Sunday, May 31, 2009

Another comment response..

How far do you think housing market can realistically drop? Im a real estate newbie, but I dont think further declines of 20-30% are realistic.

I am thinking it's more 5-10%?I am looking for a relatively new (10yr or newer) SFH in the Surrey/Langley area. I want something with a basement suite for under 450,000. I would be looking at a 375k mortgage, and was doing my affordability calculations based on 5% locked in at 10 years at 25 yr amort. If i am aggressive with my payments, and assuming straight 5% intrest i can be debt free in 13.5 years.

The bank rakes in 123k in interest. Now however, lets assume I wait 1 year. In that years time, i can accumulate 50k more towards the downpayment, and suppose interest increases up to now 7% for 10 years @25 amort. Let's say the interest increase causes a drop of 5% off the house price. That means, I can shave off 50k + 20k towards the mortgage.

So now I have a 305k mortgage @ 7% for 10 years at 25 amort. Putting in the same payment options I would have done for the 375 mortage, im am looking at 11.2 years before being debt free, and the bank earns $128k interest off of me.So, its looking like, do i overpay for the house, or give the bank more money? The numbers favor overpaying for the house.

I had a look at the historical rates you've linked, and the 5% rates hoover around 5-6% for 5 years, so likely I am over estimating the interest rate? But I think given what people are saying about inflation etc, maybe its not unrealistic? Sorry, I frankly do not know too much about the banking/fiancial system or real estate so If i miss something importatnt in my calculations, please let me know!

Anon- no one can tell you what you should do. We are bouncing back from a near collapse of the world-wide financial system.

The pull-back has happened with huge infusions of tax-payer money to bail out the bankers who were irresponsible and helped blow-up this international RE Bubble.

I personally dont see inflation coming for some time, because people are still losing jobs, and big companies are cutting back or going BK (like GM and Chrysler), so I cant see where the demand will come from.

However there is the possibility of a 'black swan event' like a drought or mid-east war that could drive prices of staples much higher. That would be a total catastrophe. Weakening demand and buying power coupled with rising prices is what leads to social unrest- like the Russian Revolution.

I am just putting that scenario up there, not because I expect it to come about, but because that is the only way I can see any major inflation in the short-term.
If that is the case, then we should have these low interest rates for at least a year or so (though maybe not quite as low as today).


Affordability has improved dramatically due to the drop in mortgage the second part of the equation will come into play for RE - the demand.

That depends on many factors...job market strength, in-migration from other Provinces and countries and commodity prices.

Together these will determine the cumulative demand for RE in our Province. Can you forecast one of these? Never mind all of them!

I cant. That's why I laugh when I read bears or bulls picking on one factor and saying this is the cause RE will collapse or rise. Did anyone think the desperate measure taken by the BOC would suddenly prop up RE from Toronto to Vancouver?

Did anyone expect oil prices to nearly double from the lows earlier this year which were sending Alberta into a major recession? Can anyone forecast where they will be in six months?


Therefore you can see how difficult it is to forecast RE which is dependant on all these factors.

However we all make our bets and mine is that we still have a lot of weakness ahead. Canfor has just idled three mills with no start up date, the Provincial and Federal Governments have lost control of the deficits, and cannot even forecast where they will be in three months. I would expect cut-backs and lay-offs to continue for the foreseeable future. All this does not seem to be the makings of a robust housing market.

I think your numbers make sense, however you should also be asking yourself how secure your job is, what will you do if you lose it and go on EI for six months, do you have reserves or family and friends who can help you out...etc.

FREE info on BEST Rates in Malaysia

Its been a while since I start sharing the latest BEST rates in Malaysia including Saving Accounts, Fix Deposit, Car and House Loan, BLR etc. The orange color bar start with wordings "Best Rates..." at the top right angle on this page is an example. Or you can see one below here too ...

Since then it has been made into a widget and anyone can include this info at their own blog / web site by following some simple instruction here.

It is NOT easy to simply pick a number out of the long list of available choices and call it Best rate. Furthermore, there are so many considerations and factors that it is almost imposible for other people to 'decide' which rate is the BEST rate for you. Hence, lets review why and how malpf makes its list.

Fix Deposit is a finance tool you use when you have a sum of money that you will NOT be using for a while and you can gain Higher saving interest than normal saving account. So the higher the rate the better it is. Hence the interest rate is mark in blue color.

One of the greatest pit fall in FD is that if you withdraw before its maturity date, you may lose your interest or even have to pay penalty to it - liquidity problem. On another aspect, its best to increase the frequency of 'taking' the interest and put in back into the FD itself to enjoy the power of compounding interest. Hence keeping these 2 in mind (liquidity and compound interest), 1 month FD is the better choice compare to other longer term FD even if longer term FD may give higher return. Choosing compound more frequent with lower rate is better than locking the fund with a rate that seems high today.

Hence when comparing FD rate, 1 month FD is used and the higher the rate is the better.

BLR or Base Lending Rate is another important number where most of the variable loan will use as the reference loan rate. The lower this number is, the better it is. Hence the rate is marked with RED color. Just to add a note that business loan can benefit more from lower BLR than housing loan.

Saving account is one of the hardest ones to compare due to its large variation in future. There are junior and senior accounts, ordinary and islamic accounts etc. However, if we focus on the fundamental of saving account, it is a finance tool to 'temporary' keep our money to maintain our cash flow, ie. day to day liquidity. So the ease of interest calculation is important and we shall focus mainly on working adults ( Not Junior Nor Senior accounts ). For ease of calculation, multi-tier rates are less welcome. Certain accounts who impose minimum amount before paying interest is also less welcome. After considering these factors, we can pick the highest interest rate as the Best Rate (in blue).

Car Loan is usually fix loan rate. Car loan for used car and new car is very different. However, use car's selling price is very largely different as well. So when used car loan rate is too high, simply shop around more looking for a cheaper car will do. Hence back to the Best rates consideration, it is more reliable to consider NEW car loan rate where the car price is pretty much standard. In this case, the lower the number the better it is. ( red )

Lastly is House Loan, which is also a very tough call for Best Rate. However, borrowing principals from saving accounts, multi-tier rates are less favorable here. Getting 1-2 years of Zero interest by committing to potentially high rate in future is NOT exactly a great way to go. Therefore malpf only concentrates on the simplest BLR-X% where the Higher the X is the Better it is, ( blue )

Among all other best rates, house loan best rate may be the least influencing one because all other considerations like Zero Moving Cost and the most recent flexi all in one account, overdraft without the overdraft rate feature makes it really tough to generalize their good and bad.

Alright, thats the start of why and how these rates are choosen.

Check out below on some of the new Best Rates too, some of them may be useful to some people too ... ie.

FD12mth : 12 months Fix Deposit for those who are really sure will not touch those money for a year
Save1mil : Saving account that has MORE than 1 million in it
Save15k : Saving account thas has MORE than RM 15,000 in it
iSave : Islamic Saving account
UsedCarL : Car Loan rate for used cars

Wednesday, May 27, 2009

From the comments...

Hi, my name is May13 Anon (Fish wants me to pick a real name). And I brought a house last week.It was a very strange feeling after firmly believed this Vancouver Market will drop at least 50% for a long time.
There were a few things happened in my situation made me to change my mind. The numbers works out good in the purchase. Since it was a family deal, we were able to pick up a Town house in a pretty good area of East Vancouver (Killarney), plus the low interest rate. My mortgage for the next five years would be around 1200. And we also arrange the deal, so we don’t have to pay the darn CMHC 1 penny (that is very important for me).
Yes, the interest rate could be 15% five years down the road. But I could have hit by a truck as well. That's life.What hits me the most happened couple weeks ago. As I was riding my bike to home I saw groups of people gather outside. You know these people too. They are usually three in a group. One well dressed person accompanying an anxious couple standing on the sidewalk. Yes, realtor + would be home buyers.
Mind you, there is not just one group but 4!I was thinking: good god! When will these people go away! We saw BC poverty rate and EI claims soared this year. Who are these people? I have no idea, but I know there are plenty of these people out there.I well aware this decision effectively kills my dream owning a SFH. But oh well, I want to live in Point Grey too.Now the darn mortgage broker hasn’t returned our calls. Which means he is probably damn busy.My bear friends, what is your take? P.S 5 yr fixed is 3.55, should I go variable?

Hi May13. Firstly congratulations! No need to apologise. I will let you into a secret...all the bears who read this blog, myself included, hope to buy a home one day.

If not, why would anybody waste their time reading a housing blog.

You bought because the numbers worked for you and that's great. As I mentioned before, the cost of home ownership has come down nearly 40% from the peak due to the price drops so far and the drop in motgage rates. There are many other reasons to buy apart from financial and there are many reasons not to as well.

No one can advise you to go fixed or variable, without knowing your circumstances. A couple of hundred dollars spent talking to a good accountant would serve you better than all the free advice that you will get on the Internet.

here are a few points however:

3.55% is remarkably low. If you look here you will see that this is historically low. These are posted rates for commercial banks so you could take 1% +/- off, but even so, these rates are incredible.

No one knows where the rates will be in 5 years, but if I had to guess I would say higher.

Over the recent years it has always been beneficial to go variable rather than fixed, since fixed has always been a few % higher and because we have been in a twenty year span when Central Banks have been bringing rates down. As rates come down it benefits variable mortgages.

Of course there have been spikes up, but on the whole the trend has been down form the 20% of the late 70's to less than 1% now.

Over the life of a 15- 25 year mortgage you would have done better going short and variable than long and fixed.

However things maybe different now. For one, we cant go any lower, so by Murphy's law we can only go higher. If inflation shows up again (say in a year or three) then the Central banks will ramp up short rates. Long rates would probably be driven up by the market too. However if you went variable and could just make the payments, you may have to leave your home with little ceremony.

Fixed offers you 5 years of security. You know how much you have to pay. Variable leave you open to the whims of Central Bankers.

A well-known episode of this occurred in 2004. When Alan Greenspan famously told everybody to save money on their mortgages and go variable. Millions followed his advice.

He then raised fed rates 16X!! From 1.25% to 5.25%. People got skewered! Their payments often doubled or more. This was one of the contributing factors to the housing debacle in the US. I am amazed no one sued him, I would have.

So there you have it.

I like security, some like to pay less for now. Maybe you can get a spit mortgage with half in each if you are not sure. But definitely speak to an accountant who can show you the difference in payment if interest rates start to move up.

BTW bears...let me clear this up-I am not buying. I think we are in a window of calm before the financial storm sets about again. We have dramatically rising unemployment, debt, deficits and I don't see any of this turning around in the near future. It might not be the near collapse we had in fall, but it is not full speed ahead again IMVHO.

So based on that I cannot bring myself to take a bullish stance. However if a deal comes my way, that makes sense, I will look at it. Nothing has come near so far.

Friday, May 22, 2009

Not much to say this week...

The Canadian banks have been down-graded by Credit Suisse who thinks we still have some fiscal pain ahead.

Japan is in bigger trouble than anyone thought, with a 4% first quarter drop in GDP. That is enormous. Since then the Yen has appreciated against the dollar so expect more of the same, as they are an exporting nation.

The Canadian Dollar has had a nice little run, which I have used to buy some US dollars for trips and shopping. Everyone is abandoning the US Dollar as they think the US government is going have to bail-out companies and issue debt for a long time. They will, but then so will every other government. So I am betting within a year the USD will move much higher once again.

The UK had it's rating put on 'credit watch'. Now some of you may think that it is impossible for a first world sovereign nation to be put on credit watch. It did happen to the UK in the 70's when the IMF had to pull them out of the ditch. However it goes to show you how bad things are.

I do not think we are out of the woods by any means.

I am seeing a slight drop off in sales for this week, and lower prices on the sales. The froth that built right after the big mortgage rate cuts, is diminishing. Folks are beginning to realise that there is no point taking on a $1M asset, loaded with debt, however low the rates....if... there is a good chance you they not be able to make the payments in a year, the asset is no longer appreciating, and they end up having to sell and lose your equity.

What are the rest of you seeing out there?

I am seeing consternation amongst the bears and even the most bullish Realtor bloggers are expressing surprise about the market strength. No surprise at all.

About a year ago, when the market was it's feverish heights, many bears (myself included) estimated that the market was 40-50% ABOVE the affordability level for this city.

Well we were right, it's just that the mechanism of correction wasn't what we expected. We expected housing prices to drop 40-50%. Well as we all know, sales went into free-fall from Oct 2008 and we hit 20 MOI.

Then the Central banks cut rates to near zero. The net result is a 12-15% drop in prices and 30% drop in mortgage payments, which gives us our 40%+. The payments have come down to the affordability level of a year ago.

So am I buying? Not yet. Note above I said the affordability of a year ago. I think we live in a very different world from a year ago. In the interim many large banks in the world have teetered on BK and have been rescued by tax-payer money.

Two of the big three auto makers are moving slowly into bankruptcy, even Toyota has suffered it's first loss in 70 years!

So this is not the same world. I doubt many of you reading this blog will get much in the way of pay raises if you are an employee, or make as much money as last year if you are self-employed.

So the affordability level is actually lower now than last year and I would expect housing to have to correct further. How much further? Well that depends what happens to interest rates. they cant get lower, but they can go up, as is happening in the US now. As rates rise, the prices will have to adjust for that as well as lower earning potential.

Meanwhile I found this sad tale on the Internet. The dirty side of a reckless boom going bust:

Thursday, May 21, 2009

You want to buy a car, NOW ?

Thanks to the new PM effect and various new policies in place including the RM 5,000 rebate, almost ALL of my Average income friends are Really interested to buy new cars.  Although soon they find out a lot of inconviniences because there are too many rules about the RM 5,000 rebate which make stuff not that practical but now friends still want to buy new cars no matter if he can gets the rebate.

If you also have a property 
that you can refinance
you should seriously think about
 refinancing your property 
to buy that car
 instead of getting a car loan.

Car Loan rate is 3.5% now.  Following the rule of thumb that car loan rate is 1.9x house loan rate, the 3.5% car loan is almost more than a 6% house loan.  With today's BLR-2.X offer, your house loan is most probably serving at 3.X% only.

6.X %  to 3.X % is a HUGE difference for crying out loud !

There are even some level term loan offered by insurance companies at 4.75% now, which is still so much BETTER than the 3.5% car loan ( which is 6% ) no matter which angle you look at it.

Despite the fact that car is the biggest personal finance killer in Malaysia, and if anyone buy a car NOW by taking a CAR LOAN while having the choice of refinancing his property .... Please ... at least share with me here why you do it, why do you want to spoil your own personal finance plan while I am already feeding you nice food near your mouth ?  Why do you still split it out ?

I will start with the most common excuse, "I scare income tax will find me if I pay my car in full as if buying it with cash!"

True concern but only valid for those illegal drug dealers etc.  If you Really have a property that can get Approval from banks to refinance, there is Absolutely no concern at all on tax filling.  Upon enquiry by tax department, simply submit your house loan documents and declare no other income whatsoever un-declared in the past.

Assuming all people start to do exactly what I share here, there is only one person they will go after - me!  They will blame me for causing them and the banks to lose so much more income.  Bank may start reducing the amount they lend to a property, they will ask if you are using the extra money to buy a car and then they may deny your loan application in future!

But I doubt that will happen at all, truth for the past thousands of years show that human just like to stay in their own shell even if it has been hurting them for so long, they get used to it and they will just refuse to walk out even one step to the more comfy zone.

What ?  You want to buy a car nOW !?

Benny Lee's theory : why Experts are Always Wrong

After banging on how bad he is twisting words (preceived value => value) to sweet talk naive public on a course he promotes, this article is about the good side of Benny Lee.

In the beginning of his FREE seminar, he listed out a series of expert's predictions on what stocks to buy and sell.  Then he shows how badly ALL those predictions fail miserably.

Although one of the reasons he uses is that Fundamental Analysis is useless which malpf disagrees and claims that he got it ALL WRONG where the REAL Fundamental does not change over a short period of time.  It takes a paradigm shift to affect a business's fundamental.  So News like these are NOT part of True Fundamental Analysis.

However, Benny also said it clearly that why an expert made a wrong prediction - because the expert adds his own Opinion when performing the analysis.

Company A is granted with Project X is a fact.  Company A is 'going to' earn Y amount of revenue could also become fact.  But how these news will affect Company A's stock price from RM 2.12 to RM 2.54 is an Opinion!  This is because in his calculation, he will have to make a lot of assumptions on the posible future finance data and those numbers are very opinionated ( different from one analyst to another ).

People who worship Technical Analysis may have heard of Mr. Market's story - that you must follow Mr. Market and not trying to out beat him - by using Technical Analysis ofcourse.  And this concept of Opinion from Benny Lee stick very well to Mr. Market's story.  Also one of the very good reasons why more people earn money using Technical than using their own Opinion = speculation.

Malpf also share that there is a Science part in investment but there is also an Art part.  The Art part malpf talks about is the same as the Opinion Benny talks about.

Some older readers also know the very specific step by step how to evaluate the True value of a business and therefore find out your very personal target buying price.  There are only 2 critically important numbers in that method : EPS and PE.  PE is the number that actually represent Opinion.

However, there is one distinct difference.  Benny claims that Opinion is bad, not reliable and therefore in order to earn money from stock market, you should rely on Technical and Technical never lies (Mr. Market story again)!  

Malpf preaches that Opinion can be dangerous.  But the more you know the better opinion you form.  The more you practise making opinion, analyse the result of your previous opinion and form better ones next time is the whole important process.  At the very end, be it Fundamental or Technical Analysis or any other methods, it all goes back to Opinion - the Art part in investment.  Which is also the part that distinctly draw a difference among all of us.  The tools we use may be the same but we will ALWAYS reach a slightly different opinion eventually.

This bring the end of this article to Soros story again.  Although Soros has a strong team behind him to earn money consistently using technical analysis.  But when he forms an Opinion about certain situation, his opinion will Overwrite ALL other opposing signals and it is this type of charismatic move brings him to what he is today.

So who can resist not forming his own opinion hoping to become the top of the world one day ?

An example where Morning Star goes wrong

As far as the Morning Star prediction goes, it DID NOT HAPPEN or the technical reading is WRONG !

In that article, it says that

1) candle stick is one of the 'best' chart format to use
2) Morning Star is one of the most reliable signal in Candle Stick analysis
3) It said KNM will shoot up big time on 20 May onward

But after 2 days of movement, KNM's price has gone down instead.

So if 1) and 2) are right, then technically 3) should be correct too.  While the fact proven it wrong, what has gone wrong ?

These are the possibilities:

1) The technical reading is wrong.
This is one of the simplest indicator you can find.  Any user in technical analysis can comment at first sight if the artcile is right or wrong.  The only part they may disagree is the part that Morning Star is reliable, which is an academic claim.  Practiciant may have their own different personal experience.
At the same time when KNM is expected to go up due to that Morning Star signal, KLCI is expected to go down technically as well.  But it turns out KNM goes down while KLCI goes up the next day.  
However, in the same article, it did mention some other technical readings that say 'don't buy yet'.  So you may hear some technical gurus always tell you wait until ALL 3 indicators tell you to buy or sell then only you make a move.
Reasoning 2 is usually a better explaination to this 'wrong prediction' example.  However, malpf doesn't think using more indicators will give you more reliable signal.  It is just adding more reasons to one gambling move.  If you use the right reasons, you get what you want.  But when you use the wrong reasons ( wrong indicators, wrong parameters etc ) then you will still get the wrong result.  ( details on danger of TA )

Wednesday, May 20, 2009

Mahathir also dislike Forex ?

Read from chedet (english version) on mata wang, is he refering to Forex ?

But from the way he is 'accusing' today's world finance model including hedge funds shows that Tun M. is STILL in a denial mode.  Despite how bad hedge fund and forex CAN BECOME, but the finance tool itself is not at fault.

I hope Tun M will read my 3 parts money turns evil stories one day.

Its already a FACT hedge fund is overtaking mutual fund, its also a fact the forex is the largest and most liquid market in the world.  Its just like long ago, we didn't need money when we did the barter exchange thing.  But eventually 'Money' became a fact of life although till today theoritically its NOT really needed if we Human are perfect.

Its also like a fact that value of money is NO longer tight to Gold.  Gold is limited, currency is not.  Despite how bad it is, its already a fact for many years.  Despite it almost melted down the whole western finance world, its going to come back as it was.

So its a fact that Human are not homogenius, keeping the good for Everyone is NOT our priority but keeping the good for Ourselves is.  Many still think Everyone = Ourselves and there is where the paradox lays.

HATING hedge fund and forex blindly is NOT any better than LOVING them blindly.  Both are idiots and will only continue contribute wealth to the rich.  Its only a matter of doing it directly or indirectly.

Forex - the RIGHT way - Must use EA

I just realize this is one of the draft articles that has been sitting in my to-publish-list for more than 3 months but didn't get out in time to help people earlier. In short, I do NOT promote Forex investment because you really need to learn enough to do it but the fact is that you WILL NOT learn enough on it and you WILL invest in it before you learn enough. But such plain statement did not stop anyone to get into Forex and troubles. So I thought I may as well share the right way to do it, although carrying the risk of pushing more people to the dangerous world of leveraging - which already proven failed in this current financial break down in western world. Anyway, this post is stressing on EA - if you don't know what this is, don't forex !

1. download FREE forex trading software from MetaTrader4

MetaTrader4 is the foundation software for all the other forex brokers. If you don't want to download from MetaTrader you may try get a demo account from Interbank or, they all use MetaTrader4 software anyway. is known to have the smallest price gap which is very important especially when you have limited capital.

2. Get the demo account for FREE and then learn to buy, sell, long, short using the trading platform. Make as many buy sell transactions as you can and observe why the result is different than you would expect.

3. Understand price gap which is Different in each currency pair. You should eventually find out that there are only 3-6 currency pairs that you should trade in because they have the smallest price gap. This price gap is dynamic and it is possible that the gap changes right at the moment you execute a transaction, although not often.

4. Understand Expert Advisor feature in the software, you should learn (a) how to use it and how to (b)implement your own trading strategy.

5. Use real money ONLY after you have found an investment strategy that is proven can bring you return more than 60% of the time.

6. Apply money management, risk reward ratio, win lost ratio etc.

More on EA (step 4)
EA or short for Expert Advisor is one of single top most powerful feature why dump general public can earn money from Forex scientifically and systematically.

EA is a script that you can write yourself to get any data out from your trading platform, do anything you want with the data and then make decision on what transaction to take.

In short, if you have any investment ideas, you can TEST the idea and SEE if it works right in front of your own eyes! From the test result itself, you may further fine tune your investment ideas until you think you have gotten the right methodology, then you can invest with your real money in confident.

The most attractive elements in Forex is its liquidity and its HIGH leverage. It is the same liquidity and leverage that kill multi billionaires. So these 2 factors apply the same to everyone who trade Forex, sometimes it helps you, some other times it kills you. Its all up to your luck which way it turns.

However, EA is the ONLY quantifiable element in Forex (for FREE) that differentiates one investor than another. Because every investor has his own idea. And the ability to test, verify and 'PROVE' this idea for FREE is upmost powerful.

It is also the one last compulsory step but NOT many people have enough persistency to walk through the whole process. Which explains why 90% of the poor ALWAYS contribute to the 10% rich even in Forex.


Tuesday, May 19, 2009

Technical Analysis Example : Morning Star

One of the most popular technical graphs used is candle stick.  One of the problems with technical analysis is that there are too many indicators and it is hard to decide which to use.  However, historically some indicators are obviously stronger than others.  Morning Star is one of the strong ones.

See chart below on the red circle, that is a good example of Morning Star.  So for the next 3 days, KNM should be going UP if this Morning Star is proven correct.

Personally I am NOT buying KNM at this point of time.  Technically I can find an excuse that (1) Stochastic blue line has NOT cross up yet ( it means don't buy yet ).  I also believe I may have better (2) chance to get in later (an emotional opinion).  Most importantly, I am (3) NOT able to follow this stock closely for the next 3 days.  So this speculatable profit is not my rice bowl :D

Monday, May 18, 2009

KLCI 090518 end update

Where was I ?  .... Oh ya, see ?  KLCI did rebounce at 1,000 and didn't even break any support at all as predicted this morning

Tomorrow analysts would be sharing bullish news.  As of this particular moment, I see the dip of gold price which do indicate bullish in stock so I guess this time I have to agree with potential bullish move tomorrow.

But you will need to check USA ending market condition to further justify above claims.

Just want to remind you that I get all this 'opinion' all from alone.

Sunday, May 17, 2009

KLCI update 09 05 18 0950

Its too early for me to say, "see? told you so ..." ...  but its interesting to see suddenly all the analysts became so bearish straight away predicting 1000 support line and even mentioned the 975 for today's movement.  If they anticipated this all along, why didn't they mentioned about this cautiousness the past 2 weeks like I did ?  Da ....

Anyway, as most of you should have known that we have 2 cases of A H1N1 in Malaysia now.  I have to admit that our new PM has done a good job controlling how the news spread this time ( by luck or by plan ).  First of all, I hope not too many of you are naive enough to believe all these below are coincidences:

1.  Health minister has been saying ok all along, suddenly both he and the deputy are out of the countries when the problem occured ?
2.  A1 disease confirmed on Friday (after diagnosed result) and the whole situation is 'stable' by Sunday ?
3.  The ministry want to 'punish' those plane boarders didn't come forward on Saturday but on Sunday they have proactively and successfully trace down most of them ?

Its ok for anyone to think great and bad on how the ministry has performed but as far as I can see.  Our new PM has been very sensitive to the market and make sure news come out in a way that will shake the market least within the situation given.  And past 3-5 days are perfect example to support my thoughts :D 

Anyway, simple fact as that the outbreak hasn't occured ( news wise ).  As factual as my own understanding in this situation, outbreak has already occured, its only a matter of to what degree.  So market may show correction but the crash I anticipated will not come just yet, not until the ministry is left with no choice but to release the outbreak numbers.

If you don't plan to keep your current stocks for more than 3 years, sell them off (after checking your technical charts).
If you are prepared to buy more stocks like I am, wait further with patient.

Thursday, May 14, 2009

Pick the Right Value Stock by NextView, Benny Lee

I attended a preview in NextView on a course titled "How To Pick The Right Value Stock", speaker was Benny Lee who constantly writes for Smart Investor.

What initially attracted me was that he claimed that he can find the 'value' of a stock technically.  

As some of you may have learned that my 'valuation' imply the scientific calculation of a company's past years finance data growth rate.  It is beyond my imagination how to calculate what a stock's worth is base solely on prices alone.

At the end, it is just another marketing talk - probably a smart one thao.  When they talk about 'value', they mean the marker perceived worth, not the REAL value of a business.  So the Moving Average alone can tell us how much a stock is worth in the eye of the investors.

It may sounds logical and it is hard for me to convince otherwise.  But the real meaning of Moving Average is simply the average of a stock price base of the previous how-many-days prices.  And this Moving Average line forms the floor (support) and ceiling (resistance) price for that stock.

And in practical life, this Moving Average = Value is NOT really that exercisable.  For example;

If I think stock A is worth price X, I will buy when A's price is below X.

But in Technical Analysis, when stock A move below Moving Average (price X), its a SELL signal.  And you buy when stock A's price goes above X ( ceiling break ).  Which is OPPOSITE of valuation methods.

I immediately left the preview at this stage because I normally cannot tolerate this kind marketing twist.  However, I do have room to believe that they may have solution to my challenge but I am quite sure if the argument did get started, the best solution they can come up with is to use multiple indicators to get more reliable prediction.

Benny also claims that Most of the Analysts reports are Wrong!  And Therefore fundamental analysis is useless! He is referring to new project engagement, news of expansion, take over etc as fundamentals.  As Malpf has been preaching, anything that can change overnight is NOT fundamental!  So all these NEWs are  NOT fundamentals at all!  They are at best strong supporting news.  Which are purely subject to the Analyst's opinion on what that news may result.

For example, 100,000 viewers have promised to read Malpf blog is a good news but NOT a fundamental.  More than 500 viewers have been reading Malpf for the past 9 months - is a Fundamental.

People who promised can change, to higher or lower numbers.  But past 9 months of data already occurred and they do not get changed easily.  Fundamental is something that does NOT get changed easily.

But this is not Benny's fault at all.  Almost 100% of market analysts have no choice but to follow the trend treating news as fundamentals now.  Because everybody is talking about how good technical analysis is.  So if a market analyst is singing different tone, it is very hard for him to keep his job as his boss and others do not agree nor believe in him.

Other than above, I think they can still run a good training for beginners.  They plan to include teaching on Stochastic, MACD, Bollinger Bands and Candlesticks.  The course is only RM 150 per person and comes with 6 months support ( I think, you will have to ask NextView if you are interested ).  So its quite a good deal if you are not one of those who can learn these stuff by yourself.  

It wouldn't hurt you too much even if you got the wrong understanding on these technical stuff as long as you are able to USE them correctly.

Best Companies in Malaysia

I read from Dali's blog on some numbers of voted best managed, corp governance, investor relation, dividen companies in Malaysia.  Basically they asked the expert analysts to vote for the company they think best in each category.  The company who receive most number of votes is considered the winner in that category.  For example, 36 analysts voted Public Bank as the Best Managed Company

To sum the whole report up, I further come up with a few derived numbers;

1. How many times a company is voted in that particular group.  The more the better.
2. Total number of votes received.  The more the stronger the choice is.
3. Sum of the ranking in all 4 categories, the less the better.

Sort these derive numbers and I ended up with this unify choice of best companies in Malaysia.

There you go, this is another example of stock pick method.  From here onward, you just need to calculate the worth of each company stock.  If the current price is lower than your target price, you are in the buy zone.  Use technical analysis for further fine tune the entry timing.  However, don't follow too close and get greedy because Technical Analysis wouldn't be able to predict the lowest and top point correctly.

Wednesday, May 13, 2009

Response to a comment

Anon (wish you would pick a name) said :

One more thing adds to the spring bounce. In the chinese media. They report shipload of chinese investors are buying. Canadian dollar has gotten a lot cheaper. Overseas chinese investor has more wiggle room than us even if the market drop another 20%.
If you earn a paycheck here in vancouver. Various taxes have already eaten 40%. I feel it is harder and harder to get by.I myself already cut one of the family cars. So the government has one less thing to tax me. Family finance really doesn't really add up.
If anyone interested, I can let you know how much I spend and how much i earn every month. As I think a lot of people are in the same boat like me trying to make ends meet. However, both political parties do not seem to get it.
Fish, I can see you have soften your bearness. I guess this is the reality out there. I've also given up my hope for affordable housing in Vancouver. We will probably buy the end of this year as all my reasons to delay the purchase have proven "wrong".Good health to all.

Lots of stuff there....

Firstly I agree, when folks come from areas where they haven't paid taxes it makes it tough for the locals to compete after paying 30-40% in taxes. It's nice to get their money here, but it also pushes up housing costs for those who live and pay the taxes here. It is certainly a double edged sword.

China is such a behemoth , that I have no doubt it does and could have an even bigger effect on Vancouver house prices, just as US buyers/investors were the main drivers of Whistler's explosion over the last ten years. However I haven't seen a huge influx of wealthy Chinese investors as of yet.

So I have become a 'softer' bear' :)

When I started this blog a year a couple of years ago, I was a rip-roaring no holds barred bear. The price inflation in RE was just crazy and I tried to warn folks to be careful.

We went higher and dropped down and are now back to the levels when I started the blog, or down a few %, but 5 year fixed mortgages have dropped so much that affordability has improved. Am I just as bearish?

Well I am worried. Not worried, like you, that I may have missed the (tiny) window of opportunity to buy and prices will now sky-rocket again. I am worried about the over-all economy.

This is no ordinary recession.

- In previous recessions I didn't know anyone who had lost their job and couldn't find one straight away. This time, I have several friends and family out of work and looking.
- I told you that once the election was over, we would learn the truth about the economy and cuts would come. Well today we learnt that there will be some cuts as Provincial government income drops. e were also told that the economy will contract 3% in BC instead of the previously forecast 0.8%. Big difference!

Why is it that our governments never save for a rainy day, but spend every penny in good times and then have to cut spending at the worst possible time, right into the teeth of a recession?

Anyway anon. I think you WILL see lower house prices. I don't think we are out of this mess by a long way. The only reason we have not collapsed, is because the Central banks are throwing everything they have at this. Low rates and even buying auto loans from lenders. The ship is still listing badly despite all the baling.

Good health to us all, indeed. I have learnt first hand how important that is, more important than whether you own or rent or timing RE.

This will be my week-end post and I will add to if anything comes to mind.


How bad could things get?

Well here's how bad they are in some parts of the US

House-Price Drops Leave More Underwater by Ruth Simon and James R. Hagerty Monday, May 18, 2009 Wall Street Journal

The downturn in home prices has left about 20% of U.S. homeowners owing more on a mortgage than their homes are worth, according to one new study, signaling additional challenges to the Obama administration's efforts to stabilize the housing market.

The increase in the number of such "underwater" borrowers comes amid signs that falling prices are making homes more affordable for first-time buyers and others who have been shut out of the housing market. But falling prices also make it more difficult for homeowners who get into financial trouble to refinance or sell their homes, and for others to take advantage of lower interest rates.

For instance, fewer will qualify to take advantage of a key component of the Obama administration's plan to stabilize the housing market. Under the plan, announced in February, as many as five million homeowners whose loans are owned or guaranteed by government-controlled mortgage giants Fannie Mae and Freddie Mac can refinance their mortgages, but only if the mortgage loan is a maximum of 105% of the home's value. Government officials are considering an increase in that limit.

"It's a question that we're looking at," said James Lockhart, director of the Federal Housing Finance Agency, which regulates Fannie and Freddie. Real-estate Web site said that overall, the number of borrowers who are underwater climbed to 20.4 million at the end of the first quarter from 16.3 million at the end of the fourth quarter. The latest figure represents 21.9% of all homeowners, according to Zillow, up from 17.6% in the fourth quarter and 14.3% in the third quarter.

"What's going on here is that you don't have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks" of communities where home prices have fallen, said Stan Humphries, a vice president. Borrowers who owe far more than their home is worth may also be less likely to participate in another part of the government's housing plan, which provides incentives for mortgage companies to modify loans to make payments more affordable.

Thomas Lawler, an independent housing economist, said borrowers who owe 30% more than their homes are worth are far more likely to walk away from their property than those who owe just 5% or 10% more and expect prices to rebound. More than one in 10 borrowers with a mortgage owed 110% or more of their home's value at the end of last year, according to First American CoreLogic. There are some recent indications that the housing market could be beginning to stabilize.

(stuff deleted)

% of Homes with Negative Equity

Las Vegas 67%
Stokton Ca 51%
Modesto Ca 50%
Reno 48%
Vellejo Ca 46%
Phoenix 42%
Orlando 42%

Over-all US 21.9%

Tuesday, May 12, 2009

KLCI 20090512 update

KLCI performs as expected as last Friday's update, so I may need to adjust my dead cat bounce theory if it really bounce back this Wednesday(1002) or Thursday(1007).

However, it doesn't mean waiting is the only game you can play.

Normally you wouldn't be buying KLCI directly, you would just buy ONE particular stock - ONE very specific business.  So technically there is always an opportunity to buy/sell any stock.  Its just a matter of if you can find it.

For example, KNM is going to converge to 0.83 on Thursday 14 May (see below blue lines).  How it move ( above or below ) would be very interesting for those who follow technically ( at least it should).   But from experience, my bet is on side track below the support line.

until Meningitis (Melaka) or Swine flu officially lauched wars on Malaysia.

So by now, my previous sales made on KNM is another example of sell-too-early example.  But I wouldn't change any of my investment strategy due to this event alone.

Monday, May 11, 2009

The market drivers

In my last post I told you how RE has become a lot more affordable due to the 15% drop in prices from the peak and the drop in mortgage rates.

These two factors have reduced the cost of owning property by between 30-40%. No small amount.

Add this to the normal seasonal factors and the current strength in the market, which seems so inexplicable to many bloggers, is obvious.

Does that mean we are off to the races again and should expect double digit appreciation?

I don't think so. Why?

The economy will trump everything. In the US they had the same metrics and housing only stabilised temporarily before resuming it's downtrend.

Of course the US had crazy 0%-down, neg-am, interest only, no-doc mortgages which helped bring their house of cards down. We are not in such a bad shape, but we do have a lot of people who have got in way over their heads in upper and lower end RE. We are also very dependant on resources and the construction and service industries (eg building and selling houses to each other) and have a higher median age than Ontario or any other Western Province.

We are in a major recession, with more lay-off coming and if the economy doesn't turn soon, 'we could see a race for the exits', as some owners are forced to sell..

As the economy weakens, two factors will impact RE prices. Wages will not rise and family income drops as unemployment increases. So while affordability is increased, it may be cancelled out by lower income.

Secondly rents are likely to stagnate or even drop. Therefore the rent/buy comparison I made a few posts ago tend to favor renting, where costs are fixed- whereas owners will face the increased costs of repairs, increased taxes and changes in interest rates.

It may seem to my readers that I am arguing both sides of the coin, saying how much more affordable RE is in one post, how renting and owning are becoming comparable in another post and then explaining how I still think prices will fall further.

The truth is, there are many cross-currents affecting RE, as with any other investment, including some I haven't thought of, which may in fact be the critical ones!

However look at the housing boom of the last 7 years.... As affordability became more stretched, the bears became more convinced that a correction was inevitable. That was 2004! It caused a small drop and then we had fours more years of sizzling hot price inflation.

By 2006 I remember bears frothing at the mouth on the news that 50%+ of income was needed for housing costs. Sure enough there was another small and very short-lived blip down then, too. But by 2008, it had reached nearly 70%. Momentum and a speculative boom overwhelmed the lack of affordability much to the bears disbelief. (me included)

You can see the very short-term dips in 2004 and 2006 on this chart:

Now we have the opposite. Increased affordability has stopped the market from dropping, but the negative momentum and uncertainty will likely overcome the short-term stabilisation.

I think we have moved from a bull market in RE, ( and stocks) to a bear market in both. Both will have a bounce, but I think they will both eventually go lower.

At least that's how I see it. However, as I mentioned, there can always be some other factor which unexpectedly changes the equation. You can only make the guesstimates based on the information you have available. If I see a very strong summer/fall in RE and a solid turn around in the economy, then I will have to re-evaluate my theories. I don't expect either one.

Saturday, May 9, 2009

Where to now?....and then some

Rob Chipman, the realtor who has been blogging and posting numbers steadily for the past few years put up a thoughtful post recently: In it, he admits that even he is surprised by the strength of the Spring bounce and wonders what's up?

Well I think what's up is that a lot more homes just became affordable. We are down anything from 12-15% from the peak and interest rates have brought the monthly mortgage payments down 20% or more. Combine those two and you can estimate, that even though we are still at bloated valuations (compared to income, historically etc), homes have become 30-40% cheaper to buy than at the peak.

That's pretty good and some folks who have been waiting to buy, or move up, have jumped on this opportunity. Others have refinanced at these low rates and so maybe able to hold on to their homes longer through these difficult times (another good thing)

This is exactly what the central banks wanted. They could see, residential and commercial property and stocks in free-fall and the whole system was at risk of collapse.

In our leveraged society, the ultimate holders of these assets are the banks, insurance companies and CHMC. The only thing that they could do, was what they had done again and again for the last two decades, debase money so no one wants to hold it.

Forgetting of course that this was exactly what got us into this mess in the first place. However, this time they had no choice but to pull out all the stops.

Frankly speaking if this didn't cause a small blip up in activity then we could all kiss capitalism goodbye and look for another system of societal interaction.

In the US, the blip was tiny, but enough to stabilise the stock market from it's quickest decline in history.

In our city, the blip was a bit more. That's good, but unfortunately I don't think it will persist for much longer.

We still are in a nasty recession. Lay-offs like the 800 person closure of E-bay's Burnaby call center will continue. Add to that the government cut backs, that in my opinion, WILL come from Gordon after the election, when a 'special budget' will show us how bad the books really are.

However for now there are folks buying. You see, there are some people who look at monthly payments and some who look at price. Those who look at monthly payments, cant believe their luck; prices have dipped, rates are down..they can buy...and they have decided that they wont look at the price in 6 months and kick themselves if their equity goes, or if the foreclosure down the street shaves 20% off.

Others are focused on price, they see a 20% a year, multi-year rise and then, in the worse financial crisis since the great depression, a 15% drop. Surely that cant be it? They would be upset to buy something, the biggest thing you ever buy, and then find it 15%+ cheaper in a year or two.

Count me in the second group. I have waiting so long another year is hardly a chore.

June and the summer will be very telling.


Just got back from the EPIC sustainability show. A bit of a disappointment. I was expecting some solid ideas on how to reduce waste, particularly plastics which are destroying our oceans and rivers. Instead I paid $15 to wander through a bazaar with people trying to sell me stuff.

There were a few stands given to Fraser River protection and other environmental groups, and some interesting speakers, but ING? Investors group? The car companies??

Lots of food samples, given out in little plastic cups...duh! How the heck is that sustainable??

Kudos goes to Salt Spring Coffee Company which was the only one (that I saw) using coffee mugs for their samples, and this company stood out for me: You can buy all your summer picnic wear..plates, cutlery, even straws for $30 or less and it's all biodegradable.

However the show did not meet my expectations, but then it was sponsored by my least favorite media monopoly.

First look at the convention centre for me, and I liked it. Lets hope it isn't an expensive white elephant.

BTW - when I bought my ticket they asked for my phone number? Huh? Why? The last thing I want is some call centre trying to sell me something...maybe even a newspaper subscription?? No!

Friday, May 8, 2009

KLCI 20090508 - what can you do now ?

First, it was bearish and most experts were saying the worst is yet to come;  (me too)

Then bull came and expert analysis polarize into 2; one group said that this is dead car bounce (me too)  and another group said the worst is over ! ( not me)

Now majority of the analysts are forced into agreeing on the bull trend. (not me)

Despite what they (I) said, what can you do at times like this?

First of all, no matter if you believe this is a fake or real bull.  The fact of up trend has been formed is a reality.  Following this method;

You can see clearly that KlCI hit the ceiling at 1,032 on 7 May and therefore came down that day.   You probably should have sold some of your old holding stocks by now.  If you have just bought some, sorry for late posting lor :)

(I sold mine on 5 may, slightly earlier than the perfect point)

Anyway as you may see from above 2 blue lines and learning what to do during an uptrend from this article ...

You may wait till the following support line to buy again;

993 on 11 May
998 on 12 May
1002 on 13 May
1007 on 14 May
1011 on 15 May

Expected entry dates would be 12-13 May.

This is one of the examples to earn easy money from stock market during an up trend.  This particular analysis is confirmed on 30 Apr, so it would be best if you engaged on that point using this analysis result.

As of now, there is only 1 hesistation on this.  Observe the orange circle and rectangle,  stochastic shows that it is in oversold status.  So if it hits the support line on 13-14 May (late week) then it may indicate rebounce (buy before support line), if it hits support on 11-12 May (early week) then it may indicate a crash ( buy after rebound ).

An added strength to this analysis is that the whole Malaysia is crazy about technical analysis now.  Most investors think that technical will 'guarantee' profit due to their ignorance.  As described in these articles:

Technical chart alone are NOT the solution for stock investment !

Anyway, what really matter is, since the general public are dump and now they believe in technical charts, all of them will buy and sell based on the charts.  Knowing this, it will give you the advantage to get in and out earlier than them to earn better profit than them.

---- ok so far, above are considered as proper consultation despite what you believe how the market will move (scientific?), below this would be my own personal judgement (artistic?)---

Since I am one of those who believe in dead cat bounce, I wouldn't be able to enter market during the next rebounce.  I will have to wait till it really rebound then I will need to decide again if I still believe this is a fake bull or is the worst really over.

I am sure this article will be more confusing than helping to most.  But in general, what this kind of analysis has done is adding a dynamic variable to technical analysis - the Time factor.  It doesn't change the fundamental flaw in Technical Analysis but it does help to stay ahead of others who also use technical charts.

Wednesday, May 6, 2009

stock market making me dizzy ...

Was just having a little fun making world stock market spin like it rises now ... just to remind you that you may have 1 bird eye view on the whole world stock market performance in real time in ( no spinning )

Try move your mouse around the spinning markets to control the spins ... :)

Tuesday, May 5, 2009

Another way to value a house

In this post I compared renting versus buying, as one way to try and value a house.

However it does imply two things, 1) that you have money to pay down a mortgage. If not, it is much cheaper to rent the same property than to buy it. 2) that you have security of income stream. If not, having to sell under duress could be financially disastrous.

However, if I was an investor, I would be evaluating the price by slightly different metrics. As I mentioned, these mirror, but are not the same as the rent/buy comparisons.

Cash flow negative, neutral or positive?

OK time for some explanation. Every property is cash flow positive if you buy with 100% down! So these terms are relative. At what % of down-payment does the property become cash-flow positive. 10%, 25%, 50%?

During a boom, investors are more likely to buy properties which are only cash flow positive with high down-payments. It means they often 'top-up' the rent to pay the expenses, but expect to gain on a robust rental market, and with capital gains.

Rents go up by inflation or more, while the mortgage is being paid down, so properties that start off being cash flow often negative end up being positive after a few years.

In a recession the opposite is true. Rentals are weak, renters may fall behind, and capital gains cannot be counted on, in fact the property maybe dropping in price and will need repairs etc.

In this case I would want to see a the property cash-flow neutral or positive with a very small D/P at purchase.


I don't think this is the average recession. If it was, we would not be sitting at near zero rates and the politicians and central bankers would not be saying, with fear in their eyes, 'we must prevent a depression', before the recession had even started.

This may be one of the few times in history when renters can negotiate no increase or possibly even a rent reduction, when their lease comes up, as the economy softens.

I have just negotiated my house and commercial lease with zero increase for the coming year. And in case you think I am so smart (I am not) I could leave and get into comparables for both 5-10% cheaper. Had I done a bit more market research before I signed the lease extension, I may have got a better deal.

So imagine you are an investor and your renter wants a rent reduction. The alternative is to try and rent it our again in a softening market, with possibly other concessions too. In this instance, a cash flow positive property can become cash flow negative!

So if I buy something now:

1) I would have to be able to carry it without suffering too much, if the income drops or if the renter falls behind, or leaves after missing several months of rent, or it cannot rent quickly, or the market dictates a lower rent.

2) I could handle a reasonable increase in interest rates. No one can foretell where rates will be a year or five from now, but they are remarkably low now. So if the property cannot cash-flow at these rates, then you are unlikely to get much benefit from lower rates in the future.

Incidentally the investor will need to make provision for repairs and special assessments AND the very real possibility of increased property taxes after the Olympics.

While an owner may shrug these of as the cost of owning, for an investor these added expenses reduce, or in some case can completely obliterate his/her returns.

Therefore the deal for an investor has to be significantly better than the rent/buy comparison particularly in a softening market and recessionary environment.

BTW: another great post by Mohican which must not be missed:

Stock Pick 2009 05 05

Lucky or not, recent stock market's dead-cat-bounce is higher than expected, so high that the technical reading triggers the signal of end-of-bear-market, eventually made me changes my previous investment strategy, i.e. sell now instead of selling 3-5 years later.  In general this is an example of emotion overtake logic.

The emotion part is my belief that this is a dead-cat-bounce; the logic part is the clear technical signal of bear-end.  So sum all up, now even if the market goes crash, it would most probably be supported at 950.  Instead of the much lower level I expected earlier.

Although 70% profit within a month seems pretty good but almost any speculator for the past few weeks would most probably easily get that return rate and more.  Should I really keep for 3-5 years, 4x return isn't really that impossible.  To really feel the difference, try imagining earning $70,000 from $100,000 vs. the potential income of $400,000.  What can you do with an extra of $330,000?

Taking profit now actually allows me to rest for the year of 2009 (this year target achieved).  However, selling off everything I have now is a bad positioning move, so I will need to start working on 'what to buy now'.

So follow the same method to screen out stocks to be analyzed on, this time I am using these rules:

1) Volume higher than 15,000
2) Price between 0.30 and 0.50

This is the list I got;


Screen through their finance data (ROE and EPS), these are the 3 stocks I am watching now.  More in depth study will be needed before taking any action but I have time for that (before end of 2009).

GPHAROS : EPS chart and trend line

INSAS : EPS chart and trend line

MULPHA : EPS chart and trend line

One exception during above exercise is NTPM.  It doesn't really fall under my worth buying now rules but it is the only pick that all its EPS stays positive during the whole period.  So I am keeping this on my watch list too.  I may not be able to earn 15% from this stock, but it will be a good safe and steady keeper which I will need should I be wrong in my dead-cat-bounce perception.

NTPM : EPS chart and trend line