Bond Market Lessons from Borneo

This article was originally published on eBooleant.com. Join readers who were curious how Borneo and the bond market run in parallel.

The jungles of Southeast Asia are not a bad place to get a break from the world bond markets. It’s a place where all the locals know where Kota Kinabalu is, but not who chairman Jerome Powell is. And that was just fine with me.

Being a serial retiree, I figured this was the perfect place to get away for a month or so. Would that it were so easy. I'm back a bit now and two images stand out in my mind. After a couple of miles’ hike in Mulu National Park, in a driving rainstorm, I saw 2 million bats emerge like a thin dark cloud from a craggy cave on the mountainside. Of course, I was taken back to the equity markets of 2008 and 2009 as investors swarmed out of the financial markets.

Another other picture I remember was from Kota Kinabalu, where I found myself staring into the South China Sea complete with an armada of tankers and transports at anchor in the peaceful port. I had been to Southeast Asia’s multicultural mix years before but now it was very clear that to the Western eye that this was China.

To me, seeing things clearly was a matter of observing the contrasts. Still, over time a certain consensus seemed to be controlling. One way or another, over the years of my professional life, and I have had a long professional life, objectivity demands a break. That’s how I ended up in Borneo, in a mix of hotels, jungle camp chalets with monkeys pounding on the roof all night and park bungalows not far from green pit vipers sleeping peacefully on trees—by the way, let them sleep. Planning was operating in full force, even if they weren’t issuing municipal bonds. Even in the most remote regions, infrastructure was developing in villages. Concrete for houses was in use and schools were in attendance.

Public finance was most needed though in the cities. To a foreigner, it might appear that the crushing weight of poverty was weighing heavily on the people in the cities where you didn't dare drink the water. For their part the growing population looked to technology to improve their fates. There was no pushback that I could see on cell phones or new highways. The locals were the have and have-nots surrounded by the noise and hodgepodge of life.

These were intelligent and industrious people employing technology to bring the forest lands to their peoples' highest and best use, a common theme in public planning for all levels of economies. Very often that was planting palm trees for their oil. The wealth of the people improved to various degrees, but the animals lost their habitats. It was a kind of gentrification – stage one – which evicted the natives. The people I spoke to were very sensitive about the criticism they received in the Western press. They had responded by creating large and unruly parks for the animals which I visited and saw their efforts to balance ecology with economy.

I was delayed an extra day in Mulu when one of the engines on our prop plane would not start. I was more than a little concerned when I came to the airport the next day and saw that they had started the engine somehow and refused to shut it off again even as the plane loaded passengers and cargo. No one else seemed concerned as we flew low over the jungle. It's like they were experienced riders of the New York City subway. Somehow we always get there, in spite of the bounces along the way.

Beneath us lay a carpet of verdant life fed by almost hourly rain showers. Preserving it spoke for itself, and it needed to be nurtured along with the growing population. Public finance will have an important role here.

I saw the jungle as a giant collection of bargains between competitors flying overhead or swinging from trees. Everything had its price in the rain, yet it was the overwhelming energy which sustained the place. Change was the rule and exchange—the eternal give and take—drove it forward. Nature abhors straight lines and annuities due. There are no riskless assets or zero volatility trades here. In this the greatest market on earth the only commodity being traded was change.

When I returned to Singapore, I began to fixate on the Sino/American trade war and wondered if it had heated up again. Old habits are slow to die, and I began to get up quite early to watch the BBC and read what information was available to me about the bond markets. Retirement as a short sabbatical rather than a long-term sojourn became a distinct possibility. My old life as an analyst was like the proboscis monkeys, I had seen—possibly not rare in some places but also distinctly unforgettable.

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