Author: Lawrence Chan

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The Awkward Real Estate Dynamics in China

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Unlike any other country, China has experienced a prolonged growth in its real estate markets for a very long time. In fact, much longer than any other ones we have seen in the other countries in the past. Is it something sustainable? Well, I am going to discuss about this from a slightly different angle instead of the more traditional evaluation approach. Namely, I will look at the whole situation from the study of the participants in this interesting market.

The Rising Tide Lifts Everyone on Board

Over the past thirty years, China has been undergoing huge reform in its real estate market. The efforts to modernize the major cities and the relaxation of regulations to ownership of realty created the biggest boom in real estate markets across the country. Many people were assigned title ownership to various real estate and related resources as the laws changed. This alone created massive amount of wealth into the hands of the people who had the right connection or status at the time.

Let’s ignore the issue of fairness and whatever moral value you uphold for the moment, as this article is not about that at all.

What is important, however, is that this wealth effect has profound impact on the psychology of the people in China.

Those Who Won Big Without Knowing Why

Those individuals and their families who got the chance to ride on this boom have no idea why and how they actually become wealthy over such a short period of time. Just like any other people in the world who have similar kind of fortune, majority of people who won this lottery game of real estate attributed the success to themselves being smart, to their country being strong and for some with nostalgic beliefs, that Chinese civilization somehow helped them to get to where they are now.

Of course all of these thoughts are plain wrong. They are put into the right place at the right time. i.e. dumb luck

Well, ignorance is a bliss …

Those Who Have to Park Their Money Somewhere

During this wild west type of economic expansion and discovery process, the must have element of corruption and grey area deals for which money are made unethically, of course, are happening everywhere in China at the same time. These money, however, cannot enter the modern banking system easily because, even China does monitor outlier deposits, after all.

One of the obvious routes to park the money, of course, is with real estate, just like everywhere else in the world.

In fact it is a good example why real estate markets are the number one choice for dirty money. Since these money cannot be taken to the bank to exchange for the banknotes with the highest value, the space the money will take up now matters. Just imagine the actual physical size of the paper money needed to hold the value of a property. With small denomination banknotes, they will occupy more space than the property itself!

The Speculators Who Thought They Know

And then there are those short term speculators who think they know how to profit from this real estate boom in China. Of course there are many people who made a lot of money from this bull run. It is again no difference from speculation of real estate in any other parts of the world. The funny thing is, however, how leveraged these speculators can be.

According to various studies, Chinese speculators are the most leveraged speculators in real estates comparing to any other places in the world. Their voodoo beliefs in real estate markets can never drop drive them doing things that any people with common sense would never do. Yet, those with common sense are the ones who have been left behind in terms of financial well being over the past ten years.

So Who are the Suckers Here

Normal hard working people without special trade skills like a professional designation (i.e. doctor, accountant, etc.) will never see the light to even paying for their down payment for a decent apartment in China. Those young professionals will be able to afford buying their own property at the cost of turning into debt slave for the rest of their lives. Yet, they represent only a very small percentage of the population. Hence the important players in the real estate game in China are those who are already on board, either by dumb luck or out of necessity (e.g. dirty money) and those active speculators who continue to actively buying and selling in the current market environment.

Since the dominating players still playing this game are relying on the Chinese government to support the real estate markets as oppose to having at least one valid reason, I think that everyone in this game are suckers at this point, maybe except the central Chinese government itself. It is just a matter of time the Chinese housing market will collapse significantly.

Feature Image: Stanley Street Market in Hong Kong

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Singapore: Searching for a New Identity for Survival

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After talking to many people in Singapore from all walks of life, my impression is that it is no longer the uplifted, high energy place it once was. In fact, many factors that are contributing to its long term well being are no longer there. Similar to Hong Kong, Singapore can no longer depend on what it built in the past to thrive in the coming decade.

Real Estate and Financial Industry

The decline in Singapore’s real estate market has been on-going since 2014. Many analysts in Singapore think that the bottom is near. Well, I am not that optimistic. From my conversations with many people who work in the financial industry there in Singapore, many firms are ending their contracts with local staff and sending their own people back to their home countries. That means one segment of high income earners in Singapore is disappearing which is the real reason why Singapore’s real estate markets are under pressure.

In other words, Singapore is facing its biggest challenge ever as its role being an important financial centre in Asia is now at risk. We cannot tell if these major financial institutions will expand their businesses there in Singapore in the near future, but usually this type of business planning is at least 5 years or longer. Hence it is reasonable to say that if, ever, these firms will be thinking of growing their businesses in Singapore, it will be at least 2 years from now. The 2 years estimate is based on the fact that these firms moved out since 2014.

Tourism

As a tourist destination, Singapore is usually a one to two day tour city because of the overall size of the place. Majority of tourists who visited Singapore for leisure purpose would revisit the place for just once or twice more, unlike resort destinations where various resorts each offering a different experience where the visitors can enjoy their stay for longer time to rest and relax.

For seasoned business travellers, they have already enjoyed touring the city in the past hence they are no longer big spenders when they stay in the city. And the trend of rising prices at restaurants and shops targeting tourists and foreign business people is also a big turn off for the visitors as there are many alternative locations in Asia where they can better spend their money.

So I think it is reasonable to say that it can be difficult for Singapore to grow its tourist industry into something more significant for its economy.

Internet Era

For many years, Singapore has been very focus in ensuing their citizens being better educated to deal with the industrial world back in the last century. However, since the beginning of this century, the internet has completely upset the balance of the world economy. This wave of technology shock has affected economy worldwide. One thing that really messed up the world is that the education of people around the world were all pointing to the wrong direction since the internet revolution has started. Nothing in the education of young people are preparing them for the new economy.

This problem affects Singapore much more than the other countries in Asia. Even though in college level education, younger generations can be trained with more computer knowledge, but that implies that at least 2 generations of young workers in Singapore need training before they can be redirected into the knowledge based economy or Singapore will lose all the advantage they used to have against the rest of the countries in Asia.

More importantly, the education up to high school level has to put a lot more emphasis on computer skills which was never the focus. Without reform, the education system will continue to produce workers without the skill sets necessary to thrive in the new economy era. This is no difference from other high tech places like Hong Kong, Korea or Japan. Just that Singapore economy has always been driven by one or two main industries while other Asian countries have better diversifications. Thus, being able to stay at the forefront of knowledge based economy is more important for Singapore than other places.

Tough Time Ahead

In this modern time, as people demand more and more from their government while in reality the government is really nothing more than a construct to manage a place, Singapore is really dealing with a serious identity crisis at this point. Singapore, being a special sovereign entity situated at the centre of South East Asia, has enjoyed great economic growth and endured tough times while bouncing back gracefully every time.

Yet, as the world is entering this crossroad all together this time around, Singapore is facing a very tough time ahead as its government leading approach to its society and economy is facing its biggest challenge ever. To thrive into the future, Singapore has to figure out not only what lies ahead but also resolutions that has to be put in place as soon as possible before the tides turning.

Feature Photo: Singapore Changi Airport

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What’s Wrong with This Picture on the US Stock Market

Here is the sentiment indicator from stocktwits on SPY, the ETF on S&P500.

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And the sentiment for emini S&P below.

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We seldom get a significant selloff from such bearish sentiment … bears have to be more careful to avoid turning into roadkills during this holiday season.

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Going Back To Hong Kong

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After a hectic week of visiting a number of countries in South East Asia, I am now getting ready to leave Singapore for Hong Kong tonight. I have spent time with bankers and traders who I know for more than a decade. I also got the chance to meet new friends and potential clients introduced to me by my friends. It is nice to see the familiar faces while enjoying the company of my new acquaintances.

First thing I noticed is that many of my friends are now bald and some are very out of shape. Some already passed away due to sickness. It is evidence that we are getting old. Time does not care who we are indeed. The experience is giving me stronger determination than ever to keep myself healthy. The choice is there for everyone, but we must consciously make the hard choices first in order to get the long term benefit.

The retail trading scene in Singapore and other South Asia countries have not changed much. The rules and regulations in many of these countries are still too lax and unenforceable. This give rise to unethical practices by many brokerages to lure naive people into speculations on high risk financial markets without realizing that they are engaging in such activities.

Worst yet, some of these operations are just outright scams taking money from people and then disappear overnight.

I am not sure how long will it take for these countries to mature to the point for which average investors are sophisticated enough not to fall for these scams and illegal activities. It will be a long road and it takes a lot of political willpower to make the necessary changes happen.

I have more to write about my trip to these countries but I have to do that another time. I have to pack up and head to the airport soon.

Have a nice weekend all!

p.s. feature pic is the airport train for connecting the terminals of the Singapore Changi Airport

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Leaving Hong Kong Soon

imageI am heading towards other Asian countries tomorrow. My schedule is jam packed and some of the countries I am going to do not provide reasonable internet access. I am not sure if I can even check email in some cases. It will be a nice break from the Net though. Like many people suggested, maybe it is a good thing to unplug from the Net once in a while.

I have notes written down on quite a number of topics that I like to write about. When I get the chance to sit down quietly on my own, I will be able to organize my thoughts and have some interesting observations to share. It looks like my decision to spilt the blog from daytradingbias.com is a very good call. It is quite unprofessional to talk trash in a site that offers professional services to traders, isn’t it?

I am hoping that I can wrap up this round within a week. After all, it is very tiring to talk like 8 to 10 hours almost everyday. I definitely need a break and what is better than spending the Christmas week with friends and family to enjoy the holidays?

The feature image is my father’s Chinese calligraphy.

Have a nice weekend everyone!

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Hong Kong is Fading Away

traffic on junction in city Second week into my busy schedule meeting people here in Hong Kong, one thing that I have to deal with consistently is the time spent in between. Due to the packed environment and crazy traffic condition in Hong Kong, traffic jam is the norm. Hence much time is wasted on travel. In fact, I think I spend more time traveling in Hong Kong than in many other major cities I have been to. Killing time in leisure seems like a luxury in Hong Kong when you see all these people walking in very fast pace with serious look in many of them.

Historical Importance vs. Reality

Many Hong Kong people are very proud of their past accomplishments. As the richest city for Chinese people back in 1970s to 1990s, it is approximated that Hong Kong’s GDP was as much as one third of the whole China back then. It was really amazing how such a tiny city, due to historical reasons, being placed into the global trade route, could shine so bright. But this is exactly the problem with the people in Hong Kong – many of them do not realize the special conditions allowing the city to grow so much has been chipped away over time.

As of year 2015, Hong Kong’s GDP is less than 3% of China’s GDP. Its relative importance to the growth of China and its future is long gone. Within a decade or two, as China continue its push to modernize the rest of its coastal cities, Hong Kong will likely be less than 1% of China’s GDP. In other words, Hong Kong is going through what many Western countries were going through over the past 20 years – normalization of its economy, living standard and social structure while the developing countries like China were playing catch up.

A Highly Inefficient Place

One thing that stands out in Hong Kong is that majority of the workforce are being rushed to get things done. Everything are being pushed for completion as quickly as possible. By results, however, they are just making more mistakes and time wasted on these mistakes. At the end of the day, nothing is really accomplished efficiently this way.

Another clear problem with the city is the less than desirable education cost which reduces the competitiveness of the city over the years. Education cost is so high that starting from very young age, parents are forced to pay so much of their income just to get inferior education for their children. The high stress environment is also making the younger generation less capable to think creatively or critically. Highest priority in life for the young adults is how to get by with a better paid job.

Fading Away

Hong Kong can keep on fighting the trend of being normalized into just another major city of China but it is not likely to succeed. Hong Kong got its chance and became a very important city of the world. It has a good run just like other famous cities in the world. As the original conditions disappear, the inevitable cannot be avoided hence Hong Kong will never have the same level of importance for being the sole connection between China and the rest of the world.

For the people in Hong Kong, especially the younger generations, there are many great opportunities out there for them but they have to better equip themselves with more knowledge and analytical skills. The internet actually liberated all the knowledge human kind has accumulated so far. Unluckily, English has been a very weak spot in Hong Kong’s education system, making it very difficult for the young people there to learn from the net by themselves.

For instance, the overall investment knowledge in Hong Kong is so bad that even young professionals do not know much about financial markets. Those who are interested in the financial markets are often misled by the financial media in Hong Kong.

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Settling Down After a Chaotic Week

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Flying from Toronto Canada to Hong Kong is easy. In fact, way easier than traveling to United States. First and foremost, going through US customs takes at least double the amount of time. Anyhow, my hectic schedule started the very next day after I arrived.

Jet Lag and Polyphasic Sleep

I have been asked enough times about jet lag that it is something worth mentioning here.

Ever since I trained myself to sleep in biphasic sleep, jet lag is never an issue. I always get sleepy once I have nothing to do and can fall asleep easily. When I focus my mind, I can continuously work 10 to 15 hours straight. That’s the interesting benefit of training oneself to actually sleep multiple times a day.

One thing to remember though it takes time to modify one’s sleeping pattern. If you are used to sleep at least 8 hours a day and that you cannot easily squeeze out at least 45 minutes during the day for a nap, cutting short your main sleeping time will seriously affect your brain functions.

Meditation as a Sleep Replacement

Sometimes, if actual nap is not possible, there are interesting ways to refresh our mind to peak performance through other means.

If you have practiced meditation long enough and can get yourself to the state of a cleared mind quickly, you can try to induce the sleep like function in your body where it starts to flush out the chemicals generated during the day when your brain has been working hard. Key to this technique is switching to a breathing rhythm closely resemble the one that our body normally does during our sleep.

In other words, one can consciously induce the brain cleaning function without actually going into deep sleep. Your brain will be completely refreshed after a 20 minute practice of sleep breathing under meditation. Interesting isn’t it?

Hong Kong

It is considered being cold in Hong Kong right now but for someone coming from Canada, just T-shirt and jeans are perfect for me. Obviously that attracted many curious stares wondering if this guy is insane. The picture in this post is taken from the famous place in Hong Kong where they make the roasted gooses. I chose to take a picture of the mega bridge connecting the airport to the rest of the region because it is in fact a very cool piece of architecture.

My schedule will continue to be very hectic. Instead of the expected quiet down of my meetings, many more meetings are now scheduled around my original ones. An interesting development indeed since I thought not that many people would be interested in my line of work.

Have a nice weekend all!

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Introducing My New Blog Site

imageHere it is, my blog site with its own domain, is now (kind of) ready.

The domain name, TheLawrenceChan.com, was picked because my name has been taken by someone else many years ago. There was an actual website associated with that, based on research by my team through wayback machine until the owner decided to abandon the domain. Since I have chosen to use the name TheLawrenceChan at LinkedIn, I may as well use it as my domain name.

The older content of my blog will still be hosted at DaytradingBias.com because it was a mix of announcements and my random thoughts. I have assigned the task of moving the blog posts from this year into the new site. This process takes time and those older posts will start to appear on the new site slowly.

Travel Schedule

I will be traveling to Asia with multiple stops starting next week into early next year.

This should not affect my newsletter publishing schedule. My real-time commentaries could be affected but I will still try to keep up with the battleplans.

In order to properly assess the current economic situation in Asia, there is no better way than talking to the people there directly. My point is that if Asian countries are heading for a slowdown, the global economy as a whole will not be doing well either. My goal is to shape my overall investment strategy for the next four to five years based on a well rounded review of what is happening now around the world.

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One Good Idea Turns Into Reality. What’s Next?

lightbulbi15Earlier this week I prototype an idea called Emini S&P500 Battleplan as suggested by many premium members. It has been very well received. The idea is to post what I see from my charts instead of just describing it in the real-time commentaries before market open. Although it is still very simplistic so far, feedbacks from my members is telling me that they love the idea and it is very helpful for them. Very glad I took the plunge and just made it happen first without worrying about how difficult or how time consuming it can be.

Emini S&P Daily Battleplan

This experience has taught me two things.

First, I need to test out new ideas without worrying too much. I hesitated to do this for months just because I worried too much – like it would take up too much time and that my charts could be too messy to show people. Now that I took a leap of faith to start the project first and see if it can work out, the obstacles are not as big as I first thought. The key is to actually doing it first so that I learn from the process on what the actual requirements are.

Second, listen to my members is very important. They may not know exactly what they need for their trading but when many of them telling me something similar the pattern emerges. My role is to find a way to fulfill what they need and paying attention to what they are asking for is key to achieve this goal.

Having a chart or two makes it much easier to explain what I have in mind. Yes it is actually difficult to post the charts because some of the charts I use actually reside in remote servers. It took some coding magic to allow me to take screenshot from them and now it is as easy as working with charts on my desktop computer.

There are various drawbacks of posting my morning summary before market open in real-time commentaries. For example, people who login after market open may not be able to see my morning summary once many messages have been added.

Now both issues are resolved with the battleplan idea, I have setup a home page for the battleplan posts so that premium members can refer to them when they study the historical charts themselves. This should be very useful in helping traders to understand and develop the thought process in formulating their own plan before the start of a trading day.

Real-Time Custom Market Breadth Chart

Thank you everyone who emailed me to sign up for the alpha testing of the real-time custom market breadth chart. Once it is ready I will email you all with the access information. We are still working out some technical glitches before the alpha release. I will keep you all posted on the progress.

In the meantime, I will write up several articles explaining what these custom market breadth indices can do.

I have already revised the titles to two of my older articles and included them into the Trading with Tick Index series. The two articles, S&P 500 Tick16 and Tick1K and Its Divergence Signals were written long before I started the series hence I never thought of them being part of the series. Now that I am making the custom breadth indices available to our members, it is a good time to add them to the series so that everyone will get a proper introduction on custom tick indices.

Hopefully the real-time custom market breadth chart will be another good idea turning into reality.

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Is 2016 Year of Surprises

baby_surprisedWhat a way for the year to start. In Asia, China acted decisively to devalue its currency and then speculators panic selling stocks in response. In Europe, EU looking to establish its own army while talks of Britain leaving EU getting a lot of attention. In America, US dollar continues to strengthen and Canadian dollar just made decade long new low against the US dollar. As if the world has chosen this year to make drastic changes in everything.

Is it all unexpected though that we are getting all these so-called news shocks within a week? I don’t think so.

All the events mentioned above have been developing since last quarter of 2015 if not earlier. The holiday season simply delayed them all and aligned them to happen right after New Year. Some people already blaming this year for being an unlucky year. Well, I am not sure if luck has anything to do with this. But I know for sure that looking at things this way does not help in resolving the matters on hand.

Case in point – the stock market selloff happening this week. Subscribers to my newsletter all know that I am looking for a selloff and that the target price level is now reached today after Non-Farm Payroll report. It is not that difficult to tell a correction is going to happen. It is the timing and magnitude of the drop that caught people by surprise but they shouldn’t be. All signs are on the wall.

Similar things can be said about Canadian dollar. The crushing of crude oil has killed the economy of the oil producing provinces within the country. That in turn affecting the other provinces. The Canadian dollar getting weaker is just a matter of time.

Media, however, cannot tell people that everything is expected. The need of ever increasing readership means exaggeration is part of their job. No wonder we got all these headlines that this week is the worst ever first week for the US stock market in history.

Keep calm and carry on.