Does anyone know the recession is coming?

Here is the story of me and my boss.

I work in a strange company that my boss suggests stopping facebook and Instagram sharing of your daily life. At first, It’s hard for me as I used to share my life in social media. However, the more time I work for him, the more I know for his rigorous control.

Anyway, working for him is lovely.

‘Knock-Knock’

‘Come in’

I come to office at 9am but my boss will always be earlier than me.

‘Please tell me you instincts, will you believe the recession is coming?’

‘Pardon me?’ He always asks unusual questions, but he not always ask them in the early of the morning.

‘Tell me, who will be the last one to realise the recession?’

‘It must be the working class, like me.’

He let out a belly-laugh.

‘Why rich people don’t let them know when recession is coming? They have families as well.’ I want to express my feeling about rich always forgets the poor.

‘You should ask, why government doesn’t want to let them know.’

Sometimes he ask me powerful questions that makes me blank.

‘Recession, when you see it, it will be too late. We should say ‘thank you’ to the poor because they always pay the costs for our society.’

Yes, it’s sad but sure.

Advertisements

Hyperloop VS High-speed rail

While China is developing her High-speed rail which China’s government claims that it is the world’s longest high speed railway network, the World especially US is working on the project called Hyperloop.

China High-speed rail trains can almost run at speed from 250 km/hr to 350 km/hr. Compared to the Hyperloop concept, High-speed rail trains may not be fast enough. A Hyperloop is a proposed concept of passenger transportation and conceive may carry passengers along the 560 km route at a speed of 1200 km/hr. The idea is that a pod can travel free of air resistance in a sealed tube at high speed efficiently. Even though some experts are skeptical and concerned about its cost and safety, some US companies such as Boeing, Tesla and SpaceX are still planning to think beyond the boundary. Maybe it is still a concept now, however, 10 years later or 20 years laters, we may thank these companies for this amazing idea.

We all know that China’s government right now initiates One Belt One Road development strategy which involving infrastructure investment, construction, railway, highway, automobile and real estate among Eastern Europe, Asia and Africa. There’s no doubt that the One Belt One Road project will help China to extend its affections around the world which triggered the US. The US must do something to balance the influence of China. Promoting Hyperloop project will be the way to go.

What does it means when housing prices go down in Hong Kong

Given that the US federal Reserve increased interest rate by 0.25%, the escalated China-US trade war tension and the upcoming vacancy tax in Hong Kong, the world’s most expensive property market prices drop about 2.5-5% which compared to last few months.

Together with major Hong Kong banks raising their prime lending rate for the first time for decade, the property bullish market in Hong Kong has come to the end. People in Hong Kong are witnessing the economy is going down in 2018. The purchasing power from mainlanders are weaken due to the RMB devaluation. The HS index has already dropped from the top by nearly 5000 points. Hong Kong economy growth depends on Chinese economy and Hong Kong lacks economic characteristic after hand-over. Hong Kong does not have any developments on special or significant areas as such AI platform, IT or creative technology industries. Hong Kong economy growth is mainly leading by banking and housing markets. Most of the economy analysts believe that the bullish stock markets and housing markets in Hong Kong are benefited by the hot money from China.

When the Hong Kong economy is going down, industrial productions will drop, retail sales will drop, consumer confidence will drop, new jobs will drop and finally housing price will drop. House price will always be the last thing to drop. Once it begins to drop, the correction will be 5-10 years because property is not a liquid asset. If there is a recession in Hong Kong, no one can get a mortgage from bank and you cannot sell at good price.

Buy or Sell Tencent stocks?

Tencent’s profit drops as Chinese government freezes game approval. Due to a temporary suspension of game monetisation approval and a regulatory restructuring of the government,Tencent’s share plunge for a fourth day. And now it falls to about HKD 325 dramatically.

Tencent was always supposed to be the star that goes no wrong. However, it surprised the investors with the first profit drop after a freeze on the new game approval in China. It’s also a reminder for the investors that the Chinese government can really break some of these major technological companies like Tencent. No one really knows when the approval will start again. As Tencent’s revenue is really relying on gaming in the recent years, the regulatory restructuring really hurts.

Furthermore, like I said in my previous post, the major investors of Tencent have already offloaded their shares and they are shifting their funds from Tencent in the previous months. Tencent is no longer a sure bet for individual investors.

The dead-cat bounce of Tencent

Tencent holdings Ltd just slumped nearly 3.4% now. The biggest tech company in China seems to be getting crushed. So many Hong Kong and mainland individual investors still believe that Tencent will get a rebound, however, they are feeling frustrated that Tencent loses the support at 350 today.

Since early this year (March), the major investors of Tencent kept selling off the their stakes. Tencent has already give up its rising dynamics of stock.

Tencent cannot get rebound, but dead-cat bounces.

Low inflation is a sign of recessions.

Federal Reserve must raise the interest rates or the recessions and deflation will come.

The low inflation is a signal of economic problems and related to weak economy. Global inflation rates have been low since the financial crisis of 2008. The too-low inflation makes unemployment high and makes the consumer confidence low. People and business may be less willing to make investment and spend on consumption, and then it may bring the economic to recessions and deflation.

Even though Donald Trump keeps inciting trade wars with Canada, EU and China, it has not sparked any increase of inflation yet. Economic history has shown that economies perform best with slightly higher levels of inflation, such as 2-3%. If the inflation too low, the companies may not have leeway to raise prices and that may force them to cut costs or cut back on hiring. And low inflation often come along with lower wages. Lower wages may cause consumers become less motivated to spend.

So I am looking forward to two more hikes in 2018.