Friday, July 31, 2009
The US has had a catastrophic RE melt-down, many of it's largest companies have gone bankrupt, most of it's large banks were insolvent and required tax-payer money to stay open. Meanwhile the US's largest trading partner, Canada, is having a rip-roaring RE boom!
That is not how most bears thought the script would be written.
And I have to admit the market is still a rocking and a rolling. I spoke to a Realtor tonight who just wrote a no-subjects, full price offer on a Burnaby house that had been listed 3 days and there were several other full-price offers presented at the same time.
This smells like the panic of 2007 all over again.
We know how that ended, in a blood-bath. Will this too?
It is crazy how an asset can go from must-buy-at-any-price-panic to no-bid and back again in one year!
Basically inventory for July has been flat, going out within a 1-2% of where it came in, as have prices. I am going to be watching the next couple of months carefully to see whether this buying frenzy continues. If so, the bears will have to do some serious hibernation until after the Olympics.
All assets are now linked. RE, gold, oil, stocks and even bonds. They have all been on fire since March 2009 without the even slightest correction. I expect late Summer and early Fall to bring a larger correction in all assets.
If it doesn't then I for one will have to consider whether the economic rebound is stronger than I expected.
Wednesday, July 29, 2009
It's hot and the heat has been affecting the rational part of many buyer's minds.
I see sales which have sat there for months, suddenly going for at or near the listing price, as multiple buyers chase it up, worried that if they don't buy now the Kingdom of Heaven will be barred to them for ever!
In any case the last two days I have seen more listings and less sales. Lets see if this is a trend. I will tell you if it continues.
As Robert Prechter said:
The news at turning points is too strong for people to act contrary to it...fundamentals so intensely support the continuation of a trend, just when it is ready to reverse.
Tuesday, July 28, 2009
So as you may see, sometimes we want to tick size to be as small as possible, some other times we want the tick size to be larger than our transactional cost.
Monday, July 27, 2009
When you put both graph together, the current / old tick size vs the future / new ones, you get below graphs ...
1. Long term investors can now accumulate expensive stocks with much cheaper cost, especially those between RM 3 and RM 10.2. The only speculatable ground is now reduced to below RM 0.50 arena only.
Sunday, July 26, 2009
Friday, July 24, 2009
I think we have a tale of two markets. The first is the Fraser Valley and outskirts of Vancouver. While they bounced back from the near catastrophe of last fall, it was a fairly modest rebound.
On the other hand we have had a much more robust rebound in Vancouver proper, especially the previously red hot areas, which are now glowing again.
The question is whether the weakness from the outside will work it's way in or the heat expand out.
Regular readers may remember us charting the progression of the first major drop..it started with rising inventory in Surrey and Langley and surrounding areas, then MOI started rising and finally prices fell. In due course this spread to Vancouver itself.
We will keep our beady eyes out to see which way it goes. Inventory has started to inch up a tiny bit. However it is still too soon to call it a trend.
It's All About the Economy Stupid
Mark Carney has called the end of the recession. Well he actually said it would probably end in a few months. The stock-market obviously agrees since world indices are about 40-50% higher than their Armageddon lows of March 09. I am not so sure.
Lets crunch the numbers. We were literally in free-fall late 2008 and early 2009. The GDP in Canada was dropping at an annual rate of 3.7 in the last quarter of 2008 and 5.4% in the first quarter of 2009, and will probably be down 3.4% in the second quarter. These are Major Depression numbers.
So I for one am glad that they pulled everything they had out of the bag and dropped rates down to almost zero to prevent food riots and mass unemployment (yes it was possible).
However I do not have ANY confidence in the predictive abilities of the BOC..Fed..etc. We in the blogosphere have been saying for years that the mountain of debt built on bubbling assets was a recipe for disaster. Furthermore deregulation eg the crazy trading of US brokers and insurance companies or the sale of garbage-backed paper to Canadian investors was unsustainable.
Our regulators and policy makers, who mostly come from the investment industry, assured us that all was well.
"We are insiders, trust us, we know how it works."
Late 2008 they all looked like deer-in-headlights and ripped the cover off the tax-payers' cheque-book and threw as much money as they could at the collapsing assets to put a cushion underneath them.
If they were so bad at predicting the arrival of the biggest financial cataclysm of the last 70 years, should we trust them now?
I expect rather tepid growth for some time. Even though we have are no longer in imminent collapse, we still have de-leveraging and over-capacity to deal with. We also have a lack of any drivers taht I can see for a new leg-up.
Last week-end I drove around Vancouver and saw lots of commercial real estate in trouble. Shops and offices down-town vacant and strip malls with empty stores. The situation is the same in many industrial parks where businesses are leaving or down-sizing.
Metro Vancouver's office vacancy is up from 5.7% late 2008 to 7.4% mid-2009. Which businesses suddenly start soaking up this excess? I would guess that we will be up HIGHER by the end of the year lease renewals will be at lower rates.
My proof - I rent my business space and my home - and for the first time - neither increased their rents but were just happy to have me stay.
So I think we have a modest rebound, and then folks realise that the recovery is going to be slow and job-less and that in the meantime, governments are going to have to provide for more people with less revenue. I suspect that will come in the next few months and will be looking to the stock-market and bonds for clues that the investment community is moving from the euphoria of non-collapse to a realization that this is no ordinary recession. BTW if Mark Carney is right that would make it a very short recession of about a year or so.
From 'end-of-the-world' to short recession - I don't buy it.
Low rates and oil and cheaper stuff
We have had a huge fiscal stimulus. Interest rates are lower, oil is less than half what it was a year ago, and many things like cars and furniture are being sold with 0% interest rates.
So those with secure jobs have been using their newly acquired disposable income to buy a house or move up.
I would have thought the effect of this huge boost would have ended by now, and the reality of a fragile job market and on-going recession would have pulled the carpet from under the rebound in housing. However I underestimated the effect. It went on longer and stronger than I thought. It happened across the country, with some cities reaching new price highs.
Thankfully that hasn't happened in Vancouver (yet!) and frankly speaking I doubt it will, but will be watching the numbers heading into fall very carefully.
Table 1: Current and New Tick Sizes on Bursa Malaysia
|Securities Price||Current Tick Size||New Tick Size|
|Below RM1.00||0.5 sen(1/2 sen)||0.5 sen (1/2 sen)|
|RM1.00 to RM2.99||1 sen|| 1 sen|
|RM3.00 to RM4.99||2 sen|
|RM5.00 to RM9.99|| 5 sen|
|RM10.00 to RM24.99||10 sen||2 sen|
|RM25.00 to RM99.98||25 sen|
|RM100.00 and above||50 sen||10 sen|
Thursday, July 23, 2009
Finance is a big complicated topic, Personal Finance on the other hand is really simple where the dumpest guy on the world can easily get 'everything' he wants. The 2 topics are hugely different.
Venue: Sime Darby Convention Center, Bukit Kiara, Sri Hartamas
Price: RM 92 pp
RM 80 pp when purchasing 4 or more tickets
Tickets sold by Ticketcharge: 03-2241-9999
(click on image to enlarge)
Do you aim to be:
- a Fund Manager
- an Equity Analyst
- a Forex Trader
- a Private Equity player
- an Investment Banker
- a Corporate Finance executive
- an equity Dealer
- a Bond Trader
- a Hedge Fund analyst
The talk is by S Dali of Investing Scents weekly business column in The Star. He is an ex fund manager and head of research, for local and foreign investment houses, having worked in Sydney, HK, Tokyo, Singapore and KL.
- the right degrees for the right careers
- ranked universities vs local universities vs second tier foreign universities
- specific subjects and majors
- is CFA the passport to success
- are you suited for the financial markets or do you just want to get rich quick
- getting through the front door, reworking your resume
- indirect passages to sound financial markets' careers
- what if your degree consisted of poor grades
- critical success factors to have for viable financial markets career
- remuneration scale for financial markets
- command of English, essential or unnecessary
- things financial markets employers look for
- is financial markets for you
- things they don't teach at business classes
Wednesday, July 22, 2009
At first the Farmer can make 4 meats in 4 hours and 16 potatoes in another 4 hours. The Rancher can make 24 meats and 48 potatoes like wise.Then when they started trading, Farmer concentrates on making 32 potatoes in 8 hours while Rancher makes 18 meats in 6 hours and 12 potatoes in the rest of 2 hours. Farmer gives Rancher 15 potatoes, Rancher give Farmer 5 meats.After trading, Farmer has 5 meats and 17 potatoes vs previously 4 and 16. Now Farmer has more ! Rancher has 13 meats and 27 potatoes, Rancher has even more than Farmer's more!
Tuesday, July 21, 2009
a longer insurance series may follow soon after this mutual fund series ending in a few more articles.
Monday, July 20, 2009
Are you sure you want to pay the extra fee just because they did good in the past ?Do you pay more just because you agree with the investment objective of the fund ?How about just because a certain fund has some of the stocks you want to buy anyway ?The agent is your friend, she did a great sale talk ?
Sometimes I like to shop in a particular grocery store more than another even if some items are slightly more expensive. That is because the store owner is really friendly and knowledgable. He can answer most of my questions and I really don't mind letting him earn the extra cents.
Friday, July 17, 2009
When the market turns down again, it will be obvious. Now is not that time.
The market needs a jolt to send it back down, like it had from the events of last fall.
What will that event be?
1) Rising interest rates. Possible, but I would be surprised if we go much higher. Inflation is fairly tame at the present. In fact we just had negative yoy rates, down 0.3% from last June. The drop was caused by gas prices dropping. Without the gas price drop we would be up over 2%. I don't think the economy can withstand higher rates.
2) The Provincial Government slipping further into deficit and having to slash spending, just as the big projects..bridges, Olympics-related, Canada line come to an end.
3) The World economy having escaped financial Armageddon, just sinks into a very severe recession, hitting commodities and bringing fear back into the minds of asset buyers.
I think 2) and 3) are more likely. Despite the fact that we have unprecedented rate cutting and stimulus packages around the world, we are sinking deeper into recession daily with rising unemployment and lower government tax receipts. The governments which were blowing the horn of stimulus, will soon be panicking about the burgeoning deficits, and will be looking to make cuts.
So I don't think we need to look at every statistic hoping for signs of a change. When it comes, it will be unmistakable. Until then I am going to enjoy the summer, and wait for the jolt.
Thursday, July 16, 2009
- Fund managers are incompetent
- The only people who gest Rich are those agents, not the investors!
- mutual fund fee 5-6% are terribly HIGH!
- mutual fund returns are LOW!
- mutual fund is NOT a PASSIVE investment, you may as well buy stocks!
- Buy Low Sell High is applicable in mutual fund, why should I keep the fund knowing the price will drop?
- Mutual fund cannot be compared with FD, their risks are different!
- If you look at the world's best investors of all time, in average they out perform the market by 6.46%. This includes Warren Buffet, Benjamin etc. Most of the fund managers may not be as good as the Gurus, but their past historical performance is not that far apart.
Most people who curse at fund manager's competency are due to their unrealistic expectation. Some ofcourse is due to their own unhappy experience. Either ways, generally fund managers' performance is at par but definitely has room to improve.
- Let's face some factual figures. The most a mutual fund business can squeeze out of the investors are the 5-6% no matter how they distribute among their agency force. Insurance can be up to 40% while MLM structure usually allocate more than 55% in similar distribution.
So if one is worry his agent gets richer just because he invest, mutual fund is probably NOT the first and major concern relatively.
- The 5-6% High Fee is VALID but may not be as bad as it was described. For example, a comparable stock investment with 0.7% fee could have an effective rate of 2.31% vs the mutual fund's 5.5%. So buying one mutual fund is as if buying 2 stock counters.
- See 1). Get the expectation right. No one becomes rich because they buy mutual fund. But when done right, many retire wealtheir than they initially thought of.
- Yes, mutual fund CAN BE an active invesment like in 6). But MalPF preaches not to use it that way, one should use mutual fund the PASSIVE ways.
- If you know the timing of a market trend, mutual fund and dollar cost averaging concepts is NOT something for you. Buying a stock can give you exercise your timing concept with lower fee. This is an example of how to.
Are you sure you are not an agent earning commission when you encourage people to speculate using mutual fund ? Are you sure there is no conflict of interest with your clients portfolio ?
- As mentioned above, the top part of mutual fund ie. equity fund cannot be compared with FD but the lower part of mutual fund ie. capital guarantee fund, money market fund etc. CAN.
But if you really put the numbers together, you may realize its just another looks-good but pratically almost everything stays the same. For example, the typical BLR in the market now is 5.5% and the common offer is BLR - 2.2% so
BLR 5.5% - 2.2% = 3.3%
MLR 4.7% - 1.3% = 3.4%
Wednesday, July 15, 2009
Tuesday, July 14, 2009
Sunday, July 12, 2009
Now to the bubble graph I posted the graph a week or so ago:
Wednesday, July 8, 2009
Most of it we have been saying on the blogs.
2) The best of the rates are probably behind us.
3) So from now the state of the economy and incomes will be the drivers.
BC specific: after the sharpest drops since 1991, it has rebounded and he sees a floor under prices from lower construction and listings.
The RBC affordability measure dropped for Vancouver dropped from a staggering 80-90% of household income to own a SFH to 70% or so. Still remarkably high. He notes the rebound DESPITE a soft economy and surging unemployment.
Here is the whole report : http://www.rbc.com/economics/market/pdf/house.pdf
I agree with most of it. The drop in interest rates has had an incredible affect on affordability. It was like a price drop of 20-30% -except not quite. The asset you are buying is still over-priced even if the carrying costs are lower. Would you buy a car for 20% more than it is worth, just because the financing costs were low?
Nevertheless it has led to a major bounce. Now what? Well as he says now we have to wait and see what happens to the economy. The floor he mentions can easily be broken if the economy starts to wilt.
In fact I would say that after the Olympics, if the world economy does not rebound quickly, the price of housing will be the least of our worries as our unemployment continues to surge, and we have to deal with the Olympic cost over-runs and resultant cuts in spending.
I don't see any driver for improving the employment situation anytime soon and am concerned about another surge post Olympics.
Hat tip to Larry Yatter for posting the report.