This week was a bloodbath in the financial markets for many. There were extreme volatility and wide swings in an illiquid market caused by multiple unexpected events.
For many banks, it has been a tradition to wind down trading activities by end Nov to get ready to close their books before year end and prepare for the next fiscal year. The trading positions are trimmed and traders get ready for their year-end holidays. Those that don’t meet their budgets by now will know that it will be hard to catch up within a month in an illiquid environment. Hence it becomes a self-fulfilling situation as most banks withdraw from the markets and liquidity becomes very tight and wild swings may occur.
There were telling signs that Dec was going to be a crazy ride as Americans celebrated Thanksgiving towards the end of Nov. We had the G-20 meeting last weekend which pundits predicted correctly that it will not end well. Theresa May was trying to sell her Brexit plan to Britain which was doomed for failure. And finally, we have Trump with his multiple shenanigans and flip-flops which really confused the markets further.
The noose around Trump’s neck is also getting tighter – Mueller’s investigations coming to a head – Cohen, Manafort and Stone either frantically trying to complete plea bargains or doing a final last-minute hero’s stand (pending a presidential pardon?). In desperation, he is trying to deflect attention to anything and everything but himself. Lies and untruths are now being generated at an accelerated rate.
First off was his interpretation of the dinner with Xi via tweets. Even his own US team could not comprehend what he thought was agreed upon. The Chinese were also confused and stayed silent, trying to decide how they can respond to actions which Trump thought he had made with China over just one dinner. Markets initially rallied on the 90 days delay on the tariffs implementation date and perceived beginning of peace talks. It unravelled again when they realized that US is actually playing hardball when the Huawei CFO was arrested in Canada at the request of the Americans.
Meanwhile, the Republicans and Democrats were briefed on the Khashoggi murder by the CIA and they are crying out for justice now against MBS and for the orange one to change his tone. He is also waging another war to keep oil prices low while OPEC is meeting to agree to cut production to support oil prices.
A lot of the White House positions are still vacant and the capable ones are avoiding it like the plague. He is literally scrapping the bottom of the barrel trying to fill understaffed departments. Did you hear about the replacement for Nikki Haly? Fox news is running out of people to offer. Soon, we will have cartoon characters taking over the WH.
We should expect more volatility ahead into Christmas as everyone is falling over each other trying to react to new knee-jerk events and 180 degrees change in positions. Hang on tight! I am looking to buy some more US equities on dips while my crypto portfolio is going into the red now.
Looking towards an exciting week ahead for me. Preparing for the SCB half marathon tomorrow morning at 4 am, then off to Yangon again. We will be travelling with the senior management team to visit some of the microfinance branches around Nap Pyi Daw. Then it is to attend the officer commissioning of my older son as a proud parent before we have a week of family vacation time in Phuket. Have a great holiday ahead!
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