I spent a lot of time writing this forum post below, thought I’d leave it here for memory.

“Thank you Prof and classmates for the insights and riveting discussion expanding on the topic of QE. With regard to Prof’s statement that managing monetary policy is both an art and a science, as well as what Prof mentioned in class on Fed watchers, I’d like to expand on why I find it so interesting how central bank communication has become increasingly critical for market participants.
For instance, we just saw how markets reacted this past Tuesday when newly inducted Powell accidentally let slip the fourth rate hike. We also saw the interesting movement in the markets when the January FOMC meeting minutes were released last Wednesday (first, when algorithms digested the “appreciable risk that inflation would continue to fall short of the Committee’s objective”, dollar and yields were instantly knocked lower, stocks rose – then when actual humans read the minutes to learn that as a whole it was decidedly hawkish, dollar and yields were jawboned higher, stocks fell).

I’d like to highlight an interesting week back towards the end of January (week of 22 January, to be specific, when Trump was at Davos), when there had been a de facto currency war of sorts. Essentially, statements from Trump, Mnuchin, Draghi and Kuroda were basically in the driver’s seat of price action in FX that week.

To zoom in on BoJ and USD/JPY in particular, there was the January MPM on Tuesday, January 23rd. Just some backdrop, the BoJ was up till recently viewed as the most dovish central bank, and any communication that departed from that would be wildly out of character and thus result in an outsized market reaction. However, early in January this year, BoJ trimmed the size of its JGB purchases by JPY10bil in the 10 year to 25 year segment, and this was viewed somewhat as “stealth tapering”. So next in focus for BoJ rhetoric was signals as to when they would join the rest of their major global peers in starting the conversation on normalisation. So then came the January monetary policy meeting, and while the BoJ had essentially doused any hope for discussion on withdrawing stimulus, there was a slight tweak in inflation language. Just some context: inflation has been the laggard for the Japanese economy, and it’s also a crucial data point for the BoJ, as Shaun has detailed in his deep explanation on BoJ’s past and present efforts. So while output gap has tightened, business confidence has been increasingly rosy, the fact that inflation still falls far short has always been emphasised on by BoJ. But because BoJ appeared more upbeat on inflation during the January meeting, this immediately sent a knee-jerk lower in USDJPY – which Kuroda later tried to talk back during the post-meeting press conference.

Another case of this would be the Fed back in the 80’s, which Mr Chew talked about in class. Then Fed Chair Volcker was a firm hawk in his quest to conquer double digit inflation – his credibility as a hawk and talking down of inflation emerged key to the success of the Fed in combating exceedingly high inflation.

As you can see in the above instances, it’s amazing how markets can dissect central bank rhetoric (some strategists would actually routinely compare word for word, central bank minutes from different months to identify key changes) and how single statements and tweaks in wording can impact the markets.

Further, I’d also like to briefly mention the possible deployment of the Fed Put against a backdrop of quantitative tightening / the balance sheet taper, which Samuel has cast light on. I read somewhere that in early February at the height of the recent turbulence of sorts in the markets (the week of the Black Monday “redux” I believe), the Fed’s balance sheet actually increased substantially – meaning short-term asset purchases were made, which may have been deployed to mitigate the extreme price action we were seeing in the stock market.

This leads me to point out a somewhat troubling aspect of QE, which is relative a lack of guidance published regarding the specific schedule. To illustrate, in October last year, which marked the start of the balance sheet runoff, it was discovered from data published by the Fed itself, that the Fed’s balance sheet had actually grown rather than shrunk (which led some financial journalists to joke that the Fed’s trading desk hadn’t gotten the memo). This is actually in stark contrast to quick action when the Fed first kickstarted QE and asset purchases. As such, this haziness somewhat surrounding the precise timeline of quantitative tightening could enable the Fed to make asset purchases in short, immediate time frames, and essentially deploy the “Fed put” in a bid to support the stock market temporarily.”

A year ago one of my close friends in USP, Mark* (true identity not disclosed – besides, he adopted this pseudonym himself) started a WordPress to mark his foray into content creation, which wasn’t exactly a surprising streak of his character to be frank if you recall the immense wit he brought to all sorts of conversations. He attributed his “consumer self” to being a science kid. His words ad verbatim:

“I’m a Science kid. Science kids don’t produce content for fun. We learn what Science adults discover (for work!). We aren’t Arts kids. We don’t do Art things. We do Science things.”

Beautiful.

Anyway, all the digital content he claimed to have consumed in abundance surely amounted to something, because his blog turned out to be a masterpiece.

At this point, I guess I should provide the blog address and/or at least tell Mark I’m referencing him in an anecdote, but this is the prime conundrum of hosting your thoughts in a semi-public space. You never want to be actively drawing your audience in, so you are spared the liability for any inanity your content may have exposed your readers to. Besides, I haven’t talked to Mark in a while. At the same time I should probably give credit to the inspiration for this post. Hmm. I’m just going to leave this hanging.

In essence, this dichotomy somewhat between being a producer/consumer of content is intriguing to me. I’ve been a “producer” many times in my life, and it all started that day I set up my very first email address and Yahoo asked me what my occupation was. I accidentally selected “Producer” because computers were slow then. I didn’t know what it meant back then, but when my parents explained it to me, it sounded fantastic. Since then, I became a producer in the little ways a kid can growing up.

Primary 1: We always had Art exams after English/Maths/Mother Tongue. My mermaid drawing impressed the invigilator so much that when we had to go for recess, she instructed us with special mention to the girl who drew the mermaid, to keep our artwork under some newspaper to ensure they’d remain intact when we got back. After recess, so many people came over to see my now famous mermaid.

Primary 4: I started writing fiction about girls who were aged 13 and older, and their boyfriends, and whatnot. I co-wrote them with 2-3 friends each time in 50 cent exercise books you use for spelling homework. Apparently it was well-received, because the series lived till the sixth exercise book and we were writing for peer consumption all the way till end of P5. I still recall that rush of pride I felt when the coolest girl in my P4 class asked me a year later if I had “Book 5” or if someone else were reading it, and the teacher who overheard our exchange seemed surprised there was this battered-looking exercise book that for some reason was in high demand.

Secondary 1: I ended up in Choir. My class had 4 girls who were also in choir, 2 sopranos and 2 altos. One day that year, just before the June holidays, some of our classmates stayed back to listen to us sing Kimi o nosete and recorded us on their phones (!!).

Secondary 3: Two friends told me separately they read my blog every morning before school. That drove me to making sure I posted something every night, so they would always have something to read the next morning.

After O’s: I started doing covers with all that free time on my hands, and also because 2011 was the year I started actively listening to pop and Top 40’s. Looking back my covers were quite awful then. But that I had consistent listeners asking me to cover other songs despite my level of noob kept me going.

J1: I started doing covers again, but learnt to record individual harmonies with my iPhone, send the whole lot of 30 mini recordings to my email, download them on my old ASUS laptop, open Windows Movie Maker and place them one-by-one in their appropriate spots, zooming in and out excessively in the process. That was before I realised Garageband does that for you in one swift motion. But I didn’t mind all the work when I listened to my final output, and even more so when friends started sharing this piece, and some even told me they listened to it on repeat. Really?! Are you sure you’re referring to something I made?!

2014-2015: Gained enough recognition for my graphic design ability while I stayed in Cinnamon College to find one morning, when I was chilling at the lobby after breakfast, that 80% of the posters on the wall opposite me were mine. And to get into the lift and find the same.

Dopamine

Apparently there’s this substance called dopamine that we millennials are quite well-acquainted with. I came across this on a viral video – each time we get a like on social media, our body releases dopamine and it just feels so good. Subset of endorphins, but without the requisite physical workout. Dopamine is the best way I can put across my love for producing things, although “likes” weren’t really a concept until late 2009, and definitely not my KPI / means of validation back in 2002.

More accurately, it was the realisation that things I were creating were giving other people utility. The thoughts I scribbled every evening made a friend’s sleepy breakfast less sleepy the next morning. The cover I stringed together made a friend’s morning train ride to school at least a little bit more interesting. Never mind if maybe some got more utility from the recognising the flaws/mistakes/areas lacking- at least it contributed something, and well, it’s always an honour that people consume what you create.

How it really began

Then again, as infatuated I was with the idea of being a producer, I was always an avid consumer first.

Primary 1: The only way I learnt to draw that mermaid well was because my mom, an architect by training, drew it first, and I spent hours trying to recreate it afterward because it was so beautiful.

Primary 4: I only started writing those little stories because I was inspired by a former classmate’s own stories. In fact, the very first 80 pages I wrote was essentially copying what this classmate wrote (she did realise later on and called me a copycat, but hey that was the truth anyway, at least for the first 80 pages), and only afterward I got the hang of creating my own storylines and characters.

Secondary 1: Prior to joining choir, I spent the whole of primary school admiring the choir girls who performed at Founder’s Day mass, or at school concerts and secretly hoping I could be on a performing arts CCA one day.

Secondary 3: Once again, was inspired by seniors’ blogs on school life, because they made secondary school sound a whole lot better than what I’d been experiencing.

After O’s: That was after falling in love with Glee, The Voice and realising people like Christina Grimmie (rest in peace, beautiful soul) were posting their “singing videos” on YouTube.

J1: I started travelling to school on my own Sec 3, and just before stepping out I’d whip out my orange iPod nano and listen to the likes of Leona Lewis, Dave Matthews Band and Pixie Lott. When you listen to such good tracks repeatedly, you can’t resist harmonising / improvising along to them after a while. Afterward, I watched on YouTube one of Kimbra’s live looping performances. I was so amazed at her talent I spent the whole of the promo exams season wondering if I could ever pull off the same and have at least an inkling of her chops.

2014-2015: There were so many talented artists in JC that I didn’t dare to tell anyone I used to like anything art-related. But the turning point was when I started my first internship and had to use Adobe software for graphic design purposes. My fellow intern, an expert at Adobe Illustrator, taught me a great deal and since then, I’ve never regretted buying a second Macbook six months later from NUS so I can get Adobe Creative Suite for a tenth of the retail price HAHA.

*

I guess the common theme, or red thread if you will, running along these episodes was that before I ever started doing something on my own, I always observed first, and for a much longer time.