Monday, June 28, 2010

Lu Dat!!

Whatever "Lu Dat" means, regardless, everyone in Taiwan is cheering for Lu right now. Andy Roddick was just defeated by Lu Yen-Hsun of Taiwan (not TPE (Taipei)) who will now move onto the quarterfinals. Great day for Taiwanese tennis, as Lu was not shy to promote Taiwan before this match as well as in the post-match interview. Here's a snippet of what he said last week:

The result wrote Lu's name in the Asian tennis history books and he expressed his pride about putting Taiwanese tennis on the map.

He added: "There is probably a lot of news coming out right now in Taiwan. I am happy to have done it for my country, for my family, for my friends and for all the people that have supported me.

"But I don't want them to call me the Pride of Taiwan or anything - I am the same as I was before."

Recaps are just starting to come out, but for the most part I have not seen any refer to him as from Chinese Taipei or some ridiculous name like that. Edit: Just saw one out of the LA Times that states "Lu of Taipei." Oh well... as long as international sports organizations keep allowing China to dictate what Taiwan can be called, you can't really expect much from the media.

ECFA News: With the ECFA likely to be signed within the next 24 hours (one of the saddest moments in Taiwan history), I remain quite bearish on the TAIEX. Take a look at the leading indicator for the TAIEX that I have been using (the Shanghai Composite) and tell me that is not a negative divergence showing on the TAIEX. But of course there is the possibility that the indices are decoupling from this previous correlation.

Friday, June 25, 2010

Ma on Taiwan Province, Part II

It would be hard to find Taiwanese who support Taiwan that would shrug off the meaning of the president & leader of Taiwan using "Taiwan Province." Indeed President Ma did that this past week (see previous post here), showing his true colors, mainly red. Well, there's many places you can find this type of error where someone or something incorrectly states that Taiwan is a part of China.

The latest one I've found on a large website? Wikipedia! It's pretty bad to see the main encyclopedia resource that kids and students use these days stating that Ma Ying-jeou is the president of Taiwan Province of the P.R.C.

Not sure how to work Wiki cause I've heard it's quite a mess to edit it, especially if you aren't one of the "super editors" or something like that, but I hope someone sets that right. Edit: Thanks to thegreensquirre1 for taking care of that - it now correctly states that he's the "president of the Republic of China (ROC), commonly known as Taiwan."

In other news, being a tennis player myself, I will have to report that a Taiwanese (Lu Yen-hsun) has made it into the round of 16 at Wimbledon. Awesome!

Wednesday, June 23, 2010

The Road Back to ... The "Double-dip" Recession

Well what do you know, those artificially inflated "good" housing numbers over the first half of 2009 and late 2008 are just that - inflated. May's housing numbers are not what you would expect in a recovery, no not even close. [Emphasis from me in bold]

The Commerce Department reported Wednesday that new single-family home sales dropped 32.7 percent in May from the previous month to a seasonally adjusted annual rate of 300,000. Analysts surveyed by Bloomberg had predicted a decline of 18.7 percent.

The percentage drop was the largest monthly decline since the government started tracking the numbers in 1963. The annual rate also ranked as a record low. New-home sales fell by double digits in every part of the country, led by a 53 percent drop in the West.

If you had gotten in a conversation with me anytime over the past year about buying a house, you would have heard me tell you not do it as an investment, nor to do it for the $8000 credit. If you were to buy one, buy one because you found a house you loved and it was a good deal (without taking the $8000 credit into consideration).

Despite what the media has been telling you constantly over the past year about our V-shaped recovery and that we are on our way out of this recession, the truth is the job growth is still not there.

While I basically erased my 180% gains on the year [and proceeded to further decimate my account] over the last two weeks due to this false-rally, I will be back. And when I do, I will not make this same mistake again. Note to traders: Shorting with vigor and tenacity requires exactly that. On the flip-side, it also requires you to be prepared to get a full-on beating with similar vigor and tenacity. That said, it was a great experience (positioning 100% long/short in trades) as I believed I picked up some nimbleness in my trading.

P.S. If 109 breaks on SPY, not a good sign for the bulls!

Tuesday, June 22, 2010

Ma's Stance on Taiwan: Simple and Clear

If you have any questions as to what a person means when they say, "Taiwan Province," let me assure you that they mean Taiwan is a province of China. Thus, they mean that Taiwan is a part of China.

It should be infuriating to the people of Taiwan and Taiwanese abroad to hear their elected-presidential-leader call their own country, not a country. From the Taipei Times:

President Ma Ying-jeou (馬英九) referred to Taiwan as a “province” yesterday while describing the sister-state relationship between Taiwan and Texas, rekindling the controversial issue of his perception of Taiwan’s status.

From statements like this, if you have not already, you should begin to understand why and how most of Ma's foreign policy (specifically regarding China-Taiwan) are shaped. That is, they are shaped with the mindset that Taiwan is a part of China and that any relationship must be held in that regard.

While he may say that it is the constitution of the R.O.C. that states this, then we must also ask why he does not also recognize that the constitution states that the people have the right to a referendum. While I am no law/constitution buff, it seems that to have a constitution that is not consistent with the current reality is not really a viable constitution at all. What is the current reality though? The reality is that an overwhelming percentage of Taiwanese on Taiwan do not consider themselves Chinese, instead as Taiwanese. Furthermore, they do not consider Taiwan a part of China. Either follow through with the constitution completely, or the constitution is simply just another document with no meaningful value at all.

Here's an editorial on this issue in the Taipei Times as well. An excerpt:

Ma rationalized his reduction of Taiwan to an “area” by stressing his government’s adherence to the Republic of China (ROC) Constitution, which states that the ROC is an independent, sovereign state whose territory includes China. Hence, Ma said the relationship between Taiwan and China is one of two regions, with Taiwan, a province, known as the “Taiwan area,” and China as “the mainland area.”

Interestingly, Ma does not refer to Taiwan as a province when talking to local audiences. Whenever elections are closing in and campaigning steps into high gear, voters can hear Ma, along and other Chinese Nationalist Party (KMT) heavyweights, roaring slogans that trumpet the name Taiwan. Whenever they mention Taiwan in their campaign speeches, the electorate assumes that the word “Taiwan” implies the country for which the official name is the ROC.

Given that his definition of the word “Taiwan” seems to depend on the occasion, it is no wonder there is continued public doubt over Ma’s dedication to safeguarding the country’s dignity as a sovereign state. If Ma wants to be clear about his meaning, in future whenever he talks to the people of Taiwan and uses the appellation “Taiwan,” he should not do so in shorthand, but rather use the term “Taiwan Province,” as he so clearly did with the Texas governor.

Friday, June 11, 2010

Foxconn's Troubles

Great editorial piece in the Taipei Times on the possible effects that Foxconn's pay raises may have on manufacturing plants and on labor in general in China.

When a market leader such as Hon Hai offers such massive salary increases, it puts great pressure on other electronics companies and might even force competitors out of the market. In addition, the increased expenditure can be passed on to US, EU and Japanese companies so that it does not affect Hon Hai’s profits. The move could even turn out to be a crucial first step toward the transformation of China’s labor-intensive industries.

Another side effect of the big raise could be that some Taiwanese companies see more clearly the uncertainties of the Chinese market and decide to return to Taiwan to invest in automated plants. If that is the case, then Taiwan should thank Terry Gou (郭台銘) for such an unexpected gift.
It indeed will be interesting to see what the effects of this are, not only to the companies down the line from Foxconn (most notably Apple and their iProducts), but also the impact on "cheap Chinese labor" that has governed the way we think of labor in China. Optimistically speaking, this could serve as a reminder to those in Taiwan that doing business with China in China comes with a lot of baggage, especially concerning labor laws and the inability for companies to control their workforce in China (i.e. Honda's manufacturing plant in China).

More on this issue @ Michael Turton's blog, where he also covers some quote-un-quote conspiracy theories on what is actually happening in China between Foxconn and the government.

Wednesday, June 9, 2010

BP & Things

With all the recent support for crucifying the company BP to the cross for its part in the accident that occurred in the Gulf of Mexico, I can't help but say no thanks. When everyone is piling onto the train, I usually have to take a step back and reassess things.

First off, it was an accident. And secondly, they are doing everything they can to try and stop it. An accident like this has never occurred and despite our technological and engineering prowess that we believe to have, tackling this engineering problem involves careful planning and execution, which takes plenty of time. Furthermore, as engineers know, there will always be bugs and unknown variables that will affect your design negatively. So for all you who think BP or Obama are not doing enough to stop it, why don't you get yourself an engineering degree before we hear from you again.

For the Republicans, please stop getting on Obama's back for "not doing enough." These are international waters, and as such I believe it should be a joint effort between nations in order to help BP solve this problem. Now is not the time to play politics either.

For the Democrats, you need to realize that taking the company BP out to backyard for a genuine beat down is not in the best interests of this country. With BP being one of the largest companies in the world, and it being not only an oil company but also an energy company, the number of employees a company like that employ should be a staggering amount. Attempting to bring down a company of that size will wreak havoc on the economies of the world.

As I mentioned, BP is not just an oil company that does nothing but find oil, refine, and sell. Indeed it is not. It is an energy company that does commit millions if not billions of dollars into research and development. If you fail to understand the significance of R&D in a company, then it is likely that you fail to have an engineering degree.

Lastly, if you still feel that BP needs to be punished, then why the hell are you not calling for the crucifixion of all the banks that stole your money in 2007-2008, and likely will continue to do so this year. My point it this: BP has problems in the Gulf it needs to take care of. It is doing so and has pledged to do so with their own money. That's all we can ask for.

As far as the BP stock goes... well, let's just say it's best to not be in that stock. I would be wary of shorting BP on the idea that they are going to get kicked in the groin by the public and government. Why? Because that's what everyone thinks! I'd be more inclined to watch for a potential short-term bottom and go long for a short squeeze. In other stock news, much to the chagrin of iLovers, I have a bearish view on AAPL. My reading of AAPL charts tells me that AAPL could be trading at the price of a new iPhone 4 16GB model (with an AT&T 2-year subscription agreement). For those of you not in the know, that would be $199.

P.S. If you ever have any questions or would like to see a chart of what I'm talking about, let me know!

Tuesday, June 8, 2010

TAIEX Outlook - Week of June 6th

Apologies for not getting this out on the Sunday as I originally planned. So, without further adieu:

First off, let's check how the markets unfolded after my last update:
Looking at the $SSEC that has already begun a bounce off the lows, it would make sense that the TAIEX follow similarly. Targets for a bounce are a 50% retracement from recent highs to lows at around 7400, which also coincides with a gap fill. Above that, the 200DMA could be within reach at the 7600 price level.
I specifically noted the 7400 level as an area to watch for the first signs of distribution. While the TAIEX did not quite hit 7400, it came mighty close to that level, at 7373.98. Good enough for me! Now here comes the tricky part - where do we go from here. Here's a current chart of the TAIEX:

I'm afraid this week I'm actually at quite a loss for where it might be headed. The chart certainly looks a bit more volatile, with gap downs and gap ups a-plenty over the past couple weeks. At the least, I would be looking at a range-bound market between 7000-7400. Until the Taiwanese markets decide to break out of this range, I foresee more choppy prices.

Lastly, what does the trusty Shanghai Composite forebode for the TAIEX?

What we see here is orderly selling, something that is not indicative of a bottom. Short term and intermediate term bottoms usually occur on climatic selling. Accordingly, I would not be surprised if there was more downside for the Shanghai Composite in the near future.

The interesting thing is that most experts including your local investment adviser at your bank will likely tell you that this sell-off is just part of a normal correction that happens all the time in bull markets, and that they foresee higher prices. While I certainly don't know what the future may hold, neither do they. All I know is that the economy is worse than everyone thinks, and as such you should trade the markets accordingly.

Saturday, June 5, 2010

Human Rights in China

Yesterday was the anniversary of the Tiananmen Square incident (6/4), in which Chinese students and intellectuals protested against the Chinese government. Originally to mourn for Hu Yaobang, the protests proceeded onto calls for reform using slogans such as "No corruption," "Rule by law," "Human rights," and eventually "Democracy." In the end, there was a swift and violent crackdown on those in the square, and unofficial numbers (more accurate than the "official" numbers) go into the thousands for the number of deaths.

Fast forward 20+ years, and it seems as if the CCP has not changed at all. Suppression of basic human rights, freedom of speech, freedom of press, freedom to assemble and protest are all still illegal today in China. Moving beyond the normal suppression of human rights, China has continued to censor speech on the web.

It's interesting to note that many "experts" and "scholars" continue to see Taiwan as a mediator for western democracy and human rights to enter into China. The idea that Taiwan can influence China to become "westernized" is a dangerous road for Taiwan to consider. While Taiwan can definitely try, the results thus far have usually been the other way around - China affecting Taiwan.

Even more of concern is the human rights in Taiwan today, and the apparent regression of human rights in Taiwan. How can one call on another to do this and that, when they themselves do not even adhere to the same principles. What do I mean?

For one, the continual rejection of referendums being proposed by groups in Taiwan to ask the Taiwanese public if they really want an ECFA or not is a clear sign of the current KMT government restricting the voice of the people.

Secondly, the suppression of press via the confiscation of radio equipment from Ocean View, a pro-democracy radio station located in Taichung, is another clear sign that the current KMT government is violating the freedom of press.

Thirdly, the bullying tactics by police in Taiwan against e-users who are vocal about Taiwan's democracy should be raising a flag to any human rights watchers. People's rights to privacy and their right to express their opinion are being violated by the government and the seemingly police-state government.

The list goes on and on. While most of us hope for a more open and democratic China in the future, perhaps we should work on keeping Taiwan a free and democratic country first. After all, you will hear Chinese say often, "western-style democracy is not for us." Then the appropriate response to anyone who tells you that is, "Taiwan is a western-style democracy, and it's been working for them for almost 20 years now." And the kicker? It shows you right there that Taiwanese are not the same as the Chinese, when they say "us."

I will have an update on the TAIEX and markets in general on Sunday.