Ataraxia Financial Newsletter - April 2023
Hiding the Truth of Financial Risks and Some Thoughts About the Truth and Perspectives in Taiwan
"While concealing the truth might make people happier in the short run, it won’t make them smarter in the long run.”
— Ray Dalio
…and…
“The truth is often what we make of it; you heard what you wanted to hear, believed what you wanted to believe.”
— Obi-Wan Kenobi
Sunday, April 30th. Tainan, Taiwan.
Taiwan is a unique place.
I used to live here for 5 years and never lost my curiosity and admiration for the country and its culture. Even though I am quite familiar with the customs and traditions, I still don’t feel like I can fully understand the way of thinking and what makes people tick here. And each time when I come back, I still feel like a stranger on a mission to explore a mysterious planet.
I will come back to that in a moment, but lets first turn to the key market indicators of the month.
While the stock market is up, the Treasury yields declined and the VIX is at a super low level (the volatility index that is an indicator that intends to imply the level of fear and uncertainty in the markets), there are a lot of issues boiling under the surface.
The injections given to the banks, by the ability to use their Treasuries at par value (instead of market value, which is considerably below the par value at the moment) and use them as collateral to receive funds to stem any potential liquidity issues, might have saved further havoc throughout the banking sector for the moment, but it does not solve any of the underlying problems.
To the contrary, it probably has increased the amount of systematic risk of the entire financial house of cards.
It is just another form of market manipulation and hiding the truth that the prices try to tell us.
It is as if someone would ask you to borrow $100,000 from you and as security give you all of his Tesla shares with the current value of $50,000, making the argument that they are really worth $100,000, since that was their value a year ago. Would you hand over the money and think of it as a correct way of assessing the risk profile of that loan?
Probably not.
At some point the truth will come out, the cards will be swept and the day of reckoning will have to be finally faced.
But this month, I'm going to share a few thoughts about another subject on my mind. It is also related to how we sometimes build and shape our own truth.
More specifically, how different cultures can take the same facts (which are true), but incorporate them in different ways (also truths? 🤔) and come out with a totally different perspective on things in the daily life.
Taiwan is the perfect culprit for me to explore that.
So… back to some of the curiosities that I have about Taiwan.
Some Contemplation About Taiwanese Perspectives
I decided to spend my first week on this trip in Kaohsiung, a harbor city that I really like and that I honestly think is one of the most underrated cities in the world.
When booking my room I was (just as on previous trips) surprised how cheap the prices are in the supposedly most prestigious building in the town. So I booked.
85大樓 - The 85 Sky Tower
The 85大樓 is a massive building, towering majestically over the city of Kaohsiung.
I have always enjoyed the looks of it and combined with the more recently erected modern skyscrapers, Kaohsiung really offers an architectural eye-catching panorama view.
When its construction was finished back in 1997, with a height of 378m, it was the highest building in Taiwan until the Taipei 101 (509m) overtook that position in 2004. However, it remains the second highest skyscraper on the island and it is higher than the highest buildings in most European countries (Commerzbank Tower in Frankfurt is “just” 259m). Moreover, the shape of it resembles the character “高 - Gāo” which means “tall” and is the first character of the cities name “高雄 - Gāoxióng”, and even more in the way that the character was written in ancient times. Quite cool:
Actually, I found this building so interesting that I did a short presentation more than 6 years ago in the Real Estate Finance class. You can check it out here.
Interestingly, since the Chinese word for 4 (四 = sì) has a bad connotation related to “death” (死 = sǐ), there is no 44th floor in the building.
Side note: When renting or buying apartments in Taiwan, the prices for the floors containing a 4 (in case the building even has those floors) are often discounted.
Anyway, it is hard to tell exactly how its story turned bad, but there were some incidents, for instance a famous artist found dead in her room two days after checking in and some people committing suicide jumping out of high floors over the years. These incidents fostered the writing of blog posts, speculations, ghost stories and conspiracy theories about it. As these stories spread across the web, the place got a very negative perception and became more and more dreaded.
Thus, Taiwanese generally don’t want to stay and life there and subsequently the prices of hotel rooms and apartments has collapsed over the years.
As of now the main hotel that used to be there is closed and the Panorama View Deck on the 75th floor, which used to be an amazing place that offered a panorama view across all directions of the city, was closed during the COVID pandemic and I don’t know whether it will be opened again.
Thus, while the situation and the bad business there has — as far as I can remember —always been bad, it appears to have gotten even worse in the last 2 years.
A friend explained to me that for whatever reason, the place just has a “bad aura” and that she can even feel a bad stomach feeling when passing nearby.
Well, I stayed in the building several times and never got any bad feelings. I can understand that someone wouldn’t want to buy a specific apartment in which someone died mysteriously or did a suicide, but to condemn a whole building because something bad happened somewhere at some time, seems illogically to me. I mean bad things may happen everywhere and indeed they do happen every day.
The only thing that really gives me a bit of a strange feeling about it is how it looks during the night time. There is the sea of light that a lively big city displays and out of this ocean of lights raises this massive black tower — but with no single light on. There are only a few lights of the remaining hotel rooms and apartments of the lower part of the building. It really does look like a ghost tower! But then again, that just stems from the fact that apparently nobody wants to be there.
COVID Hysteria
The reason why I left Taiwan 2 years ago was actually mainly due to the way that the COVID “crisis” was handled and how the population got totally brainwashed by 24 hours of fear mongering across all news chanels, which got them into a total hysteria mode. It got to an extent in which it became even impossible to do simple things, such as a midnight run, or chilling on a lonely beach, without being shouted at for not wearing a mask.
Living in such an environment was just unbearable for me. So I decided to leave.
Taiwan has been one of the last countries, but finally even here the restrictions have been dropped and it is possible to live normally again.
However, while there are no restrictions, the majority of the population still sticks with wearing the mask wherever they go. Even in closed cars, while jogging and in the gym there are still people who seem to be afraid to breathe fresh air.
The train of thought of this will remain a mystery for me forever I suspect.
One of my Taiwanese students assured me that most people are actually not worried anymore, but they just got used to it and they just wear it based on peer-pressure and just do what most others do.
Well, to me that makes it even more incomprehensible.
The bright side is, that even though I haven’t put on a mask since I am here, I didn’t feel any hint of resentment. People seem to be fine with it.
The China Question
Some topic that always comes up when talking with anyone — besides Taiwanese — about Taiwan, is the question about China and the likelihood of it attacking Taiwan.
The interesting thing is that while the world is worrying and there are numerous proclaimed “international relationship experts” who say that it is not an “if”, but rather a question of “when”, Taiwanese are not worried even the slightest bit.
Last night in a bar and over some Tequila, I entertained the question once more and my two Taiwanese companions immediately proclaimed that it will never happen and they quickly buried the topic by lightheartedly referring to the CCP chairman as “Xi Winnie”.
In fact, spending 5 years in Taiwan, I haven’t met any Taiwanese who had serious worries about it.
That’s actually why I also used to take a more relaxed stance on the topic and put it forward as an argument against the likelihood to people who asked me about it. I would reason that there are a number of economic, as well as geopolitical reasons, why an attack would be stupid for China and that if anyone, Taiwanese should generally have a better natural understanding of the situation than some western think tank figures.
However, after what happened last year in the Ukraine (I would have estimated the probability of Russia attacking the Ukraine at less than 10%, even on the day before it happened), I am not so convinced anymore.
The problem is that rational thinking and having “the best in mind for the people” are unfortunately not what guides our “leaders” actions. Not in Russia, not in China — and also not in western democracies.
As for Xi Winnie, the strive for power combined with the ambition to become as popular among the Chinese population as the “great” — psychopath and mass murderer — Mao Zedong and having his name marked in the history books as the one accomplishing the reunification of Greater China, might lead him to follow thorough and do stupid actions with terrible consequences.
So what is the true level of the risk?
I am really not sure.
Interestingly my experience in Korea has been quite similar. While the world is worrying about a nuclear missile attack, South Koreans appear to not be worried at all and are rarely talking about it.
Anyway, that’s it for this month.
Next month I'm actually gonna be in Korea. I’ll make sure to ask my Korean friends about the North Korea question. So stay tuned.
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Best regards,
Disclaimer: The content of this newsletter is for informational and educational purposes only. It contains my personal views and opinions, which are not to be taken as direct investment advise. All investments have risks and you should do your own due diligence before making any investment decision. If you require individualized advice, to review your unique situation and make a tailored advice for you, then contact a certified financial planner or other dedicated professionals.