#-Lens

What is wrong with Japan and its path

Wed, 05 Nov 2008 10:57:07 -0800

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....

http://www.economist.com/world/asia/displaystory.cfm?story_id=12544740&fsrc=rss

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Obama, Looking forward

Wed, 05 Nov 2008 10:25:06 -0800

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?

Sat, 25 Oct 2008 13:33:51 -0700

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

Thu, 23 Oct 2008 14:32:59 -0700

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

Tue, 21 Oct 2008 07:42:23 -0700

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?

Sun, 19 Oct 2008 11:34:15 -0700

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?

Sat, 18 Oct 2008 16:51:52 -0700

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

Fri, 17 Oct 2008 21:51:40 -0700

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

Thu, 16 Oct 2008 08:03:27 -0700

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

Wed, 15 Oct 2008 18:33:07 -0700

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

george.j.liu@gmail.com

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First Taste of Democracy

Wed, 15 Oct 2008 07:29:07 -0700

I had my first taste of democracy yesterday, Oct. 14th 2008. It was the general election day for Canada. Since I turn 18 and becoming an eligible voter, there has been two elections. Regretfully, I did not vote in the first one, not that it would make any difference since it was strong Liberal riding.

It was very interesting and exciting for me to cast the ballot. Growing up in China, educated in Canada (at Queen's, a very grassroots democratic school, almost everything at the university is run by student. We even got an elected rector who gets a say in the school budget setting.) I found this constant struggle and debate about political system. What is the better form of government? A mono-party system in China or multi-party democratic system like in the West? (I hate to use the word dictatorship, because the current government is not run by one person, hardly even a circle of people. There are some constant political struggle between different fraction of the party behind the scene. That could be a topic for another post.) On one end, I found pro-Chinese government people arguing that democracy is bad because it never gets things and it is just corrupted. The main evidence they have for this is India and Taiwan, and sometimes Japan. Now we can probably add US to the list for its failure to prevent the financial Armageddon. It is true that democracy is inefficient. Any political textbook will tell you that. In a representative system, politician tend to trade favors to support each other's bill. US is really bad at this, pork and barrel projects tow to about $200 billion. However it is untrue that democracy induce corruption. In a well designed democracy anyways. Taiwan's democracy is still at infant stage, but even then we can observe the beauty of democracy. That is of course correction. In Taiwan case, we can see the prosecution of a former president, which we will not able to observe in a non-democratic society. Look broadly, we can see that democratic countries, especially US, have made many mistake at the top, but it is very impressive that the system can heal itself by elect the right person who is going to fix the problem. I deeply believe that is real beauty and impressive thing about democracy. It can be wrong sometimes, but it also can heal itself, whereas in an authoritarian state, the system heal itself through revolution and civil wars. Much more painful way to correct the wrong.

Until a better system discovered, we should stick with Churchill's words: "Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

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Finally, Land Reform

Mon, 13 Oct 2008 14:57:02 -0700

Finally, it is here. The almost private ownership of land for 800 million farmers in China.

CCP has recently passed a policy in the central plan committee meeting that would allow peasants to freely trade and sell their 30-years land rent contract. No more those peasants are exploited by Town/County official who would take the land away, sell to land developers and leave peasants with a peanut compensation comparing the land's market value. Many protests in recent year in China (thousands per year) are centered around the issue of rural land. Peasants want proper compensation, yet by law they have no rights to it. No More!

With this policy, peasants should see their wealth increase, productivity raise. Those who want to stay farming can have more land and achieve scale of efficiency. Those who want to move to the city can have a good capital to start them off. The wealth gap between those who live in city and rural region should be narrowed. Now the question is how to make those 800 million peasants aware and understand this policy. It is a going to a difficult task given many of them are illiterate. Word of mouth would a good bet!

George Liu
george.j.liu@gmail.com

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Rescue The World From Depression

Sun, 12 Oct 2008 20:12:00 -0700

No escape, no safe heaven. Around the globe, stock markets are falling. S&P 500, Dow, FTSE, Nikkei 225, Heng Seng, Shanghai, everywhere has been falling. In Russia and Iceland, stock market has to be shut down to avoid further landslide. Corporate bond prices are falling, the return on Treasury bill are at all-time low. Commodity prices are also dropping off the wall. What is there to invest in other than gold?

All of those are caused by fear factors. People, investors in particular, are scared! They fear losses, so they withdraw money, which just further depress the price, a self-fulfilling prophecy. The real problem is when is all of this are going to hit real economy? Probably pretty soon! Banks feared of insolvent, are conserving capitals. Inter-bank rates are at all time high, lending to consumer and corporations are all the lower with record high rate.

No more credits simply means no more spending and possibly pushing many firms into insolvency. Government is scared, they tried everything, from Bail-out to injecting cash, even lower rates. All those so far have failed to shore up the confidences. The question is how can a bunch of scared faces convince others not to?

source: Economists (http://www.economist.com/daily/kallery/displayStory.cfm?story_id=12381847&source=features_box4)

George Liu
george.j.liu@gmail.com

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Photos of Miao in the Mountains

Sun, 12 Oct 2008 07:25:00 -0700

My friend Wei has just came back from Moon Mountain in Guizhou, China. It is where ethnic group Miao lived. He has came back with great photos. We will be working on them and post them soon to socialjourney.org. Here is some preview.

See and download the full gallery on posterous

It has been some hard works for Wei, who backpacked for hundreds of miles on feet in those mountains. Those who want to give him a round of applause can do so at his blog mirageyard.com.

George Liu
george.j.liu@gmail.com

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