What is wrong with Japan and its path
I have in the past
spend endless effort to improve Chinese' view on Japan as much as I can. But the
Japanese are not doing its bits....
George's Comments on Everything
Obama, Looking forward
So Obama has won the
election, the next president of United States of America. It is a prolonged
election, two candidates were really good. I like some aspects of them and
disliked others. If I was an American, I probably would voted for McCain.
Senator McCain is an impressive man, although his performance in the campaign
was totally contrary to his true color, I believe it would all be ok once he got
elected.
Obama is also a
truly impressive man. A true portrait of the American dream, once again affirmed
my view on that American have a way to heal itself and bring the world to push
forward. My main concerns regarding his fiscal policy, especially regarding
restoring budgets to the black was dispelled by his economic advisor Rubin and
Volcker.
Now, wholeheartedly,
looking forward to his performance. The whole world is watching, the world once
again need a strong American leadership!
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Flight to Quality?
The gold price has been down, US dollar has been up while the stock markets around the global is tanking. It is a rare moment of fear. Usually the gold price trade oppose to the stock market. The stock market goes up, the gold goes down, vice versa. Not now. It is a state of panic. Investors are fearful, they want cash. Assets abroad are dumped, causing the huge drop in foreign currencies and stock markets aboard. Next is the stock market in US, all the investors, retail or fund are holding their asset in USD, treasury. Not even in gold! But is going to T-Bill a flight to quality? With the size of US debt, it is probably not. The only assurance is that no one in the right mind would let US to default. The world cannot afford to.
It is time to listen to Buffet: Be fearful when others are greedy, and be greedy when others are fearful.
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My First Outsourcing Experience
I recently posted two jobs on RentaCoder to get two WP plugins for a project I am co-founding with a friend. The experience has been great. I posted the project, within hours, I got good responses, and I was able to pick one of them. My first project was completed to perfection within 1 day. Impressive. Although one thing troubles me. I have to set a max price, but often I am not sure what is ongoing market prices. All my bidders bid around the max price I set, that makes me think I have set a price either too high or too low. It would be nice if the platform could suggest a price or let the bidder to do the job. The market is not efficient here.
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China's Slowdown
So China has slow
down, to 9.9% growth rate, that is a still a respectful number although less
than previous years. Much of news I have read so far is really negative.
Although I think it is a welcoming change. First, inflation danger that China
faces will cease as commodity prices drop and investment heat fades. The bigger
welcome will be the change in GDP growth. For the past couple years, China has
depended on fix investment and export to grow, ultimately those growth are
unsustainable. Now the slow down offers a chance for the economy to adjust
itself, to a consumption-driven economy. With the right policy and incentive,
China's prosperity is golden. Now we just have to watch and
see.
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Why Invest in Real Estate?
House Value over the last centuries:
(source: http://3.bp.blogspot.com/_wFWqWIH-WFU/SPnTDZ-G-pI/AAAAAAAAGLw/EmInfXSfe00/s1600-h/housing_projection.jpg)
S&P 500 return since 1950:
(source: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=20800&t=01004553487438585767)
I saw the first chart today, and immediately want to find a comparison chart. I always been told by many people that investing in real estate is good, safe, low risk, and good returns. I had my doubts, but I am unable to convince my friends that equity is a better choice. Now I can convincingly say so.
The first chart is the house value over the last century adjusted for inflation. Clearly, over the last 100 years or so, the house price barely grow, even at the height of the last housing bubble, you would made 200% return. However, if you invest the same amount of money in S&P 500 in 1950, your capital would grow by 10 times + dividend. (shown in blue line on the second chart.) The reason I excluded dividends is that we can compare it to the housing price, since it did not include rent income. Had we invested the dividend, we would gain 100x, shown in the red line. I doubt that re-invested dividend income would gain as much return.
George Liu
george.j.liu@gmail.com
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Who's fault?
This cartoon is on Economist this week:
It is a real danger! The worst of this crisis is not recession, but reverse of progress! The world has set its march towards market economy for awhile, and this crisis might jeopardize it and put the entire world's economic growth for the future in real danger.
The root of the problem is not capitalism, but unregulated market and wrong executive compensation plan. CMO, CDO, and CDS are real financial innovations that bring more liquidity into the financial market. CMO in market will allow more people to access credit. But the perfect tool can be used wrongly like nuclear power. We have to regulate and price those derivatives properly going forward, but capitalism as a whole should be blamed for this problem. It is all too easy politically to blame everything on capitalism. Popularism might rule, and that is the real threat here to global economic health!
George Liu
george.j.liu@gmail.com
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The Spillover to Real Economy
So far, the crisis has mostly remained in the financial realm. Increasingly now, I see signs of the spillovers. First it is the story of people cannot get car loans and credit cards in US. The car sales figure seems to confirm that. It has fall from the sky since much of it depends on credit.
Now numerous start-ups have lay off large number of employees. They depends on funding to survive and grow. In a tight credit cycle, they may be the first affected company, and surely enough all of them are preparing for the winter. (Hopefully not a nuclear one) So what is next? Housing, car, start-up, private buy-out, M&A, and etc those credit intensive activities are already slow. Consumer spending seems have been down a lot as well, probably result of a combination of depressed wealth, loss of job, and tight credit card.
But big things haven't come yet. Firms haven't come under threat due to tight credit cycle. When we see that start happening, we are in real trouble. Buffet declared its time to buy right now, but I am just not sure how long a time horizon we must have to be profitable. It is a winter, but will it be a nuclear one?
George Liu
george.j.liu@gmail.com
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Quit My Day Job
I want to quit my
day job, plain and simple.
My day job is a
quite good job, high pay (close to 6 figures), relaxing (I never had to work
overtime), flexible (very flexible hour and vacation time), long vacation time
(1 month), and of course a very good boss that is understanding and easy going.
Still I want to quit my job, because I am not enjoying the work I do. First I
felt my work is not value-add to the bank. Secondly I am not learning. I have
worked at this job just little under 2 years after I graduated from my
undergrad. This job has taught me a lot, but the learning experience
is now fading. I am simply not motivated to do my job. Everyday I tried to kill
as much time as possible by reading news and etc. Each day felt longer and
longer.
I think this
experience warrant a strong motivation to quit the job. Several things
have constrained me from doing so far. I am an fresh undergrad with work
exp of just 2 years, and currently attending an evening/weekend program for
my graduate degree. Financially I am broke with all those tuitions I
paid with loans over the years. (My graduate program alone cost 70K.)
So if I was to quit this job, I probably need to start at
another job immediately. Hopefully that job's pay is as much as this
one. Given the state of market and financial industry, the likelihood of
finding such job is low, especially that my primary interest
is on market side of this industry. On top of
it, I am unable to relocate to hot market in Asia given my commitment to
the graduate program.
The prospect of
quitting my job looks depressing. On the bright side, I got several things
I started on the side (entrepreneurship stuff) I could occupy myself with. I
call myself entrepreneur, because I believe I have a strong entrepreneur spirit.
Always finding things to do, starting and building things from scratch. Beside
the day job, I have started couple things with a couple friends. I haven't
committed fully to them I felt, although I was about to get by. But
entrepreneurship is also about taking risk. I haven't display that at all
recently. Sadly I have been displaying the opposite trait by staying on this
job. I think it is time to stay true to entrepreneurship, quit my day job, and
get going on an start-up or two.
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The Volatile Market
This the S&P 500 and Dow Jones Average for the last 5 trading days. Very volatile! Everyday it moves up or down by more than 2%. On Monday Oct 13, riding on the news of massive nationalization and market intervention, both indexes climbed more than 10%., the biggest one day gain in history. However, today, we suffered the biggest one day loss since 1929 Market Crush.
This is trade on fear!
George Liu
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