Investments | My Journey

2021-11-13

Escape Plan

“Escape for your life. Do not look back or stop anywhere in the valley.

Escape to the hills, lest you be swept away.”

Genenis 19:1-38

Twenty one months ago, my time has come to leave my nest, to embrace reality of harsh world we live in. As always, like a little bird, afraid to leave their comfortable lullaby of 9 to 5 nest. I had to fly into jungle of personal enterprise world. There were many butterflies flying around. Didn’t we hear them buzzing, “life time opportunity”, “things to do before you die”, and “go big or go home”?

I was born into a very humble (excuse me to make poor word better) family, who could never afford to have overseas study, let alone overseas travel. It’s still very vivid in my eyes, US university brochures, my father brought back home. In that silent, heart touching moment, my eyes could hear well, and stored the image safely in my brain vault. My parents only left me persistence and perseverance, no capital, but that’s more than I needed. Due to that persistence, Norwegian government invited me to come and experience Scandinavian life. It’s my next important stepping stone, confidence.

Twenty twenty, what a year of resident evil moment. Many asked, was it the end of human race when streets were so empty, puny human race was jailed to their own home, and stock index was falling? My persistence and experience told not to discourage, but took that opportunity. I might still believe the influenza that turned into Covid name event, is a man made. I’m talking about a coordinated orchestra event, at the end of financial curve inversion, after failing with ominous overnight rate spike in September 2019, not the virus. If it’s true, how powerful is financial could take a grip of human life. We do realize though, none of us is immune to any virus, nor the curse of death, nor possibly we can escape from them.

Entering reality of my own personal corporate world and competition is never been darker and colder. Very sure, rhodopsin, dark adaption, is never be a pleasant experience. I had to close my eyes, looked into my heart, what is my best mutant ability? X-MEN is never be a 1-MAN, everyone has their own unique and incomparable skill. The easiest way to look for is what interested us most, not our one year interest but our many decades of interest(s).

I surely know myself. Even though I can do very well, it’s not Information Technology that I interested most. What should people look from well known university brand name in their resume? I disbelieve it’s skill from that palace. It’s rarely economy books and theories can be used to make money from market competition. However it’s still important knowledge. Without knowing how economy theory works, we can’t make a lie about them, nor get fooled from it. It’s all about opportunity, to enter higher ladder corporate, for then to experience real cruel world in comfortable chair of salary to pay bill of liability, and take opportunity to build more confidence experience. Luckily the information technology gave me entry opportunity point to the ladder. There were many great leaders and they will always be my unforgettable mentors to me. In 2020, I’s drawing a line. I’m flying with my own wings, nothing can stop me now, no superiority, nor woke barrier, not even any sky can limit.

Meanwhile this music is playing in the background.

Let me summarized, what I needed were persistence/perseverance, confidence and opportunity. Year 2020, was the year of my opportunity. I forced myself to run as fast as I can. It’s never be perfect. I still missed lots of opportunities, hit many road blocks, that is life. Persistence, go fall and rise stronger, there is no way back.

Here is what I like most, The United States. The country has made me great, I owed them, and I think they will make me greater again.

The United States (especially their 10 years debt) is still the most liquid asset on earth. Its hegemony spell prohibits their front end from increasing to next 2 years, without crashing everything, and wasting their costly momentum effort.

This game is not complicated. White collar like banks, are just buying front end (mostly 2 years) and invest it back to longer end (mostly 10 years). Due to their leveraged greed, less liquid and certain 30 years, is currently getting hurt most, inversing the 10. What can fail them is USD bankruptcy but that should never be an option at this moment. Even China will blink, and continuously lie with their 3 red-lines from transferring their surplus into their current not-so-much troubled Real Estate sector. This asset changing moment cycle must be protected at all cost.

We shouldn’t be surprised with a possibility of commodity deflation moment before their run. Thanks God, it seems to be timid. When money is invested into long term, its long term yield will be under pressure, which will beg for long term support of central bank and short term rally in US golden child, FAT ANG. However to hedge their long term investment, they should go against USD risk or do investment in inflation protection like TIPS, estate or commodity. My thesis is supported with recent PBOC net buying and continuous growth of their mortgage book, rather than their 3 red lines. Please forgive China for their lying of everything, for having inflation death threat, it may not be a sin.

China Bonds Advance on PBOC's $16 Billion Liquidity Injection

I believe taper is less worrying with existing support of RRP:

Have a look back into yield curve picture, arching and moving to front end, shorter term rate, even its very long term 30 years is hardly able to follow. For me, I think it’s obviously a beautiful front end steepening indeed. Houston, we don’t have a problem, our mission after 12 years of easing trick, seems to start being fruitful. People are now starting to enter our trigger baits. We’ll keep baiting them to next 8 years, before we claim our mission to mars is successful.

Without having to explain detail of this math, I’d summarize my humble thesis and vision, before happening, in my own English version:

Next year is probably last average windows time to take big investment. It’s still able to raise to next 5-8 years, but they should never be better investment compared to ones taken from year 2020-2022. Last overshoot is always possible but that doesn’t justify better risk and return profile.
In 2 years something big will come and I don’t believe it’s a Minsky moment.
The Federal Reserve taper should help to transition RRP/negative yield with fiscal deadline to market upside and not allowing front end rate to raise. However even if inflation force would be uncontrolled, we should still have about enough 6 points until the rate could hit their long term downtrend.

The market rally screams same music:

I’m floating around in Ectasy, so don’t stop me, don’t stop me now…

I’m a shooting star leaping through the sky
Like a tiger defying the laws of gravity
I’m a racing car passing by like Lady Godiva
I’m gonna go, go, go
There’s no stopping me

I’m burnin’ through the sky, yeah 200 degrees
That’s why they call me Mister Fahrenheit
I’m travelling at the speed of light
I wanna make a supersonic man out of you
Like an atom bomb about to
Oh, oh, oh, oh, oh, explode!!!

What is the world thinking at the moment? My vision of current decade evolution is with Electric Vehicle (EV) infrastructure, not just the EV itself. Hundred millions of Electric (not-gas) stations grid to build, all over the world in 10 years. Low rate weapon to protect uncompetitive low growth of advanced countries, turns into climate change cooperative initiative to protect high margin business to survive and to end low margin uncompetitive fossil fuel. This effort to leave fossil fuel has hit their competitor most, no less than China. Economy growth related copper and nickel, as their similar industry had lack of capital expenditure, would then be their hidden Cleopatra. Other scarcity of cheap electricity and cheap food may also have to get censored from their expected 100% growth for every 3-5 years. I hardly believe copper, nickel, energy and food will undergo transitory theme, while US steel is hinged under protection from entering transitory.

In this squid game, life and death, profit or loss, I should start with my escape plan, not to quit the squid game because it’s always be my interest, but to start planning their golden parachute plan, before the game is even starting to plan their end, in which I believe so much temptation of greed will be happening in next following years. Why I think is important? We may work and accumulate income well for rest of life, however at the end of the day, it’s our competitiveness to keep them growing that will matter most. A stable 20-30% per year (or faster return) is enough to catapult into billion mark in long run. A sudden 50% drop at the start of retirement means 50% loss of whole life wealth accumulation. Do we know soon-to-see high inflation is a hidden harsh of regressive tax? Our best effort, even with real estate portfolio, is always prone to these thieves. Have a look at how RRP should survive and take wealth from their pension funds. I would also expect we will see a lost decade between year 2030 to 2040, when Sodom and Gomorrah sky may be most likely being turned dark for 10 years. Welcome to reality of financial squid game, win big, survive, or die. My x-ray lobster-eye satellites keep scanning them, stay tuned.

11,788 Squid Illustrations & Clip Art - iStock

Disclaimer: opinion is my own and never become any financial advise.

2020-07-21

Foreign exchange, Investments

Evolution, but not like that

Microorganism is always evolving. Corona virus is like an influenza virus but it’s not like that. It carries new characters. One of few similar characters is they are evolving over time, in which is under a spell of frequency or cycle.

The corona virus is like an influenza virus but not like that.

A possible similar situation is like in 1930s. It could be a reflation but I will argue if it ignites high inflation with their money expansion. I don’t think is because of long easing but simply anything times zero is just zero. This might arguably fit with value vs growth hunting theme/arguments. Negative or near zero rate has failed to perform its inflation targeting. It should be true that market participants have learned and anticipated possibility of recession with monetary polices but unfortunately its number power has gone zero. I like the idea of using yield control targeting but it must come to opposite of monetary policy or long waited fiscal initiatives.

The reflation is like in 1930s but not like that.

Hugh Hendry argued we should instead raise the interest. We know it’s not possible in massive debt. Currently we don’t have any issue with massive debt because the massive debt times zero is also just zero. However we might be able to raise its real interest, like in spread, but still just not like that.

Real rate might increase, but not like that.

The times zero event unleashes a new characteristic of economy theory, that may never be found in any economy literature. Let’s imagine, if money and debt continue going exponential to infinity, is infinity times zero still zero? The answer is false as indicated here but undefined. It will unleash another new characteristic of new economy event. The “undefined” moment will allow more freedom for money to go to whatever it likes. We should start seeing wild gravity of economy theory and mathematics.

I also like the idea that money would need to come to the opposite of its value. The supremacy of USD is being challenged by China rise. Its value depreciation might flow to its opposites like assets but not many countries are able to challenge US. Warren Buffett and Jerome Powell reminded not to challenge America.

The depreciation of USD or any of their peers is like loosing their value but not like that.

*a volatility supported with a “rising” is usually a confirmation of cycle reversal*

I like the idea from Hugh Hendry, other countries will not allow their currency to appreciate and they will do monetary policy (or even better in mixture with fiscal policy). They would increase reserve but at same time buying anything else. Countries will run currency war but it won’t allow their currency to win.

Countries will try to win currency war but not like that.

However I would notice one thing similar. They are all under a curse of time, born, grow and die, a cycle. Time is always an opposite of a period, opposite plays. Anything we do in time zone, should also be seen in frequency zone, in this case is the cycle. Five and 10 year cycles are still looked likely repeating with quite similar sign of their reversal, such as extreme volatility during their rise.

Cycle repeats but not like that.

I would have to argue that assets might run like in year 2005 to 2008 but the zero and negative rate has pushed it to the opposite side.

Assets may rise similar to year 2005-2008 but not like that.

We should also see discrepancy between rich and poor. If we could explain this phenomena, why should we argue high growth of selected shares like FAANG and TESLA? The demand of money opposite should go to not just everything else but very distinct-ed or special assets or equities.

Learning above, I like the idea of being opposite sides. If monetary policies are printing money like no-end, the growth will go to the opposite, asset in value, in a distinctive way.

Opposite works like in a supply and demand theory but not like that.

I’m fond of adaptive theories in which its mathematical frequency characteristic is a base of learning. I think that could explain a “correlation but not like that” event. It can follow market participants without foolishly following just like that.

This is just my own opinion and not in any case of financial advise.

2019-12-05

Bonds, Foreign exchange, Investments

Sure, It’s a Plus! +

The + sign is getting obvious, there might be a start of a change to the world of economy. Australia continues to record current account surplus. It’s first time since 1975 or 45 years ago, and to continue rising.

The current account surplus is mainly related to commodity export to China and depressed currency. It should have high correlation to recent rebound in China PMI or highly probable China expansion.

How about other countries?

Emerging market and developing Asia seem to be the ones on way back down to deficit.

With US tries to control deficit, I may suspect China may have risk/difficulty to maintain their current account surplus, as seen a big flash drop in 2018.

Trade war will try to balance US and China trade and current account. They try to tango/stable two world strongest currencies, in simple term is trying to not manipulate currency, but to monopolize them. There seems to be an effort for China to stimulate their economy and effort to park the money in US to stable the pair.

USDCNY tries to stable at 7
source: marketwatch

Meanwhile, the impact seems to benefit some other countries like Australia. Negative sentiment of trade war, in addition to almost crash in property, is fueling local central bank easing to indeed catapult Australia to a condition we might never see in 45 years.

Everyone is waiting for fiscal initiative. One plausible outcome is a big tax cut. The stage 3 might put it back well to about 50 years ago, which seems to be correlated with the condition of current account surplus history.

With net overseas immigration continues to run hot, it may help to mitigate recent oversupply in Australia property. And when the fiscal does more such as infrastructure, it’s expected to be another plus.

From property perspective, investment properties (IP) are heavier than owner occupier, having more lending restriction and higher interest. If we look at gross rental yield, they return at average of 3% to 3.9% and quite stable in last decade despite price volatility. With current IP mortgage rate at about 3.5% from big banks and 3% with non conforming lenders, it’s quite clear that depreciation (tax benefit) suddenly turns investment property to be a surplus vehicle, as long as price is no longer down and rental yield is reduced less than mortgage rate, in which both of these two are happening. My argument in May 2019 is correct. There’s no benefit for investor to sell at this lower price, rather than to keep them for almost definite profit, even if the price doesn’t increase.

If we’d like to forecast how much tax benefit is diminished with price increase, assuming other conditions are stable, we may look at how much tax benefit is. This article shows that taxman contributes 24% of the cost, therefore we might expect price to rebound at about 24% from bottom to bring this vehicle back to normal, i=r+t or when we may expect volume to build.

It’s only a matter of time. The price has rebounded and only half way to go.

We may see clearly, that if RBA cut another rate, at current yield curve, one more rate cut to 0.5%, may ease short term lending pressure and form an inflationary yield curve. However even if RBA reduces the rate, I may doubt banks will pass the rate cut, considering recent profit pressure and may become a positive news for the bank instead.

I don’t say that economy is healthy enough (stubborn low inflation and wage increase), but many conditions have been definitely improving well, as long as RBA helps this recovery on track.

We do hope though, the plus is giving more benefit to the economy. Some evidences might show a surplus could be negative to local investment vehicle, such as shares, and may introduce some unintended consequences, like in Japan, which is still trying hard to stimulate their economy.

Japan Current Account — Japan has been recording current account surplus for decades.
source: tradingeconomics

However it seems the government is being careful, before doing a massive change and may take a safe measure, such as tax cut. The forecast from IMF shows that the surplus might be just an impulse and may quickly go back to deficit. This forecast is correct because it’s just based on simple past series math, but it may not be able to tell future, should the surplus condition persists. There is some argument that there might be some volatility in near future which may require financial sector to have bigger buffer.

The story might be related to a ‘big rescue‘ to US banks in September 2019 when their daily repo rate shot up very high. The Federal Reserve wouldn’t disclose who are the rescued ‘too big to fail‘ ones until next 2 years. The most coincident event during that time was a possible bubble burst of negative yield in long term US treasury. Many US banks have been participating to hold/engineer more treasury rather than what they park in Federal Reserve, causing short term liquidity crunch. In an event of global correction that could easily challenge other countries. It’s no coincident that many Australia banks are now in rush to raise their liquidity level.

Eventhough China seems to lead non US rebound, Germany is still contracting. People may still look for further evidence. Until then, US economy remains unchallenged.

Germany Manufacturing PMI — German PMI source: tradingeconomics

If indeed condition of surplus continues further, I would expect the fiscal policy to do more than just a tax cut initiative. We’ll see.

It’s my own opinion and not in any case of financial advise.

2019-11-09

Bonds, Foreign exchange, Investments, Property, Shares

Holy Grail

Many years, investors and traders have been trying to find and formulate their holy grail techniques. Most of them are failed and it’s not surprising. It’s market participants behaviors that are always trying to take advantages from those who are trying to find it. However I still find a dynamic adaptive learning to follow market participants is still doing well, rather than sets of quantitative formula or trying to redo past experience.

source: *The Damsel of the Sanct Grael* wikipedia

Since 2009, central bank balance sheet has been growing tremendously in a binary pattern. I always argued that we are not required to do any normalization yet until there’s any sign of global inflation. We were worry about US inflation in 2016, but at the end, US has to give up their inflation to bigger slow down of global growth.

In any of those events, our main concern is always about uneven money distribution which is related heavily to high grade investment vehicles supply issue. We see high quality bonds is getting scarce and drove their price to unprecedented negative yield. When we see junk bonds are being elevated too, people start to worry. There’s not enough supply for high quality vehicles which then raised another opportunity for their longer term. Companies also widely do buy back in effort to reduce their supply and cause unprecedented very high PER (Price to Earning Ratio). Funds may get more concern about what i called “new elevated normal” and due to their anchor to previous lower PER, they leave. If sufficient permanent balance sheet keeps permanent, as they are, this high PER could be the new normal, rather than previous failed effort to normalize it down. Isn’t it the behavior of economy policy makers?

We shouldn’t be surprised that ascending triangle of US shares, supported by Federal Reserve should be a conducive environment for them to continue up rising. Also if we looked our history, flat curve can cause rally as well, just like in 2002-2004. Did we just worry about US recession recently? I can tell that the recession is now officially gone in which I already predicted few months ago, as long as central bank remains supportive. Isn’t it amazing that money (rate cut and continuous 160B$ injection) can turn recession away, just like that? The impact should, of course, happen to US share market before it spills into other economy since US is still doing better than rest of world. We can see very clear that significant US 2y steepening makes their banks on right spot. Other countries like Australia big banks are now starting to raise their CET1 and Basel III, to possibly get their engine ready and catch up.

If we look Australian property market, after GFC 2008, actually Sydney property and many emerging property had been doing well. The GFC had caused people to panicky do saving and it caused these property market very healthy, which then caused rally from 2012 to 2015. This boom of profit margin attracted many developers (including from other states) to build Sydney and caused oversupply. It’s Sydney which has oversupply issue. Similar to money effort to save current risk to the jewel of US economy (IT industry) this year, there should be same effort to save Sydney property and I believe it will unevenly spill into other states which are not oversupplied, such as Victoria, with their tier-1 Melbourne CBD. With continuous effort to choke developer funding, it may evenly cause unevenly under-supply. It’s not difficult to measure number of cranes with our own little eyes.

China on the other side, was entering crisis in 2015 and may start to recover in 2020 ( 5 years ). It might be similar to pattern of US recovery from 2009 to 2014 ( 5 years ). Those are relatively matched with average length of maturity of their bonds. If it’s, inflation might start to happen in next couple years and people with negative yield may start to worry. US and China may really need to cooperate and introduce fiscal initiative. Powell said there might be a positive path towards negotiation. However we might interpret this as an opportunity for US to front run other world, rather than trade war deal. There’s still an effort to introduce #bluedotnetwork, an initiative from US Australia and Japan to challenge China BRI.

Other sign of inflation, may also be seen from recent plan of Aramco IPO. There’s an argument that the IPO might change the structure of Saudi people subsidy to rather fund their kingdom and US fiscal/global initiatives. Those masterminds behind the IPO are world rulers and leaders. They can decide market behaviors. My holy grail is to learn and follow their behaviors, the money.

Another sign of inflation is correction of negative yield bond rally in August which might cause short term funding issue. Eventhough the correction pattern may complete, it clearly shows that there was a pause in rally or having some structural change. It may continue to rally in medium term since it’s still above 2018 average, but it could also lead to global inflation. Christine Lagarde will take helmet of ECB (where most negative yield is) and she seems to be more fiscal supporter, unlike her predecessor.

Let’s have a look from RBA speech today. In past few years, RBA has been hard to maintain inflation to their mandate of 2% due to slow global growth, trade war and China efforts to combat their economy slow growth issue. The achievement from 2015 to 2018 were mostly only due to lower currency. If currency didn’t fall, we might not have much luck.

The recent inflation data were broadly as expected, with headline inflation at 1.7 per cent over the year to the September quarter. The central scenario remains for inflation to pick up, but to do so only gradually. In both headline and underlying terms, inflation is expected to be close to 2 per cent in 2020 and 2021.

source: RBA monetary policy decision November 2019

We don’t need holy grail to save the economy. The yield curve clearly shows, we just need to push up their belly and all kind of recessions and gloomy doom outlook could magically be gone. We know well, fiscal initiatives can help to push belly up (property), probably after pushing banks healthiness, supported by RBA with keeping rate lower than the market. Don’t be surprised with recent gloomy outlook from RBA to justify lower rate longer. Spring has really sprung, Australia banks are now reducing their dividend payment to grow. Just like natural cycle, flowers stop blooming after spring, they started to grow leaves and root. It’s a significant change to their previous years of high dividend. We hope this summer inflation is not that hot and return can be at their optimum.

We might not need to worry about lower volume of Australia property transaction/auction. I believe most of the low volume is because all big banks are now lowering their risk with some actions such as abandoning any Interest Only (IO). In the event of preparation to grow, this situation might be well perceived as an effort to increase healthiness. In 3 years, all IO will be gone massively from banks balance sheet and borrowers are already enforced to put more equity through Principal and Interest (P&I). Any weak hand will be funded with lower rate. Isn’t it healthy? I hope so.

We might not know when inflation start to bite. I will worry to non conforming lenders who are trying to expand their market share and being exposed to high risk borrower profile. I would advise their borrowers to monitor carefully their non conforming lender loans, probably in next 3-5 years.

Please be very aware, I may already have significant position written in this article. It definitely has conflict with my interests. Therefore this article is not in any case of financial advise.

2019-10-03

Bonds, Foreign exchange, Investments, Shares, Uncategorized

Global Recession?

People are talking about global recession, mainly referring to US (United States) economy and their impact to global economy. It is because people used to use history that when GDP is contracted over 2 quarters, I meant “when yield curve is inverted over 2 quarters“, we will most likely see a recession. Definition of a recession is below:

A recession is a macroeconomic term that refers to a significant decline in general economic activity in a designated region. It is typically recognized after two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators like employment. Recessions are officially declared in the U.S. by a committee of experts at the National Bureau of Economic Research (NBER), who determines the peak and subsequent trough of the business cycle which demonstrates the recession

source: investopedia

It’s clear that the definition is historically and mainly applied to US economy and should reflect current US economy structure. It may not be 100% true. The definition shouldn’t emphasize all 100% population GDP but all 100% money GDP since money growth has taken over population growth with their enormous binary growth.

There’s an interesting thing is happening here. During this kind of recession risk, which is most likely a temporary turn of tightening into easing, it might already be predicted long before this decline is happening.

In my article 7 months ago, I would have to argue that we can predict the end of not so beautiful “normalization” or when the Fed tightening would have to stop or turn. I used excess reserve because it can connect dot between banks activity in relation to inverted yield curve, and its correlation to recession risk. In my article that time, I argued that the Federal Reserve would have to stop tightening after the excess balance sheet is left with 1.4T$. My math and prediction is correct with exact amount.

Since excess reserve is left with 1.4T$, market asked easing and the Fed had no choice but to end this premature normalization (in my previous articles, i used word of the end of a temporary normalization game). If the Fed has to start easing again and global economy is still not better, it means there might not be yet any real normalization need, like many economists argue.

Using a simple technical analysis from the same graph above, it clearly shows that the knowledge of this end of tightening and excess reserve numbers should have been been known since 2015 to 2017. It’s clearly showing that the risk of today recession is simply just a temporary turn from tightening into easing. It also supports that global economy can not afford higher rate and long term trend of rate is still pointing down. If long term trend of rate remains down and central banks remains accomodative, there shouldn’t be significant risk of recession. We have no doubt in past few years, central banks remains accomodative.

There could be a possibility that it’s not a time yet for normalization. The argument is because global growth is still declining while only US is rebounding. The rebound itself could be merely just a technical rebound due to excessive easing from the Federal Reserve or overshoot of easing between 2013 to 2015. It’s shown in a stubbornly strong USD even when US risks recession, which should show that other parts of the world are still weaker and global economy is not yet asking for normalization.

This situation could be made worst with recent push to long term bond play such as happening in negative yield. This capitalism may now negatively affect basic structure of economy itself. Trump may become one of the participants, having interest to introduce the trade war to benefit from government bonds. It could be a perfect time to introduce ultra long bond simply because market is so populated in this place. However if ultra long bond bursts together with other long term bonds, the ultra long bonds may need ultra long years to recover, just like its name.

Here now we know, Federal Reserve may temporarily have to stop tightening and back to easing. One day I believe there will be a time to do real normalization (not this time yet). That time could probably be when trade war ends and spark in inflation.

After market experienced yield crashed in Q1 2019 and already in 2 quarters, people start to talk about recession probability. It then raises a question, will we have a recession in 2020?

Based on arguments above, if numbers are so orchestrated, we do know it’s now leaving to yield curve to lead future. At the moment, Federal Reserve is so way behind curve. Stated in my last month article, market still remains asking for 2 basis points of rate cut and unfortunately next central bank meeting is still 3 weeks away (end of October 2019). The Fed has been trying to help with repo but I believe it’s not enough. Therefore we shouldn’t be surprised to see some share market correction. The same question again, will we have a recession? If it’s, share market should probably go down even further.

If my theories above are true, we might be able to avoid recession if Federal Reserve is willing to run at least as fast as market curve with at least a 2 basis points of rate cut this month. So far, market has been predicting monetary policy very well because monetary policy is very friendly to them. An example is in my article 5 months ago. where I predicted that RBA (Reserve Bank of Australia) would have to start cutting rate again. RBA then continuously cuts 3 rate cut after holding rate at 1.5% for almost 2 years. It’s in my opinion, the Fed should cut faster or possibly have emergency rate cut. They should, of course, try not to scare/shock market.

There’s an interesting thing happening. Australia is one country that has been running faster than the US in easing. RBA cuts their rate 3 times within past few months. If the Fed cuts 2 more rate basis points, RBA should at least cut 1 time, simply because Australia is smaller. RBA chief recently confirms that he doesn’t want to see strong AUD (which I believe is very risky to Australia property market trend) and he will maintain currency competitiveness. The issue is, if RBA cuts just one more, it may be most likely trigger an inflation in Australia and it could be one of few countries that leads global inflation, together with other AAA credit rating countries such as Canada, Denmark, Finland, etc. When inflation sparks, it may shock their share market. It’s then I believe, on next inflation cycle, probably at the end of trade war and burst of negative yield, we might see a true normalization effort, rather than the ‘not so necessary’ normalization efforts in past few years.

I’m back to the question of whether we will see recession in 2020. In my opinion, we shouldn’t see recession next year if central banks remain fully accomodative. The Fed should run at least as fast as market curve. In today situation, the Fed should cut with 2 basis points. Until that happens, we should continuously see some pressure in short term liquidity, seen clearly in share market. We hope the Fed is not too late to ease, considering effectiveness of monetary policy is now diminishing. The difficulty, of course, if the Fed is easing too much, inflation may pickup rapidly and we may experience bond crash like in 1994. I believe today correction of share market is not due to recession risk but merely because central bank policy is so behind market expectation. We should still expect share market pressure until the central bank is on or ahead market curve without inducing inflation spark threat.

Technically speaking, share market should worry of this negative divergence, until central banks put break on this as soon as possible.

This article is my own opinion and not in any case of financial advise.

2019-09-11

Investments, Property, Shares, Uncategorized

Spring has sprung

Season may change, but its behavior should remain same.

We might hear that Australia property may have been rebounded from its correction. My big question is not whether it is rebounding or not, but should investors keep investing in Australia property? If we consider price has been corrected after long decades of bull run, do we see any correction sign other than their price in AUD? I don’t. I would have to use my argument from 5 years ago, that if Australia property would start to turn, Australia was still having big saving from its strong currency, reaching as high as 1.1 to USD.

Below is some numbers from few weeks ago. Property price index and dwelling value in inverted USD are not showing any correction, indeed dwelling value reached higher high. It’s quite clear that when AUDUSD was at its lowest few weeks ago, 0.67, the dwelling value and median price are still trying to deflect deflation gravity after big run from 2009 to 2015, significantly seen near to 2015 when AUD was starting to fall. Using this view, I still don’t see any correction in Australia property. It’s no surprising that RBA and APRA put break between 2015 to 2018 to avoid inflation and were still trying to help in 2019, simply because they are still able to help. Correction in local currency is recently near to 15% and it’s too close to a sacred 20%.

source: ABS (Australia Bureau of Statistics)

Why do I think inverted USD is very important? It’s because global property is still increasing. There’s no particular reason Australia and Canada should undergo correction, other than they are exposed to commodity price, their main foreign income.

It may also explain why property price across Australia had correction between 2017-2019 after increasing uncertainty due to significant drop in currency in 2015-2017 due to commodity correction (Australia is sensitive to commodity price). In order to maintain this inverted trend, RBA should maintain currency competitiveness and it’s proven with 2 more rate cuts. When knife is falling, we would just need to wait until it drops on the floor, wouldn’t we?

One of very obvious signs that the knife has fallen down, is Australia current account surplus. Australia indeed records significant current account surplus when commodity had a hit from recent inflation and yield crash. It’s no surprising. AUD has been discounted more than 30% in 4 years. It should bring attention to foreigners and start to raise capital inflow.

Australia posts first current account surplus since 1970s — source: bloomberg

How do we compare Australia to HongKong which can be a benchmark of China property to global property? HongKong property price continues to increase and they are pegged to USD. I won’t be surprised that HKMA may have been interested with many tier-1 properties like in Wynyard and Barangaroo. These properties which Australian think is most expensive, is now 70% cheaper (=30%[HK property appreciation]+30%[AUDUSD]+10%[local panic]) for HKMA.

Just like countries who experience crisis (Australia with commodity crisis in 2015 following with tightening in lending), local might feel housing price is very expensive in 2017-2018. However it’s actually getting cheaper to the eyes of increasing global properties. This wound will heal when policies untighten their tight lending, following with global economy bailout, possibly from 2019. If my above theory is true, as long as global properties continue to increase and local policies support lending, I may expect Australia property price to reach at least 20% above their highest high in 2017.

It’s almost impossible to change how nature will behave. However I quite believe something is about to spring. I would have to rely on my theory that normalization couldn’t work beautifully yet. When season is to back easing, we should expect same behavior. Spring water should start flowing from their resource into their monopoly of banks/finance. We shouldn’t be surprised that big 4 banks, CBA, WBC, NAB, and ANZ may have sprung well. My learning machines keep alerting me from couple months ago. This sign is now quite obvious to disclose, after I see recent bounce back in Australia inverted yield.

If property is obviously bottomed or starting to continue its trend, relative high rental income with significant drop in interest should double support price. Indeed tax benefit for investment property is free from equation, supporting even more. Clearance rate is also another leading indicator of price.

Sydney auction clearance rates and house prices over time — source: ANZ research, corelogic

It might be a bit clear now that some non-bank lenders are trying to capture some market share to next 2 years with some low rate funding. We could see from 2 years fix rate competition among lenders.

At the same time, even though clearance rate jumps, its volume is still quite low. Real estate agents are now trying to invite sellers to participate. I may think low volume is because sellers don’t want to sell at current low price and expect higher. If that happens, it may show that market is quite strong and not in panic yet.

At the end, it may give few years of opportunity to unload during predicted good economy. We haven’t seen global pro-growth initiatives yet but Australia has started quite big infrastructure spending. Without pro-growth initiatives, it’s almost impossible to transfer asset to risk market and negative yield may be here to stay a bit longer. It means Australia may be one of many which leads pro-growth and risk asset cycle.

I may already have interest/position in this article, therefore it’s not in any case of financial advise.

2019-08-21

Bonds, Investments, Property, Shares, Uncategorized

A Fallen Angel

“In the beginning everything is good.”

Money is used to balance risk, spur economy, and encourage people to create value. It was good in the beginning until it began to cannibalize their own economy ecosystems. This is a story of a fallen angel.

Four years ago, we used to hear normalization but I always argue that normalization will not work well. It’s very obvious from the amount of changes in credit/money and world balance which is in a form of a binary. It may work in long term if all policies support beautiful normalization but unfortunately they don’t.

If we look at monetary side, monetary policies have been long introducing opium/easing to the market and now they have to fight the worst of their opium war. The bubble is now getting out of control. Indeed the greatest central bank, the Fed, may now have to surrender to market hostage. One of market that I’ve been closely watching most in past 4 years is down under, Australia. It’s easing more, its currency suffers most, thus it’s when share index is performing best, as usual. This year, it could be getting difficult since currency is already worst and housing recovery is near to their crash point, demanding more opium. It’s also not surprising that recent trade war outweighs since most of Australia economy surplus, both trades and account, is related to China. Accidentally this story may be similar and related to the story of opium war in HongKong, how the country began.

Fiscal policies, who should be our savior, is now becoming more politic supporter, rather than economy. Economy theory was rooted back from western/democratic economy, and it was valid until their economy got a bigger challenge. Policies were supposed to protect wealth, where rich is always growing richer. It’s until they are too powerful than the system itself and now start to re-engineering these systems for their own interests. Money always has a target to create an opportunity by any means. It’s when the angel is fallen.

Your heart became proud on account of your beauty, and you corrupted your wisdom because of your splendor. So I threw you to the earth; I made a spectacle of you before kings. Ezekiel 28:17

It successfully attacked Russian billionaires in Greece and now is targeting billionaires money from China in HongKong. HongKong is a very complex systems with its currency anchored to USD, complex China political influential through business, complex switch from export into service, and political issue from who will continue to support their foreign exchange reserve. The angel sees this opportunity, and now will do anything to monetize the opportunity, even at cost of human lives for his own desires.

Lucifer became so impressed with his own beauty, intelligence, power, and position that he began to desire for himself the honor and glory that belonged to God alone. This pride represents the actual beginning of sin in the universe—preceding the fall of the human Adam by an indeterminate time.

Dr. Ron RhodesReasoning from the Scriptures Ministries

Economy is evolving and it may need central bank to introduce market shock and dramatic approach to pop the bubble before it’s too late. The market knows central bank is always taking action based on history and will not risk stability, even for a temporary pain. It’s for sake of GDP growth which should never be negative/see a recession.

I see one of greatest bubbles in history in making. It’s negative yield which is now about 16 T$ and I believe it’s now out of control. Some countries are even growing worst, offering negative yield for their mortgage. Four months ago, we’ve been discussing potential rally/bubble from this and it seems to be true. During that time, I believed that the best time to switch into fixed income vehicle was not when yield curve was inverted (about a year ago) but when central banks around the world were starting to bow into market (Q1 2019) and they started to ease. I believe it should trigger market perception that central bank has less power to control and should be a sign of more inversion and negative yield rally.

Global supply of bonds with negative yields hits $16 trillion — source: bloomberg

In facts, all bond holders in almost every developed countries are now enjoying enormous return, as much as over 100% return, mostly from their long term maturity. A vehicle that has lowest risk should return lowest. However this vehicle is now returning relatively highest return at lowest risk. It defies economy theory books unless we agree with me that it’s all right to be wrong. Any significant movement should mean something, either fear or greed at same time. Austria 100 years bond returns 200% and we can see as well in many major developed countries. It’s no surprise that US is considering ultra long bond and it may trigger more rush into this bubble. It’s always be in my theories that those vehicles that are protected from most public access, would always have higher chance to enjoy bubble or great return.

In my opinion, the only way to revert the yield is either a drastic monetary cut rate/easing or introducing massive pro growth fiscal initiatives. For central bank, it’s a dilemma. It’s too late! It’s out of control! If they ease more, it basically tells the market they bow to market and loose the opium war. Central bank is now pouring gasoline into fire and expect the fire to distinguish sooner. At the same time, greedy smart money keeps pouring on into negative yields and might push this catastrophe bubble even higher. If central banks don’t ease, credit flow in banking systems will start to revert back from long term into shorter maturity and reducing amount of credit along the time. Even worst, at the moment, I think most of central banks are still behind curve. Market is no longer expecting Fed to cut 1 basis point but 3 or 4. As well as other countries, market is now expecting immediate 1 or 2 basis points of cut.

Where are the pro-growth initiatives? I would think pro-growth initiatives are being delayed until there is a deal from the trade war. We have been expecting these since 3 years ago but they never happen. We should see this as an indicator of what fiscal teams really have in their mind. Trump can save the world but I believe he prefers to win the war. The old decades of money recycle has stopped since 2008 and there’s no new deal until today on how to recycle back. I would think they should take HongKong as a hostage. I believe they will win, not because of making more, but making less loss.

After all, I would expect to wait for below signals while continue to ride negative yield related vehicles:

pro-growth initiatives,
inflation to crawl back, may be from next year,
bubble pop in negative yield and fixed income,
a peaceful world,

before I see a small scale of financial crisis with a possible recession to create a new opportunity. It’s rhetoric to say that a peaceful world could bring a short term pain for better future.

“After the war, the bubble should pop and I will begin to desire for a new opportunity.“

It’s my own opinion and not in any case of financial advise.

2019-07-26

Bonds, Foreign exchange, Investments, Property, Shares

Four Wise Monkeys

see no evil, hear no evil, talk no evil, and do no evil

Economy is a protection of wealthy. It’s always be mysterious, otherwise it won’t work. We might sometimes need to see no market, hear no market, talk no market and do no market. It’s true, market and communication have been long used to make money and protect the wealth. The only way to know the real market is using math, because 1+1 is still 2. No surprise that technical is still playing well, until a strong hand does poison it to monetize and protect their interests.

Recently we should be surprised that central banks outside US, have been orchestrating easing. They are who are US allies. Can we see the evil here? Can we hear the evil here? Can we talk the evil here? Or can we do the evil here? No matter why yield is inverted, let the issue stay here.

Greece, land of Russians billionaires to park their money, fell down a decade ago. Italy and other PIGS who try to save it, are still enduring longest economic depression, longer than US depression in 1929. It’s the cost of austerity where Greece central bank is unable to supply Euro, which is under monopoly of ECB, which is under influence of bigger shark.

HongKong, land of Chinese billionaires is starting to shake when China tries to put extradition law to this biggest tunnel of money out flow from China. Could it be part of global yield inversion? I see HongKong has one main big issue. It pegs its currency to USD while it should go together with other countries to depreciate against USD. Similar to Greece, HongKong is highly dependent to US and its USD. What do billionaires in HongKong think about their money in such extreme high risk when this country can go bankrupt at any time? Eerie is everywhere and exit door is too small.

Who is going to bail out HongKong? US or China? If they go to China, people may get instructed to riot. If they go to US, they can easily get overpowered by Chinese army. HongKong issue seems to already spread into Singapore economy and two of them dictate premium property in Asia. Does it scare RBA enough? RBA rate cut is showing how they respond to risk of biggest surplus of Australia, which is coming from China, both in trade and account. It could stem into overdue Asia Pacific correction since 1997, when I self-experienced scary social unrest and first time I did deep study of GFC to many different business views. It was due to company debts bubble and could now be property and government debts bubble, through trade war, currency, and policy changes.

There should be no safer place to park your money unless you pay for its safety. Negative yield everyone? Trump always emphasizes that US won’t protect anyone money unless they pay or would US have such an ability to make more money unless everyone pays? Monopoly tends to work well.

Of course this issue is much complicated than what we ordinary can see. At the end, we are just market opportunist who is trying to follow where those money is moving. We do not need to see who is that evil, or hear that evil. We do not need to talk about that evil nor do the evil too. I think global money is starting to morph into something new and I would be just following money using my own money theories.

It leads me to classic technical play. An example of technical play is below. We did know well why we were doing big short to this company in May 2018. It broke both fundamentals (loosing arm of Veritas and Verisign, attacked by Google, long contract cheats, high debt, etc) and bad technical. We recently hear so many drama and mysteries, but seeing technical below in few seconds is enough to answer our curiosity, about what will happen to this company. There’s a Geisha make up by activists. Fundamental may not go better soon but activist play may draw stock price.

Another example, we do not need to hear any recent good news about fundamental of this company as well. We just need to know that easing is on play. It may not be favorable in short term but long term play should be strong enough. Who can win against central bank monopoly of their currency? Let traders try and we will do play with both of them.

I am a fan of any play and behavior of market participants, but recently the 4 wise monkeys inspires me much to overweight technical. When we can’t see in dark, don’t forget to always turn on the light.

I may have personal interest in any part of my article, therefore it’s not in any case of financial advise.

What you see/hear/do here and when you leave here, let it stay here.

2019-07-16

Bonds, Foreign exchange, Investments, Property, Shares

Monopoly

Monopoly defines a stable society and a stable economy

Human endures many different paths of society, democracy, oligarchy, communism, etc. They do try to create a stable society in their own way and to preserve wealth.

Central banks have been long doing monopoly. They are monopolizing money printing. Local banks also have been long doing monopoly. They are the only ones can draw money from the central banks.

In public company, we do see many examples, Google and Adobe have been monopolizing their industry. Google search engine is no match to any. Adobe Photoshop is also no match to any other. We also do see merger and acquisition strategy which is simply an effort to create money from thin air after having bigger monopoly, 1+1=3. At the end, the monopoly can decide their price and PER ratio is no longer much working to them.

Monopoly may create higher PER/Price Earning Ratio

In technology, 5G, should also be in monopoly of the “greats” since they are a strategic global infrastructure. I mentioned in my article from early this year, we should just follow 5G monopoly. It simply works. Even in current high momentum of Telstra share price movement, we can clearly see a-not-so-invisible hand on play with the 5G monopoly, even though their NAS (Network and Application Services) is quite interesting to watch. Eventhough current technical may start to show a potential correction, previous strong hand plays is already detected and may surprise in future.

In Australia property, we should see big banks are starting to lower rate BUT something unique is being detected. We do see all big banks who has direct access to the currency monopoly, has been reluctant to pass full rate cut. In the mean time, currency supply from big banks and reverse carry trade should flood the market. We clearly see so many non confirming lenders are now offering 0.5% lower or more than big banks and attracts migrations from big banks to non-conforming lenders. It raises a question to me, why big banks who are monopolizing the currency access offers higher rate than the ones which can’t do monopoly. It should be clear that there are currently a lot of liquidity at the moment. I would have my own theory that they, who can do monopoly, should see profit margin and strength from property is deteriorating. Therefore they start to sell weak assets with help of their “grandfather”, in which in future they can simply make a policy change by orchestrating liquidity out from the market when good time for property comes back. In a normal action respond, it’s part of bounce back similar to death cat bounce.

How far monopoly can push their price before introducing too much competitors? In theory, Marginal Cost (MC) is equal to Marginal of Revenue (MR) and which is above Average of Total Cost (ATC). In property, marginal of revenue should have run down faster than decreasing of marginal of cost. For example when central banks cut rate from 1.5 to 1, the market rate should also decrease 4 to 3.5. While the profit margin is relatively same, the revenue and their profit margin should have gone down with fixed cost remains same. Therefore I believe it’s more profitable for big banks to run market rather than holding assets since cost to run market is lower. The other way around should happen when long term rate is starting to rebound or inflation is starting to kick in. That’s when I believe the big bank monopoly will start to reduce oxygen from the market.

Image result for monopoly economy — source: economicsonline

We would then think bigger picture. When will inflation starts to kick in? We do know US is having benefit from monopolizing their strength of currency and enjoy this benefit while other countries like Europe and China are still having issue. I would have to agree with Fed, as long as they are still the only one monopolizing one biggest strong currency, they should be reluctant to cut rate like other countries. I would believe, when reversal time is coming, other countries could no longer do currency war and may start to increase rate. I would think that’s the time when Fed will start to do the other way around. With negative yield exceeds 13T$, there could be a big spike of inflation during the reversal. Market may fall, but inflation sensitive may then recover quicker than the other.

In the meantime, as predicted before, as the strongest currency, they can maintain Wall Street to continue their trend and slowly destroy global money value, unseen. This is what I describe as a stable currency where magic is happening and binary is formed. Inflation should be still far away because it broke MA200 ($TNX). As long as USD is strong, inflation should be in control. I don’t think we would see the reversal and market crash in next year or two. It’s simply because central banks currently demonstrate their habit of monopolizing money destruction and ample of liquidity is everywhere.

Monopoly is to make money. Money follows the monopoly.

My money theory is not in any case of financial advise.

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2019-05-28

Foreign exchange, Investments, Property, Uncategorized

Property Trading

When you are exposed to a dream, you are exposing your weakness.

More than a decade ago, I might be a bit lucky that emerging and Australia properties were running very well until next decade. There were few arguments during that time that emerging might not follow US property price. Let’s fast forward, in 2012, many people were so afraid and RBA research did support the fear. It still didn’t fear me enough.

In 2014, just a year before a major change is happening to emerging properties, I did feel property might have a chance to run out from its course. During that time I predicted that commodities would rebound when dark pool of US properties closed its gap within a year and half, which might mean the bullish cycle of emerging property might finish soon. My strategies that time was to hedge half of the properties with 3 years fixed rate and as much amount of commodities. There were a lot of arguments and theories behind commodities rally in relation to where the money will go and property hedging but I’m not going to discuss here.

The commodity and money theory did work well. However fixing rate was failed miserably. The central bank continued to lower interest rate again in 2015 after standing still in 2014. And one that I failed to see most is the Australian dollar crashed from its trend in 2015/16 until today. I did see strong Australian dollar before 2015 as a reason that Australian property wouldn’t crash but I didn’t expect Australian dollar to crash back to year 2008/2009. The market is always smart, that it lowers expensive price in a very fast and hard-to-predict way. Unfortunately commodity rebound didn’t help the currency.

I always fancy math. Before 2015, I have my own equilibrium formula:

i (interest to bank) = r (rental income) + t (tax benefit)

I only consider investment properties and ignore owner occupier properties, because that is where my money theory will work well most. The formula is only working in effective healthy market. It basically says that in very competitive market, investor will not make any profit from just buying the property (Rf = risk free) because their rental income and tax benefit is just barely enough to pay the interest. Market will do its own way that supply and demand will make sure investor is taking risk from the investment properties.

Moving forward to past few years. Here comes the interesting part. Currency devaluation is not enough to hold price, and price is starting to fall and so is the i. This environment will cause a shock to the formula to response and it would take few years before it can find a new equilibrium.

Australian property is still a biggest weight in inflation formula. In my theory it means market players still use property as an important investment or trading factor. When the weight is lower, and in my money theory is possible, it would mean property is no longer important in money market portfolio.

Due to this importance, RBA did lower interest rate in 2015 to 2016/17.

Back to the formula, i=r+t, when interest rate is lower, i and t should also go lower. However the magnitude of t is much lower than i. Therefore r must go lower even-though might not be as much as i. We have to remember that price was peak in 2016/17 where there’s hardly chance to cut more rate because dispersion between Australian rate and US rate is going higher due to Federal Reserve aggressiveness and RBA effort to save their boat. It caused money to flow from Australia to US and causing more pressure to Australian property price.

Based on my money theory as well, the not so invisible hand would sacrifice currency and at same time is trying to save their boat. If those money is not the major player, rental should have been falling since 2015 but it didn’t. r is just falling from early 2019, and not since 2015. We can see from this number. Property rental price is just starting to fall from early 2019.

In any shock, there’s an opportunity and the opportunity will get lower after market responses. When r is not responsive, there’s an opportunity to make money. Currently the r is quite high. It’s almost equal to i and money is trying to benefit from t. I found it quite interesting that they debated negative gearing and many business benefit. If the negative gearing is abolished, in my theory, property will crash. Even if the negative gearing is grand-fathered in this situation, we won’t see any recovery. I’m not surprised with result of election.

It’s very clear from above arguments that r must go lower. However if it goes lower, it will hurt the economy and retailer will suffer most because property is still a cash machine of most investors to stay afloat in an increasing global rate. Lower r means lower income or deflation, a big issue to the portfolio.

When i is going lower and r is not responding quick, we can see market is now doing:

i = r

The math does its magic because the t is free from the equation. It means we might be able to get the t with very low risk.

Rather than owning a property, it might be more beneficial to go renting and might benefit from the t for almost free. I’ll show you a case. A owns a property and pay 4% of interest. Since r is equal to i, A can rent in market and paying same amount of 4%. A can then benefit t by switching his property into investment property and go renting. Of course r must be securely located and maintained to get the high r. A will pay same amount of interest but enjoy the t for almost free. It’s not 100% free and 0% risk though because anything can happen to the property. What is the different? If A keeps his property as owner occupier, A won’t benefit from the t. Since market is now doing i=r and r is starting to fall, i is expected to start falling to help r or the economy. Lower i previously causes or due to lower price and hopefully it won’t cause a snowball to drag the price further down.

If people think lower r is not worrying, let’s see what RBA will do. RBA may race the falling r with reducing i until they find a bottom. It’s because money growth/velocity may go slower with lower r. During that time, currency may continue to suffer most. If i doesn’t go down with lower r, investors will start paying more and see less and less benefit to own investment properties and may cause more property to sell and less property to build. It doesn’t need to abandon negative gearing. If r drops a lot, maintaining higher i may cause investment property selling. With raising payment behind schedule, it should raise enough alarm for RBA to lower rate. It may also pressure APRA decision to reduce buffer in effort to stop this bleeding and boost more investment in properties. I only worry it would cause price to further down.

Current numbers (might change) show that within 3-6 months RBA should start lowering rate up to 0.375% within 3 years. i is expected to fall a bit further from 1.5% to 1% thus causing r to fall at about 12.5% (lenders are passing 0.5% or from 4% to 3.5%). If r is falling at above 10%, that will be catastrophic enough. The not so invisible money hand should help this from falling. If A switches to investment property, A will benefit high r and get t for almost free. I won’t surprise if at the end, outcome will benefit the investors. What it does hide is, going renting will pay more money because r tries to stay high. Let’s look 2015 to 2018. Isn’t it more beneficial to go renting rather than owning a property? If we own a property at 20% deposit, 10% fall in price is equal to 50% loss in deposit asset. Sometimes it can be better at paying a bit more money to save the bigger money. We should realize that Australian dollar has been falling more than 30%. If we add 12% price correction on top of the 30%, Australians have lost 42% of equity wealth from their property price. If they maintain 80% LVR, it means, unfortunately, they already loss 5 x 42% of value which may already lead to bankruptcy (over 2x of 100% loss) if currency does not fall down. It would then need many decades to bring the equity wealth back, unless of course, the price and currency rebounds. This graph is good but also tells it won’t happen soon.

I still don’t think Australian property will crash anytime soon. However I have my own theory of when bigger issue may come. There’s sign where authorities will start giving hands to weak hand instead of investors. It’s just a matter of time when the weak hand falls with holding asset. However, for now, I may expect price to rebound within 3-6 months to the next 3 years if RBA is willing to cut rate as soon as in June 2019. It can be wrong and may change tomorrow, but that’s what my numbers can say for now.

When I would expect price to rebound in conjunction to strong rental? I think this research, A Model of the Australian Housing Market, does provide many good numbers and formula. I would be more interested to see the impact from building approval (in relation also to bank lending) and interest rates changes.

Property is the dream of many citizen. Unfortunately they are exposed to their weakness for others to make money.

Above is just my theory and should be debated. It’s definitely not in any case of financial advise.

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My Journey

No Financial Advise

Category Archives: Investments

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Evolution, but not like that

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Property Trading