This is a guest post from my friend of many years, Unni. It gives possible scenarios to the Chinese stock market chart at the bottom.
Scenario A: Sudden Collapse of the Real Estate Market in China
There have been discussions on the risks currently built into the real estate market in China. The consequence of this bubble breaking (suddenly) and its ripple effect within China’s economy and global markets, can be of serious concern to many investors, economists and global leaders.
The Chinese banks are largely owned by the government of China, as a major or key equity holder. The Chinese banks heavily loaned money to developers, builders and real estate companies in China during the boom period last decade. Many of these real-estate-companies are sitting on inventories of buildings with no takers, under-construction projects with few buyers and markets where prices have gone way too high for affordability of prospective buyers. This in effect has stretched their balance sheets and their debt servicing ability.
In the event of a sudden collapse in the Chinese real estate market the direct impact will be felt by the government, which will be forced to write off Non-Performing Assets (NPAs) and Bad Debts, from banks to the real estate market. This worst case scenario would likely lead to bank failures. As the banks begin to write off debts or NPAs, the government is forced to re-capitalize these banks — propping up these sick banks with more capital.
The Chinese government budgets and the amounts spent on infrastructure projects will also take a downward squeeze. This will have major impact on Chinese trading partners: USA, Europe, Japan and Australia. Countries which fund, sell equipment and services to the infrastructure markets in China will be greatest hit. The various economic barometers of the Chinese economy will also take a serious hit: currency rates, unemployment, retail spending, interest rates, trade current account, etc. The US money market that is pumped up and held up by over USD 1 trillion of Chinese government investment can see short term attack — with hot money exiting back to China to shore up the local economic situation. If this capital flight from US money market to China coincidences with withdrawal of Quantitative Easing in US, then unfortunately the combined effect can be a double whammy in USA.
Scenario B: Gradual, Planned and Managed Bubble Pressure Release:
One would think the Chinese government planners are already thinking about ways to manage this bubble: to prevent a possible, sudden and catastrophic collapse and run on the poorly capitalized banks or banks with huge NPAs. The Chinese planners are better off conducting a stress and quality test of their government owned banks. On completion of the triage, they would be well advised to shutter (be sold off/merged) smaller banks with huge NPAs and re-capitalize mid-large banks with sizeable NPAs. Such a managed recapitalization approach will auger well for the Chinese economy and prevent “too large to fail” situation that happened in USA.
Tech 100 continues to chop aimlessly as they trace out a possible right shoulder. The PO of the blue wedge is the neckline ot 3450. That would complete a valid head and shoulders. and really debullishize the situation. PO of the large h&s is 3150…rough! It likely would lead to another recession. So stakes are high. The good news for bulls is that failed h&s are come at critical junctures.
I think this guy sounds pretty tight on the GOLD analysis. I like his 7 year cycle theory. Bo Polny - predicting gold finishes 2014 strong.
A couple of months ago I mentioned that I had adopted a few things to get more organized for a few projects I started working on this summer. Some techniques were old, some were new versions of older systems like the Pomodoro Technique. I mentioned on Twitter that I would try to summarize the system for anyone that may be interested. Warning: this post is probably not for 95% of my readers. It’s very detailed, rather prescriptive, but i just jotted down some thoughts quickly tonight to trying to get this out to a few people that said they would like to see what I had adopted.
The beginning is rather a collection of ideas and sort of philosophies I’ve come across. I’ve given links to most of the material. So when you read the information below, assume that its from one of the sources linked…sort of the cliff notes. I figure even if it helps one or two people make a positive change in their life, it was worth the effort to put this blog post together.
Traders often view the level of their worth by the performance of their trades. Bad performance can lead to a feeling of worth-less. The self critic is always the harshest. What you produce is not your complete ability.
Your mind is a thought machine, it is not awareness you are the awareness, by itself, it is just a machine. The mind is like four wild horses running free pulling a chariot and rider without reins. You need to take the reins. Your inner dialog is NOT in control…your awareness is in control.
People tend to procrastinate to escape inner conflict and anxiety. It reduces tension temporarily by removing us from something that we view as painful or threatening. Fear of failure, perfectionism and fear of success can all contribute to this destructive habit. Breaking these types of habits requires a strong commitment, conscience choices, full responsibility for the outcome and an accurate self-awareness.
Keep a procrastination log for about a week or however long you find it useful (see “LOG” worksheet in Excel sheet link near the bottom). I read about this suggestion in The Now Habit by Neil Fiore. Identify the negative self talk or rationalizations that are stopping you from getting started. Replace them with a focus on one small step: 25 minutes of uninterrupted work on that task.
Start changing your inner dialog into positive, productive, clearly communicated choices. When is it that you will start again? Eventually, you will likely realize the insane lengths that you went to in order to avoid the pain you associated with the particular task.
You will continue to procrastinate (including working on low priority items) until you adopt a strategy that allows you to find full satisfaction in working on your highest priority tasks.
PLAY HARD, WORK EFFICIENTLY
"Life is what happens to you while you’re busy making other plans." — John Lennon
Regularly set aside time to play/relax…this is a must. It may seem paradoxical, but looking forward to regularly planned personal downtime is an extremely motivational and a rewarding tool for getting your work done. Schedule time to exercise, vacation, read a book or the paper, go out to eat with friends, etc.
Neil Fiore call’s this “your proudly earned guilt-free play.” Stop putting off living due to procrastination; avoid the vicious cycle of your life being “on hold”. You can manage your time better and have plenty left over to accomplish the things you really want to do. Work will not deprive you of the enjoyment of life if you incorporate guilt-free, regular play. Schedule these rewards first and then plan your work around it.
YOUR MISSION: DEVELOPING YOUR GOALS
"People with no goals are doomed forever to work for people who do." — Brian Tracy (@BrianTracy)
"Dream big dreams; only big dreams have the power to move men’s souls." — Marcus Aurelius
I think it’s important to have a clear set of goals. Start with writing down the following and review/refine them once every few days (it only takes 10-15 min):
Some goals will be small, but don’t be afraid to make big life long goals. What would you like your legacy to be — what people remember about you? A goal without a burning desire or purpose, is just a potential reminder to nag you where you settled or dropped the ball yet again.
Know your outcome and find the beliefs that support it before you take action. What I’ve found useful is the visualization of goals in bright, larger-then-life, intricate detail. The more often and clearly you can envision these goals, the more likely your chances of actually obtaining it. There are probably several books that discuss this; I have tried to adopt Anthony Robbins’ method which I read about years ago in Unlimited Power.
Don’t become the hapless traveler carried along the stream of life with little direction or clear path. Nobody cares about your lot in life more then yourself. Exercise choice, including the ability to say no to things you don’t have time or desire to do. Goals are extremely important, but at the same time realize it’s a waste of energy to constantly focus on a particular (especially “vague”) goal: focus on the process, stay in the present.
It’s critical to break apart daunting projects/goals into manageable steps or tasks. The more vague and overwhelming it is the more likely you are to avoid getting started. Get started on the first step; have faith that the next, small steps will reveal themselves as you get more involved in the task at hand. One small step at a time in due course.
I could write several pages about perfectionism. Suffice to say there is no “perfect” unless you believe in a higher being. It’s perfectly human to make mistakes, you will never achieve “perfection” so get over it and move on. Perfection is ever changing, so abandon this idea of perfection…it’s a ghost you will never find. Criticizing your mistakes makes “failures” only more likely. It’s human to be imperfect so try to be imperfect by unlearning.
COMMITMENT TO START - THE POWER OF CONSCIENCE CHOICE
"Things do not change; we change." — Henry David Thoreau
Choosing to do something, rather than avoiding it or arguing about it is empowering. As my father likes to say: "There is only one, small letter separating bitter and better — yet a world of difference between these two choices."
Replace “I must finish” with “When can I start (again)?” This leads to the importance of planning.
First schedule your high quality, guilt free play. Also, make the periods of work shorter and the rewards (breaks) more frequent. Make sure you reward your milestones along the way, regardless of size.
Stay in the process, stay in the present - the worry goes away. The past (analysis) cannot be changed and the future (anticipation) can only be changed by the present. It’s amazing when you knock off something that’s been bugging/screaming at you from your “to do” list for months, maybe years…and it took less than 30 minutes of focused commitment to accomplish it. It’s very empowering.
HOW MUCH CAN YOU GET DONE IN 25 MINUTES?
Spending over a decade as a consultant, I realized early the importance of project management and accurate tracking of billable hours / tasks performed. Without some sort of documented history and clear, workable plan, the hours and days just melt into one another.
I’ve tried a lot of different systems over the years and by far the best I’ve found for time management is a technique called “The Pomodoro Technique”. If you want to improve your productivity and time management I highly recommend downloading the free PDF book at the bottom of the page at the above link and putting it into practice for at least a month - every day. I like to say it takes three months to make a habit.
It’s a great technique, you can get an overview by it by reading the cheat sheet. If you need to get a lot “shit done” and have been struggling to get started, this system works well.
You can buy a kitchen timer (i.e. the Pomodoro), but I found this free focus booster app works good for me. While you are at it, download the free version of Rescue Time monitoring tool to see how much time you are currently wasting every day on your computer.
I use an Excel spreadsheet to track my daily schedule. You can download it here: July Schedule (File/Download) - Maybe you will find that it is of use to you; if not, figure out a way that works:
SOME ADDITIONAL TOOLS THAT I USE
I use a combination of tools — the key is to find something that works for you. Here are some tools that I found useful:
The choice is yours, whether it’s a positive change or some other alternative. If you have questions about the spreadsheet or have other similar strategies that work well, I’d love to hear about them.
Good Luck and remember that: this Mission is uniquely yours…
I made a list of the ones that look the best to me from the short side: all REITs
This is based on:
Large market cap (options available),
High forward price/earnings ratio; the higher the better, but over 30 min
Elevated debt/equity ratio, preferably > 1.25
Reasonable short float right now – I don’t want to short something that’s already heavily shorted (8% of short is my cutoff)
Charts that look questionable (either they are sky high in need of breather or they are breaking down)
IYR - Real Estate ETF: IYR
These are the ones I think look the best from my scans:
1. SPG – Simon Property (already short, commercial retail) $35.4B, forward P/E 41, Debt/Equity: 3.59; low cash; short float 4.5% (con: super strong though..great relative strength on the weekly chart, bearish rising wedge on daily chart)
2. EQR – Equity Residential Props (residential) $18.6B, P/E 62; D/E: 1.83; short float 4.6% // good relative strength lately
3. BXP – Boston Properties (office); $15.6B, P/E 48; D/E: 1.69; short float kind of high 7.4% // con: good relative strength on weekly
4. ESS – Essex Property Trust (residential) $4.6B, P/E:95, D/E: 2.0, Short 6.8% // con: good relative strength on weekly
5. HST – Host Hotels & Resorts (hotel) $11B, P/E: 396, D/E 0.89; Short float: 6.4% // weak relative strength
6. CPT – Camden Property (residential) $4.7B, P/E: 80, D/E: 1.48, short 2.5% // new all time recent highs
7. HR – Healthcare Realty (heatlh) $1.4B, P/E 89; D/E: 1.43, short 5.9% // serious dog
8. OFC – Corporate Office Props (office) $2.2B, P/E: 36; D/E: 2.0, short 4.8% // rolling over, looks bad
9. KRC – Kilroy Realty (office) $2.3B, P/E: 104, D/E: 1.36, short 7.4% // dog
10. O – Realty Income (retail) $4.2B, P/E: 27, D/E: 0.76, short 6.7% // supper strong since crash, weak lately
Click on the hyperlinks above to see the chart. So maybe you have some feedback on these but these are the ones that look good to me – ordered by what looks most lucrative if the economy goes into a double dip. My top #4 ideas are really strong on the weekly charts, which could be bad, but they are also considerably overbought right now.