Saturday, December 31, 2022
Friday, December 30, 2022
How did it happen?
The collapse in the stock and crypto markets has wiped out $12 trillion of wealth. Divided by 8 billion people in the world, the average loss is $1,500 USD per person.
The top 1% own 43% of the global wealth. The same 1% will bear 43% of the $12 trillion loss. (I suspect that the loss of the top 1% will be more than 43%).
So, inequality will drop in 2022. But, it will still be quite bad.
Tan Kin Lian
China introduced the e-CNY as a central bank digital currency (CBDC). It has the same value as the RMB that is kept in bank accounts and e-wallets (e.g. AliPay and Wechat Pay).
Why does China introduced the e-CNY when they can promote the use of RMB, which is widely used as a digital payment.
I might have found the answer.
e-CNY is technically a different currency from the RMB. While it has the same value now, it may have a different value in the future.
What is the purpose?
The e-CNY is intended to be a currency for international trade. While it is being used domestically now, it is intended primarily to test the platform. Within China, the main form of digital payment will be the RMB in the e-wallets.
How can China promote the use of e-CNY for international trade?
1. For a start, China can ask its exporters to price its products in e-CNY, instead of USD or as an alternative to USD. The price in e-CNY may be slightly more attractive than USD, so that the buyers will opt to pay in e-CNY.
2. China will ask other countries to accept payment for their exports to China in e-CNY. This has already happened with the energy imports from Russia and the Middle East. This will be extended to other imports into China.
3. The exporters who receive the e-CNY can convert them into USD or keep them as e-CNY deposits. The China banks will offer interest on the e-CNY deposits that are as attractive as USD. This will encourage the foreigners to keep the money in e-CNY, instead of USD. They can use the e-CNY to pay for exports from China.
4. China may offer convertibility of e-CNY into gold. They do not need to offer 100% convertibility. A convertibility ratio of 20% would be attractive, as USD does not have any convertibility. This convertibility applies only to e-CNY and not RMB.
5. When the e-CNY becomes more attractive than RMB, the individuals and businesses in China may opt to convert their RMB into e-CNY. It is likely that China will set a limit on the amount of e-CNY that can be held by these individuals and businesses.
6. Some time in the future, the exchange rate between e-CNY and RMB may not be parity. It is possible that the e-CNY will have a higher value compared to RMB, as it is driven by supply and demand.
Some people think that China introduces the e-CNY to be able to track the payment made by individuals. I do not agree. If this is the intention, China already has the ability to track the digital payments that are now made through RMB payment platforms.
This is my personal opinion and forecast for the future trajectory of e-CNY. I will watch if it happens as I describe.
Tan Kin Lian
Thursday, December 29, 2022
Here are the financial fundamentals of the largest energy stocks - Saudi Aramco, Exxon Mobil, Chevron, Shell.
In this paper, I explain how a stock that has a high growth rate in revenue and earnings can justify a high price earning ratio (PER). I use Tesla stock as an example and why the price can recover to $250 in 2023.https://fisca.sg/ArticleDisplay.aspx?ID=1279
Wisdom of the Crowd: 83% of the respondents said that the best way to reduce the cost of living is to keep prices low through subsidy and removal of tax and levy, rather than to issue vouchers and give a cash subsidy to each family.https://tklcloud.com/Crowd2/chart3.aspx?id=2784
Wednesday, December 28, 2022
Tuesday, December 27, 2022
1. The following chart shows the gold price for the past 10 years. It was trading around $1,300 USD for several years up to mid 2019.It jumped by 50% to trade above $2,000 by mid 2020. It corrected to a low of $1,620 by mid 2022 and has since increased to $1,800.
2. Some analyst expected gold to increase in 2023 by 50%, perhaps to reach $2,700 or higher. The reasons are:
a) A recession in the US may cause interest rate to fall, and a rush to an alternative gold.
b) The central banks around the world increased their purchase of gold significantly during 2022.
3. I have $94,000 USD invested in Gold ETF (GLD) and a Barrick Gold (GOLD). It now shows a loss of $,500. I bought these stocks two years ago. At the worse point, I saw a loss of $30,000. It has reduced, with the recent recovery in the gold price.
4. I intend to invest another $100,000 USD in these assets.
This is a personal view. It is not investment advice.
I saw an article that reported tech stocks lost $6 trillion in 2022.My rough estimate is that the tech stocks lost 33% in 2022, so the current value of the tech stocks is $12 trillion. I am not able to verify this figure.
I have this opinion.
Tech stocks were overvalued at the end of 2011. The price earning ratios of most of these stocks must be around 40 times. So, if the tech stocks dropped by 33%, the price earning ratio will, on average, be 26 times. This will still be too high.
The tech stocks did not lose its fundamental value. It lost a part of its bubble value. It is still overvalued.
The table below shows the largest tech stocks with a total market value of $8.8 trillion. The average PE ratio is 35 times.
If one looks at the high interest rate and a likely recession in 2023, the PE ratio is still too high.
The key point that I wish to make is this - we did not lose $6 trillion in market value in 2002 in the tech stocks. They were part of a bubble, and not the fundamental value of the stocks. The current market value is still too high. We may see a further drop in the market value, before it reaches its fundamental, long term value.
Tan Kin Lian
I have a large investment in China stocks. I monitor the China economy closely.
The China stocks were affected badly by the covid restrictions during 2022. Many of the stocks were undervalued. They are likely to do well when the China economy recovers. When will this happen?
China has now relaxed its covid restrictions and open up its economy. It is going through a large wave of covid infections. The western media reported that it caused a major breakdown of the health care system and large number of deaths.
From other sources, mostly from China but include some external sources, I conclude that the reports from the western media were grossly exaggerated and perhaps malicious.
The covid infections were indeed widespread, but the infections were mild. The virus had indeed spread rapidly through many parts of China, but many people have already been infected and recovered.
I expect that most people will no longer fear the virus and life will return to normal soon. The economy will recover faster than expected.
I will watch the China stocks to see if my assessment is correct.
Tan Kin Lian
Sunday, December 25, 2022
Wisdom of the Crowd: 54 % of respondents said that MAS should introduce digital payment if it is less costly and more convenient than cash. 46% prefer to keep to cash payment for familiarity and privacy.https://tklcloud.com/Crowd2/chart3.aspx?id=2780
- ► 2023 (342)
12/25 - 01/01
- Wisdom of the Crowd - New Issues
- My positive view of the China government
- Introduce "common prosperity" in Singapore
- Inequality dropped in 2022
- WOTC - Blockchain technology
- How is e-CNY different from RMB?
- Review of energy stocks
- Price earning ratio and growth rate
- WOTC - Reduce cost of living
- Review of stocks of car manufacturers
- WOTC - Temasek Holdings
- Crash of US dollar in 2023
- Review of my investment in Gold
- Tech stocks lost $6 trillion in 2022
- China stocks in 2023
- WOTC - Digital payment platforms
- Liberalization of the retail electricity market
- WOTC - Digital payment
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