On October 6:
What's your view on the property market in hong kong ? Do you think more serious adjustment is coming also ?
HK housing market is a bubble on steroids. It may not completely burst as long as mainland growth can hold up, but we probably will have some correction this winter and it may come back up if China floods everything with liquidity again. China still has some powder for now. But that would set up for an even big stage of the bubbles and will crash even hard when it burst within the next five years. HK economy will be in a big and long winter by then. However, that does not there will be no money made; one could retire once making it.
What's your view on when the stock market can be stabilized ? Or will it be haunted by the Greece sovereign debt crisis until it collapsed and started to default ?
Europe has a few months (say 3) to decide. One temp solution is to ask ECB to buy unlimited amount of PIIGS debt. That can probably delay the resolution by another 6-12 months top and is not a long term solution. In that case, people in those countries will rebel and default and leave Euro zone, and ECB would still need Germans to recap because it has little equity. And Germans still have to recap their own banks. Some say it is just loading the explosives in the can and then kick the can down the road. The long term solution, if they still want the one Europe dream, is fiscal union, like the US. But that is not possible in near term given the very long approval process (take years), and that average Germans do not want to do that at all. So that is the biggest explosive right now.
Market won’t drop in straight lines. So as I mention in earlier email, markets might stabilize or even rally, especially given that the Fed may send another 200 Billion QE out after relatively miserable Q3 numbers are announced at the end of October and start of November. But the US will likely have a recession; republicans have tried hard to make the economy bad. They now hope for a recession in order to get in the White House. There is a very high correlation between a recession 6-12 months before election and the incumbent president being ousted. This is the last moment before their potential success, they will not give ground. They are effectively committing treason in the last couple of years for their own political gains. In a cynical way, you may not fully blame them, because the man who hold American presidency, the most powerful position in the world, did nothing to stop them. Instead, he is complicit in their crime. If these guys are not doing things like this, the US would have been in much better shape.
Some Friends wrote back and said that they agree with me. They believe everything is a doom for the near future. I might beg to differ on the latter point. There are still a lot uncertainties and even though we could have a baseline scenario, the bi- or tri-mode nature of the near future outcomes means we need to be flexible in terms of our predictions. Just from a simple trading point of view, you could short into the market by taking a bearish view and markets eventually go down much more. However, if in between there is a bear rally, it could cause so much pain that you cannot hold the position. Since I have no time recently, I am simply out of the market for the most part now, because if you read one of my earlier post, I predicted this would have been a slowly downward trend market with lots of volatility (which most do not enjoy). So on the surface you might get it that this will be a bear market, and you thought everything is easy, but markets and the situations going forward are actually much more nuanced than that (Well, that gives you one more )reason to read my blog, doesn't it?).
To follow up on the above point, also on October 6:
I think the EU solution could have many alternative outcomes than just a singular solution of printing a lot of money. That is the usual mistake people have made with the Fed, hence the false inflation scare last and this year. Also, China is not really that hand tied; they still have enough powder to deploy. So I am actually not necessarily that bearish on China for the time being. But if they do not do it in the right way to start the transition, they will lose the last bit of wig room and the crash from next crisis, say a couple of years from now, could be much bigger. So the situation might be much more nuanced than simply saying it is all downhill from here.
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