Traineeinvestor

For all its many and serious flaws, I'd rather have the current banking system than any of the alternatives that have been put forward - those that are not advocating one step backwards are advocating three. Anything that advocates restricting where and how money can be exchanged will end badly - just has it always has in the past. There are much better ways of regulating the financial system.

I think the property in Kennedy Town was Eight South Lane?

It's good for access to shops, restaurants and transport (very close to the new MTR station) but there is no outlook from most floors and the limited outlook (if any) from the high floors will almost certainly be built out at some point in the future (during the process of which residents will have the pleasure of living next to a building site for a couple of years.

I simply cannot fathom the investor intrest in this property.

Sorry, but I have to very strongly disagree with that. Most people are not equiped to either evaluate equity investments (especially in illiquid investments) or to take on the risks. Many of the people who are, would not want to and restricting capital to what can be sourced locally is clearly a very bad idea - it stops capital poor areas lifting themselves out of poverty, increases the risks and effects of a local economic downturn, results in asset bubbles in areas with excess capital and would increase inequality.

Also, I hope the banks take collateral against most of their loans and sell the collateral in the event of default - too many unsecured loans puts depositors at risk and the failure to enforce collateral/repayment obligations introduces a huge moral risk.

At some stage all the banker bashing is going to come and haunt us all. As Bernstein (The Birth of Plenty) and Ferguson (The Ascent of Money) both pointed out, the availability of capital and the free movement of capital are both necessary ingredients for a growing economy and prosperity in general. By regulating and punishing the banks in excess, the banks are reacting very rationally by focusing on activities which carry lower regulatory and financial risk and which tie up lower amounts of regulatory capital. Among the areas getting squeezed - small business finance.

I already have a reasonable investment in silver but am very tempted to pick up a little more at sub $20 per oz given the price action over the last several months.

Given the allegations of market manipulation, the cynic in me would be surprised if the price of silver saw any significant movement either up or down during the early stages of the new price fixing mechanism (absent a significant movement in gold) - any large movements up or down will just be seen as confirmation that the price of silver has been manipulated and invite regulatory investigations and lawsuits.

HSBC has increased its on-line valuations again - the second time (that I have noticed) that valuations have been increased in the last two months. Hardly surprising given what is going on in the market. They are still a bit below the all time highs of January 2013.

Any hopes of adding to the portfolio on a meaningful drop in prices are well and truly dead. (Of course the other side of the coin is being grateful that we didn't sell anything.)

(reposted here from my diary as it may be of general interest)

Martin Spring's excellent On Target newsletter has just arrived and the leading article is "Gold Starts to Recover Its Traditional Role"

An excerpt:

"This has been particularly noticeable in recent months as the impact of US government sanctions on international banks for failing to comply in full with the dictates of its foreign policies “has become severe.”

Since May the American authorities have extracted almost $12 billion in fines in settlements with France’s BNP Paribas and Zurich-based Credit Suisse. As a result, Dizard says, “the world is finding ways to get along without the dollar.”

Gold is one of several alternatives.

“Not many transactions are actually invoiced in gold as such; instead, gold is used as the settlement medium rather than for the price quotation,” he says.This has been particularly noticeable in recent months as the impact of US government sanctions on international banks for failing to comply in full with the dictates of its foreign policies “has become severe.”

Since May the American authorities have extracted almost $12 billion in fines in settlements with France’s BNP Paribas and Zurich-based Credit Suisse. As a result, Dizard says, “the world is finding ways to get along without the dollar.”

Gold is one of several alternatives.

“Not many transactions are actually invoiced in gold as such; instead, gold is used as the settlement medium rather than for the price quotation,” he says."

I am very close to taking a bit of money off the stock market and buying a bit more bullion.

Agree - it was a great video. Clear, concise and actionable without being unrealistically confident of an uncertain future - not the waffle or unsupportable bombast that too many commentators indulge in.

I will definitely be listening to more of these.

http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=246058&sn=Detail

Summary: demand for physical gold in Asia has fallen and investors have been reducing holdings of funds which hold physcial gold (and Barclays is bearish).

I actually view this as an overall positive for gold - if the price has edged up slightly in spite of the weakened demand, what will happen when that demand comes back?

And another one on the rehypothecation of Shanghai warehouse stocks. Assuming the numbers are correct that wold suggest that there is a significant shortage of gold (and probably other metals) at least some of which will need to be replaced: http://www.bloomberg.com/news/2014-06-26/china-finds-15b-of-loans-backed-by-falsified-gold-trades.html

So basically Turkey secretly sold some of its gold to Iran to reduce the current account deficit and make the economy look better ahead of an election: http://www.bloomberg.com/news/2014-06-25/turkey-sells-200-tons-of-secret-gold-to-iran.html

Gotta love politics as usual.

Also, fewer investors means fewer properties available for lease which means higher rents than would otherwise be the case (unless he believes that for every investor who does not buy there will be a matching end user buying which is IMHO very very unlikely).

The very antiquated (and, IMO broken) system for fixing the prices of gold, silver, platinum and palladium is under review: http://www.bloomberg.com/news/2014-06-18/new-silver-benchmark-seen-heralding-gold-fix-revamp-commodities.html

Silver is being used as the crash test dummy for whatever new mechanism is adopted. It will be interesting to see what they come up with and what effect (if any) it will have on the price of silver.

Hedge funds net short and record short selling by speculators are certainly very bullish indicators.

This is speculation - Hong Kong banks have very high deposit levels and I am seeing anecdotal evidence that demand for RMB denominated products AND IPO margin loans have declined. It would be logical for banks to increase HKD mortgage lending as a means of putting some of the otherwise unprofitable deposits to work. It doesn't show up in the HKMA stats (yet) so I can't offer any verifiable support for this idea, but it sounds reasonable.

India to relax gold import restrictions: http://www.bloomberg.com/news/2014-05-22/gold-imports-by-india-seen-climbing-as-rbi-relaxes-some-curbs.html

This may not be as exciting as it sounds. The expected increase is from 10 to 15 tonnes per month for as long as the relaxation remains in effect. There will probably be some substitution of legally imported gold for smuggled gold - although how much is a complete guess.

But gold is ultimately about sentiment rather than fundamentals. Given India's traditional appetite for gold and the international recognition of that appetite, the question is whether this is enough to reignite sentiment for the yellow metal?

 

Perhaps ... but then one would need to take into account other asset classes as well, very quickly complicating the picture.

Exactly - which is one of the reasons why i said the argument was a ver very weak one.

Those are important charts (and a very good question).

A couple of comments on the charts:

Comparing a dollar of debt in 1940 with a dollar of debt in 2012 is not meaningful. They would be more useful if they were either in log scale or inflation adjusted and compared to total GDP and had the present value of unfunded commitments added to the national debt. Debt + present value of unfunded liabilities against per capital income would also be a useful chart. Even with these adjustment, it would still be an ugly picture of a country that is hell bent on bankrupting itself through political means.

I agree with you that there is no rational basis for linking to price of gold to the level of US debt. There is a marginal argument for linking the price of gold to the money supply but it is a very very weak one.

It is usually a good sign when insiders buy and/or the company makes buybacks.

I agree that there is much better value in HK property shares than in HK physical property. There are well run companies selling at discounts to NAV which are not only significant in absolute terms but larger than historical averages. They also offer reasonable yields.

I was looking at some last week and was struck by the divergence of the recent share price movements between Cheung Kong (HK:1) and Henderson (HK:12) on the one hand and Wharf (HK:4) and Wheelock (HK:20) on the other hand. While there are obvious differences between these companies, I was struggling to explain the divergence.

http://www.aastocks.com/EN/stock/BasicChart.aspx?symbol=00004

Wharf offers a trailing yield of 3.2% (slightly higher than the market average) and a discount to NAV of 42% (52.65/90.94).

Wheelock 3.1% yield and a discount of 61% (31.55/81.98)

Henderson 2.2% yield and a discount of 42% (47.4/82.77)

I'm inclined to believe it's as likely to be sloppy journalism as deliberate spin. They overhype when the market is going up just as much as they do when it's going down - at the end of the day its the most sensationalist stories which attract readers (sadly).

Interesting.

LSK is a regular buyer of Henderson (HK:12) making it a moderately predictable "buy the dips" stock.

Wharf (HK:4) and Wheelock (HK:20) seem to have come back the most among the big developers. In fact the divergence in the performance of Henderson/Cheung Kong and Wharf/Wheelock is quite striking.

Posted my comments on your diary thread.

FWIW, I am inherently suspicious of claims of cross-the-board upward or downward bias in the media. For the most part, they are trying to write stories that grab people's attention and that usually means talking about the extremes.