Traineeinvestor

Given the increase in building activity and increases in construction industry labour costs generally, a rise in salaries for surveyors etc is not surprising. What is surprising is that their salaries are lower than Singapore and China. Midland is an interesting situation - lots of animosity, a loss, and publicity. It is tempting to buy a board lot just so I can go to the next AGM.

The developers have had a nice run recently - Cheung Kong and Henderson (which I hold) in partcular.

We've been listening to claims that the HK property market is heading for a 10% decline, 20% decline, 30% decline, 40% decline, imminent collapse for years. There was no shortage of people predicting a total collapse of the HK property market right at the bottom in 2003. The people making these claims include large banks, property agents, reporters and a few fringe sites whose "analysis" is long on exaggeration, selectivity and unsupported claims and desperately short on either critical thinking or objectivity. They have done so with sufficient regularity and shrillness that they have long since lost whatever shred of credibility they may have had. Possibly they trained at the Harry Dent or Robert Pretcher schools of financial forecasting - I can't think of any other reason for such consistently awful advice being given with such great frequency. As Max Gunther put it - they may not be right often (or at all) but they sure are often. Even a stopped watch is more useful than some of these people - at least you know the stopped watch is useless. While I am sure that one day there will be another substantial decline (one cannot argue with history and economic cycles), anticipating it by listening to the likes of Mr Chan is not going to be remotely useful. For my part, I am very glad to ignore them.

An interesting paper on including gold in a portfolio to improve the sharpe ratio: http://www.merkinvestments.com/downloads/2014-03-20-case-for-gold-optimal-portfolio-allocation.pdf It's interesting, but I am slightly concerned that much of the analysis relies on timer periods when the price of gold appreciated significantly. I would like to see an analysis which included the gold bear market.

An Un-Ghosted "Ghost Town"? (headline added by Dr.B ) And with perfect timing at least one journalist actually went to the trouble of checking the facts and found that claims of Valais being a "ghost city" were simply false. 75% occupancy on weekdays and higher on weekends may not be high but it is not a ghost city either: http://paper.thestandard.com.hk/?archive=1 (It's on the bottom right of page 6 of the HK Standard 25/3/2014 edition in case the correct page does not show in the link.)

There is a huge amount of unsupported exaggeration in that article. As far as the HK property market as a whole is concerned, prices are (in general - there may well be exceptions) drifting lower rather than crashing. Any "scrambling" is not showing up in the property indexes - only in anecdotal reports on a relatively small percentage of the market which is all the media seems to be capable of reporting. The latest CCI/CCL data is here: http://hk.centadata.com/cci/cci_e.htm Most of the selling pressure appears to be in NT West. Local demand, low gearing levels, low interest rates, developer discounts and high transaction costs are all positives for the market right now. Some pressure on some PRC owners and increasing supply are the two main negatives. I would say that the market is leaning towards the downside but the difference is not that great. As much as I would like to see some panic selling and an opportunity to pick up a bargain, right now, that's not happening.

Not sure if you've seen this, but it gives an idea of the transformation that the Philippines is going through: http://www.bloomberg.com/news/2014-03-25/san-miguel-s-ang-revives-plan-for-10-billion-manila-airport.html (Excerpt added by Dr.Bubb): San Miguel Corp. (SMC), the Philippines’ largest company, revived plans to build an airport in Manila as the fastest-growing Southeast Asian nation attracts tourists and investors. The company, which also manages Philippines Airlines Inc., will ask President Benigno Aquino in April to approve a new airport to be built at an investment of $10 billion in an 800-hectare property over a five-year period, San Miguel President Ramon Ang said in a mobile-phone message reply to questions. Ang had first proposed the airport plan in 2012. The Southeast Asian nation will build new airports and expand existing infrastructure to help meet its target of 10 million foreign visitors and 56 million domestic tourists by 2016, Transportation Undersecretary Rene Limcaoco said March 20. . . . The transportation agency said it could expand an airport in Pampanga province and develop a new airport about half an hour from the capital, and either close or keep the existing Manila airport.

Silver retreating to its kennel. Could be back under $20 oz soon. :-(

Yes, i read the report - thanks for posting. It is very useful. Henderson's results came out yesterday. Latest NAV $82.77. Share price $40.50. Discount: 51%. Dividend was increased by 10% over last year. Good pipeline of projects for the next few years. I probably won't buy any more on market but will take up my full entitlement under the dividend reinvestment plan. Some of the smaller developers are trading at much bigger discounts to NAV. Tai Cheung (HK:88) is at a huge discount to NAV (if the hotel is valued at market), offers a 5+% yield and has a large net cash position. Like most small developers, profits will be very uneven because of the timing of the comparatively smaller number of developments. I have had a few shares for a few years now.

In the shorter term they should be buying back all the shares they can - with discounts as big as they are, it's the nearest thing to free money they are likely to see anytime soon. However, for developers, size matters. A bigger balance sheet means they can take on bigger projects and get cheaper debt. There's also something of an ego element involved here (IMHO). While I'm feeling a bit of pain at the moment, at some point the market is pricing is too much negative new for the property sector? There are decent yields, huge discounts to NAV and plenty of strong balance sheets to choose from.

The problem with David Morgan is that he has erroneously called bull too many times to take too seriously. That said, I hope he is right on the price of silver.

Very odd but I believe (and please correct me if I am wrong), the PRC government does not buy its gold in the international markets so it does not show up as a buyer. As for India, if the Indian government were to be buying gold at a time when it is punishing its citizens for protecting themselves agains a weak currency, I would imagine that would create a bit of controversy (to put it mildly).

Another article suggesting that the London gold fixing mechanism is used to manipulate the price of gold: http://www.bloomberg.com/news/2014-02-28/gold-fix-study-shows-signs-of-decade-of-bank-manipulation.html At the risk of repeating myself, the fixing mechanism is so outdated it should have been dispensed with decades ago.

Nothing new here but a nice summary of which countries are adding to reserves: http://247wallst.com/commodities-metals/2014/02/25/seven-nations-buying-the-worlds-gold/

A hesitant view on a bull market in silver re-emerging: http://www.marketanthropology.com/2014/02/back-to-bull-market-highway-for-silver.html

A somewhat ambiguous view on silver: http://finance.yahoo.com/blogs/talking-numbers/why-the-rally-in-silver-is-in-trouble-015435940.html While it has to be acknowledged that the price of silver is at least partly dependent on investor demand, in the longer term i am more optimistic.

A big jump in sales of gold and silver coins by the US mint. “Any kind of uncertainty attracts people to gold,” Scott Carter, the chief executive officer of Los Angeles-based Lear Capital, said in a telephone interview. “The long-term buyers accumulate gold every time there is a drop.” http://www.bloomberg.com/news/2014-02-01/u-s-mint-gold-coin-sales-jump-63-in-january-silver-triples.html There must be some gold minings stocks that will still make money even if gold prices drop to $1050 (as some are forecasting).

"Who do you think has a worthwhile opinion on the Gold market?" Good question. Off hand, I cannot think of anyone who has been consistently good on gold. Unfortunately, too many experts (including some who have made some very good observations) are always advising people to buy gold right now which makes me question their judgement. My much depreciated HK$0.02 worth is that its better to test ideas with a group of people who are are not in either the "gold is the only real currency" or "gold has no fundamentals and therefore no real value" camps than to be overly respectful of anyone (no matter how highly regarded). FWIW, I am becoming a little more bullish on gold because: 1. the ability of banks to import directly into the PRC has the potential to enable more PRC investors to buy gold - in simple terms, more people in China will have access to gold distribution channels. As a matter of policy, I can see the PRC government encouraging this as a means of diverting money from both an over heated property market and away from shadow lending activities. Increased gold imports also have the effect of lowering China's trade surplus (gold is an imported commodity for these purposes) and effectively substitutes onshore gold for offshore USD securities (which is where the bulk of China's trade surplus ends up); 2. global demand has been partly suppressed by India imposing import restrictions (now joined by Pakistan) which may or may not have reduced Indian imports by eighty percent (less however much is being smuggled in through one means or another). At some point, there will be an element of catch up; 3. the pick up in demand for physical bars and coins when gold dropped below USD1,200 per oz was huge; 4. COMEX inventories continue to fall - this is not something that can continue for ever; 5. ETF holdings continue to fall - this cannot continue for ever; 6. unexplained delays in returning Germany's gold are a cause for concern; 7. current gold prices may be low enough to render some current and future production uneconomic. On the bearish side: 8. gold has no fundamentals which can be analysed; 9. gold has few uses other than as a store of value (this is one reason why I prefer silver); 10. historically it can be argued that gold more or less provides no substantial real return and, if that is correct, it is (depending on where you start the analysis) trading above its long term trend; 11. the rise in nominal yields on debt securities increases the opportunity cost of holding gold; 12. the ready availability of unbacked paper gold products and the absence of restrictions on the creation and issuance of such products divert a lot of buying interest away from physical gold; 13. the buy-sell spreads on physical are very large; 14. there is a non-negligable risk of fake gold; 15. there is a risk of government confiscation which I view as being extremely low in Hong Kong (but devastating if it happens); 16. banks in Europe and the US are reducing their involvement in non-trade commodities businesses . While this is largely due to regulatory pressures making it more difficult and expensive for banks to take on the risks involved (i.e. it is not part of some conspiracy to manipulate the price of gold), the practical effect is to reduce the accessibility of gold and gold related products by clients of these banks. Put differently, banks will be selling different products to their clients. I have no views on: 17. storage risk - there is storage risk or equivalent with all asset classes; 18. Deutsche Bank withdrawing from the London Fixing mechanism - which is a redundant throwback to the days when the price of gold was fixed and should have been done away with in the 1970s; 19. the emotional appeal of gold - undoubtedly one of the reasons why gold continues to be a popular investment but emotions are very fickle things; 20. digital currencies like Bitcoin diverting some money away from gold. I have deliberately not included either: 21. inflation; or 22 deflation, as being either bullish or bearish as much would depend on other circumstances at the relevant time (e.g. an inflationary environment which saw high interest rates could be either bullish or bearish for gold). The real difficulty is that it is difficult to quantify most of these items (not all, obviously). FWIW, I am more bullish than bearish at this time (which means nothing because my track record is not so good either). Unfortunately, my early experiences with charts came from exposure to Robert Pretcher and a now defunct stock investment service - both of which managed to get things wrong far more often than they got them right. That said, David Fuller runs a pretty good service combining technical analysis with fundamental and a geo-political overview. Marc Faber is someone I have a lot of time for (although he always says you should buy gold). Occasionally the big banks have got it right - the problem being that none of them are right sufficiently often to be relied on. So, I will read what people have to say but be at least a little bit skeptical at all times.

Thanks for posting the links to the two CNBC articles but they have to be two of the worst pieces of journalistic rubbish I have read for a long time (well, today at least). The first is close to being incoherent, waffling between quoting people who predict gold prices to go lower and people saying demand increased because of lower prices. Nowhere does it attempt to o any analysis and for the most part does not even explain why the people referred to might hold the views they give. The second is better in parts (it identifies restocking as an issue and quotes from at least one of the banks licensed to import gold directly into China) but contains this classic lack of awareness of what is happening out there (including things which CNBC has itself reported on): "But China's gold imports from Hong Kong - the only official data available - could fall in 2014, four analysts said, with three of them pegging a decline of at least 10 percent." Given that China has now licensed ten banks to import gold directly (including the first two foreign banks) so that importers can bypass Hong Kong, a prediction that China's imports from Hong Kong "could" fall is a little short of the Sherlock Holmes league and tells us absolutely nothing about demand in China. Needless to say, neither article wasted electrons on issues such as the decline in COMEX inventories, the decline in ETF holdings, the delays in repatriating Germany's gold, the impact of India's import restrictions (now followed by Pakistan - in fairness, this was after the articles were written) and, more recently, the increase in hedge funds making bullish wagers on the price of gold. The observations posted by Dr Bubb and others on this thread are light years ahead of the journalistic efforts that went into those two articles.

This is also just a fraction of the amount of gold which China imports every month. Something does not add up. I am getting very tempted to go down to the bank and buy a few more maple leafs.

WSJ suggests that gold may be a good contrarian investment right now: http://www.marketwatch.com/story/contrarian-investors-fight-off-the-gold-bears-2014-01-17

Thanks for that. Gold is starting to tempt me - as much for all the negative predictions out there as anything else.

What happens when the last ounce is withdrawn from Comex?

Ahhh ... Bob Pretcher .... Harry Dent's greatest rival for the title of world's best contrarian indicator ....

Real estate near Chernobyl? I have to admit the fact that gold is being bashed and the restless metal is being ignored (even by its usual standards) is tempting me to start accumulating some more. The hard part is that it is (IMHO) next to impossible to do any kind of fundamental analysis on silver - meaning I don't see how I can distinguish between price and value. To some extent or other, investing in silver involves a leap of speculative faith that past price movements will repeat themselves at some point in the future (and before I run out of patience).