Monday, October 27, 2008

I am become death, the destroyer of the worlds.

"I am become death, the destroyer of the worlds." -- J. Robert Oppenheimer, 'The Father of the Atomic Bomb'.

A nice sounding quote (with a sad tone) from the creator of one of the world's first nuclear weapon, I feel that it accurately portraits our current global condition and how Subprime has changed our financial system forever.

I wasn't gonna write an entry about the financial mess but the panic in the recent days gave me the right incentives. Global markets basically came to a crash-and-burn last Friday and today. Financial institutions are facing unprecedented liquidity dry-out. Corporates (in America or not) are facing drastic slowdown in profit, sovereigns are facing default risks (Iceland, Argentina, Korea, to name a few).

First and foremost, I would like to follow-up on a conversation I had with a few fellow players on how this mess will affect the world. I would like to ask them to rethink about their opinions, as I highly doubt that they will remain unchanged. Previously, my witty friends confidently told me that this crisis is nothing compared to the Great Depression, that it's just a reset. Everything will be fine after the crash-and-burn. Also, they saw this crisis as created by the financial institutions, and limited to impacting the financial institutions. I would like them to rethink, and reassess how big the impact is likely to be.

In my view as a hedge fund trader, I see the upcoming years being extremely difficult, and not just for the financial sector. I see businesses across the board come to a huge deterioration in profit, and a lot of them will not be able to make it through the downswing. The weaker, less well-managed, business will go bust, and unemployment rate will soar to at least a 20-years high. The layoff trend will spread from the financial institutions to nearly every sector.

Interestingly, I'm already seeing behavioral changes. I personally am less comfortable in spewing money on a 5-star dinner or an expensive vacation. I see lots of idle cabs at taxi stands which previously guarantee a queue. Expensive restaurants which costs more than US250 per head and required a 3-weeks advance booking can now be booked for same-day. Most of these stemmed from the losses people are taking in the stock market, but also the fact that they might be laid-off the next morning. Good time to be holding a lot of cash.

In terms of poker, I think now is a GREAT time to win a major donkament. A million dollars now is worth a lot more than a million dollars a year ago simply because things are (and will be) much cheaper and people around you are less rich. Also, I see the ring games getting tougher because the live ones will have a tighter bankroll. No more Chinamen who don't give a ding about shoving with 5Jo in a 3-way pot people! Time to play some quality poker in games which were previously donk-fests! So, in general, I see the EV shifting from the cash games to tournaments, especially the televised ones. (If you can land a sponsor deal now, it'll beat your day job by about 10x.) Personally, I'm gonna play less cash games (and I'll need more value at a table than previously for me to sit down), but I'm gonna play more tournies as long as the traveling cost doesn't kill me.

1 comment:

MYworld said...

Yeah man. I think that there will be some fundamental changes because of this crisis.

USD might no longer be looked at as a "safe haven", more currencies will be traded for oil.

China will become stronger in comparison to Europe/USA.

Hopefully, not too many trade tariffs will come up.

Ah well... It's going to be a fun ride for the next 18mths at least.