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Casualty of Going Cashless: Empty Donation Boxes at the Cashier Counters

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I do not usually go to fast food joints or coffee shops. If possible I always prefer brewing my own coffee and cooking my own meals. Doing this for years not just because of the health factor but also for the sake of avoiding long line ups. During my trip going from Canada to Hong Kong, however, I spent some time strolling in the airports while waiting for all kinds of things. I found a very interesting but sad phenomenon has emerged.

Those donation boxes that sit at the front of these cashier counters at McDonald’s, Starbucks, Tim Horton, etc. are all pretty much empty.

I actually popped the question to a few cashiers to see if my observation is correct.

Well, it turns out, the little amount of coins in many of these donation boxes were the collection for over a week.

My casual observations tell me that eight to nine people out of ten lining up at Subway used credit card, bank card and even cell phone to pay for their food. I actually counted the numbers while waiting for my flight. That’s about 50 people over a 45 minute sampling. The remaining ones who paid with cash have not put their changes into the donation box.

Well, Canada chose to do away with its pennies (1 cent coins) probably contributed to the problem too.

I wonder what the charitable organizations can do to counter this situation.

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The Two Things That Keep Toronto Housing Market Messed Up

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The news is in – there are 15,000 to 28,000 homes in Toronto that are sitting empty. The real estate industry downplayed this as just 2 to 4 percent of all housing units, as if that cannot affect the housing prices and supply at all. They are wrong.

First, we have to understand that many of these houses are investment with no plan whatsoever to rent the units out. There are special investors unlike the classic ones who want to put their capital to work. These special investors are parking money on these properties just because they need a safer investment vehicle than keeping cash in the bank. By the way, keeping a lot of money in the bank is not safe.

So the suggestion of putting a vacant-home tax on these empty houses will not improve the supply of rental units that much. At least not as effective as what many people believe. The reason is exactly what I wrote earlier that there is a new class of housing investors who do not behave the same way like the ones that we are familiar with. This class of investors will simply choose to ditch their investments in housing and switch to something else. Hence, we may see a drop in average purchase price but not improvement in rental unit supply.

Case in point – the so-called foreigner tax on properties has already been neutralized by accounting tricks in Vancouver. I guess the same fate on foreigner tax will happen in Toronto quickly.

Lesson learned from foreigner tax? Negative incentive (i.e. punishment driven taxes) seldom works.

Further complicating the situation, many smart investors are now converting their investments into AirBnB instead of the traditional long term rental because of the significant increase in potential income. In additional, the rental units operated as AirBnB can be sold quickly with no troublesome issues of long term contracted tenants. Hence, local people seeking for long term rental units are facing a near static pool of supply even though there are new condos built everywhere.

The government has to think of more novel ways to resolve the housing supply problem.

To start, they need to factor in the two new dynamics I mentioned above that changed the housing market behaviour so that the correct solutions can be found. Otherwise, people can no longer choose to rent or buy their homes because there will be next to none new supply of rental units. When everyone is being forced to buy their living places, the housing prices will never stabilize. The long term economic impact will also be very bad when labour mobility is greatly reduced.

Personally, I can think of several ways to tackle this problem but it will not be welcome by majority of the people living in Greater Toronto Area as the balance of renters and home buyers is now completely messed up.

For example, introducing positive incentive policies to get people to consider offering their housing units for long term rental can be very effective. It can be as simple as first time landlords offering long term rental units can keep their gain tax free the first 5 years. This encourages more people to consider doing long term rental instead of the more entrepreneur AirBnb option. We cannot force investors to do something they do no want to do but incentives can get people to think twice before going for the AirBnb route.

Policy of this type, however, is almost always objected by the NDP party because “it helps the rich”. So whatever I suggested here is, yet again, babble for my own amusement.

 

Resource

http://www.metronews.ca/news/toronto/2017/06/12/in-housing-crunch-15000-to-28000-toronto-are-empty.html

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Peak Marketing

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We’ve heard about peak oil, peak gold and even peak water events. I like to suggest that peak marketing, or peak social networking, is a near term inevitable event. No kidding here. I seriously think the expected global economic slow down is at least partially affected by this.

 

It Is All the Marketers Fault

One thing that keeps up with the technological revolution all the time in the past 200 years is marketing. Every advancement in technology available to the public has turned into new ways for people and businesses to promote their products and services.

The moment publishing became a reality, we got flyers.

Shortly after the moment radio was invented, marketers figured out how to use the channel to blast out audio advertisements to the public. It works very well back then. However, as people got used to simple statement based advertisement, their effectiveness dropped. Smart marketers improved their ads with sound effects, music and pretty much anything you can think of since.

Whenever a new media form becomes available, the marketers would exploit that.

Whenever the simple delivery methods drop in their effectiveness, the marketers would refine their approaches.

As you can see, it is a never ending cycle of power struggle between the marketers and the public. The marketers try their best to trigger the biggest percentage of responses they want from the public. In response to what the marketers do, the public gets numb over time after every new marketing approach is applied.

Lucky for the marketers up to the present time, technology breakthroughs in introducing new form of media has been on high gear all years. Marketers get to benefit from this a lot as it gets easier and faster to reach more people at lower costs all the time.

As the marketers working hard to grab our attention, they desensitize our reactions to promotional materials. The marketers destroyed our attention span. In a way, it is all the marketers fault making us not interested in anything if the promotional materials could not catch our full attention.

 

Peak Connection Materialized in Social Networks

Until next round of even better technology emerges beyond the current state of computing, social networks have successfully connecting people all over the world in ways we can never imagine in the 20th century and probably maximized the potential of this capability. Even if the potential is not fully tapped, it must be very close to the limit because the best possible scenario is connecting every single person on Earth in some way on the internet.

For majority of people in the civilized world, especially for the younger generation, they are already connected on the net by some measure. Even governments and big companies are encouraging people to do so such that they can off load the cost of hiring more people to service their clients back to the clients themselves through self-serve internet portals. There is really not much more room for more improvement in this area. At least the leaps and bounds we see in the past 10 years will not be possible going onward.

So this is it, we are getting very close to peak connection among all people on Earth. And this is the where the nightmare begins for the marketers. The world has reached at least a short term plateau in distribution channels similar to the way how TV advertising was completely saturated at the end of the 20th century. The upper limit of audience that one can reach on the internet is now well defined.

 

Marketing End Game

All these techniques developed by the leading edge marketers on the internet nowadays are no longer driven by simple hacking or guesswork. Marketers tap into the science of human behaviours, from how we react to certain colours to how normal people focus their eyes on a page, in order to maximize the results they are looking for. The world famous orange colour button Amazon uses on its site is a prime example how much effort is put behind everything we see on the internet today.

Well, such optimized approach to trigger human responses works very well every time a new trick is discovered. But it has led to rapid decline in effectiveness of all marketing techniques as people are trained to ignore these “noises” affecting their normal internet usage. In short, people are evolving as well in the way how they handle visual and audio stimulants.

Unlike the TV era, where advertisements were shown to us one at a time. We are now bombarded by multiple advertisements within one web page almost all the time. Everyone of these marketing efforts contain at least several triggers based on human behaviour to induce us to response to them. We are bathing in these stimulants everyday. No wonder our numbness towards internet based marketing materials has been developing at such an incredible rate.

The numbness in human responses to advertising will be the biggest challenge for the world we are living in today due to the fact that our world is now a consumption driver economy. With less consumption, there will not be enough economic activities to drive the necessary growth to sustain the infrastructure cost of the big governments around the world. Big companies cannot solve this problem by reducing their operating costs only as the slow down in sales growth or real decline in sales can hurt the bottom line much faster.

Peak marketing will likely dampen global economic growth in coming few years.

 

Peak Marketing Until Next Technological Revolution

I am not a doomsayer and I do not believe in those end of the world stuff. This current peak marketing situation will probably be resolved in a way similar to what happened before. When internet was introduced, we did not know that one day, it will become the primary means for people to connect to each other. No one back then can tell how quickly TV no longer dominate the way people spend their time.

For now, internet is likely maturing into its final form and usefulness. It has come a long way from desktop to wireless, and now going mobile everywhere. When a similar disruptive event like the popularization of the internet happens in the future, I am sure marketers will find new ways to grab our attention, and our money, in no time.

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Thoughts on this US Presidential Inauguration Day

Today is the inauguration of the 45th US president. Donald Trump will become the US president for the coming 4 years. Interesting, however, is that the focus in the mainstream media is not about this event. Instead, the top stories are flooded with negative comments, both on Donald Trump himself and how bad his presidency will become, coming from famous people who messed up the world very badly over the past decade.

First I saw on the news, the US congressmen, the infamous bad actors, are “grilling” the nominees of White House important positions. I thought the US Presidential Election already told us what the people of US are thinking. Why are these crowns allowed to have a second say on Donald Trump’s choices? Definitely an interesting way to make sure Donald Trump cannot run the country according to his vision.

Second, the name George Soros went to the top on multiple financial news outlets. Well, Soros being an “activist” and exposed for his “work” in funding all kinds of “unusual” activities worldwide to create chaos, told the press that Donald Trump will fail. Why is Soros so doomy? In my not so humble opinion, I think he is talking his book again. Maybe he is very short and need a outlier-sized pullback in the markets to get out of his troubled positions …

Third, the famous actors and actresses, teamed up with famous Hollywood figures, protested against Donald Trump in front of his Trump International Hotel in New York City. I remember some of these figures said they would emigrant to Canada (or other places). Why are they still there?

Here is a fun comparison of the importance of various things over time according to Google Trends.

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Obviously, Obama is not wanted since 4 years ago (that tiny blip in Nov 2012). On the other hand, Trump is so famous that we did not see a major surge in searching for his name unlike 8 years ago, when Obama was relatively unknown and being elected as POTUS for the first time. But both of them are not important, after all, as people searching on gold consistently beats them both.

And of course, jobs have always been in the mind of the normal people.

But none of the above matters when porn is added to the comparison. I guess it is fair to say sex being a primary human need is far more important than politics or work …

One thing I know for sure – the name Donald Trump will be a front page stable for the coming years whether you like it or not.

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It Costs More to Travel Among Cities within Canada Than Going Abroad

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I am very happy to be back home after the long flight from Hong Kong. No surprises during the flight, maybe with the exception that those who were sitting nearby are all sneezing and coughing. Hopefully I do not catch anything nasty from them.

While I was flying, I checked the costs for plane tickets going from Toronto to various destinations in the world. In particular, I was checking for prices to several cities for which I may have to go on a short notice this year. I found out, to my surprises, that the cost of plane tickets going anywhere within Canada are relatively more expensive than going abroad. What’s wrong with this picture?

Honestly, this was the case all along in the past. Years ago, I accepted the fact that Canada, having very limited number of airlines servicing the flight routes within the country, has to absorb the higher cost of operation on per customer basis. Hence higher ticket prices was unavoidable.

However, since 10 years ago, when more operators were allowed to compete for businesses, I thought the scene would have changed. Well, I cannot be more wrong on this.

After a bit of investigation, I found the culprit of the higher prices. It is the additional charges and taxes placed on the tickets that distorted the prices of these plane tickets. In other words, The actual fees charged by the airlines are now lowered while the government and its extended operations like the airport authorities have erased the competitive effect offered by more airline operators.

In short, we are seeing exactly what we can expect from big government – taking all it can with ever expanding charges and levies. This is not a big issue, really. People simply adapt to not travel, for both business and leisure, whenever possible within Canada. The incentive to travel also nudged towards go abroad instead even if the flights cost more because they are relatively cheaper in comparison to the ridiculous pricing for flights within Canada.

When we think of someone acting stupid, the saying of “shooting one’s own foot” comes to my mind quickly. In this case, however, this is definitely a case of shooting both legs – first leg for sending people abroad and the second leg for destroying the eco system of the airline industry within the country. You cannot get a better negative example than this.

Feature Image: Coffee served at the Charlie Brown Cafe in Tsim Sha Tsui, Hong Kong. The coffee there is great!

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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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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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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.