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Jamin Chen

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  • Why Prechter Is Probably Wrong About a 1000 Dow [View article]
    Without any rationalization, theory, or whatever, if you plot DJIA ever since it became 30 in 1920s in a semi-log chart and draw a straight line through it, you will find that DJIA should be at about 10,000 at the beginning of 2010 and about 10,700 at the end of this year. So, it may not be coincidence that DJIA is fluctuating more or less between these two sign posts this year. Also, if you look at the maximum deviations of DJIA away from this straight line, you will see that on the high side it is about 1.5 times away from this line and on the low side it is about one-half of this line. So, for now, if the market somehow goes way up in the next year or two, DJIA would probably reach 15,000 to 16,000, and if it somehow drops way down it might reach 5,000 to 6,000. That is the way the market is, historically. I have yet to read the book “This Time is Different” to see if such historical perspective may hold up this time.
    Jul 11 06:28 PM | Likes Like |Link to Comment
  • China's Currency Change Isn't Necessarily a Win for the United States [View article]
    Here is my observation.
    First of all, China is still placing too muchemphasis on “face” in doing things. They should be more confident and do things that are good for them without afraid of losing face. With too much emphasis on face, the result is that they look arrogant while missing the right moment to do what they should have done. They are going to pay some price for it.
    To begin with, China held on to low exchange rate for too long. The simple fact is that U.S. is really like to hold on to high U. S. dollar policy. (I believe the labor unions in the U.S. is the primary political force behind the “weak” dollar policy now and since the labor unions were the biggest contributor for the Democrats regaining both the White House and the Congress, we are in this pique to get U. S. dollar lower.) By holding the exchange rate low, China has been selling short the labor of their people as well as their resources. I believe the people in the government in China know this all along. But, they had to cater to the “capitalists” in China for them to make money by selling the Chinese labor cheap. One of the biggest failure of the opening of China right after the Mao-Nixon event was that Mao had priced Chinese labor so high that they were priced out of the market and it took Teng to correct the situation (this is my personal observation). However, it went too far. I wouldn’t want to see anyone I know to work in the sweat shops in China today. I believe most of the Chinese feel the same. But they are trapped by the events after Teng got the power.
    High RMB will not reduce the U. S. trade deficit nor it will increase the American employment. Those jobs are gone for sometimes to come. Either the manufacturers will find some other cheap places to move to or we simply pay more for our imports (lower U. S. dollar). We need to keep U. S. dollar high so that we can keep making an iPhone for $10 or $20 each in China and sell them all over the world for $300 or more.
    Higher RMB, higher wages, and higher internal consumption means inflation, if there is no cheap import into China from outside. That is what happened to Japan when the Japanese yen started to rise. Remember those apples costing more than $20 at Narita Airport and $150 Kobe steak dinners in Japan in later half of the last century? How does China go through a similar difficult transition without causing social unrests? That is for the Chinese government to solve.
    Jun 27 11:53 PM | Likes Like |Link to Comment
  • BP Neglected to Address Safety Concerns [View article]
    There are two basic issues involved in the current BP oil spill in the Gulf of Mexico. The first is how to stop the oil flow if a leak develops by any reason. The second is how to clean up the oil that spilt into the ocean by any reason. In both issues, BP has miserably failed. Otherwise, the oil spill has long been stopped and there aren’t such big oil disasters around the gulf area. We can ask each one of the oil drilling and production operations in the waters around the U.S. the same two questions. If any answer is yes, we like to see it applied to the current situation and demonstrate its practicality. Until the drillers and producers of the deep and shallow sea oil have “demonstrated” responses to these two events, whose occurrences are no longer theoretical but are actual possibilities, they have no business drilling and producing oil there. It is that simple. The moratorium on oil drilling and production in the sea should continue until we know how to deal with these problems else we are just waiting for another disaster to happen. We are paying dearly already with the current disaster. We cannot afford another one.
    We have laws already that apply to land based operation requiring provisions for emergency situations. But, there are no such laws applicable to off-shore operations. We must make new laws for off-shore operations.
    May 30 01:56 PM | 10 Likes Like |Link to Comment
  • HFT, Goldman, And How to Save Free Markets [View article]
    Ellen: A week or so ago, I asked what is the "buy" side of the HFT (high frequency trading). And, today, we got the answer. It is much more vicious than the sell side. When a large sell-at-market order is placed, the HFT buying program can drive the price of that stock down to near zero when there is no intervention, human or otherwise. I guess many individual investors lost more in that half-an-hour than they did while the HFT stole a few pennies in each trade as the market went straight up in the last several months.
    May 6 08:06 PM | 1 Like Like |Link to Comment
  • Bubble in the Boonies, China Edition [View article]
    There is some very interesting factoids in the Chinese real estate market. The apartment in Hefei is priced at about $120,000 per unit. The average wage of the factory worker is only about $1 an hour. It takes 15 years to earn $120,000 and buy one such unit assuming the worker does not spend a penny of his or her income.
    It is also mentioned that most of the buyers pay cash. Therefore, the buyers are not the "average" Chinese but the "upper income" people. With more than a billion people in China, suppose these upper income people are 1 per cent of the population (I just made it up), there would be about 10 million of them.
    How many new apartments have and are being built in Hefei? I don't have the actual number. But my guess is less than 100,000 units. So, to satisfy thes 10 million new rich of China, they need 100 Hefei.
    Another thing: 10 million people with $120,000 each is about $1 trillion. Isn't these housing is the best thing the Chinese government can do to absorb all that U.S. dollars these Chinese have made from trading with the U. S.?
    Now, let us look at the U. S. real estate market. The New York apartments are heating up just now, selling at $1500 per square foot or about $2 million for a 1,500 sqft apartment. The inventory is depleting very quickly right now while the rest of the country are haviing housing fire sale from the subprime collapse. What better place than the New York apartments to absort all the money made in and by Wall Street.
    May 1 03:58 PM | 4 Likes Like |Link to Comment
  • HFT, Goldman, And How to Save Free Markets [View article]
    Ellen: This is a great article showing us clearly how the HFT jacks up the stock price and hence the market. However, I do have a question: How do they "instantly" get the supply to sell ? I doubt these traders keep a large inventory of stocks. Most probably they don't own anything. So, where is the other side of the trade?
    Apr 26 09:25 AM | Likes Like |Link to Comment
  • An Unstoppable Bear Killing Machine [View article]
    I don't have the current figures. But, a few years back when the reported total capital gain was about $1 trillion, the capital gain tax paid to the treasury was about $150 billion. The U. S. stock market capitalization was about $10 billion. So, running up of stock market valuation is a very important part of the U.S. treasury balance sheet, especially when the capital gain can be realized by average citizens through mutual funds. Chairman BB and the rest of the government have all the reasons to keep this market moving up.
    Apr 23 07:07 AM | 2 Likes Like |Link to Comment
  • The Connection Between Low Volume and High Frequency Trading [View article]
    This is a pure guess of my side. I may be all wet. But, this is my guess:
    1. Everybody (I mean the big funds) is sitting on whatever they have.
    2. They are happy to see their valuation inching straight up with the market.
    3. They don't want to sell (trade) anything now only to have to buy them back at a higher price.
    4. The only major buyers are the 401k or pension funds who have to buy.
    5. When they buy, the HFT (high frequency traders) do a front running and jack up the price ever higher though a little at a time.
    6. Everybody is happy with 5 above and gets the benefit of higher valuation by doing nothing.
    The above scenario fits very well with this market that is inching ever higher with very low volume.
    This is just a guess. The reality may be something else.
    Still, if the guess is right, how high the market can go before everybody says enough is enough and it is time to take the money and run?
    DJIA = 12,000? 13,000? 14,000?
    My guess is somewhere between 13,000 and 15,000. We will see.
    Apr 14 09:44 AM | 5 Likes Like |Link to Comment
  • Be Conservative, Not Conventional, And Prefer High Quality Growth Over Value [View article]
    It is a great quote from Ken Fisher. However, one must know that Fisher made this quote in the middle of the great steady advance of the market between1982 and 2000. During those years, even the DJIA itself advanced 13% per year on average, not including the dividends. Another fact is that not many, if there is any, mutual funds did better than the market year in year out. Therefore, a lifetime yearly return of 15% to 20% quoted by Fisher is really a pie in the sky. I would say, for the average investor, if he or she can have a return of 9% plus per year (again quoting Fisher’s number for the market as a whole), he or she should be very happy.
    Of course, you can always jump on the Berkshire Hathaway bandwagon or try to emulate what they do.
    The law of statistics is such that it is very hard to beat the average all the time.
    Mar 2 08:58 AM | 4 Likes Like |Link to Comment
  • JPM's Dimon on the Soundness of China's Banks [View article]
    There are at least two types of investment in China. One is to invest in a business of your own to do business there to make money. The other is to put your money into Chinese companies to make money. I think Dimon is talking about the former (the hard way with potential high returns) and many other investors are talking about the latter (the easy way with potential lesser returns).
    Feb 9 11:03 AM | Likes Like |Link to Comment
  • JPM's Dimon on the Soundness of China's Banks [View article]
    Many US companies are in China to profit mostly from manufacturing products there for sale in the US and they don’t make much money in China itself. Selling inside China is mostly through “joint ventures” where the Chinese partners make most of the money. Toyota and Honda in the US are fully owned by their Japanese parents but Ford China makes auto inside China through joint ventures where Ford is a minority share holder.
    Feb 8 06:17 AM | Likes Like |Link to Comment
  • JPM's Dimon on the Soundness of China's Banks [View article]
    Most people who had done business in China would agree with the quotation from Jamie Dimon. It is one way street. They can make money off you, but not you. You can bash Dimon and JPM. But what he said is a fairly good summation of how you get treated in China.
    Feb 7 09:01 PM | 5 Likes Like |Link to Comment
  • Devaluing Currency Is a Fool's Game [View article]
    A strong dollar at any price does not make sense. It makes sense only when you have a balance of trade. What is going on between China and the US is a dangerous game which someday will explode. We should ask first: What allows us American to take the cheap Chinese products and dump them into the garbage cans day in and day out while the trade deficit is mounting ever higher?
    China needs cheap Chinese Yuan to keep its people happy by being employed. The US need to keep expensive dollars to keep its people happy by having lower cost of living. The not-so-appropriate parallel is the housing bubble we have just experienced. We kept our money artificially cheap (low initial interest rate) to lure normally unqualified people to purchase houses and when the day came to pay up for what they have purchased, bankruptcies are everywhere and still continuing. In other words, in the face of not being able to balance the trade, if we keep spending like we have now by both our government and ourselves, the debt we owe will one day blow up in our face. That would not be pretty either for us or for Chinese. Witness that both the borrowers and banks had suffered hugely in the housing bubbles, trough the banks were helped mightily by the government and in turn by Chinese by purchasing our debt.
    It is time that we American should tighten our belt and resists the low cost Chinese good. Making Chinese goods more expensive does not necessarily mean lowering our cost of living. It means we waste less by throwing fewer resources into our garbage dumps.
    Making US dollar cheaper and Chinese Yuan more expensive is the medicine we need now to correct the wasteful habits of us American which someday will lead us to a bankruptcy.
    Feb 4 07:08 AM | 4 Likes Like |Link to Comment
  • Wealth, War & Wisdom, by Barton Biggs [View article]
    I specially liked your quote:
    "One commonality between Germany and Japan was a lack of resources, and rather than produce and trade to get them, they chose conquest."
    I am in the middle of putting together a presentation from the Roman Empire to Ottoman Empire. The theme running through both of them as well as most of the nations through the history is their rises and falls through raw armed contests. These armed conquests and conflicts are still going on in quite a few places around the globe even right now. We in the North America have been quite lucky in not having the actual armed conflicts taking place here during both Great Wars and having the Cold War fizzled instead of going critical.
    Jan 25 07:25 AM | Likes Like |Link to Comment
  • Massive Outflows in SPY: What Gives? [View article]
    My cynic view is as follows. It is a simply a manipulation of the market by the mutual fund managers. Come year end, the simplest way for them to jack up the market to boost their bonuses is to pour all their cash into SPY, the largest index ETF. The ETF would then have to buy in the open market all the components of that ETF. The market rises and the fund managers get their fat bonuses. Then when January arrives, as the market is still rising, this is the time to get suckers in. As the suckers are sucked in, the fund managers take the profit and keep a plenty of cash meet the coming onrush of redemption by the people who have to pay capital gain tax before April 15th.
    Jan 22 09:00 PM | Likes Like |Link to Comment