At the close of each year, I am accustomed to composing a reflection on the preceding twelve months and articulating a strategic plan for the year ahead (though execution remains a separate matter). However, an unanticipated departure at the end of last year resulted in my welcoming the New Year abroad.
Occupied by the pursuit of fine dining and various professional obligations—as this was not a purely recreational endeavor—I lacked the leisure to write, balancing moderate labor with periods of respite. The demands on my energy were unexpectedly substantial.
During my time abroad, I mentally cataloged various themes and plans; however, it is only now, nearly two weeks after my return to Korea, that I find the capacity to commit these thoughts to writing. The transition between years proved more taxing than anticipated.
I shall begin by auditing my projections for 2019.
To provide the conclusion at the outset for the sake of brevity: Every projection was validated.
Validation of 2019 Outlook (Based on Closing Prices on Jan 2, 2019)
Year-End Review and 2019 Outlook (2018.11.28.)
Stock Market Outlook (2019)
Bull markets are born on pessimism,
grow on skepticism,
mature on optimism,
and die on euphoria.The time of maximum pessimism is the best time to buy,
and the time of maximum optimism is the best time to sell.― Sir John Templeton
If you judge only from news headlines, the stock market appears to be in a state of near-panic selling. From a fundamental perspective, an entry point is gradually manifesting …
For a value investor, the current climate presents an exceptional occasion to accumulate equities of high quality stocks at demonstrably depressed valuations. It is definitely one of the rare, significant valuation dislocations in recent cycles.
First Time Logging Into My Brokerage Account in Almost a Year (2018.12.31.)
Whether it is a result of an optical illusion or market reality, I cannot say much from a short-term trading perspective, but for medium- to long-term investing, there seem to be a huge number of stocks to buy.
While the axiom that “those destined to rise will eventually prevail” holds true for both trading and investment, the current market appears treacherous for those seeking immediate returns.
It is intriguing to observe that large-cap stocks have undergone significant price compression. Simply establishing a position in blue chips—such as Samsung Electronics or SK Hynix—and maintaining a passive stance seems to be a sufficient strategy.
Stock Market Outlook Verification (2019)
Samsung Electronics: +61.03%
SK Hynix: +64.85%
A simple, passive 50/50 allocation between Samsung Electronics and SK Hynix would have yielded a return of +62.94%.
Due to frequent requests for stock recommendations from the blog subscribers, I established an investment recommendation in early 2019: Market Commentary: Stock Picks for a Value-Driven and Defensive Market (2019.01.02.)
My investment methodology has long since transitioned away from intraday trading. The prevailing market environment appears far more conducive to fundamental value investing than to short-term speculative maneuvers.
I strongly advise against maintaining concentrated exposure for those unequipped for active intraday trading. For those unable to execute a disciplined -1% exit manually, I recommend setting stop-loss orders in advance.
Unless you have a rigorous background in technical analysis, or have traded derivatives long enough to stay emotionally steady while trading in a volatile market, I recommend prioritizing large-cap blue chips.
For those seeking capital preservation amidst uncertainty, then buy high-dividend defensive stocks and just sit on them… Or at least buy an ETF…
KODEX KOSPI Leverage (2x): +39.2%
Since late June, while not published on the blog, I have been advising close friends to liquidate stock positions and reallocate capital into cash, inverse instruments, and/or sovereign debt.
A Macro Call Realized: KOSPI Declines to Test the Low 1900s (2019.08.06.)
Conversation with my friend after the market close on 2019.08.05.
[5:19 PM]
Friend: Heading to the airport, for f***’s sake.
Friend: Let’s talk when I get back. \[5:19 PM]
Me: lolllll safe travels, bro[5:20 PM]
Me: I love this clean drop in stocks lol. Have a comfortable trip.[5:21 PM]
Friend: lol okay then[5:21 PM]
Me: The door just opened for the KOSPI to test the low 1900s today lol
Me: See you when you get back[5:33 PM]
Friend: Alright, alright
Even without such long-short strategies, a straightforward “buy and hold” of the KOSPI Leverage ETF would have yielded +39.2%.
Real Estate Outlook (2019)
In my limited view, the Seoul housing market will rise further, provincial housing markets will be hit hard, and wealth polarization will become even more extreme.
With capital increasingly flowing into real estate funds and public funds gradually gaining traction as well (for now, private funds account for 97% of the entire real estate fund market), I would recommend gaining overseas exposure through REITs or real estate funds if you don’t have enough capital to buy an additional home in Seoul.
While the merits of owning property in Gangnam are self-evident, I proposed overseas investment via REITs or real estate funds as an accessible alternative.
Real Estate Outlook Verification (2019)
TIGER US MSCI REITs: +27.87%
Simply allocating to US REITs would have generated a (pre-tax) return of +27.87%.
Senior Secretary for Social Affairs Kim Su-hyun: “We will provide an opportunity to sell homes until next April” (2017.08.03.)
Minister of Land, Infrastructure and Transport Kim Hyun-mee: “Owners of multiple homes will face discomfort… sell if it is not your primary residence” (2017.08.04.)
Next, let’s look at housing prices, where the Moon administration vowed it would “bring prices under control," and where I predicted, “The Seoul housing market will rise further while provincial housing markets will be hit hard."
Remarkably, “집값 잡겠다 (will bring housing prices under control)” even shows up as a Google autocomplete suggestion.
True to its word, the government did get housing prices “under control”; the national average posted a YoY decline of -1.42%.
In particular, Seoul rose by 1.11%, Gangnam by 1.53%, and Southeast Seoul (Gangnam 3-gu) by 1.95%, while the provinces fell by 2.73%.
So yes, they did flatten housing prices. Just not in Seoul or Gangnam, the very places they claimed to be targeting.
NOTE: Gangnam is the epicenter of wealth and real-estate speculation in Korea, where the average price is roughly USD 23K per sqm (or USD 2K per sq ft). Gangnam 3-gu refers to the three districts in the Gangnam area, i.e. Gangnam-gu, Seocho-gu, and Songpa-gu.
For reference, these indices are benchmarked to November 2017. So if we compare the current figures not with those from one year earlier (Dec 2018) but with those from two years earlier (Nov 2017), the picture looks like this:
Seoul +10.1%, Metropolitan Area +3.8%, Gangnam +11.9%, Southeast Seoul (Gangnam 3-gu) +14.0%
Provinces -5.8%
So yes, they did keep their promise to “bring housing prices under control”—if by that they meant crushing provincial housing markets while letting Seoul―and Gangnam 3-gu in particular―rip even higher.
| Gangnam Area Real Estate Holdings of Senior Government Officials | Gangnam Area Real Estate Holdings of Presidential Office Officials | ||
|---|---|---|---|
| Senior Official | Properties | Presidential Official | Properties |
| Kim Dong-yeon, Deputy PM for Economic Affairs | Dogok-dong, Gangnam-gu Dogok Rexle APT | Cho Kuk, Senior Secretary for Civil Affairs | Bangbae-dong, Seocho-gu Samick APT |
| Kim Sang-gon, Deputy PM for Social Affairs | Daechi-dong, Gangnam-gu Raemian Daechi Palace APT | Kim Su-hyun, Senior Secretary for Social Affairs | Gwacheon, Gyeonggi-do Jugong 6th Complex APT |
| Kim Sang-jo, Chairman of the Fair Trade Commission | Cheongdam-dong, Gangnam-gu Opera House 2nd APT | Jang Ha-sung, Chief of Staff for Policy | Jamsil-dong, Songpa-gu Asia Seonsuchon APT |
| Lee Hyo-seong, Chairman of the Korea Communications Commission | Gaepo-dong, Gangnam-gu Gaepo Jugong 1st Complex APT | Joo Young-hoon, Presidential Security Chief | Banpo-dong, Seocho-gu Banpo Xi APT |
| Paik Un-gyu, Minister of Trade, Industry and Energy | Daechi-dong, Gangnam-gu Gaepo Woosung 2nd APT | Kim Hyun-chul, Presidential Economic Advisor | Daechi-dong, Gangnam-gu Samsung APT |
| Choi Jong-ku, Chairman of the Financial Services Commission | Jamsil-dong, Songpa-gu Jamsil Els APT | Park Hyoung-chul, Secretary for Anti-Corruption | Jamsil-dong, Songpa-gu Galleria Palace APT Jamwon-dong, Seocho-gu Shinbanpo 2nd APT (Partial interest) |
| Ko Hyoung-kwon, 1st Vice Minister of Economy and Finance | Cheongdam-dong, Gangnam-gu New Hyundai Riverville APT | Shin Ji-yeon, Secretary for Foreign Press | Seocho-dong, Seocho-gu Yuwon APT |
| Son Byeong-seok, 1st Vice Minister of Land, Infrastructure and Transport | Bangbae-dong, Seocho-gu Samick APT | Yoon Seong-won, Secretary for Urban Housing | Nonhyeon-dong, Seocho-gu Gyeongnam Nonhyeon APT |
| Cho Yong-woo, Secretary for State Records | Gaepo-dong, Gangnam-gu Hyundai 1st APT | ||
| Cho Han-ki, Secretary for Protocol | Jamsil-dong, Songpa-gu Jamsil Els APT | ||
“At this moment, my heart burns with the fervor to build a nation unlike any we have known before."
President Moon Jae-in’s inaugural address (May 2017)
Mr. Moon’s fervor burned as hot as Hell Joseon itself.
“The administration of state affairs leaves no room for failure or trial and error. It is not something that can be done with good intentions or sheer will alone; one must possess a fundamental grasp of the administrative architecture and its underlying operational mechanisms."
TV debate on unifying the presidential candidacy (2016)
And, without missing a beat, he managed to add KRW 2,000 trillion (i.e. USD 1.68 trillion) to land values nationwide in just two years.
If this counts as success, it is a remarkably selective one.
GO MOON!