great for commodities. 

Politics

Anyone betting against Trump winning again? Thoughts?

What would lead to the Thai government stepping down? Corruption, incompetence, lobbying etc etc all obvious but they are still there. Thoughts? 

Are we going to see new political parties from this? What would their mandates/narratives be?

Human behaviour

Are people going to save more $ for the next generation/rainy day? Will consumer behaviours change? No more spending $ on attainable luxury items and only focusing the basics, will families that used to be willing to spend xyz amount on a holiday decide to go for a drive and camping instead? A focus on experiences as opposed to spending on luxury? 

What’s the point of banning alcohol?

Is Thailand the only country in the world doing so? Is this to help prevent gatherings during Songkran? Or did they approach the alcohol groups (Thai Beverage and Singha) and say “pay or we ban your crap for the month” 

Howard Marks

He’s on a roll with his commentaries. Here’s the link to the latest one.

https://www.oaktreecapital.com/docs/default-source/memos/calibrating.pdf

Thai bond market issues

A few weeks we began noticing issues in the fixed income market in Thailand. TMBAM halted redemption’s for one of their funds. This is why you saw the BOT, SEC and SET come together for an announcement over a weekend. There’s some 1 trn THB of fixed income (bonds, BE’s, debentures) that need to be rolled over.There is/was a risk of a domino effect

So the BOT has created a capital preservation fund…but then…now they are fcuking around with the capital structure of firms, if investors demand a higher interest for the risk of buying the debt why not let the capital markets figure it out, I hate this form of back stopping, as it helps the larger “investment grade” firms ( BBB- and up). Use True as an example, -THB 20 bn in FCFF for the past 5 years, a tonne of debt, why aren’t they paying ~10-20% of interest if not more on their debt? So a continuation of saving large weak companies => zombie companies, and prevent the formation of new groups to compete. Capitalism during good times, socialism during bad times…. however I suppose the thinking goes along the lines of, if you stabilise the most senior part of the capital markets structure then it will come down and stabilise the other parts of the capital structure. But with news that the US Federal Reserve is now buying High yield ETFs to stabilise the US market…there are probably lots of problems in the piping of the financial system. Regardless, now we know the equity of these companies are not going to be wiped out…

  1. i have no alcohol at home. as soon as i heard it was banned i was excited to buy some (I did not). The American prohibition in the 1920s taught a great lesson about people. Prohibit alcohol and sales will skyrocket. Just a point…women never went to bars and drank before prohibition. During and after, they were elbow to elbow in the bars. even kids went to the bar. It was a crime for kids to be in the bar but it was a crime for anyone to be in the bar so what the hell. Young people have never stopped.
    In USA, the 1%ers absolutely run the country. ‘We the people’ have no say. They own the GOP and now, they own the Dems. Bernie Sanders was a ray of sunshine but the 1%ers moved in and shut him down by paying off the Dem party. They sold their black souls to 1%ers. It is impossible for me to think a brain dead person…biden… can run for president. He might win because Trump is so evil. What a choice. If Biden wins he will have to hide under the bed in the Lincoln bedroom. He will not handle the resulting pressure. Regardless of who wins, the 1%ers reside at the top. This point is missed by everyone because they just cannot accept it. 75% of Americans want medicare-for-all. they will never get it because the 1%ers make trillions from health care which is #1 in cost but at least #30 in quality.

    USA has 2,500 dead/day from the virus. that is acceptable for Trump/GOP/CDC to open the economy. Thailand said…we will reopen once we have less than 10 new cases a day. Big difference. Why? You know why…American leadership know they get re-elected only if the economy does well so sacrificing 2,500 people a day is acceptable to get the economy rolling and get re-elected.

  2. Trump will throw Dr Fauci under the bus along with WHO for misleading the World into plannedemic – and crashing the markets consolidating the wealth further into a small group

    Trump will win again handsdown as the left screwed up again

  3. “Anyone betting against Trump winning again?”. He is bound to, the stupidity of the American electorate can never be underestimated.

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