December is the month of Reflection 2022

Crypto Winter

Crypto, stocks & α lot of asset prices dropped since the start of the year. The main culprit is USA's interest rates. It creates a negative spiral effect across the markets & capital flight to the reserve currency's bonds.

If it is just the crypto prices drop, that's fine. As the customers can cut their losses and withdraw their reminding money. As it turns out there are a lot of cans of worms opened... As these exchanges use their clients’ money or crypto for their own speculative or investment purposes. When their clients want to withdraw their money or crypto, these exchanges can't do so. They freeze the withdrawal function & shortly these exchanges declare bankruptcy. While their clients have nothing left.

I admit not all exchanges have the same problems. However, they did not live up to their promise, allowing the clients to trade & withdraw their money/crypto.

To add, some of these exchanges use this money, to buy luxury assets (Good Class Bungalow, yachts, etc)!  I can't be sure what money they use to buy but when the exchange bankrupt, the liquidators also take these assets. So I guess they are using companies’ assets to buy these luxury assets.

Reflecting on this, without regulation, will we humans do anything right? Or is regulation really necessary so that people like these will not abuse these privileges?

Even if there are such self-disciplined people in Management roles, how many will there be?

To prevent such things from happening regulations will be in place. But when this happens, Taxation will & will be no different from a normal financial market. Something the crypto surely doesn't want.

Interest rate is the gravity

When Warren Buffett said interest rate is gravity. I have yet to fully understand what he means by Until now… (I think)

When interest rates are low, the market is willing to buy more risky assets for better returns than near-zero interest-rate bonds, which are nearly risk-free. When these safest assets become more profitable, everything else drops in price and keeps chasing & people the safest assets. REITs aren’t spared as investors are worried the cost of debt increases which may cause REITS to produce lesser dividends.

Maybe I put it this way. The interest rate is similar to a planet’s gravity. And the asset’s price is like a rocket that is trying to reach to the moon. The stronger (higher) the gravity (interest rate), the harder the rocket (asset’s price) to take off. And vice versa. The weaker (lower) the gravity (interest rate) is, the easier for the rocket (asset’s price) to soar.

Thus, the interest rate is like gravity! I guess it took a war and untold suffering in other countries for me to realize this. And I hope I got it somewhat right.

Regulations too strict backfired too!

China was the first to discover Covid 19. Their Swift response helped them save as many lives as possible back then. As time passed, medical science managed to make the covid 19 vaccine in the shortest possible time. This is a great achievement! This allows other nations to lower their covid restriction earlier, while china insists only to use their homemade vaccines. However, for some reasons that elude me, China is not able to achieve the ideal vaccination rates & infection rates plus death work are soaring.

Thus, this leaves China to carry on imposing strict Covid measures. Although their intent is truly wished to protect their citizens, this comes with a lot of negative effects. Supply chain disruption, causes inflation to rise. The elderly were suffering great inconvenience. And lastly, the one that trigger the latest protest, was a fire that broke out which killed everyone in a building when they can't escape due to the covid restrictions.

Yes, protests happened. Now the China government is willing to relax the restriction.

Regulations are necessary. Yet, if the regulations are too strict... It doesn't benefit anyone either. Making the balance is a tough thing to do.

My take here isn’t a criticism of the China Government’s policy. But I am reflecting that regulations are important, but being too strict with them will create tragedy too.

Portfolio Management

Risk is always present in any investment. No matter how sure I am in my investment. Of course, certain investments are so safe that I don't mind allocating a big bet in my portfolio.

Even Warren Buffett can get it wrong sometimes. And on the recent local example, Temasek Holdings write off F1X investment.

Despite the amount of money, they invested in FTX in terms of millions that amount is less than 1% of their total portfolio. Plus they look 8 months to do their due diligence.

8 months! Temasek Holdings should be able to have Superior data, tools & connections to make a better-informed decision.

Yet they can still make a loss. What are my odds? I have to respect the risk. Sooner or later this will happen to me. And if since it is going to happen, I believe that I should invest conservatively.

December is the Month of Reflection.

I believe this year has a lot of suffering and a lot of losses.

But I am still grateful for my situation now. Still grateful that I still have a roof, am well-fed & have a simple job. No one is shooting at me; the one who wants to take away my home.

Something this money can't buy. Peace of mind is truly priceless.

You’re Humility

Manferd