I am normally, as a matter of economic philosophy, opposed to government bailouts. However, I am very tempted to make an exception here because it is the government that is causing a large part of this problem by inflating the cost of doing business Hong Kong. I would say that if the government gives any of these SME things money they should have their whole operation in Hong Kong. Why bail out any group that is actually manufacturing up North and simply based here? If they are not adding to the local economy through job creation and local taxes then let them wither away. Most of the people who own these type of firms have Canadian citizenship anyway so let them go back to Hong-Couver or Toronkong get a job and pay taxes there. They can enjoy the year-round sledding too.
I am more concerned, in a niggling, almost unconscious sort of way about personal debt in Hong Kong.
I don't have any statistics for the amount of debt held by the average adult in Hong Kong, though antidotal evidence makes me think that in some cases it might be rather high. I am not thinking of mortgage debt here, which is bad enough but what should be called discretionary debt. Credit card bills, vacations, Money lost in Macao, eating out eight times a week, 15 pairs of new shoes a month, USD $12.00 a gallon gasoline when you could take the bus; that kind of thing. It seems that everywhere I go I see a billboard advertising a finance company that wants to give me a debt consolidation loan. They also advertise on TV and have all but completely eclipsed the formerly ubiquitous but unlamented you-too-can-become-a-middle-aged-female-soft-porn-dancing-queen-with-our-weight-loss-program Unfortunately they haven't replace the belching guy trying to kiss his ugly wife antacid commercials.
I am assuming that if there are several companies doing this there must a pool of financially overstretched people dumb enough make their problems worse and make the saturation ads worth the advertising money.
What is scary about these companies is not that sometime people need them but that the companies are pitching the loans as a way to continue a life style that is overly extravagant. There is no "So you've made a mistake or had some bad luck financially, we can help you recover." Instead the pitch is "Get what you want when you want it." I think a lot of the people getting these loans will have to default as the economy worsens this coming year.
Unlike the problems with renting a business here, personal debt isn't the government's fault. I think that a fair number of folks may soon figure out that there is some virtue in delayed gratification.
It is my sincere hope that I am wrong about this. I also hope that the people getting these loans are smart enough to realize that if they have a choice of paying the mortgage or paying the credit card bill that they pay the mortgage.
Until Net Time
Fai Mao
The Blogger who is debt free
Showing posts with label Financial Crisis. Show all posts
Showing posts with label Financial Crisis. Show all posts
Tuesday, November 11, 2008
Saturday, November 01, 2008
The name is Bond, Lehman Brothers Bonds
I've been accused of being cynical before and probably will be again but I have very little sympathy for the people storming HK banks because they lost their life savings making bad investments. Don't misunderstand, I'm sorry for them but low risk does not equal no risk. They were either idiots or didn't research their investments well. Please note, the really pretty-looks 25 years younger than she is-really smart-hard working Chinese wife and I have seen our portfolio shrink significantly so this financial crisis hits home for me. But, and it is a big huge, in capital letters and flashing red font BUT we didn't have all our eggs in one basket and didn't consider a long term investment to be 18 months. These people did. They evidently didn't maintain any cash, or not near enough. They also apparently bought all their bonds from one bank, probably because they could get the fees waived that way (Penny wise & dollar foolish) and presumed that because their 26 year-old account manager had never lost money in his 4 years of investing they'd never lose either.
Some Question:
1. Did it really take this crisis to show the locals here that the banks are some combination of dishonest, corrupt and incompetent?
2. Did they ever READ the contract? If they couldn't read it did they have someone read it for them?
3. Did they ever think there may be a difference between speculation and investing?
I've been to a couple of investing seminars sponsored by banks here. What they told me was that a long term investment is one that doubles in value every 18 months. A short term investment was 6 months and a medium term investment 9-12 months. I've got news for these people. All of these are speculative investments. In fact, they are incredibly speculative. Most of the investors here, and up North are not really investors but speculators.
I find the lack of honesty by the banks here to be particularly galling because they charge fees that are something like 3 times the world average and then give bad advice to people who want to double their assets every two or three years. We've even had the banks tell us "Yes, our charges are more but you make more" Well hey Einstein, when the market goes South do we lose less if we've paid you more? To quote Bugs Bunny "What a Maroon!"
I'm sorry, and it bothers me to say that I agree with Mr. Potato Head (Joseph Yam the guy in charge of the Hong Kong Monetary Authority) Did it not ever occur to these people that the reason that they could get 6% or 8% or 9% on these investments when a pass-book savings account offers 1.5% was because there was substantial risk involved? Did it every occur to the banks that their customers might riot when they found out how badly they'd been screwed?
I guess not. Or maybe the people storming banks and assaulting security guards just think if they pitch a big enough fit someone will bail them out. Evidently the banks never thought this would happen or they wouldn't have had unarmed security guards.
It gets still worse because it is going to get worse. If the US and EU go into a deep recession which is what happens if John McCain wins the US election or experiences the second coming of the Great Depression which is what will happen if Barrack Obama wins then all those Chinese factories will go belly up. Either way the days of the Chinese economy shooting up like a rocket are probably coming to an end, at least for a while. So what happens when Constantine Tiberius Yuk-Ming Chan and his wife Hilarious Butterfly Ying-Ping Wong (I made up these names but there probably at least two or three people with similar names to these in Hong Kong) can't pay the mortgage on their 15 million dollar 750 square foot flat in the mid-levels because his import-reexport business can't sell Chinese shoes to Wal-Mart because nobody is buying them? They will have to do more than let one of their three Filipino maids go, move their spoiled brat Constantine II to a cheaper school and sell the second Mercedes, that's what! Expect the real estate market here to crash next year; and I mean crash like go down in flames. Expect lots of the returned Chinese to suddenly go back to Canada because they can't make enough to make it worth living in the air-pollution in Hong Kong if they can't make a several of million a year in Hong Kong dollars.
Looking on the bright side the wife and I would like to buy a new apartment so maybe we can get a deal.
Remember the stock market can, theoretically, go all the way down to zero but the stockbroker can go down only as far as the sidewalk, unless he falls through a skylight over the restaurant and then he can go to the basement. I think lots of speculators in Hong Kong are probably going to wish they'd been a little more careful before too long and some of the families of stock brokers are going to wish they worked on the ground floor.
To be a little fair; the banks here are fairly shady. To their credit (I know that's a really bad pun) that is why they probably won't go under. So maybe we do need to do a few things
How about requiring banks to provide contracts that say the same thing in English as in Chinese. If you think they already do, think again! Risk that is clearly stated in English is often times glossed over in Chinese; I know this because the really smart wife told me so.
How about putting a sentence in 12 point print that says "There is risk involved with all investments and you could lose all your principle. The risk of this investment is considered Very Low/Low/Average/High/Very High/Do do it if you can't afford to lose it" and making the bank customer sign it?
How about not letting fresh grads from HKU be financial councilors at banks?
How about people learning how to gage risk before they invest?
How about some anti-collusion laws so that bank charges would fall?
In other news, Krispy Cream closed but a new Burger King just opened in North Point. I feel like a Cheeseburger!
Until Next Time
Fai Mao
The Blogger who is only a financial expert when compared with investors in Hong Kong
Some Question:
1. Did it really take this crisis to show the locals here that the banks are some combination of dishonest, corrupt and incompetent?
2. Did they ever READ the contract? If they couldn't read it did they have someone read it for them?
3. Did they ever think there may be a difference between speculation and investing?
I've been to a couple of investing seminars sponsored by banks here. What they told me was that a long term investment is one that doubles in value every 18 months. A short term investment was 6 months and a medium term investment 9-12 months. I've got news for these people. All of these are speculative investments. In fact, they are incredibly speculative. Most of the investors here, and up North are not really investors but speculators.
I find the lack of honesty by the banks here to be particularly galling because they charge fees that are something like 3 times the world average and then give bad advice to people who want to double their assets every two or three years. We've even had the banks tell us "Yes, our charges are more but you make more" Well hey Einstein, when the market goes South do we lose less if we've paid you more? To quote Bugs Bunny "What a Maroon!"
I'm sorry, and it bothers me to say that I agree with Mr. Potato Head (Joseph Yam the guy in charge of the Hong Kong Monetary Authority) Did it not ever occur to these people that the reason that they could get 6% or 8% or 9% on these investments when a pass-book savings account offers 1.5% was because there was substantial risk involved? Did it every occur to the banks that their customers might riot when they found out how badly they'd been screwed?
I guess not. Or maybe the people storming banks and assaulting security guards just think if they pitch a big enough fit someone will bail them out. Evidently the banks never thought this would happen or they wouldn't have had unarmed security guards.
It gets still worse because it is going to get worse. If the US and EU go into a deep recession which is what happens if John McCain wins the US election or experiences the second coming of the Great Depression which is what will happen if Barrack Obama wins then all those Chinese factories will go belly up. Either way the days of the Chinese economy shooting up like a rocket are probably coming to an end, at least for a while. So what happens when Constantine Tiberius Yuk-Ming Chan and his wife Hilarious Butterfly Ying-Ping Wong (I made up these names but there probably at least two or three people with similar names to these in Hong Kong) can't pay the mortgage on their 15 million dollar 750 square foot flat in the mid-levels because his import-reexport business can't sell Chinese shoes to Wal-Mart because nobody is buying them? They will have to do more than let one of their three Filipino maids go, move their spoiled brat Constantine II to a cheaper school and sell the second Mercedes, that's what! Expect the real estate market here to crash next year; and I mean crash like go down in flames. Expect lots of the returned Chinese to suddenly go back to Canada because they can't make enough to make it worth living in the air-pollution in Hong Kong if they can't make a several of million a year in Hong Kong dollars.
Looking on the bright side the wife and I would like to buy a new apartment so maybe we can get a deal.
Remember the stock market can, theoretically, go all the way down to zero but the stockbroker can go down only as far as the sidewalk, unless he falls through a skylight over the restaurant and then he can go to the basement. I think lots of speculators in Hong Kong are probably going to wish they'd been a little more careful before too long and some of the families of stock brokers are going to wish they worked on the ground floor.
To be a little fair; the banks here are fairly shady. To their credit (I know that's a really bad pun) that is why they probably won't go under. So maybe we do need to do a few things
How about requiring banks to provide contracts that say the same thing in English as in Chinese. If you think they already do, think again! Risk that is clearly stated in English is often times glossed over in Chinese; I know this because the really smart wife told me so.
How about putting a sentence in 12 point print that says "There is risk involved with all investments and you could lose all your principle. The risk of this investment is considered Very Low/Low/Average/High/Very High/Do do it if you can't afford to lose it" and making the bank customer sign it?
How about not letting fresh grads from HKU be financial councilors at banks?
How about people learning how to gage risk before they invest?
How about some anti-collusion laws so that bank charges would fall?
In other news, Krispy Cream closed but a new Burger King just opened in North Point. I feel like a Cheeseburger!
Until Next Time
Fai Mao
The Blogger who is only a financial expert when compared with investors in Hong Kong
Subscribe to:
Posts (Atom)