I've spoken to clients, colleagues and friends about the future. I foresee lots of "Global Warming Refugees", people displaced because of rising sea levels, lack of fresh water and famine. Wars will be fought over fresh water, food supplies and energy. Coastal areas will be eroded.
The pressure to clear land for agriculture will exacerbates the global warming problem.
I often ask why Singaporeans are so stupid to work so hard all their lives only to aspire for a landed property. Do they not fear that by putting their eggs into one tiny basket they run a high risk of being wiped out ?
Anyway, fools and their money will soon be parted. There are many cities that can withstand global warming. Auckland, Melbourne, London , even New York will probably be around long after Singapore is underwater or wiped out by a famine or thirst to death!
http://sg.news.yahoo.com/singapore-to-get-warmer--wetter-over-next-century--report-030148990.html
Sunday 29 September 2013
Sunday 22 September 2013
Unsold Housing Swells in China's First-Tier Cities
Unsold housing swells in China's first-tier cities
A view of Beijing. Weak demand and oversupply has dealt a blow to property markets in China's biggest cities. (File Photo/CFP)
Inventory of houses waiting to be sold in China has increased significantly since the transactions and prices of properties continued to decline in September and October, usually regarded as the traditional peak season for China's property market.
Figures from estate agency Beijing Centaline Property suggested the inventory of available houses for sale in China's first-tier have reached a new high. In September and October, the inventory of exiting properties and property projects in Beijing reach its highest level since June 2009, an increase of 250,000 units compared to before current purchase limits were implemented. It would take at least 22 months for the market to buy these even if no new property projects are built.
In October, Shanghai's housing inventory level reached a new high with 9.72 million square meters. The unsold new properties could stay on the market for 21 months. In Guangzhou, the number of unsold properties increased 11,000 in October compared to the same period last year, analysts with Hanyu Property said.
Experts predict that China's housing inventory level will peak in March next year. Centaline Property was cited by media in Taiwan as saying the trend of declinging property prices will become more pronounced over time. Property prices may decrease since demand has been weakened by the government's limits on purchases, increased inventory and tightened credit. With rising inventory and debt levels, the asset/debt ratio of real estate agents is expected to reach 70%.
Saturday 21 September 2013
How Tapering Harms Emerging Markets and The Sooner It's Gone The Better
I've constantly got to face clients about the impact of tapering on stocks and bonds. They seem to believe that by delaying the inevitable, we could see the economy grow a few more years.
My opinion is to the contrary. QE has harmed many emerging countries. The extra money that was printed was supposed to boost the US, EU and Jap economies ( the countries that print money) but they have flooded into hard assets in China, Indonesia, India and Brazil. How do I know? Just look at the price to income ratios of these countries for residential properties. Singapore's is over 20, so is Hong Kong's. Chinese cities regularly hit 40x. The yields are at record lows.
Inflation in emerging countries shot up because of asset inflation, fuel and food prices rising too fast. Because of rising fuel costs, transport costs also shot up. Wages rose as a result of inflation but exports haven't picked up.
When tapering starts, between Oct 2013 and Mar 2014, many investors that bought assets at high valuations, low yields will get burnt badly. It is paradoxical that hard assets in Europe and the US are at record lows while equities' valuations are high.
My advice is: sell your Asian hard assets and buy Asian equities slowly. Sell your US equities and buy US and European hard assets.
My opinion is to the contrary. QE has harmed many emerging countries. The extra money that was printed was supposed to boost the US, EU and Jap economies ( the countries that print money) but they have flooded into hard assets in China, Indonesia, India and Brazil. How do I know? Just look at the price to income ratios of these countries for residential properties. Singapore's is over 20, so is Hong Kong's. Chinese cities regularly hit 40x. The yields are at record lows.
Inflation in emerging countries shot up because of asset inflation, fuel and food prices rising too fast. Because of rising fuel costs, transport costs also shot up. Wages rose as a result of inflation but exports haven't picked up.
When tapering starts, between Oct 2013 and Mar 2014, many investors that bought assets at high valuations, low yields will get burnt badly. It is paradoxical that hard assets in Europe and the US are at record lows while equities' valuations are high.
My advice is: sell your Asian hard assets and buy Asian equities slowly. Sell your US equities and buy US and European hard assets.
Advice for BUY TO LET Wannabes
| Experienced landlord and buy-to-let guru Phil Spencer provides advice. Here are a few "don'ts" from Phil for successful property investment: | ||
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Monday 16 September 2013
Do Not Believe What The Newspapers Tell You: London Is Not In A Bubble. Singapore, Hong Kong and Iskandar Are. New York Is The Most Attractive!
My parents often tell me not to trust what I read on the internet. I agree with them. But the papers sometimes give us even greater misinformation than the internet. Newspapers get their revenue from ads and not so much from your subscription! The biggest contributors to their ads often have a say on what gets published! If the property developers often advertise their new launches on the papers, the financial institutions advertise their new fangled products, the papers will be very restrained in making negative comments on topics concerning the products their clients are selling!
On 12 Sep, Thur, the Business Times ran a full section on the property market. Some articles were good, like the article "On the Fringe of the City" and "Buying Landed Is Like Buying Art". Others, such as "Private Home Markets on Sustainable Path", "Outlook Firm for Malaysian Market", "Iskandar Malaysia Comes to Life" were written by the research team of major property firms or journalists who fail to provide quantitative data but merely quote from analysts in the property firms. It is difficult for an analyst to be objective when his salary is paid by the amount of sales his team makes.
"The Expense of London's Boom" is an article about the UK property bubble. I bet that it has scared off a lot of people from buying UK properties. I'm glad the articles came out because I'm in the process of securing more properties there.
I've quickly devised a proprietary model that predicts which cities have the biggest value, which ones are merely a HOLD, neither BUY nor SELL, and which ones are clearly in a bubble territory. I used factors like price to income ratio, nominal GDP growth (because the faster the income grows, the tenants can pay higher rents and buyers can pay higher prices), demand and supply dynamics.
US cities like Phoenix Arizona, Houston Texas, Orlando Florida, New York emerged as runaway winners. Surprisingly, cities like Ho Chi Minh City, Seoul, Brisbane, Adelaide, Petaling Jaya, KL, Toronto, London and Manila came up tops as well.
Tokyo, Jakarta, Bangkok, Guangzhou, Shanghai, Hong Kong, Perth, Yangon, Beijing, Shenzhen and yes your favourite Singapore are in the HOLD category, which means that there may be room to rise further but they are dangerously in the bubble category.
Cities like Makati, Taipei, JB, Suarabya, Hangzhou are in the SELL category. Many of these cities have a deadly combination of high prices relative to median income, oversupply and moderating GDP growth.
US cities are in the sweetest spot. They are at the most affordable in decades and the government is encouraging people to buy more. Building activity is still falling as the consolidation of builders continue.
Ahhhh... now for London. If you think London's 13x price to income ratio is high, and the gross yield of 4 to 5% is low, why then are you bullish on Singapore? It's price to income is 21x, and gross yield is 3 - 4%? You see, London's price to income may not be as low as NYC's 9x, but it has a severe shortage of properties. For the next decade, London's population will probably grow between 80 - 100k per annum. it needs about 30 - 35k of net new homes built per year, but last year, it achieved only 18 - 20k. The next three years will see between 20 - 25k built. London is the only city with the price to income ratio above double digits. The other cities are well below, but their GDP growths are also below that of London's. London has at least 30% of price growth some form of concern is warranted. But let me explain to you, even if you curb property prices in London, the fundamental problem is the lack of supply and if ownership is curbed, rents will rise as renters are forced to continue to instead of buy.
If you believe that London and US cities are too far away, then do consider Manila, KL, Ho Chi Minh and Australian cities. I am extremely risk averse when it comes to investing and if I do not understand the language or believe there is a lack of transparency, I'd always settle for developed countries because the ownership structure and landlord rights are strong. However, Australia has a capital gains tax which I detest, and also a restriction of foreigners to buying only uncompleted properties.
My advice to anyone investing in properties: figuring out demand and supply is extremely important. Price rise without yields is like investing in art and banking on The Greater Fool Theory. Taxes can eat away your returns too so try to avoid countries that have high capital gains and income taxes.
On 12 Sep, Thur, the Business Times ran a full section on the property market. Some articles were good, like the article "On the Fringe of the City" and "Buying Landed Is Like Buying Art". Others, such as "Private Home Markets on Sustainable Path", "Outlook Firm for Malaysian Market", "Iskandar Malaysia Comes to Life" were written by the research team of major property firms or journalists who fail to provide quantitative data but merely quote from analysts in the property firms. It is difficult for an analyst to be objective when his salary is paid by the amount of sales his team makes.
"The Expense of London's Boom" is an article about the UK property bubble. I bet that it has scared off a lot of people from buying UK properties. I'm glad the articles came out because I'm in the process of securing more properties there.
I've quickly devised a proprietary model that predicts which cities have the biggest value, which ones are merely a HOLD, neither BUY nor SELL, and which ones are clearly in a bubble territory. I used factors like price to income ratio, nominal GDP growth (because the faster the income grows, the tenants can pay higher rents and buyers can pay higher prices), demand and supply dynamics.
US cities like Phoenix Arizona, Houston Texas, Orlando Florida, New York emerged as runaway winners. Surprisingly, cities like Ho Chi Minh City, Seoul, Brisbane, Adelaide, Petaling Jaya, KL, Toronto, London and Manila came up tops as well.
Tokyo, Jakarta, Bangkok, Guangzhou, Shanghai, Hong Kong, Perth, Yangon, Beijing, Shenzhen and yes your favourite Singapore are in the HOLD category, which means that there may be room to rise further but they are dangerously in the bubble category.
Cities like Makati, Taipei, JB, Suarabya, Hangzhou are in the SELL category. Many of these cities have a deadly combination of high prices relative to median income, oversupply and moderating GDP growth.
US cities are in the sweetest spot. They are at the most affordable in decades and the government is encouraging people to buy more. Building activity is still falling as the consolidation of builders continue.
Ahhhh... now for London. If you think London's 13x price to income ratio is high, and the gross yield of 4 to 5% is low, why then are you bullish on Singapore? It's price to income is 21x, and gross yield is 3 - 4%? You see, London's price to income may not be as low as NYC's 9x, but it has a severe shortage of properties. For the next decade, London's population will probably grow between 80 - 100k per annum. it needs about 30 - 35k of net new homes built per year, but last year, it achieved only 18 - 20k. The next three years will see between 20 - 25k built. London is the only city with the price to income ratio above double digits. The other cities are well below, but their GDP growths are also below that of London's. London has at least 30% of price growth some form of concern is warranted. But let me explain to you, even if you curb property prices in London, the fundamental problem is the lack of supply and if ownership is curbed, rents will rise as renters are forced to continue to instead of buy.
If you believe that London and US cities are too far away, then do consider Manila, KL, Ho Chi Minh and Australian cities. I am extremely risk averse when it comes to investing and if I do not understand the language or believe there is a lack of transparency, I'd always settle for developed countries because the ownership structure and landlord rights are strong. However, Australia has a capital gains tax which I detest, and also a restriction of foreigners to buying only uncompleted properties.
My advice to anyone investing in properties: figuring out demand and supply is extremely important. Price rise without yields is like investing in art and banking on The Greater Fool Theory. Taxes can eat away your returns too so try to avoid countries that have high capital gains and income taxes.
Be Greedy When Others Are Fearful: Start To Dollar Cost Into Russian and Chinese Equities
In 2009, after the biggest plunge of stocks that the world has ever seen since WWII, nobody believed in stocks anymore, especially EM stocks because the MSCI EM fell by over 60% from the peak in Nov 2007 to the bottom in Mar 2009. 2009 turned out to be one of the best year for MSCI EM as it registered over 150% of return that year. In 2010, confidence slowly returned to stocks but many were still sceptical, MSCI EM continued their ascent. By 2011, every neighbour and her dog was into MSCI EM. It proved to be the peak. Till today, MSCI EM is around 18% below the peak in May 2011. The four biggest components of MSCI EM are in order of China, India, Brazil and Russia. That's right, it's the now infamous BRIC countries. Other peripherals like Turkey and South Africa also account for a sizeable weight but still pale in comparison to the Great BRIC.
The MSCI AXJ peaked in Nov 2010, six months earlier than its EM counterpart. That was because China, which peaked at that time, was the runaway heaviest weight in the index. It is now around 11% below the peak.
The HSCEI also peaked in Nov 2010 and is now 26% below the peak. It has been in bear territory for almost three years. the SHCOMP peaked in Aug 2009 and is today some 34% below the peak. China is the biggest culprit because SENSEX, the second biggest component of the MSCI AXJ remained sideways since May 2010. SHCOMP's decline was due to the misguided policy of the Chinese government, using central command policies that are not market driven to pump prime the economy. The order to increase credit in late 2008 resulted in a lot of misallocated resources, and widespread corruption. Today, China is in danger of facing a credit bubble much like what the rest of Asia went through in 1997 and the western world went through in 2008.
However, today, the SHCOMP and HSCEI's valuations are at record lows, whether you look at PE or Price to Book. The technicals are turning positive too. What is needed now is catalyst to boost the index. furthermore, I detect a peak in pessimism about EM stocks. Be Greedy When Others Are Fearful. It is time to dollar cost into Chinese equities.
The MICEX Index peaked in Apr 2011 and is today 22% below the peak. It too is bottoming up. Valuations of Russian stocks are even cheaper, at around 5 - 6x PE.
I say it again, "Be Greedy When Others Are Fearful.... Be Fearful When Others Are Greedy."
The MSCI AXJ peaked in Nov 2010, six months earlier than its EM counterpart. That was because China, which peaked at that time, was the runaway heaviest weight in the index. It is now around 11% below the peak.
The HSCEI also peaked in Nov 2010 and is now 26% below the peak. It has been in bear territory for almost three years. the SHCOMP peaked in Aug 2009 and is today some 34% below the peak. China is the biggest culprit because SENSEX, the second biggest component of the MSCI AXJ remained sideways since May 2010. SHCOMP's decline was due to the misguided policy of the Chinese government, using central command policies that are not market driven to pump prime the economy. The order to increase credit in late 2008 resulted in a lot of misallocated resources, and widespread corruption. Today, China is in danger of facing a credit bubble much like what the rest of Asia went through in 1997 and the western world went through in 2008.
However, today, the SHCOMP and HSCEI's valuations are at record lows, whether you look at PE or Price to Book. The technicals are turning positive too. What is needed now is catalyst to boost the index. furthermore, I detect a peak in pessimism about EM stocks. Be Greedy When Others Are Fearful. It is time to dollar cost into Chinese equities.
The MICEX Index peaked in Apr 2011 and is today 22% below the peak. It too is bottoming up. Valuations of Russian stocks are even cheaper, at around 5 - 6x PE.
I say it again, "Be Greedy When Others Are Fearful.... Be Fearful When Others Are Greedy."
Saturday 14 September 2013
Close Out Your Gold & Silver Positions.
http://musingsonwallstreet.blogspot.hk/2013/08/gold-and-silver-is-finding-bottom.html
I warned that the long XAUUSD and XAGUSD trades may just be a short term one. It is a pure technical trade because the fundamentals do not look in favour of precious metals. Here are the pros and cons:
Pros:
1. Physical buying has increased, especially in Asia.
2. Debasement of currencies still ongoing.
Cons:
1. Inflation is still low. Inflation expectations are still low too.
2. 10 year UST yield is rising to 2.9%. If it passes 3%, it may be more profitable for the risk averse investors to buy long term bonds than holding on to gold.
I've closed my XAGUSD trade at 23.00. I started at 19.50. I closed my XAUUSD at 1350. I bought at 1300. I didn't make much. Just 18% for XAGUSD and 3.8% for XAUUSD. After transaction costs the returns for the XAUUSD trade is negligible but for XAGUSD, it is still at 16 - 17%. Not bad for a month of trade.
I warned that the long XAUUSD and XAGUSD trades may just be a short term one. It is a pure technical trade because the fundamentals do not look in favour of precious metals. Here are the pros and cons:
Pros:
1. Physical buying has increased, especially in Asia.
2. Debasement of currencies still ongoing.
Cons:
1. Inflation is still low. Inflation expectations are still low too.
2. 10 year UST yield is rising to 2.9%. If it passes 3%, it may be more profitable for the risk averse investors to buy long term bonds than holding on to gold.
I've closed my XAGUSD trade at 23.00. I started at 19.50. I closed my XAUUSD at 1350. I bought at 1300. I didn't make much. Just 18% for XAGUSD and 3.8% for XAUUSD. After transaction costs the returns for the XAUUSD trade is negligible but for XAGUSD, it is still at 16 - 17%. Not bad for a month of trade.
Thursday 12 September 2013
Hong Kong Investors Snap Up Older Properties in London Hotspots (This Is Why Hong Kong Investors Tend To Be More Savvy Than Most Singaporeans / People From Rest of Asia)
People in HK tend to be more savvy than Singaporeans. In Singapore, we are taught to be obedient employees, saying yes to everything our bosses tell us to do. There's little room for creativity, analysis, or questioning. There's also little focus on debate and eloquence, which makes us even poorer communicators.
In the mid 1990s, Hong Kongers were buying a lot of London properties, right at the start of the 15 year boom. Singaporeans only realise overseas property investments in the last three years.
Hong Kong investors snap up older properties in London hotspots
Wealthy Hongkongers are among those buying to renovate and rent, or sell on to other Asians
Wednesday, 14 August, 2013, 4:03am
Kensington and Chelsea is one of the top areas. Photo: Bloomberg
Wealthy Hong Kong and mainland Chinese property investors are snapping up homes in London's second-hand market, buying multiple properties to improve, rent out, and sell on to other Asian buyers.
Guy Meacock, director at buyers' agency Prime Purchase, has helped a Chinese businesswoman buy seven central London properties. She has bought multimillion-pound flats with two or three bedrooms in London's most expensive boroughs - Westminster, and Kensington and Chelsea.
She buys Victorian homes mostly because they are better located than the majority of new developments, and where necessary she puts in new kitchens and bathrooms and makes other improvements, said Meacock.
Older properties tended to more popular with Britons and Europeans, the biggest source of demand in the resales and lettings markets.
Research by property consultancy Knight Frank shows most types of older property in Britain are sold at a premium. Georgian houses command 25 per cent over the price of the average house, whereas flats and houses built in the second half of the 20th century are typically 15 per cent less valuable than the average.
Meacock's biggest client invested across the two boroughs, including the Bloomsbury and Marylebone districts, where home prices may be boosted by Crossrail, a commuter line that will connect them and other parts of central London with towns east and west of the British capital when it opens in 2018.
Property consultancy GVA forecasts Crossrail will add £5.5 billion (HK$66 billion) to residential and commercial property values in locations along its route.
Meacock's client is banking on anticipated future capital appreciation to make a profit, not rental yields, which are only between 3 and 4 per cent in central London, according to Knight Frank. Older properties tend to require regular maintenance, which eats into returns.
Buyers' agency Black Brick is helping a Hong Kong entrepreneur find blocks of apartments valued at between £5 million and £10 million in Kensington and Chelsea. The cash buyer will either rent them out or refurbish them and re-sell to buyers in Asia.
Hong Kong investors must pay income tax on rental income, but no capital gains tax when they sell a property.
Robert Hadfield, managing director of investment property management company Pineflat, said there was merit in the approach taken by the investors if they wanted to build up a store of value, because there was a finite number of period homes available to own and tenant demand was holding up strongly.
But the strategy was speculative, said Hadfield, if it did not take into account income stream and was based on reselling already overpriced property at a higher price later on.
This article appeared in the South China Morning Post print edition as Investors snap up older homes in London hotspots
Sunday 8 September 2013
How to Play Iskandar If You Really Must.... Show Me The Money!
I've been writing about my cautious approach to investing in Iskandar. The key beneficiaries in the Iskandar boom are NOT the following:
1. Foreigners who bought condos after 2012.
2. Foreigners who paid over RM700 psf of land (for houses) or strata (for condos).
3. Foreigners who paid over RM1m for condos or over RM2m for houses.
Everybody thinks that the Sing - Malaysia MRT is a given. I honestly would not count on it. There is a 100% chance that it will be delayed by over 5 years (completion in 2023 instead), 75% chance that it will be delayed by over 10 years (completion in 2028) and 50% chance that it may not be completed at all!
As for the talk of all the politicians, governments, and famous businessmen putting money into Iskandar, has any money actually changed hands or is it just an option signed for that piece of land with plenty of show-and-tell with promises of extravagant projects?
Read the two articles below to know what I mean.
1. Double the police force and pay them well, so that crime rates can be drastically reduced, and contracts enforced.
2. Show all caveats lodged of historical transactions, right down to the unit number. This is available in UK, US, Ireland, Singapore and Hong Kong. So why can't this be done in Malaysia if you want greater investor confidence?
3. SHOW ME THE MONEY. Put money where your mouth is. Show us the time line for building the MRT line and actually start drilling. I'll be waiting eagerly for point 3 to happen sometime in 2014. This requires government money and if it's delayed, investor confidence could tumble.
Finally, I am not against Iskandar at all. I hope with all my heart that it will be a success and become Singapore's hinterland. But deep inside, the sceptical part of me persists and it has been proven right time and again.
If you really must buy a house in Iskandar and believe in the story, then take this advice from me, which is a 100% certainty: BUY A RESALE UNIT INSTEAD OF AN UNCOMPLETED PROPERTY. Refer to my previous posts about the risks of investing in uncompleted properties!@ Why buy new when there is obviously an influx of supply in the next 5 years in Iskandar?? There should be a recession by 2015 / 16 and I'm very sure that some foreigners will sell their completed homes as they cannot find enough rental to cover their mortgages!!
Saturday 7 September 2013
Get Out Of Bonds NOW! Asia ex Japan, Chinese Equities Attempting to Base Build
10 Year US Treasuries just hit 3%. I believe it will hit 3.25% by end 2013 and 4% by mid 2014. If you're holding on to high yield or investment grade bond funds, it's time to shift to balanced funds NOW before you incur even greater losses. Investment Grade bonds are in their biggest bubble in 3 decades!
I also mentioned in an earlier post that Asia ex Japan and China stocks are in a bear but the downside is limited as valuations are good. Right now, US equities are sideways, and so are Europe. But Asia ex Japan, Emerging Markets and China are attempting to form a base, and at 1 standard deviation below their median valuations. The rise could be very strong.
In developed markets, I prefer Europe to the US because Europe has just emerged from a very long recession.
Silver and gold are still holding steady. I spoke about buying silver at 20. it is now at 23.80. I bought gold at 1310. It is now 1380. If their supports hold, gold and silver could trend higher.
AUDUSD also looks to have formed a base.
I find that so many people are bearish on China, Asia x Japan and EM equities now that it could be time for a change of trend. US is fast becoming a crowded trade so I may just avoid it!
I also mentioned in an earlier post that Asia ex Japan and China stocks are in a bear but the downside is limited as valuations are good. Right now, US equities are sideways, and so are Europe. But Asia ex Japan, Emerging Markets and China are attempting to form a base, and at 1 standard deviation below their median valuations. The rise could be very strong.
In developed markets, I prefer Europe to the US because Europe has just emerged from a very long recession.
Silver and gold are still holding steady. I spoke about buying silver at 20. it is now at 23.80. I bought gold at 1310. It is now 1380. If their supports hold, gold and silver could trend higher.
AUDUSD also looks to have formed a base.
I find that so many people are bearish on China, Asia x Japan and EM equities now that it could be time for a change of trend. US is fast becoming a crowded trade so I may just avoid it!
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