Sunday, November 8, 2015

Australian Property and Dire Straits! How being a contrarian saves you from crazy bad IPO's

Australian Property and Dire Straits! How being a contrarian saves you from crazy bad IPO's

Property tops.... Australian Economy drops .... Bank default rates increase .... Aus banks cut dividends ....
Aus banks drop.  No saving from China this time!

Wednesday, July 29, 2015

Macau/China's Fragility

I had not been to Macau in two years even though it's only 50 miles away,  but as evident today, they are still building at their fastest rate including an Eiffel Tower in third or half scale, a Colossus, and a Massive land reclamation. I see probably a dozen mega casinos being worked on still.  Macau loves creating Fragility!
Or is it just another big Gamble!?

8 years ago this was a quant Portuguese - local Chinese mix with great food and meandering back alleys. All gone except a few of the restaurants. 

Thursday, June 4, 2015

Where is the Optimism in the economy or stock markets?

Morgan Stanley recently produced a  report saying that there have been net OUTFLOWS in equities from 2010-2015 essentially, EVEN AS THE SPX rose as much as it has.

(see chart of equity flows since 2010 in particular - with few inflow weeks since then).

Recently the data has included some net inflows into the ETFs and equity market especially when a new high in SPY is hit, but also into high yield bonds!

To me i would ask WHERE IS THE OPTIMISM SO FAR?  I say nil to minimal.

My Reason: Even if the trend of inflows into equities continues we are just at the beginning of optimism, but there is still
a search for yield/risk aversion leading to bond inflows at the same time somewhat negating that.

I think it will be interesting if this trend is a crossover point ... TBA i guess?  But I am still bullish stocks, and bearish bonds.

Monday, April 13, 2015

Will the Chinese RMB replace the USD as reserve Currency?

An excellent, though long post by Michael Pettis from his blog, where he begins to look at the new AIIB, and continues with a review of past challenges for reserve currency status.  Particularly the section from the following paragraph through to the end is an excellent review of history, and likely modern parallels. 

"There have been four times in the past 100 years, in other words, in which we were more or less certain (absolutely certain in the cases of the US in the 1920s and Japan in the 1980s, very certain about the USSR in the 1950s, and arguably certain about Germany in the 1930s) that a country would become the dominant economic and geopolitical power, and only once did this turn out to be true. Anyone old enough to remember the 1980s will remember that we were even more certain about Japan’s rise in the 1980s than we are about China’s rise today, but in the Japanese case, as in every other case, we were flabbergasted by how difficult the economic adjustment turned out to be, which suggests at the very least that we might want to wait to see how Beijing manages China’s rebalancing before we insist that this time is indeed different." (continues to the end of the blog).

The question is not whether China can force this to occur, or even when.  But there are serious challenges that they must face for quite some time before the RMB can even vie for equal footing with the USD.  The only time in history where reserve currency status actually changed, essentially took 40 years of USA economic leadership first, and 2 World Wars with the resulting economic decline of England.

It reminded me of a blogpost I made comparing Japan in their bubble years to the US.

Back then, claims were made of the Yen replacing the USD too.

Monday, April 6, 2015

China & Hong Kong - Property Bubbles and Euphoria.

Recently I noticed that a long established photography shop in Central HK had closed down, and within a week had been replaced with a fully functioning new……
shock horror…. real estate agency!  (I was not at all surprised).

This is in an area where there has to be at least one retail real estate agent every 60-70 metres along all the main roads of Midlevels, Central, Sai Ying Pun, Pokfulam, The Escalator, and Causeway Bay (well - all of the north of HK Island actually).

For those that live there, this is often so annoying as to draw comments along the lines of; “That could have been a nice coffee shop/martket/restaurant/creche/<insert a desirable alternative> instead.”

In fact, it seems that real estate agents are competing to rent the spaces that they should be trying to rent out to good shop tenants!

Is this the proof that there is a property bubble in HK/China?  Not necessarily I think.
Is this proof that there has been bubble like behaviour occurring with respect to property, and the marketing of property to as many people as possible?  Yes I believe so, and its been occurring for years.

Too many times discussing HK property with colleagues, I have heard the standard response of “HK property always goes up” / “It will stay up as long as the Mainlanders are buying, and have so much money,” etc.
But people have already forgotten (unless they were hurt), by the huge reduction of prices when SARS hit HK in 2003, and it took Ten Years for their equity to be regained.

Why?  Because SARS caused a surge of fear that was unheard of previously.  Were they scared of SARS destroying their property though?  I don’t think so - they were scared of the collapse of the property market that was occurring due to Fear becoming contagious in HK.  SARS after all is a respiratory illness that cannot hurt a property itself.

So can HK property collapse again as much as it did in SARS?  Sure, just add fear.  Fear of recession, fear of a hike in interest rates and loan servicing ability (we are pegged to the USD and their low rates in HK), fear of a pullout of money from Chinese Mainland investors, fear of job losses, fear of currency devaluation or depeg,  But one thing is for certain, there will be less real estate agents after that, and maybe a few good coffee shops finally.

I don’t know if it will happen or when, but its certainly interesting walking around HK, looking in agents windows, were a tiny unit can cost as much as several dozen acres in the USA, and where rent can easily outpace the actual full salary of a professional employee.

{My main road up the right hand side - 7-8 agents in three minutes walk}][img]

{$6-10 Million HKD for 830 square feet - any takers?}][img]

{Competition among agents for a rental placement is fierce}][img]

Saturday, March 7, 2015

Physical Gold – Why Bother?

Below is the sad story of the pensioner in France that has his Gold bars stolen by well-informed thieves.

It begs me to ask, Gold – Why Bother?

I don’t disagree with the value of holding some physical Gold, either in the home or elsewhere.  But certainly, if in the home, not too much that you are destroyed by its loss.

The reasons for this, to me are simple:

1. Holding Gold to me is cataclysm type event protection.  If it’s just as an investment, or to hedge inflation, buy GLD the ETF.

2. In a cataclysm type event, any Gold you own will be ripe for the taking as soon as it is known that you have it.  So you better have it well hidden and protected with security. (i.e. guns and bullets).  You will need them!  (The most amusing thing about “Doomsday Preppers”, is that they go on TV, showing us what they have and often where.  This is totally is defeatist in intent).

3. Big value, one kilogram Gold bars are next to useless when you need to live on them.  Coins are definitely better.  I would argue Silver coins are better again, as they have lower value per coin.  Gold coins if you needed to travel would work fine however to move wealth.

4. In a cataclysm type event, Gold ownership is likely to be made illegal, as during the Depression era of the 1930’s in the USA.  (In this case physical Gold in vaults is even more at risk.  Penalties after the fact of hoarding it could be severe too.

5.  You can’t eat Gold, meaning that someone with land, water, defense, crops, and some source of power is more likely to be useful and thrive.  They simply wouldn’t need your Gold necessarily.

6. If I need Gold THAT badly, in an end-game scenario, without the things listed in point 5, I am not sure I would even want to be around!

7.  Finally there is an opportunity cost in holding large amounts of Gold.  What is the probability that the world will put us in a position to NEED it?    I am certain there will come a time of high inflation where owning Gold as an investment makes sense again.  I am not certain that I will ever need it as a physical asset to trade to live.  (But it’s pretty and nice to have a bit – until the thieves come).

Below the article on the theft:

Thursday, February 5, 2015

The U.S. Economy and Oil

Very interesting historical perspective on the "common job" in each state over time.  But what got to me was the dependence on trucking and delivery as an industry, vocation, and owner-driver type of career.

How can the US NOT benefit from lower oil prices when so many rely on it as a major necessity and also a liability in their business?  The stock market can go do whatever it wants, but consumer confidence is likely to keep on rising as the cost of transport falls, and ALL those truck drivers out there benefit.

USA - Keep on Truckin!

Sunday, January 18, 2015

Ka-Boom!!! The Swiss go to War on Currency - CHF

Recently I wrote a post looking at Leverage and Trading success that I came across, and the observation that the best performers limited their max drawdown percentage risk to less than 50%.  Further the greatest number of net profitable traders held less max drawdown percentage risk at around 30%.

"Humans have a great awareness of risk through survival instincts, but this does not seem to translate into the markets!"

I certainly didn't predict the move the SNB made to unpeg, but the observations seem to be borne true, especially when you consider that FXCM users owe FXCM over $300 Million, forcing FXCM itself to seek a bailout to satisfy their fiduciary obligations.

FXCM had even been one of the champions of allowing greater leverage use by traders to the US Commodity Futures Trading Commission review.

I had a bit of a loss on the USDCHF move, saved largely by stoplosses limiting my risk, but I also learnt a couple of lessons as a result of the "close-call."

1. I will from now on keep my option and any spot positions separate in another account.  Whilst I didn't suffer any option liquidations, I would have been VERY annoyed if those long term options had been closed on me.

2. EVERY Spot position needs a solid stop loss.  Fortunately I had that.  The danger with Risk, is that is is unknowable until you suffer its effects.

3. Forex options are a better alternative to Spot.  These are still alive at least, and not subject to leveraged margin calls.

4. Leverage must be watched like a Hawk, and controlled to levels that allow survival in surprise events, as proven in the chart of trading success and leverage above.


Thursday, January 8, 2015

Stock Market Noise and B-S.

It took me a few days to finally decide on my New Years Financial Resolution for 2015.

Just one, its pretty simple – “Avoid listening/reacting to all the Noise and BullS$@t.”

Jan 9th and the market is in an uptrend, booming strongly again, despite fears just days before in the media of the Greek Exit from the Euro (Grexit - stupid catchcry legitimizing media name for something that hasn’t ever happened), more of Putin’s games, unrest in the USA, Oil up or down a dollar today,  etc etc.

It doesn’t really matter if you think that the market is manipulated or not, but its very easy to believe that retail investors are heavily manipulated. 

“They”, whoever “they” are, those men in dark suits, the Fed, Politicians, Wall Street etc, have that mastered to an art form.  Washington DC and most political centers around the globe operate on a 24-hour news cycle.  That keeps the public listening to what the politicians have to say about how great they are doing.  It is of course no different in finance and the markets.

Short news cycles keep the investor herd running from side to side in a state of flurry, boosting commissions to Wall Street, and destroying investor long term trades, allowing Investment Professionals to keep all the bigger gains.

Buying where you think it’s low, and selling where you think it’s high, or at fear of going lower – essentially buying wrong and selling wrong.  Simple.

How can investors avoid this trap of Masterful Psychological Manipulation?

First, is refuse to participate.  If you are not a deliberate day trader, watching CNBC or Bloomberg is really not going to help, unless you have the discipline to not make ANY trade decision on what you see or hear.  Better to leave it off.

Second, is to not make a trade based on a stock pick.  If it’s on telly – it’s too late more often than not.

Thirdly, and I think most importantly – There seems to be long-term macroeconomic shifts at play.  These are the trades to make.  A strenghtening US dollar, the coming of increased interest rates, a stronger US economy, weaker emerging markets, and even longer term is a recovery In Europe.  None of these are affected in the long term by whatever they decide to sell you in the media today.

Remember the media’s only job is to get you to watch and read regularly, to view or click on the ads that appear – not provide ANY sound advice.  Even worse than that is that it can become addictive!  So well are we conditioned and targeted towards emotional responses, cultivating a fear of missing out (FOMO) need to continue watching even if it is to our disadvantage.

“Its just noise and B-S.”

“What’s just noise?”

“It ALL is.  Except for the part that is B-S!”