Who is going to laugh till the end?

 He said it at last.

In yesterday Trump responded to the reporter during the Thanksgiving appearance in the White House that if the Electors choose Biden to be the next President of the U.S.A. in their voting on the 14th in next month then he will leave the White House.

The Biden camp burst into euphoria when vote counting revealed that Biden's ballot outnumbered that of Trump's. The media even claimed that Biden has won the election few days after the voting ended. Biden was a bit reserved on the outcome and did not declare victory only till the 8th when the vote count in Pennsylvania and Georgia showed that they are in Biden's favour. 

On the other hand, Trump insists that the election was rigged and has never conceded failure even now. He has been saying to fight for the justice via legal action. Trump said it in the Tweeter many times. 

Despite earlier quite a few nations like the France, the U.K., Canada, China, German, Saudi, Australia...etc have congratulated Biden becoming the president-elected yet the transition between the two administrations has not started only after the General Services Administration(GSA) confirmed it under the letter to Biden three days ago.

After Biden's declaration and the endorsement of GSA, the world, or at least most of it, thought that the president-elected is by right becoming the next president. Or is it?

Why so asked?

Because Trump said he would fight via legal action? Nope. Despite Michigan, Georgia and Pennsylvania have rejected the cases but that is not the key point. In fact, It is only Trump's tactic in dealing with the public. Legal action is merely a cover up for the true action behind the scene. He knows something that you guys don't, or be misled with. Being the president as well as the player of this election game, he knows what matters and what don't. And he revealed to you guys in yesterday. He is waiting for the voting of the Electoral College.

In fact in my earlier post Does it really matter?  I already mentioned it. The general public, at least many American, thinks that the election happened on the Nov 3 decided who the next president would be and they think their votes made that happened. They are damn wrong though. Americans are misled by a deliberate illusion. Their voting is just a beautiful misleading to make them believe that they enjoy the democracy to choose their president. There are in fact other king-makers behind the curtain. 

Trump knows it all. He does not care about American's votes. Nor does he care about the GSA's decision. These are not the determinant. I say it again. He is waiting for the voting of the Electoral College. They are the true king-makers.

The design of the election system is that when the Electors judge that the popular vote does not reflect the best interest to the country, upon their conscience they can cast their vote otherwise. Now the trick is that Trump said the election was rigged. He claimed there were many frauds in the mailing ballots. The accusation leaves much room for the Electors to exercise their conscience. 

In my another post Politics is cruel?  I said politics is all about parceling out interests. There is nothing more political than is the presidential election especially that for the U.S. President. One must be super naive if s/he really thinks that the Electors will cast their votes solely upon their conscience when facing such a big controversy. S/he must also be ultra stupid to think there is no solicitation upon these electors now. Needless to say, there must be enormous bargaining happening right now behind the curtain till the December 14. People should not forget that there were five popular vote winners did not win the presidency along the American history. In fact Trump himself was exactly the beneficiary of such system which he actually lost the popular vote in 2016 but won the electoral vote. So he knows most what matters.

Who is going to laugh till the end? As what Trump always said, we'll wait and see.

It's all up to you now, guys

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A political nuclear bomb exploded here in Hong Kong in yesterday. Following the passage on the qualification on the Legco lawmakers by the standing committee of the China's People Congress, the Hong Kong government immediately declared that four lawmakers in the opposition camp were disqualified with immediate effect. Meanwhile, all the 15 remaining pan-democratic camp lawmakers announced their resignation resulting from such action from the Hong Kong government.

Some may say this is something like the tsunami following the 10 scale seabed earthquake in politics. Or is it?

The main street seems not much be concerned nor did the Hong Kong bourse react on it. This is rather eerie though, contrasting with the public's fierce reaction arising from the motion on the extradition bill by the Hong Kong government in last year. Apparently the general public has learned something. So what did they learn?

First of all, people know that the Legco is part of the regime. Opposition within the Legco against the administration apparently will not pay off. In fact, the opposition camp lawmakers have never really made any ground-breaking success in altering the Hong Kong government's main theme of China-isation. What they could do were filibustering during the Legco meetings, adjourning the meetings via insufficient presence of lawmakers. Being minority actually there is really not much substantive they could do. Having an opposition voice in the Legco seems to be symbolic more than substantive. It is not a true regret that all the opposition camp withdrew from being a backcloth which the Hong Kong government can use as the existence of democracy or the exhibition of the liveness of the so-called "One country, Two systems".

Secondly, people learn the true meaning of the frequent statement made by the Hong Kong government's officials that Hong Kong is an non-alienable part of China. They know that China's rules of game finally will, or have already? cast on Hong Kong. With the table turned, Hong Kong has evolved from the guiding role of China's modernization to the seeker of the preferential treatments from the central government. When guts has become the word of the past, people are also pragmatic and realistic on their stand.

On the other hand, with the successful containment of the novel corona virus vs the latest outbreak again in the western world, followed by the economic influence table-turning, China has gained much courage and confidence towards its once big brothers counterpart. The vision of the Rise of the Big Nation is getting closer and closer. China not only can say no but can do it as well. Compound with the decoupling which further leaves no hope on the harmony with the West, China dares to do what she likes at will blatantly and in broad daylight. 

So what happened in Hong Kong in yesterday is not something unexpected. This is just something along the script. People will not be surprised when something else similar are coming down the line. In fact, the recent trend in Hong Kong's development doesn't come without any practical point. With the dust and mist settled, a clear road path on Hong Kong's future is visionable. It will become part of China, as what people can see in many other cities in China. The Two Systems will become only a talk when China uses Hong Kong to deal with the West on bypassing the sanction or whatever inconvenience which the Mainland faces. Domestically people here in Hong Kong can expect everything will be same as what their Mainland fellow is facing with. 

Now, it is all up to you on how to deal with it for you and your families. Guys.

Ant-Man has been taken down!

Forgive my lousy gag and accept my apologize to the fans of Ant-Man. In fact this post absolutely has nothing to do with the Marvel's character, Ant-Man. It is solely a joke on the subject because the China fintech company, Ant (Group), did get into trouble on its IPO in China and Hong Kong bourse thus the Man, Jack Ma, behind the Ant did get trapped with some headache.

While the ballot counting on the farce of the U.S. presidential election is still going on, perhaps equal attention has been drawn on another farce of the abrupt suspension of the IPO of the Ant Group here in Hong Kong, and in China as well. It was said that there were more than 1.5 millions subscribers on the IPO so it potentially became the talk of the town. It is abrupt because the suspension was called in two days prior to its intended listing day. It is a farce because the suspension was due to the supervisory bureau's sudden awareness, just prior to the IPO, that the business model of Ant Group has potential great threat to China's financial stability.

It is absolutely correct and legitimate to suspend the Ant's IPO if its business model is hazardous. However, the Ant has been working on such business model for years and its IPO application should has been scrutinized by the related supervisory bureau well ahead of the intended listing day. It is impossible that the Bureau only noticed such potential threat two days prior to the listing. Nor the Ant's business model evolved into a great threat to China's financial stability within days after the approval of IPO by the Bureau. Yet the farce happened and perhaps it is the only possible in a nation with China characteristic. 

A farce may be but it did happen with its context. The Ant Group is China's rising fintech company whose major owner, Ma Yun, is the nation's richest man now. Ma is also the owner of China's largest online shopping platform, Alibaba which is listed in the U.S. and Hong Kong and it is commonly regarded as a private company. Being the largest online shopping platform, Alibaba has enormous influential power in China's economy because there are tens of thousand SMEs selling their products in its platform and behind these tens of thousands SMEs and together with their suppliers there are tens of millions workforce engaged and feeding the same amount of families. Alibaba's annual turnover is also gigantic so its operation is about the make or break of the economic as well social stability in China. 

With so much in stake, Ma and his companies become so important to the ruling of the country that the CCP cannot sleep well without a full control on them. Yet officially Ma's companies are privately owned. It is still alright if Ma is fully obedient to the governance but he is so daring to make criticism saying that there is no financial systematic risk in China because there is no system in the first place during a public speech in last month. This is just too rebellion that he cannot be tolerated in the CCP's eye. This is the trigger which most commentators commonly see it why the Ant Group's IPO was suspended.

Perhaps Ma's recent speech did cause the CCP's dissatisfaction but this move should not be the main reason because despite such speech did slam the financial bureau's face but it does not bring material threat to the ruling of CCP. It is Ant's business nature that matters. Traditionally China's lending market is dominated by the state-owned-banks(SOB) and through these SOBs the CCP controls which business sectors and which corporations can be funded to maneuver its financial and economic policies. Such ability is equally important to the firm control over its army for the CCP's ruling on the nation.

The rising of the fintech companies like the Ant Group is an undermining of CCP's such ability. The Ant's lending is mainly to the SMEs and the individuals though. The borrowings from these SMEs and individuals are much smaller than those from the state-owned-corporations but they are vast in numbers. Despite the total lending amount which was taken by the Ant from the SOBs does not really endanger the latter but who will be happy to see one's business is shared by someone else especially when the business climate is not good? The Ant has hurt the interests of the beneficiary controlling families behind the SOBs. 

On the other hand, Alibaba together with the Ant, one focuses on the marketing and the other one on the financing just forms a business empire putting a vast numbers of SMEs and the people related under its umbrella. This business empire could become a formidable force which can rock the governance of the nation, especially when the leader of the business empire is too bold. 

This Ant must be taken down! 

Then what about the Man?

Does it really matter?

As October is drawing to its end the whole world is looking forward to seeing the biggest event that is going to happen in this early November. Yes, you got it right, the U.S. presidential election. It is important not only to the U.S. and the Americans but to most parts of the world as well because with Trump has stirred the world as well as the U.S. itself upside down in the past four years so people just wonder whether this guy is going to win another term of four years and keeps stirring the world, especially amid the pandemic.

The polling is going to end on November 3 local time so most people think it is the decisive day on the presidency. However, those who know know that November 3 is only last day of the polling by the Americans but actually they do not have the right to vote for their president. It is only the electors in the Electoral College have this right. They are the ones who are really going to decide who is going to be the president of the U.S. and their voting happen on December 14 only so it is more than one good month later than November 3. 

Customary and usually the Electors should align their vote with the popular vote, ie., the wish of the general Americans in their states to cast their own vote but it is not strictly legal bidding. That is to say, the vote from the general Americans does not necessarily reflect the result of the election even if a candidate has won a majority of ballots on November 3. The result on December 14 after the electoral college voting is after all the real one. The fact is that electors' vote could be contrary to the popular vote in their states. So folks, just forget the date of November 3 which is just a show of democracy only.

Despite the U.S. is the largest democracy country in the world but judging from its indirect election system, the so-called one person, one vote, is actually a counterfeit. The establishment of the electoral college was actually a big scam to the general Americans and it was done in purpose by the founders of the then newly formed nation. Everybody know that the U.S. was once the colony of the British Empire prior to its independence. After fighting eight years with their original sovereign nation, the colonists finally won the war to form a new born nation. Most of the founders who were responsible for drafting the constitution were lawyers. 

Contrary to most of their fellow who were farmers and laborers that were mostly illiterate, these lawyers were well educated and astute. They engineered the constitution which is in favour to these elites by designing the indirect election system via the establishment of electoral college. The system prevents the general mass, due to their numbers, from electing an inappropriate president under the simple one person, one vote, election system especially when the overall education level of the general mass was still very low thus prone to stupid and emotional decision.

The original intention of the electoral college might sound reasonable under the particular context at that time. However, this system remains unchanged even after two centuries and the general mass of Americans have already received education and most of them are sensible enough to pick their president. Yet, their right is still deprived despite of the name of leader of the democracy world. What an irony!

In fact, it is not only the problem of the crippled election system but the faulty institution to be blamed. Under the current political context in the U.S. that with the oligopoly of the Republic Party and Democratic Party so the Americans are only subjected to a choice of lesser evil when choosing their president. After all, the president of the U.S.A. is only a front stage figurehead of the political party which he represents. The point is that both of these two parties are for the interests of their beneficiary groups only. None of them is really the guardian of the general mass of the Americans. So does the election really matter to you, Americans?

Probably the greatest discovery ever (3)

In my previous post probably greatest discovery ever-2 I lightly touched on the role of probability plays in option strike picking. I also compared the three alternatives on the access to the probability of option strike. In this post I am going to explore why probability is so important in option trading from another perspective. 

Option trading can be fun and could be profitable as long as one knows what option is all about. Option is a derivative of an underlying asset like stock or index. As explained in the previous post, some traders use option trading simply as a speculative tool especially those standalone Long traders who solely wish their trades can go into ITM to enjoy the exponential growth of the premium while the Short traders are usually less aggressive and just hope their trades can remain OTM so that they can earn some humble profit, ie., the already known premium amount received as soon as the trade is established. 

However, apart from the speculative application, option actually has a more functional purpose or usage. For some big investors with a huge portfolio or the fund managers who have an enormous holding under their management, the constant market fluctuation is a headache to trying to maintain the value of their holding in a comparative stable level. This is when hedging comes into play and option is a good hedging tool particularly the Long Put option against the anticipated market plummet. The profit from the Long Put position hopefully can off-set part of, if not all, the loss on the portfolio in case of a market crash. 

Unlike the speculators who hold their Long position solely for a speculative profit, the hedging Long Put is a kind of protection against an anticipated or unexpected market plummet. Just like any trade on earth that there must be counterparts for either the buyer or seller, whenever there is a Long then there is inevitably a Short in the option trading. That is to say, when one, due to the need on hedging, longs put say a stock option then s/he needs a short put counterpart so that the trade can be made. Naturally in the real world there are market makers so the counterparts might not be the same like those in the property transaction that a house owner matches with a house hunter. Anyway as a whole in the market, all the Longs must be equal to all the Shorts.

While there are at least two different types of long put traders, ie., speculators and hedge-seekers, but their counterpart, ie., the short put traders are rather unanimous. They all want to receive the profit, ie., premium, by shorting put. Short traders receive the profit upfront when the trade is made but at the same time they assume the risk of their position going into ITM if the underlying asset plummets prior to the expiry of the option and they will face potential huge loss if the ITM is very deep. As option trading is a zero sum game so the loss of the short traders is exactly the profit of the long traders and this is what and when a speculative long trader makes profit and a hedge-seeker can be protected. 

To the hedging Long trader's eye, the Short trader is just like his/her insurer whom will pay him/her back his/her loss on the fall of value on his/her portfolio. While from the fact that Short Put traders receive premium and assume the risk if there is a plummet and their loss could compensate the Long Put traders then they are really acting like an insurance company, an individual though. 

Everybody know that the business of the insurance industry is fundamentally a business based on probability. The probability of the event that being underwritten dictates the details of the policy especially the premium payable. With the perspective of the nature that Short traders are insurer underwriting the risk of their Long traders counterpart, this explains how important it is to look at the probability of the strikes of their position if they want to play safe. After all, Short traders are no different from running an insurance company. Shouldn't probability be treated as the most fundamental determinant when committing on any option trading, when the potential loss could be huge?

Probably the greatest discovery ever (2)

In the earlier post probably greatest discovery ever I said, as being a option trader, that probability is such a good thing especially on the strike picking because apart from reviewing all the technical indicators on the supports and resistances and the analysis on the open interest of other derivatives like the Futures and CBBC, the decision on a strike boils down to whether the strike will become ITM or OTM at the settlement day. Notwithstanding there are Straddle, Strangle, Butterfly...and many other option strategies but boiling it down to the most foundamental components there are only Long and Short while Long prefers ITM vs Short avoids ITM. Therefore the tool that helps predict whether a particular strike will go ITM is paramount to an option trade.

In that post I have slightly touched on the saying that in option trading shorting at a strike with p=0.1 of being ITM is usually safe in a normal market situation. Perhaps not every reader is familiar with option trading so I am going to explain a little bit that in the option trading world, some traders use option as a hedging of their positions in assets holding like stock while some just trade for profit without any need on the hedging of whatsoever. For the latter, profit could be from receiving the premium on their short position or the price difference after the settlement of their initial long position. Long position traders is betting on the strike(s) of their trades will go into in-the-money (ITM) so their profit can grow exponentially but Short traders just prefer the opposite because basically they are the counterparts of the Long traders despite not necessarily be of any of a particular trade concerned. Simply speaking when a Long trader makes money there must be a Short trader losing money in a particular trade because option trading is a zero sum game . Therefore Short traders never want to see the strike(s) of their position go into ITM.

I hope the above little explanation can shed some light on why I said a tool that helps to predict whether a particular strike will go into ITM is so important to all option tradings. That also explains why probability is so helpful because when the probability of a particular strike is known then it is just all about a trader's discretion on whether the risk of the trade is justified. In that earlier post I said luckily the probability of a particular strike in option trading is, unlike some other events which their probabilities are difficult to tell, rather easy to be determined, scientifically and objectively. 

For any seasoned option traders, they should be well versed in the jargon in option trading like Delta, Theta, Gamma and Vega...etc. Among these jargon, Delta is defined as the ratio of the change in the price of an underlying asset with the change in the price of a derivative or option. However on the other hand, it is also known as the probability. For example, a strike with 0.2 Delta means p=0.2 or 20% possibility being ITM. One must understand that the Delta of a particular strike does change along with the price movement of the underlying asset though so that probability is better seen as a snapshot of the moment concerned only. Therefore it is rather risky to make a trade base on the Delta reading of a strike to assume it will remain the same till the settlement day especially when there is still a long way to go. 

Considering the drawback of the Delta, some traders resort to the option pricing theory  to use the Implied Volatility (IV) to work out how likely a particular strike of an option will be exercised, ie., being ITM. In real life, IV is quoted by market makers who are usually more market intellectual to judge the riskiness of a particular strike so supposedly to be able to assign the corresponding IV. Basing on the quoted IV, traders can work out the likelihood of an option will be exercised at the expiration according to the formula of the pricing model. However, apart from other elements, the underlying asset price is also one of the variables used in the formula. Therefore using the IV on the calculation of probability literally has the same drawback as the using of Delta. Meanwhile, to the contrary to the Delta, market makers often quote a higher IV when the market is volatile but then when an higher IV is used to be the variable on the calculation in a specific market volatile moment the result tends to be fluctuant thus making it less reliable.

In light of the pitfall of the Delta and option pricing model, I prefer to refer to the historical data. For example for a spot month trading, the past record of the percentage of the monthly closing price vs opening price is used. These past percentage figures, say for the last 10 years, are ranked from smallest to biggest then it is easy to find out which percentage is within the 10% of the smallest as well as the 10% biggest. Those 10% smallest should be negative representing the most extreme adverse months while those 10% biggest are positive representing those extreme good months in the past 10 years. The thresholds right before these 10% smallest and 10% biggest biggest are what I am looking for and are used to become the risk determinants. That is to say, the strike is chosen at the same percentage of these thresholds comparing to the month opening price of any particular spot month trading. Naturally whether it is 10% smallest/biggest or whatever percent just rest on the risk appetite of the trader at their own discretion. 

The above methodology is the application of the probability based on historical data. This idea might not be most scientific but it has taken the history into account. Some argue that history is something happened in the past and it is not necessarily able to predict the future. As Mark Twain puts it that history doesn't repeat itself but it rhymes. Those good months or bad months could be as the result of different causes but the magnitude of their impact in the market were clearly marked in the history which can be used as a reference to whatever happening or going to happen in the future. For example if there will be a black swan event in this month which is not bigger in scale than the financial crisis in October of 2008 then it is quite reasonable to assume the plunge should not exceed the magnitude in that month which falls into the 10% adverse months bracket. Therefore any strike with smaller decline percentage than was that in October, 2008 should be a safe one no matter what the black swan event is.

Having said, the application of probability based on historical data doesn't come without pitfall of its own. The prerequisite of this methodology is the binomial distribution of the past data. Meanwhile even if this criteria is met, if the black swan event is so big and bigger than any past events throughout the statistical measured period, ie., 10 years in the example, then the assumption is simply not applicable. Luckily an as longer as possible period in question should be able to address the issue, largely if not completely. What still makes this methodology fails is that if there will be a mega crisis in scale which has never happened in human's history before like the outbreak of a worldwide nuclear war then the historic statistical data just fails to do their job. However, the point is, if there will be such a devastating nuclear war, then do we still exist? So do we still care about the option traded?

Novel coronavirus mass screening test

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There is a heated debate recently in this little island and it even has the HKSAR chief executive, Carrie Lam, involved into it. She accused the ones whom object the mass screening test on the novel coronavirus have hidden agenda and trying to damage the relationship between the China central government and Hong Kong. Naturally only the persons who do that know whether the accusation is valid but it is not of my concern about it. What I care is whether such mass screening test can do its intended job thus whether the Hong Kong citizens should take part into it and bear the risks associated. A typical benefit vs cost analysis apart from political consideration.

The details of the screening test exercise is yet released by the government but according to the heads up, about 100 sampling spots will be set up in all 18 districts throughout Hong Kong. These sampling spots are mostly community facilities and manned with 3000+ personnel for the samples taking. The participation on the test is voluntary based with online booking for testing. Sampling is swabbing both in nose and at throat.

The controversy lies mostly this is a voluntary exercise meaning it is just all up to each citizen's decision whether to be tested or not. This is just contrary to the intended purpose of the exercise which is expected to break the community infection by detecting and screening out those asymptomatic carriers whom spread the virus unknowingly putting the infection never ends.

First of all, when this is not a compulsory testing then it literally fails to achieve its goal especially when the participation is low. Medical experts said it must has at least 5 millions people take part the exercise then it is meaningful. I am not sure how this figure is arrived at but personally I think when the purpose is to find out those asymptomatic carriers to stop their spreading to the community then even if a handful of them are missed out if they are not tested then the whole exercise just goes in vain.

Secondly when the exercise is voluntary then people can roughly estimate how likely of  those asymptomatic carriers are motivated to be tested when most of them think they are in good condition. Common sense tells us that the most motivated participants are those work or live in high risk premises or those whom already have mild symptoms yet not verified. Naturally it is good to screen this segment of people but this is just not enough especially it is those asymptomatic carriers whom pose the major threat of the unidentified source of infection. In reality even if there is only one such carrier living in the community then the infection will just never end and most of all, most likely it will be untraceable due to unidentified source.

Furthermore the exercise can at large be seen as a snapshot of the status when the individual is being tested when people remains mobile after the testing. They could be healthy at the moment of testing but be infected in the following day. As long as people can move around after the testing then they are under the risk of being infected at any time. That renders the exercise can act only as a snapshot rather than an effective screening.


A meaningful screening works only when it is 100% compulsory and combined with strict stay home order during the entire period of testing campaign. Apparently this exercise will only become a PR show that promotes how the China central government cares Hong Kong people and how generous it is to financially sponsor the campaign.

While as a whole the exercise is bound to be a failure to its intended purpose yet it is not totally useless for individuals at least a snapshot at the moment of testing is achievable. Having said, it does not come without drawbacks. Naturally the biggest concern is the gathering at the sampling venue where risk is quite high because as explained previously that those show up at the venue are most likely whom having high risk. In fact ironically the more successful of the campaign is then high numbers of more high risk participants will be drawn to the sampling venues. This is also in contrary to the government's appeal on the social distancing. The exercise could do more bad than good indeed.

On the other hand, the qualification and experience of these 3000 personnel are at question. The government once said even the medical students will also be recruited. The process of the sampling in the nose poses certain risk which can bring injury if conducted by inexperienced personnel. The exercise will be rolled out starting from September 1 when is a few days later. It is a reasonable worry that whether those medical students are adequately trained by then.

Anyway without the prejudice on political stance, it is all up to each individual's evaluation on their own benefit and risk on the decision. Good luck!

Probably the greatest discovery ever

I have to admit that I have not been a fan of mathematics since my school days. The scores on this subject were low and sometimes fell below the pass grade. I particularly had problem with the abstract calculation on advanced mathematics like algebra and calculus which after tons of brain work yet the answers are still x, y or z which fails to correlate nothing in the real world. Having said that, it does not mean I do not like mathematics though. What I need is to relate the calculation with somethings, better be tangible, that I know after hardworking then I shall get the answers that can be visualized.

I forgot the name of the man whom once said investing does not need a great mathematician. Anyone with basic understanding of simple addition, subtraction and a little multiplication will do well. I do agree with such saying because a Maths idiot like me have never come across any problem in the calculation of my investments. Unless for those who work in the Quant Investing or Algo Trading need advanced mathematical knowledge as well as programming skills, common folks with basic understanding on Maths do not need to be shied away from investing.

Having said, an extra knowledge on top of the basic mathematical calculation does help on a better informed investing decision. This knowledge is not rocket science though. Actually many of us have learned it in our college studying because Statistics is the backbone of many sciences so all graduates must have studied it no matter what subject they are major in. Despite I did have some difficult time during my study in Statistics but I did find that it is interesting because most of the issues that Stat is trying to solve are not abstract idea. In fact many terms that we come across daily are the result of statistics like average minimum wage, households income, queuing time, life expectancy...etc. They are all intimate to our daily life but not just x, y or z.

Among all knowledge within statistics, I think the concept of Probability is the most valuable piece of discovery that mankind has made ever, at least to all investors. In English, probability is about the chance of the happening or not happening in percentage or in decimal point. This is the reason I said Probability is the greatest discovery ever. In most cases, all things on earth will end up to the fact at the extreme polarity of probability of 0 or 1 where in between lies a range of ambiguity and this is the fun part of the world, ie., how likely the result will be. Excuse me for a juicy analogy that someone once said the sexiest woman is not a nude but the one with partially revealing.

In investing world, probability also plays a very important role. We all want to know what direction the Dollar is going to go say by the end of this year, the result is very simple either goes up or down but how likely it is up vs down? This is a billion dollars question and it is all about probability. Likewise, what the chance is that a particular company's debt will be defaulted is of most concern of its bond investors. For option traders, it has nothing more important than the probability of their positions will go into ITM or stay OTM no matter they are Longs or Shorts at the settlement day.

In my previous posts I wrote quite a lot relating to the importance of probability to trading is-a trade-worthwhile and the series of index-option-trading-with-statistic5. I found that probability is really the essence of the option trading because at the end of the day what a option trader cares about is whether s/he can be benefited by her/his premium received from the credit trades or by the trade profit of the long position. Unlike something on earth that probability is somewhat difficult to be determined, luckily how likely a particular strike will go ITM or OTM is rather somehow predictable so making a option trade decision is a lot more logical and reasoned. For example, based on the past settlement data, by shorting a position at a strike which is with 0.1 probability of going ITM will most likely let the trader be exposed at only 10% risk which is quite safe in the normal market situation. Naturally the risk level is completely at the trader's discretion according to his/her risk appetite but the key point is by knowing the probability it allows a trader to pick a strike under an informed decision.

As a option trader, I would say probability is probably the greatest discovery ever!

A world of two worlds

Apart from the novel coronavirus pandemic, the most popular talking point around the world now must be the conflict between the U.S. and China. With the U.S. Secretary of State Pompeo's recent speech in July at Nixon Library, a symbolic place for the memory of Richard Nixon whom started a historical relationship with China, that he explicitly declared that such a relationship was proven to be a failure. A failure which Nixon, or the U.S. be more specifically, wanted to have China to be transformed into a member of the world that shares the western value through the economic integration with the West.

At such a symbolic place that carries significant meaning between the two countries, Pompeo's such speech was no difference from a declaration that now the U.S. not only no longer sees China as a working partner but perceives the latter as a rivalry, if not enemy yet. Despite everybody knows, when the U.S. started the trade war with China back two years ago, that the honey moon between the two nations has long finished. Yet, people might still thought that Uncle Sam was just not happy with the teen rebellion behaviour that his growing up little brother is showing. Some guessed that the U.S. might just wanted to teach China a lesson to behave but did not mean business. Now they realize that all those things were just a prelude. A prelude of a full range of combating including economic, technical, diplomatic, financial and perhaps even military actions despite China is not yet fully well prepared for that at this moment.

Some commentators termed the theme of the relationship between the two nations has transformed from decoupling to disconnection. Decoupling is just about the cessation on cooperation on some aspects while disconnection means a clear cut on all relationships. The undertone is the preparation on a true war at the end of the day. Apparently even though China is eagerly to challenge the world order that was established by the U.S. after the WWII but she is not up yet for a true war with the U.S. and that is why the China ambassador in the U.S., Cui TianKai, was trying to tone down the tension between the two nations saying "both nations have to work harder to overcome the current difficulties, to try to dispel suspicion, doubts or even fear," he said. "We have to build a constructive and mutually beneficial relationship for the future." amid the U.S.'s  continuous breakage on such relationship in all ways like the force-closure of the Houston China Embassy, force-selling on the Chinese origin social media app Tik-Tok...etc which are quite humiliating and aggressive toward the Communist regime.

Perhaps this is the moment the top boss in Beijing regrets the too high profile announcement on the advocacy of the Belt and Road as well as the Rise of Big Nation back a few years ago. Such move awakened the U.S.'s suspicion on China's ambition to challenge the world order established by the former whom will not let it happen by at all means even if resorting to a true war. When people sees the conflict is the fight on the interests between the two nations but indeed it is much more than that.

What the two nations is wrestling on is about the say of the world order. The order that dominates how the world should go and how the global interests should be allocated among nations. Because there is so much in stake, indeed it is not just the confrontation between the U.S. and China. Under the existing world order the beneficiaries are not only limited to the U.S. but its "ally nations" or strictly speaking the countries that can share the benefits under the pecking order in the existing world order. These countries are mainly the western developed countries and a few Asian countries like Japan and South Korea under the U.S. umbrella. It is this common interests that brings them together and formed alliances against any challenger to the existing world order. The typical example of these alliances is the Five Eyes which was originally meant to share intelligence but more and more it is going to be a form of power to strike any prospective challenger to the existing world order. This is the reason why the Japan is going to join the Five Eyes apart from the Australia, Canada, New Zealand, the United Kingdom and of course the U.S.

It could be this kind of coalition map that China softens it tone as much as it can, despite of amid the current humiliation which is not lighter than the invasion of the Eight Nations Alliance in the late Qing Dynasty back in 1900. China knows that once there will be a war, she is not going to fight with the U.S. only but all these beneficiary nations under the existing world order. China also realizes that despite she looks strong in economic aspect comparing to its western counterparts but she is no match at all in all round strength especially in the aspect of military power. Therefore China can't help but just swallow these humiliations to buy time to better prepare herself for this war.

While in her preparation within her own soil, China is going to form the coalition of her own to counter the western alliance as well. Naturally those die-hard U.S. opponents like the Russia and North Korea are best candidates. On the other hand, there are not shortage of opportunistic countries who will take side when the bait is large enough. China is doing this well to provide financial aids to these countries which are mostly those third world ones.

Prior to the War and when the full disconnection is in place, the existing global trading could largely be compromised. Most world cooperation organizations will be split. People interaction between the rivalries is prohibited. Things happened in the Cold War in the 60-70s' might resurge. The whole world will be divided into two blocs. By then, the world will enter into the stage of a world of two worlds.

Alien and its egg

Disclaimers: Hong Kong resident visitors are advised to read this Declaration prior to further reading of this post. Continuous browsing means the visitor's confirmation of his/her compliance to the Declaration.

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I am not sure whether the sci-fi movie The Fly produced in 1986 was the ever first movie of its kind about genetic engineering(GE). Be it true or not, the plot of this movie was an very advanced concept at the time. The story was about a human who was accidentally "fused" with a fly during an experiment so a creature with genes of both species emerged. It was an horror movie because the hybrid became a monster finally and was terminated by its human counterpart. The production seems to be against creating hybrid via the technology of GE juding from the story. I am not a scientist so only have limited knowledge about GE. Just like most of the technologies, there are pros and cons depending on its application and most of all, the people's mind behind who are developing and making use of these technologies as well as their objectives. Basically I am alright on GE as long as the technology does not change the nature of a species fundamentally but just fine-tuning its characteristic towards an improvement or eliminating some inherited flaws.

The Fly was produced in 1986 and coincidentally a political hybrid alien was also created around that time. It was the Sino-British Joint Declaration signed 1984. The Declaration was meant to resolve the reunion of Hong Kong with China after 1997 when the lease of New Territory, a part of Hong Kong,  would be expired. Apart from many technical issues, the reunion was based on the idea of so-called One Country, Two Systems which was in hope to keep Hong Kong's status quo as well as way of living unchanged after the reunion by marrying the China's socialism and the western world's capitalism as much possible as it can be resting the hope (wish?) in 50 years time the Two Systems will eventually integrated into one as seamless as possible.

The One Country, Two Systems (Idea) was once commented as an ever creative and bold master piece designed by the CCP's greatest reform pioneer Deng XiaoPing. It was true that based on the comparatively rigid and stubborn era in the CCP's history, the Idea was really creative because capitalism was viewed something toxic and even a target of striking by some veteran comrades. Allowing its existence in its own soil is really a bold idea. Deng was commented as a pragmatic person well-known with his slogan "Be it white or black, it is a good cat as long as it catches rats" so Deng's Idea was a compromise between the idealism and reality that China was very much behind of the western world including Hong Kong in all aspects so making use of this advance island to modernize the Mainland was something the lesser "evil" by allowing this once stepped son remained as much possible unchanged as the CCP could tolerate.

Despite the Idea allows the lap of 50 years to gradually bringing the once stepped son back on board with the big family but things, especially in the recent years, do not go well. Indeed it is a disaster that Hong Kong is not only not getting closer than it was to its motherland but vice versa. After all, the Idea is meant to convert Hong Kong, in baby steps by buying time, into socialism. Keeping the capitalism nature in Hong Kong was something a compromise but when China is getting more and more fully-fledged and the reliance on the island for its modernization becomes less indispensable, the Idea became less and less unshakable especially when China is imposing more and more "guidance, direction, monitoring" over Hong Kong's internal affairs.

Some people seem to be awakened and is aware of just in recent years about China's changes on the relationship with Hong Kong. They might be puzzled about the changes and some attribute it to the social movement in the past few years. They are partly right because Beijing is getting more and more annoyed with those social movement but frankly speaking the relationship is bounded to be changed even if without these social movement. People should not forget that allowing the capitalism element was only a temporary compromise based on a pragmatic need at that time. Exercising socialism in Hong Kong is CCP's ultimate goal when the island's role on assisting China's modernization is eventually finished but this step will not happen overnight in June 30 in 2047. Marrying the two systems and finally converting them into one takes time and the only way is while increasing the socialism element at one hand then decreasing that of the capitalism at the same time. we are just almost in the mid way of this process. It is like genetically engineering the capitalism gene with the socialism gene into one creature, or an alien if you like, into Hong Kong in this moment.

While the alien is getting into its shape now it also laid an egg as well. It is the Hong Kong version of National Security Law(NSL). The Law is termed as the alien's egg because it further hybrids the two incompatible law practices, ie., the Common Law and the Continental Law, into this Law. The NSL is at large based on the concept of Continental Law but it is meant to be implemented in Hong Kong where Common Law is exercised. Most of the legal practitioners in Hong Kong, especially barristers are confused how they can defend their clients in the courts or how to advise their clients to avoid violation on the NSL which mainly laid out the principles but not the specific actions of crime as put in the Common Law. The NSL egg is exact the example of the artificial genetic engineering of the hybridization the Two Systems.

God bless Hong Kong!

Declaration

In light of the enactment of the Hong Kong version of China National Security Law since yesterday and the content was disclosed since then, the below declaration is essential particularly in response to the Article 29 (5) of the Law.

DECLARATION

1. As stated in my first post, this blog is solely a record of my thoughts. While the Blogger cannot stop visitors, no invitation of viewing has ever been made to whosoever.

2. The Blogger has no knowledge of psychology so cannot anticipate any viewer's emotional development including but not limited to hatred after reading this blog.

3. This blog's content may or may not contain comments on HKSAR government and/or China government, any person, residing in the HKSAR, who might develop emotional development including but not limited to hatred towards these two Governments should STOP reading NOW and never visit this blog again.

4. While every effort has been made to avoid emotional development including but not limited to hatred towards the HKSAR government and/or China government, the Blogger assumes no responsibility should any viewer residing in the HKSAR keeps reading this blog thus leading to their emotional development, including but not limited to hatred, and their subsequent actions.

An historical day

Today is the last day of this June and this is also the end of the first half of 2020 which is an extraordinary year in the sense of globally as well as locally here in Hong Kong. The novel coronavirus pandemic is truly remarkable globally. A tiny creature has turned the human world upside down yet it is still ongoing and its impact is yet fully emerged.

Locally the Hong Kong version of China National Security Law(NSL) is finally passed in today's the People Congress meeting despite of the strong opposing opinion from the West and it is expected to be enacted in tomorrow, July 1, the day of reunion of Hong Kong to China 23 years ago. This should be an important event in Hong Kong but surprisingly it seems not receiving the relevant level of concern from the majority of the people here in Hong Kong except those figure heads of the pro-establishment and opposition political camps. It is surprisingly but indeed not surprisingly because the public know that the NSL is going to be passed and be enacted for sure no matter what criticism or sanction from the West, mainly the U.S., has put forward. There is an interesting analogy here saying that one just cannot help when the rain is going to fall as well as mama is going to marry someone else meaning when the CCP is determined and committed on the NSL, there is literally nothing the islanders can do on it. The power between the two are just so unproportional that people here in Hong Kong can do nothing other than being indifferent on such an important law that is going to affect their life significantly.

The HK version of NSL is so important to Hong Kong that some commentators even called this Law turns Hong Kong into the chapter of re-reunion with China meaning the enactment signifies the Central Government is going to modify its governance over Hong Kong in light of the failure of the implementation of the so-called One Country, Two Systems here in Hong Kong in the past 23 years. It is widely believed that the Law is going to be effective in clamping all sorts of opposing voices and actions which were considered as legitimate in the past. The grapevine says the penalty is ranging from 3 years of imprisonment to life sentence so it should be effective to mute Hong Kong. It is going to be an quite different Hong Kong starting from tomorrow.

The NSL is not only a local issue but it also receives much attention internationally. Almost the whole western democratic camp opposes it yet China stands firm on the legislation. Apparently China is more and more confident on her advocacy as and when she is becoming more and more fully fledged. Despite knowing the whole western world is opposing yet she is bold enough to insist on the legislation, the action is more meaningful than the Law per se. It is announcing to the world that China can say no.

When in today China is publicly announcing she can say no to the world, she also publicly posts her stance that she dares to challenge the world order that has been established by the U.S. since the WWII. Simply being the second largest economy just cannot fulfill China's appetite. When she sees the whole world is struggling with the pandemic on lockdown or reopen, mask or no mask but she can manage to contain it within a province. China just can't help but thinks she can lead the world better. Ambition rises along with self content.

The rise of a big nation!

Politics is cruel?

I wrote blogs occasionally but more often I read posts of other bloggers as well. One of the bloggers recently said politics is cruel because this generation of youth in Hong Kong is going to be deleted meaning they will not be given opportunity in career because employers are worry on their political stance. This whole generation of youth will end up to be victims resulting from the recent political social events no matter the ones who have really engaged or just onlookers. Employers will just play safe to avoid hiring youth in this age group. The recent social events are no doubt political and it is the whole generation of youth who is going to pay the price. This is why the blogger said politics is cruel.

His reasoning might be controversial but his view is out of question. In fact my opinion is that politics is not just cruel but even unforgiving. To explore the topic, a better understanding on what politics is perhaps can help. Wikipedia puts it as the set of activities that are associated with making decisions in groups, or other forms of power relations between individuals, such as the distribution of resources. The Oxford Dictionary says it is the activities involved in getting and using power in public life, and being able to influence decisions that affect a country or a society. I am not knowledgeable enough to argue on these definitions but personally I think they are just too textbook type of things though. A street smart view is that whenever there are three persons or more then there is politics. My own interpretation is very straight forward that politics is the way of parceling out interests among powers within an assembly of people. No academic jargon.

In fact politics ranges from small scale between couples to social circle and office politics, as well as large scale in societal, national and global so perhaps it did not happen only when Robinson was stranded in an island of nowhere. Unlike the politics between couples that it is more about the dominance of the family issues and/or sexual life but rather than financial, the one I talk about is on the societal or national, if not in global level. Politics at such level is about large scale, enormous interests. Very often it is also not only about the benefit of one or a few but a bunch of people/nations who form a beneficiary group. When the interests is large enough then it naturally attracts different groups who are also in pursuit of it thus fierce competition is inevitable. Politics at this level is all about conspiracies, deception, coercion, lure, alliance, alienation ... all sorts of dirty tricks to defeat, if not eliminate, the rivals as the ultimate goal. Therefore it is just too gentle to describe politics is cruel but in fact it is unforgiving and about life or death without any mercy. 

Politics is unforgiving in nature due to the underlying fundamental that it is about parceling out interests among powers while greed is the most deep seated nature of human being. Despite of thousands of years of civilization, mankind is still under the control of the greed on the pursuit of power, wealth and fame. Politics is the way to consolidate self's power and undermining that of the rival, while power is the means to acquire wealth and wealthy people want their names marked in the history. Nevertheless wealth is the center piece of the whole pursuit. Without the prize of wealth, power is tasteless. Any comrade in our dear communist party knows about this and that is why all anti-corruption movements either ended up in failures or just turned out to be the tool of the internal power struggle which in turn became the politics in combating for the say to allocate the control of the state-run enterprises thus the source of the enormous interests considering the huge revenue of these Enterprises.

Politics among nations, especially between the alpha and its challenger, is also ferocious. The combat between the U.S. and China is a good example that no more elaboration is needed. All things like trade war, Huawei 5G equipment spying conspiracy, ban on the export of the U.S. technologies to China, allegation on the pandemic, Hong Kong policy act, argument on the HK version national security law etc are just excuses. The U.S. "suddenly" woke up and realized that if they do not eradicate the CCP regime from the earth, their existing dominance over the global affairs thus its privilege on parceling out the global interests will soon be lost. An all-round attack was thus launched since two years ago. Naturally being committed as a challenger, the CCP was aware of the story board in day one when she had the intent to take down her uncle Sam. China bought time by engaging with the U.S. on rounds after rounds of negotiation in the past two years, today she is well prepared for the counter-fighting. China is now up and ready for a full contact combat with the U.S. for global dominance. This is true politics in play and the battle is about the life and death of being a world leader thus the say on the global interests. A "good show" is coming soon.

Politics is always about survival. Winner takes most, if not all. The prize is so big so mercy is never an option. For people who decide to take part into it, this is something they must be aware of in the first place. There was a joke happened on the HKSAR ex-chief executive, Donald Tsang, who once claimed his occupation is politician. Apparently he does not know the underlying nature of politics so mistakenly thought a government administrator is politician. However, he ended up to be imprisoned as a victim of the political game beyond his terrain. 

Probably a silver lining?

A political nuclear bomb exploded here in Hong Kong in last Friday when the news set in that China is going to establish a HK version of China National Security Law to be added into the HKSAR Basic Law in the form of an annex. This is commonly understood as a bypass of the Hong Kong Legco's failure to proceed on the law-making as per the Article 23 of the Basic Law after 22 years since the reunion with China. Apparently China is mad about the incompetence of the HKSAR government so lost her temper compounded with the more and more explicit squeezing from the U.S. during the last couple of years.

The article 23 of the Basic Law has been a taboo in Hong Kong because there is a fear among the general public that the infringement on human rights issues that happened across the border will happen in the island after the establishment of the Article. The worry on the further tightening amid the already ever increasing self-censorship on the freedom of speech, freedom of press and the independent jurisdiction surges when the news sets in. The opposite camp described the move signals the death of the "One Country, Two Systems" is certified.

The fact that the Article has such a low reception among the general public here in Hong Kong does not come without ground. China is notorious with her record of infringement on human rights on her citizens. The national security law is a swiss knife on clamping the opposition against the CCP's ruling. Despite of the title of national security but the law per se is mainly for the sake of the fortification of the CCP's governance. The extension of the China's National Security Law(NSL), be it through the establishment of the Article 23 or the introduction of the HK version of NSL, brings only the same outcome that the level of the Hongkongers' human rights will significantly be clamped.

While the public was shocked when the news was aired during the morning news report, the Hong Kong bourse responded with a more than 1300 points all way down blunt plummet throughout the last trading day of the week. The market expressed its most explicit view and the preliminary general view from the stock market commentators were conservative. Most of them hold the view that there will likely be a testing of further south. They are most likely correct because the HSI has leveled off in the past one and a half month while the Bollinger Bands width has reduced to the 1000 points range in the last two weeks, a typical signal that breakthrough is around the corner.

While the stock market is more about the money game rather than the business field, there are also views that the NSL will drive away the foreign investments in Hong Kong as a result of the worry of the deterioration of the One Country, Two Systems which in the worst scenario will render the island becomes just among one of China's thousand common cities. While the impact of the NSL on the future living of the majority of the islanders is out of question, the business world, especially international players, might hold a different view though. For businesses, especially foreign investors, the key concern has always been whether there is business opportunity to make money when deciding where to invest. The well-being of the local people is the least consideration, deep inside their mind.

When the HK version of NSL is in force, the protestors vs police confrontation will become history. All sorts of the opposing voice, view, action against China and the puppet HKSAR government will be harmonized under force. Offenders will be arrested and prosecuted under the NSL immediately to keep all these unwanted phenomenons at bay. Not a nice place to live but it is definitely a more stable environment for conducting businesses as long as the judiciary especially regarding the commercial part remains relatively independent. After all, given that the present situation on human rights in China is much worse than that in Hong Kong now but there are already many foreign investments in China so even if one day the human rights in Hong Kong becomes the same as that in China, it does not really bother foreign investors as long as the capitalism part of the One Country, Two System still survives.

Despite of the high profile comments from the western countries, it is most likely that China is set in stone to proceed the HK version NSL anyway. In fact, the opposing comments from the West in most cases just turned out to be a disservice of their original intent as the CCP has a tradition to defend their ego just to do against what they are criticized by their western counterpart. The more the West criticizes on the HK version NSL the stronger China's determination and sooner the implementation will be. Waiting ahead for the Hong Kong people is a monotone, be harmonized, steady society. People no longer have to worry about the police's tear gas nor the protestors' road blockages. Businesses can go as usual again.

Is that a silver lining of the HK version NSL?

Wild thoughts amid the novel coronavirus pandemic (2)

While the novel coronavirus situation seems to be leveling off in the western world like Europe and mixed in the U.S., in fact, from the global perspective it is still far from satisfactory because there are still a daily close to thousand new cases in Singapore throughout the past week while things in Russia is getting worse now. Coincidentally these two places are in two extremes in the climate that one is hot all year round and the other one is still cold at night now so it tells us that this virus can spread disregard of the weather. Unfortunately this phenomenon suggests that the earlier forecast made by the medical experts that this virus is going to be with us for good perhaps bingo. On the other hand, not only there were already protests in some of the states in the U.S. that people requested lifting on the ban a couple of weeks ago but there are also voices in the Europe that people urging for reopening. Ironically the U.K. prime minister Johnson has just made his speech about his experience on the fighting with the disease saying that he was indeed at the brink of death yet people just seems too brave to ignore the consequence of contracting this virus. Apparently just as what I said in my earlier post that if this outbreak as well as lockdown persist then the fear of more people will die from financial unwell than that from disease overrides mind. This is sad but true and this is the reality or dilemma the world is facing now.

While it is still controversial on the cause and origin of this virus but no matter what this is a setback of the arrogance of human being which is totally defeated by a much much smaller tiny creature at least up to this moment. Not only that an effective vaccine is still far from availability but even if when it exists, how much time will it take to produce enough dosages for the world's 7.8 billion population? Let alone some countries just even cannot afford to buy enough vaccine for their citizen. Willingly or not, herd immunity seems to be the ultimate resort for some poor countries despite at a high cost that many infected will not make it given the poor condition of the healthcare system in these countries.

Despite it is called novel coronavirus but in fact people should not be surprised on its attack. Medical experts have been waving red flag on the onset of the superbugs which is as the result of the abuse on the usage of antibiotics. In fact there are already a few antibiotic-resistant bacteria exist, namely MRSA, CRE, VRE...etc, that these bacteria cannot be treated by the usage of existing antibiotics. These superbugs can cause diseases in various severity from skin infection to death. Luck seemed to be on human's side so far that there was no outbreak of fatal disease caused by these superbugs. Is this Coronvirus just another red flag or will it end up to be the terminator? Time will tell. People should not forget that 90% of the population of the indigenous Indian in the America was wiped out by the virus brought to this new land by the European settlers centuries ago. Viruses are tiny but could be lethal.

Prior to this virus outbreak, human is so contented on their level of scientific knowledge and technologies. Some even think they are almost playing God's duties. People believe that there is a will, there must be way to defy the laws in the mother nature. The world, oh no, should be the universe is all up to human's exploitation. But is it?

No doubt that human's intelligence is above all creatures in the world so this single species excels in this planet. Human being not only dominates the earth but squeezes the room of existence of other species. With their superior intelligence human created a host of tools that other creatures are no match with in the competition on resources. Mankind seems to be almighty with the equipment built under their technologies. However, while people is contented with the progress made along with their intelligence, it seems they have overlooked that other species are also evolving along their own path. Different animals have developed different abilities which mankind is no match with at all not only to survive but also to race against their preys and predators in order to flourish. Unlike the external equipment to human being, these animals own these innate abilities built in their own bodies like bats can locate with supersonic, eagles see with super vision, electric eels shock their prey with high voltage electricity, sharks can detect the tiny electric wave emitted by the prey...etc.

When people is so proud with their equipment and the abilities brought by these tools, it seems they have never thought how vulnerable human is when they are deprived from these equipment which they take it as granted. No need to go too extreme to imagine when there is no electricity in the world but just imagine the Internet is, for some reason, no longer working then can someone think about what a world will we be living in? On the contrary our animals counterpart is not upset at all if one day no matter due to whatever reason human's technologies do not work anymore. There is a saying that if one day the world is destroyed by our own invention of nuclear bomb but cockroach will still be living.

Human appears strong and in fact we are strong when we are in command on our equipment. In other words, we are strong just because we have these equipment and we are nothing when we do not have them. The reality is that most of the people do not survive without the civilization we created.

I recall one of the lyric of the song Hotel California.

"We are all just prisoners here, of our own device"

Globalization rethink

The novel coronavirus global pandemic not only hits the world on the health aspect but also imposed a profound impact on the world economy as well. As and when the virus situation subsides (hopefully it will) there will be a host of topics that the world must look into it so many people said our world is going to be a different one after the pandemic. Among the list of topics, one most talked about is the future development of the existing globalization setting.

Some people said the once flourish globalization is nearly destroyed overnight along with the onset of the outbreak. Alongside the lockdowns and shutdown on the national borders on many nations across the major continents human traffic, especially cross-border, literally came to a complete halt. Cargo traffic is equally hit as well because when lockdowns on cities as well as on some nations kicked in the production is unavoidably severely impacted. Globalization means production of all the parts within a product scattered throughout different countries, if not continents. The Domino effect further hammers the normal operation in production when one or some imported parts is out of stock due to the lockdowns. This is particularly true for those enterprises who practice JIT (Just in Time) inventory system. The world suddenly realizes that how fragile the existing system is so people can't help but just question whether we should keep the existing system running.

Naturally the concern on the stability issue arising from the logistic problem is quite valid. The view is rather monotone though. The argument rests mainly on economic which focuses on the disruption on production and the economic losses arising from it. Despite there are also some western countries have political concern that some strategic essentials which are now produced overseas. This raises the concern up to the national security level when supplies are interrupted just like what has happened on the face masks. Naturally it is almost for sure that governments around the world will raise an agenda for the procurement on such strategic essentials but after all, these items are just a very small fraction of the total world trade volume so the retreat of these items from the world trade will not pose a significant impact on the globalization status.

Perhaps before we go further on the assessment on the survival of globalization, a look back on how the globalization is born can help. Most people see globalization a rather modern thing meaning it happened quite lately. Many people relate it to the industrialization and the modern management theory of labour division. It is true that only after the industrial revolution that production mode changed from manually to inception of machinery so efficiency was gradually increased and so was the output. As the technologies advanced over time but not all countries progressed in the same pace and the same direction, some countries outperformed others in the production of some particular products so labour division emerged among nations and that was the background of the birth of globalization.

Nevertheless, industrialization and labour division just provided a breeding ground of globalization but they do not necessarily cultivate it without a key drive. There must be someone giving them a big push to facilitate the onset of globalization. In fact industrialization and labour division were something very revolutionary by themselves at their birth but they were just the means of the underlying end, ie., profit maximization. By the employment of sophisticated production technologies and having the products made in a low costs country yields the highest profit. Profit maximization is the ultimate goal, or the single goal, if a business must choose from. Yet this is the economic drive only.

In the earlier paragraph I mentioned that most people think that globalization is a rather contemporary concept but in fact perhaps it happened as earlier as in the heyday of the British Empire who was once described as the empire on which sun never sets. The Empire earned this title because she once had colonies where the sun would always shine on one of her colonies. She owned so many colonies not for fun but for profit maximization. People should remember that the Empire was the birthplace of the industrial revolution so she had the most state of the art machinery at that time. The Empire needed a great deal of raw materials for her production as well as a big market to dump her products made by the machinery. Naturally she did not have enough natural resources from her own soil of three islands only so the Royal Navy conquered those colonies which fed the Empire's appetite. On the other hand, the warships also opened up the market for her products in different continents. This is the globalization in true sense.

After the WII, the U.S. succeeded in replacing her mother to be an empire. "American Empire" exists in another form that it basically does not own colony but through its strong military muscle and the U.S. Dollar landscape the "Empire" has been ruling the world with even more (economic) colonies than her mother. Therefore the U.S. was, till this late decade, an hard core fan of globalization. People have heard her solid support on the globalization as well as free world trade over the past decades because these two advocates are the nutcracker on opening up the world market on the natural resources supplies as well as product export. Things started to change only when Trump became the president of the U.S. because he holds different view from the multiple super super wealthy families whom are the beneficiaries of the U.S.'s globalization policy. Therefore Trump does not earn their support and people see Trump has his leg being pulled more than any of his predecessors.

Just like any of the empires in the history, the British Empire fell so will the "American Empire" eventually but people is seeing a young challenger on the rise. China is eagerly trying to mimic what the Uncle Sam's defeat over his mother to replace this ageing giant. People see that China is pathing her way towards an empire by advocating the Rise of a Big Nation followed by the initiative of Belt and Road. She is actively stretching her legs and arms over the world. Therefore people is not surprised to see China became the most solid supporter of the free world trade and globalization than is the U.S. now.

Globalization is the way empires pillage the world so as long as there is empire in the world, there will always be globalization out of question.

Wild thoughts amid the novel coronavirus pandemic

A tiny creature turned the human being's world upside down. Despite the recent news shows that it seems the death tolls due to the novel coronavirus became a little bit leveling off in these few days but the worldwide infection, except that in the origin of this pandemic China, still remains at a high level. Some optimistic people think the infection rate will drop when summer draws near. However, these people are just far too optimistic or just with too much wishful thinking. They simply forget that this is a global pandemic meaning that there are infection even in the African countries and tropical countries like Singapore and Thailand where summer is all year around. This coronavirus is just not another SARS which subsided along with the warm weather. Unfortunately the forecast made by medical experts as I mentioned in my post Did we go too far? a month ago seems becoming more and more evidenced.

In the same post I also had query that the lockdown, especially nationwide, is an appropriate measure in dealing with the outbreak because such handling is devastating in economy for those countries which practice it. Apparently as what I put it a herd behaviour is proven to be a brainless mimicking now. Despite the U.S. has the highest death tolls and infections so it became the worst hit country yet it only implements patchwork lockdown and people should note that the U.S. is also a vast country and with strong economy like China who can withstand the harsh economic consequences of the lockdown. Smaller nations are just committing economic suicide when they blindly mimic such controversial measure.

In fact as strong as they are yet China has withdrawn the lockdown on her Hubei province already and Trump is looking forward eagerly to resuming the nation in normal in order to keep their economy engine running. When we consider seriously the forecast that made by the medical experts that this coronavirus will most likely with us for good and in the meantime vaccine is not going to be available in this 1-2 years time that we know that locking down in the hope to buy time to stop the spreading is virtually impractical.

Locking down in the short run can really stop the spreading within the locked area because social contact is cut completely but at one hand lockdown is just impossible to be permanent so spreading will just resume as soon as lockdown is lifted as long as the virus still exists in that area. On the other hand, the whole world now is living in a global village so as long as this virus exists in one corner of the world then it will just spread to the other parts of the world even if a specific nation has successfully eliminated this virus in its soil. The effort and economic loss for the lockdown just went in vain.

The U.K. once considered tackling measure, herd immunity, was under big attack and Boris Johnson also became a laughing stock when he himself contracted the disease as well. This idea looks outrageous in the first glance because it puts the lives of the whole nation under serious test. Many weak and vulnerable people could die if not treated properly and timely. So the point is not the idea of herd immunity but the execution of this idea. The key point is an organized fashion of herd infection that will not flood the public health system to crash. Man-made vaccine takes at least 4-5 years to be developed but the antibody can be generated one week after the infection. An organized fashion of herd infection within the capacity of the public health system not only let the community generate antibody in the quickest time but also keep the patients in good looking-after condition to minimize the death toll due to complication. Let alone the salvation on the economic impasse arising from the lockdown.

Whether lockdown is effective in combating the spreading is still controversial and only time can tell. One thing for sure is that many people around the world have already lost their jobs or at least some of their income. When the outbreak persists as well as the lockdown then there will be even more people than is now in serious financial hit. They do not die from the disease but just from financial unwell.

Herd immunity is outrageous? In extraordinary time people need thinking out-of-the-box.

Does it upset you?

Yesterday the HSI lost more than 1100 points again and totally wiped out the 1096 points surge in last Friday. In fact speculation on re-bounce in a down trend market is a very risky business like the attempt to catch a falling knife. So far the HSI has fallen 25.6% and 35.2% from the latest peak or the historic peak respectively. The biggest trigger of the plunge is out of question the outbreak of the global pandemic. As it is event driven so no one can tell where the bottom will be until the global infection rate and most of all, the death toll, are stabilized. However, it is pretty sure that a lower level is yet to come.

As what I put in my post Correction or crash?(3) that if the HSI breaks the last foothold of 19400 level then it is very likely the Wave C is on its way. Anything below 19400 means a more than 42% plummet from the historic peak. Not all stocks, in fact most of them not, are synchronized with the HSI on the magnitude of plummet. Again the history is a good reference. The valley of 10676 in 2008 October is the departure of the past uptrend. The prior peak of this valley is 31958 in 2007 October. The valley was a 66.6% fall from its peak. However, many stocks have suffered more, or much more, loss than was the then HSI lowest point. For example, SHK property(0016) was -72%, HSBC(0005) was -78%, Galaxy(0027) was -90%, Great Wall Motor(2333) was even -97% meaning its lowest point was only 3% of its peak! A nearly total loss!

A casual glance on most of the optionable stocks revealed a current fall of a roughly average of 40% from their 52 weeks peak now. If the HSI is going to fall further then very likely some of the individual stocks are going to be suffered a further loss from their 52 weeks peak. The record from the crash in 2008 showed the randomly chosen 60 optionable stocks have suffered an average 80% loss from their peaks. If there will be a crash and if the magnitude is same as the last one, one can reasonably expect there will be another 40% fall from their peaks for most of the stocks. This can explain why catching a falling knife now is a very risky business.

Despite the fall in stock prices in 2008 was scary but  in last year some of the big cap stocks have re-bounced and even surpassed their previous peak in 2007 like CLP(0002), Hang Seng(0011), Henderson Land(0012), MTR(0066). These big cap stocks tally what Buffet's saying that in long run buy and hold on good quality stocks could be a good strategy. Having said, interestingly there are also some big cap stocks failed to return to their peaks in 2007 even amid the HSI historic peak in last year like SHK(0016), China Life(2628), PetroChina(0857) and China Mobile(0941) etc. Surprisingly these underdogs are also, or at least once, regarded as star stocks.

It seems choosing the right stocks is still the key point in terms of Buffet's buy and hold strategy but it is easier said than done. A Monday morning quarterback is of course always right. Without a crystal ball, one can only rely on the historic trend of the stocks for clue. In my post stock picking make easy I raised the idea of picking stocks with a long upward trend, say, 15 years in the hope the trend can continue even after a crash.

Apart from a track record of upward trend, if a stock is giving out a steady growing dividend payout every year in the past 10 years. If there will not be a big change in its fundamentals then it is likely that it will keep paying a promising dividend in the years to come. Naturally nobody likes to see his/her portfolio's value is cut by half or even by 80% but when a crash happened then this is the life that investor has to live with when he/she does not has a crystal ball to cash the portfolio before the crash.

While the fall in stock prices in a crash is substantive but one can choose to change the mentality to perceive it in another way. Perhaps people can imagine they are the owners of the businesses which they have stock holdings. I believe Li Ka Shing is not bothered at all even the stock prices of his companies fell in any of the past crashes because he knows his companies are still making money for him, disregard the stock price level. So as long as the portfolio of their stocks are with a solid business model that can survive this crash then people can just leave them alone and just wait to let them to climb to, hopefully, an even higher peak after this drought.

Rather than focusing on the fluctuation of the stock prices in their portfolio, perhaps one should spend more time on scrutinizing the business model of their stock holdings instead. If your stock holding displayed an upward trend in the past 15-20 years, giving you an annual 5%+ dividend and a growth on the absolute dividend amount over the years, and most of all, it shows a track record that it could make an even higher peak than that before this crash, then does it upset you?

Correction or crash?(3)

Right after my second post with the same title Correction or crash?(2) in Mar 12, the stock markets allover the world experienced a horrible Friday in the following day and days of whipsaw fluctuation. The HSI even saw the 22500 level when it hit the day lowest point.

As mentioned in the second post, three technical analysis suggest a very likely southward development for the HSI. The three technical analysis, ranging from short to long term, are the Head and Shoulder formation, supportive line formed after resisting two attempts and the possible Wave C according to Elliot Wave Theory.

Having said, it is still too early to conclude a crash is definitely on its way and there is still hope despite the recent plunge, 22.7% low of the latest peak, looks really in bad shape. The main reason lies on the hypothesis that despite of the divergence between the DJI and HSI since 2018 but in most of the time the two indexes are synchronized in direction. The recent whipsaw in the U.S. market is mainly profit-taking driven and partly event triggered by the global pandemic that sparkle the worry of worldwide recession if the pandemic persists for a long time, say a year or even longer.

The conspiracy in the U.S. market is that Trump will do everything he can to restore the three major indexes in the U.S. back to a relatively high level for the sake of his second term of presidency. The performance of the stock markets was used by Trump as the score of his office of presidency. There is about half year to go prior to the election, as long as the pandemic can be contained and compounded with the global monetary and fiscal stimulation measures that floods the financial world with excessive liquidity, the U.S. market could be saved, perhaps. The liquidity spillage over the Hong Kong bourse might save the HSI as well.

There are several footholds to gauge the possible development of the HSI. As the Index has already dipped below the first foothold of the supportive line formed after the two attempts in 2018 October and 2019 August at 24800 then the next foothold is the target of the head and shoulder formation which is around 23000 where the HSI is nagging in these past two days. A further drop below this level could mean the test of the last foothold of being a correction at the 61.8% adjustment of the total rise from the valley in 2008 till the historic peak in 2018 which is around 19400.

As long as the HSI can stay above the 19400 level, despite it is a huge fall from the historic peak but it will still be a correction because it will rise again and theoretically there should be an even higher record in the future. However, if this last foothold is lost then a true crash is really unavoidable as it is quite evidential that Wave C is really on its way.  Judging from the record in HSI except the first ever crash in 1974 that the Index has dropped from 1774  to 150, the following 10 crashes since then ranged from -48% to -103% of the total hike with the average around -80% as elaborated in my first post Correction or crash?.

Will the HSI be back to or even fall below the 10676 in 2008? Let's wait and see!

Did we go too far?

As many other countries, apart from the epicenter China, were infected with the novel coronavirus, the WHO finally admitted that it is a global pandemic and truly it is that despite not every nation in the world but all continents with human habitat have become infected areas now. Interestingly it seems China not only "exported" the disease but also the way of the public health handling. Many countries now mimic the sealing up of districts or even cities with outbreak. Some like Italy and Spain even went to next level to seal up the whole country and imposed residential quarantine in the whole nation. It seems Herd Behaviour is in play again now, and as usual.

There is a word of wisdom saying that one's tonic could be the poison of other. Sealing up the entire city or even a nation could do more harm than good when without a thorough examination on the long term effect but just brainlessly and blindly follow what China did on the blockage in the Hubei province where the Wuhan City is as well as the outcome. So far it seems China has contained the outbreak within the Hubei province by sealing up and imposing residential quarantine over the 59.2 millions of population. The success is indeed a Pyrrhic victory and it was the last resort of the lesser evil option when the patients are way much more than the capacity of the local medical system. Most of all, this measure would not has become effective without a powerful central government, or in other name, a totalitarian administration. This is exactly what the democratic nations are lack of.

The effectiveness of the Hubei blockage also lies on the China context that she is a vast country with 13+ billions of population. The powerful central government can coordinate its resources other than the Hubei province effectively and efficiently to implement whatever measure deemed to be necessary to deal with the outbreak in a relatively small fraction of the whole nation. Sealing up an entire province with 59.2 millions of population could be a detrimental hit on its economy but it is still not up to an arm or leg to the whole nation. Without such background the sheep nations who brainlessly follow what China did could just put themselves into an economical impasse. Residential quarantine means no productivity at all for the entire nation or the related district, without the effective and efficient support from an outside source, their economy could quickly be suffocated. Revenue lost during the sealing up is gone forever like barber shops, cinemas, restaurants, gyms, amusement parks and transportation of all sorts...etc and even after the outbreak the future consumption just cannot compensate the already lost revenue so recession in those countries or districts is literally something for sure.

As what I put in my post Is A Trade Worthwhile that we should examine the probability as well as the payout whenever we decide to bet or invest. The same theory holds true when facing a risk that consideration should be put on how likely and what the damage will be. This novel coronavirus is said to be highly infectious so if there is no enough protective gears for everybody then the probability of contracting the disease is very high. This is exactly the case allover the world but the key point lies on the extent of the damage even if infected. The mortality rate, according to the WHO and the factual statistic from most of the infected countries also show that it is around 3-4% as a whole. This mortality rate is based on death toll against the confirmed infection but it is quite sure that the actual infection rate must be much higher than what it is known because many countries are just in shortage of the testing capability to verify all the vectors, especially for those asymptomatic. The disease could be less fatal than it appears to be, definitely far less than a common flu.

We must admit that we are living in an imperfect world that we cannot have the cake and eat it too. The experience for those areas with earlier outbreak could be a good reference to the late comers.  China is the epicentre and Hong Kong is indeed very much synchronized on the infection. Despite there is no statutory citywide residential quarantine here in Hong Kong yet some businesses have  virtually nearly come to a halt like the tourism, hospitality, dining and most retailing except grocery. So the impact on those nationwide and citywide sealed up is unavoidably comprehensive and even bigger than that on Hong Kong. Some medical experts already hinted that this virus is not going to subside soon or even probably to be with us for good. In that case, is the world really sustainable with the current mode of counter measures?

Did we go too far in light of the economic damage vs the public health crisis?

Correction or crash? (2)

In early October of 2018 when the HSI saw a 7100 points plunge from its historic peak of 33484 I wrote a post with the same title Correction or crash? as this one putting forward the idea that the HSI was at a critical moment. Luckily at the end of the same month, after further falling of 2000 points, the HSI found its support and saw a rally in the following six months up to the April in 2019. Therefore the plunge was proven to be a correction only. However unfortunately the peak of this rally is still lower than the historic peak. What's more, the subsequent trend in the prior eleven months from now has developed a descending channel. Today the HSI is again at another critical moment when it fell below the valley in the end October in 2018. Not only it has broken a support level of 24000 which was formed after two testings in October of 2018 and August of 2019, today's falling below of this supportive level could signal the descending channel  that formed eleven months ago is very likely to continue.

Apart from the established downward corridor, the HSI also fell below the neckline of the head and shoulders formation formed from last October to this March. The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns.

The diving below supportive line, the established descending channel and the falling below of the neckline of the head and shoulders pattern all posted a southward trend to the HSI. These technical analysis revealed a pessimistic future of the HSI from a rather short time horizon though. When we take a look of the past 15 years chart. Thing is even more daunting.

By referring to my first post with the same title as mentioned earlier, you know what I am talking about. If the valley in 2009 is seen as the departure of wave 1 and the historic peak is the top of the wave 5 then this dip is lower than the previous one in 2019 which could mean this dip is indeed the wave C on the go.

I recap the last paragraph in my previous post as below.

However, if base on my view that the two debt crisis are big correction only then the departure point should be the valley after the suspension of HK stock through train followed by Lehman Brothers at 11345 in 2009 when QE began. Therefore the total hike is 22,139 points. With usual 80% adjustment it means a fall of 17,700 points so the valley of this crash, if really it is one, will be around 15700 level!
Hold tight, man!