It shows the total number of home loans and the size of loans. As you can see, from September 2009, the number of loans crashed, but the size of loans still remained in a steady up-trend.
Now, let us break it up the numbers into First-Home-Buyer (FHB) and non-FHB:
Number of loans vs Size of loans (FHB)
As you can see, since the doubling of the First-Home-Owner-Grant (FHOG), the number of FHB home loans surged to a record high. But still, the size of loans still remained in a steady up-trend
Number of loan vs Size of loan (Non-FHB)
For the non-FHB, it is clear that the total number of loans remained in a down-trend despite the surge in 2009.
There is a common characteristic among these 3 charts: despite the number of loans declining, the size of loans keeps on growing.
Last month, we reported that Marc Faber commented that China is going to slow down in 2010 (see the video in Is China going to dump their excess metal stockpiles?). The question investors should ask themselves is that whether China is going to slow down to say, 3% to 6% GDP growth or is it going to crash?
We will come to the question later. But first, the current mainstream forecast believes that China will grow 8% to 9% in 2010. Why? Because last Friday, Premier Wen Jiabao announced that he is targeting growth to be 8%. China is the only country in the world where the government knows in advance what the GDP growth figures will be. If they declare that target for GDP growth is 8%, it will be at least 8%. The question is (1) how much the statistics are tortured and fudged to get arrive at the intended figure and (2) the quality of the GDP growth.
Now, here comes the question: will China crash in 2010/2011?
We don’t know the future, but this is a possibility. According to Marc Faber, the reason is because the Chinese government is clamping down on rampant credit growth. For debt-addicted Western economies, a significant slow down in credit growth will have serious negative impact on the economy. Correspondingly, a clamp down in credit growth will have unpredictable results to the Chinese economy.
The clamp down in credit growth is part of bigger picture. Unlike prior to 2008, China seems to be getting more serious about restraining the economy from overheating. All they have to do is to look across the ocean and look at Japan as an object lesson for not reining in credit and asset price bubbles early on. Since today’s Chinese economy is still developing (unlike the developed Japanese economy in 1990), the consequences of a burst bubble will be much more damaging than Japan’s long-term stagnation. Two months ago, in Chinese government cornered by inflation, bubbles & rich-poor gap, we were pondering what will China choose- voluntary slow-down or an involuntary inflationary melt-up. As we wrote,
But there will be a day when they have to tackle the inflation problem.
There are signs that the Chinese government is getting more serious about doing so. However, it must be noted that the Chinese government is still on a capitalistic learning curve. That’s why the government’s economic edicts veer from one extreme to another extreme, which is pretty erratic (and authoritarian) relative to Western standards. There’s a chance that they may make a misstep and crash the economy.
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One very important development was reported yesterday: China is nullifying loan guarantees of local governments (see China to Nullify Loan Guarantees by Local Governments). To understand the implication of this, a little background is necessary. China’s local governments are not allowed to borrow directly. In order to raise funds for the stimulus infrastructure projects, they set up special investment vehicles to borrow from banks. Then they guarantee the debts of these vehicles. Through this means, Northwestern University Professor Victor Shih calculates that local governments have already accumulated RMB 11 trillion (US$ 1.7 trillion) in outstanding debt, with RMB $13 trillion (US$ 1.9 trillion) in available credit lines, belying China’s deceptively low reported levels of public debt (see Is China allowed to use its US$2.4 trillion reserve to spend its way out of any potential crisis?). In one swoop, the central government’s planned edict will nullify the loan guarantees and ban future ones.
Now, since many of the stimulus projects were not creditworthy by themselves in the first place, the removal of local government guarantees implies that many of these debts will become bad debt. According to Professor Victor Shih, a crackdown on such loans at the end of 2009 could trigger a “gigantic wave” of bad debts as projects are left without funding. Not only that, “By striking the fear of God into lenders, regulators hope to get them to turn off the [credit] tap,” said Patrick Chovanec, a professor at Tsinghua University in Beijing.
Since this is a serious systemic risk to the Chinese banking system, how will the central government deal with the likely gigantic wave of bad debts? We don’t know. But in 1998, it allowed Guangdong International Trust & Investment Corp (GITIC), a major bank, to collapse. According to Bloomberg,
The 1998 collapse of Guangdong International Trust & Investment Corp., which borrowed domestically and overseas on behalf of southern China’s Guangdong province, left creditors including Dresdner Bank AG of Germany and Bank One Corp. in the U.S. with $3 billion of unpaid bonds. It marked the first time that Chinese authorities failed to bail out one of the nation’s state-owned trusts.
Our guess is that, some of the hundreds of less important (or less well-connected) Chinese banks could be allowed to fail.
According to the economic law of supply and demand, if there is more and more supply for a given commodity, the prices should decrease if everything else remains equal. Conversely, if the supply decreases, prices should rise.
Normally this is the case for commodities like base metals. The level of stock for a given metal in the London Metal Exchange (LME) should give a good indication of the quantity supplied. So, we invite our readers to take a look at the supply/demand situation for lead, nickel, zinc, copper and aluminium. In particular look at the 5-year charts for the trend starting in January 2009. What do you see?
When you look at the charts, you will notice something very strange. Since January 2009, the prices of these base metals rose as the supply grew as well. What is going on? Had the economic law of supply and demand being suspended as well?
The belief that prices will always go up forever and ever can create its own artificial demand. The insidious thing with this belief is that it is a self-fulfilling prophecy- belief leads to increased ‘demand,’ which in turn leads to higher prices, which reinforced the belief, which in turn leads to increased ‘demand’ and so on and so forth. When this happens, higher prices lead to even higher ‘demand.’ Such artificial demand can act as a sink-hole for whatever quantity of supply until money runs out in the financial system (which is not possible under today’s a fiat credit system).
Indeed, this is our interpretation of what happened to base metals as well. The expectation of rising prices acts as a sink-hole for whatever quantity of supply. The most common word used to sum up this phenomenon is “speculation.” Another word that is also often used is “investment demand.”
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When you look at the big picture, there is a big growth in “speculation” and “investment demand” over the past 10 years. From real estate, stocks, bonds, commodities, foreign exchange and even art-work (see Epic, unprecedented inflation). Today, with advances in financial engineering and information technology, it is possible to speculate in the global commodities market in the comforts of your home with the click of a mouse.
… when governments undermine the store-of-value function of money (something that can only be done in a fiat monetary system), investors will flock to useful, vital and scarce commodities to store their wealth. This in turn will result in those scarce commodities becoming scarcer. The food riots around the world in 2008 were an example of how this can happen (see Who is to blame for surging food and oil prices?).
For the fundamental economic law of supply and demand to work, prices have to convey accurate market information. Prices are expressed in terms of monetary units. That means the monetary unit is the yardstick which is used to measure the relative value of things. What if the integrity of this yardstick is being compromised? As we wrote in our book, How to buy and invest in physical gold and silver bullion,
Let’s suppose you want to compare the length of two boxes. You may use a ruler to measure their lengths and from the results of your measurement, conclude which one of them is longer. A ruler can do such a job because its length is reasonably consistent for the foreseeable future.
Now, imagine that ruler is as elastic as a rubber band. Do you think it is still a useful tool to measure the length of the boxes? An elastic ruler is useless because you can always make up the measurement of the boxes to whatever you please just by stretching the ruler such that the edge of the box is aligned to any intended measurement markings in the ruler.
Now, let’s take a look at oil prices. Since oil is priced in US dollars and if the supply of money and credit (in US dollars) can be expanded and contracted by monetary inflation and deflation, how useful do you think it is as a calibration for measuring the value of oil relative to other things?
The rise of “speculation” and “investment demand” is a sign of a funny monetary system.
Today, as we look up the Sydney Morning Herald (SMH), we saw yet another blatant attempt at real estate spruiking. The offending article reported,
It’s a figure to break the hearts of first home buyers: Sydney’s median house price is inching towards $600,000 – almost double what it was a decade ago.
The subliminal message to prospective home buyers is clear: buy property now before it is too late.
The article reported that ‘wherever’ you look, the supply of housing is low and prices are going up. Then it picked a few locations here and there and sought the opinions of real estate agents (of all people) as examples to ‘prove’ that point.
Really? Is it really ‘wherever?’
If you read the comments below that article, one person wrote,
I just did a quick search on the Internet for properties available in Upper North shore Sydney and found over 200 in about 5 seconds. How this counts as a shortage I’m unsure… If there is a shortage wouldn’t it be hard to find a place?
Indeed, this is journalism on the cheap. Get a median (while conveniently leaving out the details and context), spin a story by taking the biased opinions of a few real estate agents located in a few places and then hope that readers will fall for the story through a mental pitfall called lazy induction.
We have one comment about the median. For those who are initiated, the median is obtained by lining up all the sale prices in ascending order and then pick the one right in the middle.
There are two facts about first home buyers:
They tend to go for the lower end of the market.
Since the first home-owner grant was phased out in 2010, first home-buyer activity declined significantly.
These two facts implies that sales are skewed towards the higher end of the market. That means the median figure will move upwards by definition. Conveniently, this basic analysis is omitted from the SMH article.
It’s bad enough to read cheap journalism. It’s worse to read cheap and biased journalism. We wouldn’t be surprised if the real estate industry is one of their biggest advertisers.
Recently, we were reading a property investment newsletter. As expected, it listed reasons why despite house price inflation over the decades, housing is still ‘affordable.’ One of the reasons is this: Decades ago, families lived on single income. Today, families are living on double income, which means their purchasing power had increased over the decades. Hence, with increased purchasing power, house price increases. Basically, the increase in the number of dual-income households is (one of) the cause and house price inflation is the effect.
At first glance, this cause and effect seems logical isn’t it? Is this argument the truth? We don’t know, but we know that if one buy into that argument, then that’s another justification for house price inflation, which depending in one’s bias, is good enough.
What if we reverse the cause and effects? That is, house price inflation is the cause and the increase in the number of dual-income households is the effect? Another way of saying that is that as houses become more and more unaffordable, more and more families are forced to depend on dual income to service the mortgage debt. Certainly, this is the situation of young families nowadays.
Now, the point of this article is not to argue which is the cause and which is the effect. Both of them are unprovable interpretations. Since they are unprovable, each of them panders to our beliefs and bias. The main point of this article is this: always be alert to reverse the and cause and effects and see if the logic still holds. If so, you may be on to something more subtle and complex.
In this example, the property investment newsletter’s interpretation is probably an oversimplified narrative. Human nature is such that everyone has an unbreakable habit of simplifying and reducing the complexities in life into easy to understand story. As we wrote before in Mental pitfall: Narrative Fallacy,
Narrative Fallacy is a natural human weakness because by default, our minds seek to form theories, jump into conclusion, seek judgements and explain what we see. It takes a conscious act will to do otherwise.
The reality could be more complex than just a simple cause and effect. It is possible that over the years, rising house price (among other factors) led to the effect of more dual income families (among other effects), which in turn led to even more rising house price, which in turn lead to more dual income families and so on and so forth. In other words, the cause leads to effect, which feed-back into causes, which in turn feed into more effects i.e. a positive feedback loop.
If you can think along this line, congratulations! You’re now utilising systems thinking. Systems thinking is a very important skill that can gives you the edge not only in investing, but also in other aspects of life. We will be covering more of systems thinking in the days to come. Meanwhile, if you are interested to learn more on your own, we recommend this introductory book: The Art of Systems Thinking. This is a fascinating subject and we can only bring it to life through practical examples in the field of investing and economics.
Lastly, our friend, Professor Steve Keen utilises systems thinking in his modelling, which is something that neo-classical economists are lacking.
Not long ago, we were talking to an analyst from a pretty reputable value fund manager. He was adamant that gold is in a bubble because “everyone is buying it.” When we heard his rationale for this belief, we knew straight away that he had not clearly thought through his underlying beliefs about gold and the nature of money.
In fact, his understanding about the nature of money is closer to the level of an uninformed person on the street than what we expect from an investment professional. For example, this analyst was completely blind to the colossal difference between the rarity of gold and the rarity of rocks, citing that there are heaps of gold in the world! It is one thing to have a different opinion about gold because one belongs to the deflation camp. But it is just simply too shocking to hear a suit-wearing investment professional from a reputable fund manager sprouting such nonsense! If a person cannot see the difference between the rarity of gold and rocks, then it will be beyond his level to even understand the properties of good money, which is critical to understanding gold.
At this point, this analyst posed a very good question. Given that everyone agrees that the US dollar is going to depreciate further in the long run, then wouldn’t oil be a better substitute (e.g. as currency reserves) for it than gold? As that analyst said, oil should be a better substitute because it is a vital commodity, whereas gold has hardly any practical and industrial use? In other words, will oil function better as money than gold?
To answer this question, first we have to understand what money is. At the root of its nature, it is a medium of exchange. From this nature, it then follows that money functions as unit of accounting, store of wealth and so on. The question then becomes, is oil a better medium of exchange than gold?
At first glance, it seems that the answer is yes. But if you think carefully, if oil ever becomes a medium of exchange tomorrow, it will bring about disaster to humanity. To understand why, let’s have a thought experiment. Remember, back in If gold has no intrinsic value, is it a bubble?, we wrote,
Now, imagine if one day the US government decree that all tooth-pastes become legal tender for payment and settlement of debt (i.e. function as money), how would you feel if you have to physically consume your money daily for the sake of oral hygiene?
Let’s say the government declares that 30 days from now, tooth-pastes will function as legal tender money. What will happen? Firstly, the prices of tooth-pastes will sky-rocket. Next, tooth-pastes will disappear from the shelves of supermarkets. People will be hoarding and stockpiling tooth-pastes. After 30 days, when tooth-paste officially becomes legal tender money, people will start to have bad breath, especially the poor, who can’t afford to consume tooth-pastes for the sake of oral hygiene. Then the demand for tooth pastes will rise to the moon, not because the demand for oral hygiene increases, but because the demand for tooth-pastes as money increases. Not only that, no matter how much tooth-pastes Colgate produces, there will always be shortages because there will be mass-hoarding of them as money.
This may be a funny though-experiment. But if oil should ever function as medium of exchange, the outcome will not be funny. There will be an acute shortage of oil, as nations will be hoarding and stock-piling oil in a frenzy. Guess what will happen if we have acute oil shortages in a Peak Oil world that is addicted to oil? The way of life as we know will grind to halt and we will all be back to travelling in horse-drawn carriages.
That is why, when governments undermine the store-of-value function of money (something that can only be done in a fiat monetary system), investors will flock to useful, vital and scarce commodities to store their wealth. This in turn will result in those scarce commodities becoming scarcer. The food riots around the world in 2008 were an example of how this can happen (see Who is to blame for surging food and oil prices?). That also explains why the housing ’shortage’ situation in Australia is an intractable problem (see Does rising house prices imply a housing shortage?).
That is the reason why gold and silver functioned as money historically. The free market tried using scarce, useful and vital commodities (e.g. salt, sugar, tobacco, cattle) as money before and it didn’t work out. Those that did probably did not evolve into more advanced civilisations.
Of course, just because it is stupid to let oil function as currency reserves does not necessarily mean it wouldn’t. As Albert Einstein said, two things are infinite: the universe and stupidity.
Here is a quick question for our readers to ask themselves: In view that the world is facing increasingly serious problems (e.g. climate change, Peak Oil, geo-political tensions, debasement of fiat money, food shortages, environment degradation, pollution, ageing population, e.t.c.), do you think these challenges will be increasingly insurmountable and as a result, lead to the:
Decline of centralised government control (more disorder, more control by non-state actors, e.t.c)? OR
Stronger government control of every aspect of our lives?
One of the repeated implied themes that we come across in our readings among contrarian literature is that 2007 is the peak of global prosperity. That means from now on, life is going to get harder and harder, for us, our children and grandchildren.
The basic point of this theme is actually quite simple. The amount of life-sustaining resources (e.g. clean water, oil, food, clean air, e.t.c.) for each human being in the planet is declining (due to natural forces and human stupidity). That does not necessarily mean that the absolute quantity of resources is declining. In some cases, it will be due to the fact that the increase in supply of resources is not growing fast enough to catch up with increasing needs.
With the world more interconnected than ever before and due to the global nature of the problems, everyone in this world will be affected. No doubt, humans will attempt to rise up to overcome them and there will be victories and setbacks along the way. But the important thing to remember is that governments will be increasingly unable to solve its citizen’s problems as the challenges will become increasingly insurmountable. Along with that (and because of that), the authority of the state will decline.
The big question to ask is how the journey will look like:
Increased cooperation among nation-states? Global problems require global response. If the US and China cannot agree on Chinese tyres and American chicken, how can they possibly cooperate together to solve real problems?
The root of this is that whilst everyone agrees that something needs to be done to solve global challenges, everyone would prefer that someone else foot the bill. For example, on the issue of global warming, the developed nations want developing nations to offer their fair share of effort. But the latter sees that since it is the former that started the problem over the past couple of centuries, it is the latter’s responsibility to contribute a bigger share of the effort.
We can rule out this outcome.
Rise of a strong man/institution? If increased global cooperation cannot be achieved, then in the face of acute global challenges, there will be increased conflict between nation-states, ethnic groups, non-state actors (e.g. terrorist, mafia, armed militias). The genocide in Dafur, Sudan is such an example.
In desperation or in an attempt to pre-empt conflict, mandate may be given to a strong man who can twist arms and pull fingernails to solve the problems that traditional nation-state governments can’t.
Can this happen? We read many accounts of life under Weimar Germany in the 1920s/30s. It was tough, brutal and erratic. Hyperinflation and the Great Depression made the people desperate. Back then, Germany was a highly divided nation. The state was weak, which allowed political parties and organisations to form disciplined armed groups. Hitler’s Nazi party was an example. Prior to the Nazi takeover, the Nazi Party already had its own uniformed thugs (e.g. the SS and SA stormtrooppers). They were also already secretly acquiring weapons. Eventually, the German people gave Hitler the mandate out of desperation.
Already, we have people like Lord Mockton alleging that the Copenhagen Agreement is part of plot to rise up a world government.
Underlying the change from traditional geopolitics to security as a governance issue is the long-term decline of the state. Despite state resilience, this trend could prove unstoppable. If so, it will be essential to replace dominant state-centric perceptions and assessments (what the author terms “stateocentrism”) with alternative judgments acknowledging the reduced role and diminished effectiveness of states. This alternative assessment has been articulated most effectively in the notion of the New Middle Ages in which the state is only one of many actors, and the forces of disorder loom large.
Failure to manage the forces of global disorder, however, could lead to something even more forbid-ding—a New Dark Age.
A very good modern-day example of the decline of the state is Pakistan. Today, the Pakistani government is only one of the powers in the country. There are the Pakistani Taliban, Al-Qaeda and local tribes with inter-locking and overlapping allegiances and control. Mexico is another example, with the drug cartels undermining the power and authority of the state.
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Editor’s note: Thanks to Kevin Rudd’s parallel import laws, which makes books in Australian bookshops even more expensive than books ordered through the Internet. We found one technical/professional book that is 33% cheaper in Book Depository than from the local Dymocks book shop! If you find any Internet book shop that is even cheaper than Book Depository, please let us know.
Regardless of whether we will face the decline of the nation-state or not, the first symptoms we will face are price inflation, which will be exacerbated by monetary inflation. Even our friend, Professor Steve Keen, who is firmly in the deflation camp, believes that the only things that can potentially wreck his deflation economic model are global warming and Peak Oil.
When we see the challenges facing the world in the years to come, we believe that there is a high chance that the current way of life and standard of living, is the best it can get and that it will be downhill from now on. In other words, life will be harder, more volatile and we can expect less help from the government. Therefore, to thrive well in the future, you will have to acquire self-sufficiency equipment/skills, stockpiling of supplies and self-defence equipment/skills.
For our Australian readers, it may look like this is the view of survivalist nuts. But if we are not wrong, the mood in the United States turning towards increasing anxiety, as if the modern world is on thin ice. The good news is, the downward path will be very gradual, which means we have plenty of time to prepare. The bad news is, the slow pace will lull the majority into complacency.
We will explore this theme more in the future. With this, we will show you a video of Marc Faber’s interview by ABC’s Ali Moore 11 months ago:
Following feedback from our readers, we learnt that many are interested in learning more about the mental pitfalls that afflict every human being. To be a good investor, one has to overcome or at least be aware of his/her vulnerability to mental pitfalls in order to make rational investment decisions. If you can do that, it will, by definition, make you a contrarian investor.
Today, we will look into mental accounting. In mental accounting, individuals tend to divide up their current and future assets into separate accounts and then assign different subjective values to these accounts.
Let’s look at the following scenarios:
You divide your total wealth into two accounts: Retirement Account and Speculation Account. The former is meant to be ’safe’ place to store your wealth for future retirement while the latter is for you to gamble in the financial markets. Say, you gamble $10,000 and lost the entire lot. Which outcome will make you feel better: (1) you lost $10,000 on the Retirement Account or (2) you lost $10,000 in the Speculation Account?
Say you invest in stock A and B. The price of stock A decreased by 10% whereas the price of stock B increased by 10%. Let’s say you have to raise cash in a hurry. Everything else being equal, which stock will you liquidate in order to raise cash?
In the first scenario, chances are, a person using mental accounting will feel more pain in outcome (1). In the second scenario, one is more likely to sell the winning stock. But if one looks at them rationally, there’s no different between either outcomes in both of the scenarios.
The root characteristic of mental accounting is that it violates the principle that money is fungible. Recall that in Properties of good money, we wrote that
Any commodity that functions as money ought to be fungible. That is, you can trade or substitute it for equal amounts of like commodity.
To put it simply, a dollar is a dollar, no matter where it pick it up from. A dollar you deposit in the bank is not exactly the same physical dollar when you withdraw it three days later. But for all intention and purposes, both of them can be substituted for each other.
Diamonds, on the other hand are not fungible. Each is unique from the other and hence, cannot be substituted for another. Your pet dog is not fungible too. If it died over the weekend, you cannot simply pick a similar one from the pet shop and substitute it for your dead pet.
In the same way, a dollar in the Retirement Account is fungible from a dollar in the Speculative Account. But the fact that one is more likely to feel more pain from a loss in the Retirement Account then an identical loss in the Speculative Account shows that both dollars are no longer fungible in one’s minds.
Arguably, mental accounting helps make Kevin Rudd’s free $900 stimulus cheques more effective (in ’stimulating’ the economy) then it would have been. Tax-payers who received $900 tend to put the that in the “Free Lunch” mental account. Money in the “Free Lunch” account is more likely to get splurged on consumer items that make one feel good. What if the government made that $900 be automatically credited into tax-payers’ debt account (e.g. mortgage debt, credit card debt)? In that case, most will be reluctant to spend $900. In both cases, the government spends $900 and each tax-payer’s network increased by $900. But the latter will result in most people choosing to close up their wallets. The rational choice in the former case would be to repay debts.
In another real-life example, one of our Chinese friends made an investment in physical gold and managed fund in 2007. As we all know, both the Chinese stock market and gold fell in the second half of 2008. By early 2009, he had made some paper profits in gold while the managed fund was still in the red. Due to some personal circumstances, he had to raise funds. So, he sold his gold for a tiny profit. Today, gold is at a much higher price than when he sold it and his managed funds is still in the red. The reason why he sold his gold was not because he believed that managed funds had a better prospect. Instead, he the reason was because he did not want to realise the losses in his managed fund.
We would like to thank our readers for their feedback and support in Supporting this blog and reader feedback. More importantly, we would like to give special thanks to our donors for their support. After thinking through over the past few days, we reckon that this blog can only be supported in the long-term by a mixture of donations, advertising, affiliates and micro-payments:
Donations- Donations make our day. It’s not just the money that makes us happy. Donations are a sign that our work is valuable to and appreciated by others. We agree with one of our readers that donors must be rewarded in one way or the other.
Advertising- From our reader poll, most people do not mind the current level of advertisements. At least one reader finds the advertisements useful! This means most people accept that advertising is a necessary ‘evil’ (not that advertising is intrinsically evil). Also, the majority prefer articles and advertisements to be separated. We interpret it to mean that readers want to know clearly that they are being ‘advertised onto.’ Some advertising (e.g. banner ads) are very obvious. Therefore, most readers will have no problem distinguishing them. The tricky part is affiliate promotions…
Affiliates- We receive compensations from affiliates to promote their products. But as you can read from our Advertising & Affiliates policy page, not any product/service provider can be our affiliate. We have to like their products/services first and we must have reasons to believe that they are relevant to some of our readers.Affiliates’ products/services are usually promoted in the form of links embedded within articles. Such promotions, by its very nature, are subtle. One of the reasons for this is because some of the links point to pages that actually contain useful information to some readers. Articles with embedded affiliate links can come in the form of (1) just a passing mention of products/services to (2) more direct and active promotion. Therefore, to ensure transparency to our readers, we will adhere to the following policy (as mentioned in our Advertising & Affiliates policy page):
To alert our readers/subscribers of possible conflict of interests, articles that contain subtle embedded links to our affiliates will have the “Advertising/Affiliates” tag attached to them (this exclude links that can be easily recognised as advertisements). Tags are displayed at the bottom of every article.
For example, Market Club is an affiliate link and consequently, the “Advertising/Affiliates” tag is present in this article. On the other hand, affiliates links that are clearly advertisements will not be subjected to this rule (see this article as an example). To put it simply, when affiliate links are subtle, we will use that tag.
Micro-payments- One business model we are thinking about is the idea of micro-payments on selected articles. So far, web sites that charges micro-payment are relatively rare. The pricing point we are thinking of for micro-payment is in the range between 25 cents to 50 cents, depending on the article. Of course, donors will be exempted from micro-payments.We want to avoid going towards the paid subscription model. This is because, as one of our readers suggested, paid subscription implies a commitment in terms of consistent quality and regularity. Micro-payments, on the other hand, is flexible for us, flexible for our readers (because they can pick and choose which articles they want to read) and low-risk for our readers.
Please contribute feedback below. And also, the reader poll is still open.
As we all know, the infamous short-seller (who made the famous short call on Enron), Jim Chanos, has declared publicly that he is shorting China. The question is, how is it possible for him to do so in a practical sense?
For one, there is no market mechanism to short Chinese A-shares in mainland China. Currently, the ability to short-sell shares in China is on a trial basis, with no exact time-table announced for a transition to a full basis. As this Financial Times article reported,
The regulator said it would follow the principle of “test first, then expand”, and would select some companies to launch products on a trial basis.
But the statement left many questions unanswered, including which companies will participate, whether foreign groups will be included, and the exact timetable.
The only practical way to short China is to short-sell Chinese A-shares on the Hong Kong stock exchange.
But there’s another alternative. And that is…
No, we wouldn’t give the spoiler in this article. Watch this YouTube video clip below:
Please note this is not a recommendation to short-sell Australian miners tomorrow. This is for you to understand that the short-seller sharks like Jim Chanos are probably on the alert to pounce on Australian miners.
. This is a fascinating subject and we can only bring it to life through practical examples in the field of investing and economics.
