假設.........

假設(Assumption)是應用在理論(Theory)裏來解釋現實世界中(Real World)的行為，從而使我們更能認清這個世界。一般生物、物理、地理、財務或經濟等科目的理論都是基於特定假設來加以應用的。
工作多年後，發覺原來運用它的機會比在學校還要更多。只是有時在下決定的時侯，不知不覺中已在思考過程中定下了自己所認為對的假設。原來在作投資的決定時，這樣的思考盲點經常發生。

A.次按危機 .....假設樓價只升不跌

B.Accumulator .....Blue-Chip Stocks股價只升不跌

C.Tech bubble .....eyeballs 取代盈利為厘定股價標準

D.中國大牛市 ......大部份中國公司盈利會跟隨中國經濟起飛而大幅持續上升

E.商品大牛市 .....通賬及發展中國家大量需求

F.Finanical Model .....甚麽beta,alpha,discount cash flow model......太多假設了

G.U.S. recession ......次按危機 > credit crunch > decrease in corporate earning > unemployment > no growth in GDP

H.Investment Banks ...... They assume they know everything when try to make a sale to clients!

看啊！那麽多的假設,真不知那些是真、那些是假。有時有些知識以為了解很深，往往便很容易鑽了牛角尖，而後果嚴重。LTCM不是個中例子嗎？他們可能就是錯在一個假設吧！

"I know nothing except the fact of my ignorance." Socrates 469-399BC

Brazilian markets turnaround?

Hot girls attract hot money!!!


1. Recent facts

- 27 firms made their debut on the Sao Paulo exchange,Bovespa, in the first half of the year, surpassing the total number of floats in the whole of 2006. And they keep coming!!!

2. Reasons for turnaround

- Interest rate keeps going down

- Improve corporate governance

- Country financial improved by good housekeeping and the commodities boom

- High interest rate given Brazil a fixed-income culture. Decreased in interest rate makes Brazilian pension funds increase the exposure to equities (16% now)

3. Sustainable?

- recent IPOs have to sign up so-called novo mercado guidelines, which do away with the dual shares classes, over-friendly board members and non-existent protection for minority shareholders

- Brazil's sovereign debt may upgrade to investment grade in the next 18 months

4. Risks

- lots of good companies come to the market, but some bad companies too

- Brazil is more open than many emerging markets and so more vulnerable to hot money (some 70% of the money for the IPOs has come from foreign investors)

Conclusion: Warren Buffet has been buying the Brazilian currency....

Source:"Economists" article "the view from cloud nine"

Health check of the Dragon in my dream........

Last night, I had a dream. A doctor was doing a health check for the dragon. So I used this rare opportunity to ask the doctor a few questions. (In the dragon world, there is no such a thing called private issue and the big brother is always watching U!)

HAHAHA: Hi doctor, will the surging inflation affect the health of the dragon?

Doctor: No, not now. Do you remember in 1988 and 1994 the inflation rate soured above 25%. This time the symptom of overheating is not caused by excess demand, as it was in the past. Inflation is only 0.9% excluding food. The dragon also introduced price freeze on oil, electricity and water to curb inflation. Allowing the currency to appreciate can be an effective way to control the price index. This would reduce import prices of food and raw materials.

HAHAHA: How about if the stock market bubble burst?

Doctor: If the market tumbles this year, the effect to his health is only modest. The total value tradable shares is only 35% of GDP compared with 180% in Eagle at its peak in 2000. Less than 20% of total financial assets are in stocks and price fall will have less impact on spending. Growth remains strong even stock price dropped over 55% from 2001 to 2005. So, no problem to his health.

HAHAHA: What if the recession in Eagle place?

Doctor: During 2001 Eagle's recession, Dragon's export growth dropped 25%, but imports also slowed sharply, so the growth is remained strong. Domestic demand is more important. Even without the growth of export, the growth should still be over 9%.

HAHAHA: Is Dragon place running short of cheap labor?

Doctor: Yeah everyone was paid much higher than before but their productivity has risen much faster. Then the unit labor cost becomes much cheaper and this is very good too.

HAHAHA: Wow, it seems to me that the dragon is very healthy......

Doctor: Yeah, at least these two years should be alright. But, great care must be taken. Don't worry, dragon is a very very clever creature and he can make anything happen............

Source:"Economists" article "How fit is the panda?"

Can we see the footprints of Mr. Market Bubble?

Recently, a very hot topic in the city is "Are we living under the stock market bubble?" Before that, why don't we look at the past first.



Statistics from:
http://www.webb-site.com "Article: Incredibubble!"

Over the past thirty years, the H.S. index dropped over 30% nine times. But, the nature of the fall was different. In 83, 84, 87 and 89, the bottom reached within few months. Except 87 it was due to global panic crash, the left was all about political reasons. (thanks to the Chinese government again!) Other cases like 73,81,94,97 and 00, part of the stocks were trading at extremely high valuation. It took more than one years to hit the trough, even three years in 2000. Valuation plays a very important role in determining the time of the market to hit the bottom.

Andrew Lok, the UBS Strategist, forecasted 28,000 is the base for 2008 H.S. Index, translating to 2008E pre-exceptional PE of 18.7x, or a 26% premium to the 34-year average of 14.9x. Look at the HSI today, it is already trading near 2008 earning level. I cannot say this is a bubble but the market is already very expensive overall.

Even if you are lucky enough to get a crystal ball which can tell you when the bubble ends, will it help you much to reach financial freedom? I doubt it! Mr. Warren Buffet said when you buy a stock, you are just like running your own company. You need to know the price and value of the company. What determine the value of the company? Earnings, Earnings and Earnings!!!

Stock likes HSBC if priced at 149, it is valued at 2008P/E 10.8x which is very low. On the other hand, if we look at some insurance or property companies in China, they are all trading at very demanding valuation. Just think about if you bought YAHOO! in years 2000 (I did it!!!) and bought HSBC(I didn't do it) at the same time, what are the return? You tell me. I don't want to change my good mood.

So whether the market is in bubble or not, it really doesn't matter. The most important is the price you pay for the company and the value you get. Simple is that. Enjoy the ride of the bubble! Cheers!!!