Andy Xie: Fear the Dark Side of China's Lending Surge

[touchring]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

yep... that's the forecast... all go down!

this must be the shortage period of inflation in history, only 2 mths.

[ThePythonicCow]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

so gold going poof! :eek:

Kool!! I sold all mine at $970. Time to start scaling in again.

[allenjs]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

I suspect that China's commodity purchases will turn into sales more quickly than you might imagine:

http://www.philstockworld.com/2009/0...-estate-story/

That's an interesting article, and I think he's totally right to be negative about real estate. However, I think he veers off into hardcore wishful thinking at:

This might seem rather gloomy, but I really can’t see much of anything optimistic in China’s future over the next several decades. Quite the opposite, you have been hard-pressed to have scripted a better economic doomsday scenario if you tried.

This is just stupid. On pure fundamentals, China is better off long-term than anyone else. You cannot spend any time at all in China and believe that China is in danger of economic doomsday. These are the most hard-working, resourceful, ambitious, stoic, and increasingly highly-educated people on the planet. They have the world's greatest production capacity and tremendous infrastructure. And they're bound together by an extraordinarily cohesive culture and strong central government. And, demographically, they are far too large to be squeezed out.

Western commentators love to latch on to any circumstantial argument that supports the fantasy that China will just disappear and no longer be a rival. Like America before the great depression, China may be facing some serious pain. But just like America in those times, the future belongs to China. Until I see people in America half as hungry and ambitious as the average Chinese, there is absolutely zero danger that China will fade away into "economic doomsday" lasting "several decades", as the author absurdly suggests.

[touchring]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

That's an interesting article, and I think he's totally right to be negative about real estate. However, I think he veers off into hardcore wishful thinking at:



This is just stupid. On pure fundamentals, China is better off long-term than anyone else. You cannot spend any time at all in China and believe that China is in danger of economic doomsday. These are the most hard-working, resourceful, ambitious, stoic, and increasingly highly-educated people on the planet. They have the world's greatest production capacity and tremendous infrastructure. And they're bound together by an extraordinarily cohesive culture and strong central government. And, demographically, they are far too large to be squeezed out.

Western commentators love to latch on to any circumstantial argument that supports the fantasy that China will just disappear and no longer be a rival. Like America before the great depression, China may be facing some serious pain. But just like America in those times, the future belongs to China. Until I see people in America half as hungry and ambitious as the average Chinese, there is absolutely zero danger that China will fade away into "economic doomsday" lasting "several decades", as the author absurdly suggests.

The keyword is long term. In the short to medium term, China is heading for big trouble, in my opinion.

There is a lot of fake data submitted by provincial governments that result in inaccurate national data. The reality is that consumption is falling rapidly among the masses and many Chinese companies are having severe cash crunch. I've been studying a few public chinese companies that serve domestic markets and many will run out of cash within the next few months.

Particularly interesting to me is a $100 million revenue a year Chinese cosmetic manufacturer that sells to the domestic markets (Note: they are not an exporter!) under their own brand and network of hundreds of franchisees.

This company has been in the market for like 10 years, growing year after year in revenue and profit without fail with charts that looked like Goog, until they got into trouble in the last quarter of 2009.

Last 2 quarters saw their sales drop by two thirds, the company had to write off a huge portion of accounts receivable because their franchisees were in trouble and couldn't pay up. Cash on hand dropped 90% from a year with banks, creditors, suppliers were breathing down their necks all asking for immediate payment.

The speed at which a once promising company collapses is astonishing. Within 6 months - Poof!

[makimanos]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

I agree. There is no communist country which survived in the long run.
But how long is long? And do you believe all these crap that the Chinese say?
I doubt.

[mcgurme]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

Chengdu is suppose to be one of the less polluted cities in China, if it's that bad in that city, then things must be really bad in other cities.

Yes, it is. I was there in spring 08, visited 4 cities and drove through the countryside with my host. Even in the countryside, hours from Shanghai, there was a thick smog all over.

The only clear sky I saw was when it rained, and that cleared things up for about a day. Then it quickly went back to smog.

[mcgurme]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

Big differences between China now and US before GD:
1. US GD: Oil was just starting to flow in large quantities, and the US had lots of it. We did not reach our peak of cheap oil produced in the US until 40 years later, in the early 70's. China has no such resource at its fingertips, it has to import most of it. Big difference. We got cheap energy to power our growth out of the GD.

2. US had plentiful land, with a largely undeveloped western half of our country. This allowed for significant expansion of forestry, farming, industry, and real estate. China has nowhere to expand, unless they conquer other countries. The country is largely deforested and over populated.

I don't discount China over the long haul. But they have some very tough challenges near to medium term that include over population, property bubble, pollution, lack of natural resources, political unrest, opaque government, etc.

That's an interesting article, and I think he's totally right to be negative about real estate. However, I think he veers off into hardcore wishful thinking at:



This is just stupid. On pure fundamentals, China is better off long-term than anyone else. You cannot spend any time at all in China and believe that China is in danger of economic doomsday. These are the most hard-working, resourceful, ambitious, stoic, and increasingly highly-educated people on the planet. They have the world's greatest production capacity and tremendous infrastructure. And they're bound together by an extraordinarily cohesive culture and strong central government. And, demographically, they are far too large to be squeezed out.

Western commentators love to latch on to any circumstantial argument that supports the fantasy that China will just disappear and no longer be a rival. Like America before the great depression, China may be facing some serious pain. But just like America in those times, the future belongs to China. Until I see people in America half as hungry and ambitious as the average Chinese, there is absolutely zero danger that China will fade away into "economic doomsday" lasting "several decades", as the author absurdly suggests.

[jpatter666]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

I don't discount China over the long haul. But they have some very tough challenges near to medium term that include over population, property bubble, pollution, lack of natural resources, political unrest, opaque government, etc.

Exactly. Don't get me wrong, I was *very* impressed at what had occurred in China so far as building infrastructure and there are many positive aspects.

But I'm not going to put on rose-tinted glasses either. There are *serious* economic, social, political, environment and population issues within China.

Anyone who tells you simply "invest in China for a sure thing" no doubt was telling you to invest in US Banks and housing a few years ago....

I also am very aware that there is an implicit understanding between the government and the people. Keep the good times rolling and the money flowing and the Communist party remains in power.

We haven't seen a test of that (we may be now). In my opinion the party will willingly blow a bubble to make the US bubble look trivial in order to remain in power. What have they to lose after all?

[nero3]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

dec 23, 2007...



mar 27, 2009...




jun 17, 2009...

maybe right again?

I still think it is most likely that the dow is set to go rather flat, around 10000 , with stagflation, meaning this is a correction, however, if this is the start of a debt deflation, or some kind of dow to 1000-3000 type of deflationary bear market, ala japan, that will fold out over the next decade or two then hats off to itullip.

[nero3]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

It doesn't appear that way. From what I've read here, China is facing a Japanese-style simultaneous stock and real estate bubble-pop that will mire them in lost decades as well. Given the worse conditions their general population is in, I wouldn't be surprised to see an overthrow of their government within a decade.

I don't think prices, leverage and especially household borrowing have went that far in China. I think they may be at the same level of debt that japan had 15 year prior to the Japanese bubble popped. First the RMB must strenghten 3-4 fold, and consumer debt need to blow up like crazy, and they need a decade of growth around 3-4 %. I just think that the japan story is something everyone is throwing themselves over, without really reflecting enough upon the similarities and especially the differences. I don't think the liquidity trap is a concern in china, they are still a young economy with regards to debt, and they can still very effectively expand debt through the money multiplier by using conventional monetary policy, unlike the US.

[FRED]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

I still think it is most likely that the dow is set to go rather flat, around 10000 , with stagflation, meaning this is a correction, however, if this is the start of a debt deflation, or some kind of dow to 1000-3000 type of deflationary bear market, ala japan, that will fold out over the next decade or two then hats off to itullip.

For clarification, as our subscribers are aware, our position is that debt deflation began in early 2008 and took the stock market down more than 40%, exactly as we forecast. The market then had a First Bounce off March 2009 lows due to re-inflation by global fiscal and monetary stimulus, again as forecast. As the re-inflation cannot produce a self-sustaining recovery in the U.S., China, Europe or any nation without economic restructuring, debt deflation will continue.

The U.S. fiscal deficit at 12% of GDP in 2009 exceeds twice the level that was previously considered tolerable in an advanced economy without the bond market and currency selling off. We expect long term that the U.S. will deflate the debt against the monetary unit of debt, the dollar, by allowing oil producers to facilitate the devaluing of the dollar against oil rather than gold as in the 1930s. That is the essence of Ka-Poom Theory.

[jimmygu3]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

I still think it is most likely that the dow is set to go rather flat, around 10000 , with stagflation, meaning this is a correction, however, if this is the start of a debt deflation, or some kind of dow to 1000-3000 type of deflationary bear market, ala japan, that will fold out over the next decade or two then hats off to itullip.

nero3,

iTulip does not expect the Dow to go to 1000. However, the prediction has been made for the Dow/gold ratio to reach 2:1, as in Dow 5000 and $2500 gold. For those keeping score at home, that would mean a 40% drop in the Dow and a 170% increase in the gold price from today's levels.

Jimmy

[ThePythonicCow]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

Big differences between China now and US before GD:
1. US GD: Oil was just starting to flow in large quantities, and the US had lots of it. We did not reach our peak of cheap oil produced in the US until 40 years later, in the early 70's. China has no such resource at its fingertips, it has to import most of it. Big difference. We got cheap energy to power our growth out of the GD.

2. US had plentiful land, with a largely undeveloped western half of our country. This allowed for significant expansion of forestry, farming, industry, and real estate. China has nowhere to expand, unless they conquer other countries. The country is largely deforested and over populated.

I don't discount China over the long haul. But they have some very tough challenges near to medium term that include over population, property bubble, pollution, lack of natural resources, political unrest, opaque government, etc.

Good points, mcgurme. Geography is destiny.

[nero3]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

nero3,

iTulip does not expect the Dow to go to 1000. However, the prediction has been made for the Dow/gold ratio to reach 2:1, as in Dow 5000 and $2500 gold. For those keeping score at home, that would mean a 40% drop in the Dow and a 170% increase in the gold price from today's levels.

Jimmy

Well, even below the march lows, would surprise me. If it does happen, I will be very surprised. I think it is possible a wave of bankruptcies soon will begin to mount, unless there is some inflationary pressure coming into the economy.

One point I like to make about the 1950-1965 era, was that inflation was low/moderate, even gov bonds was in a bear market. Maybe the first phase of a gov bonds bear market can be deflationary as lets say high savings offset reckless gov spending.

[goadam1]

Re: Andy Xie: Fear the Dark Side of China's Lending Surge

For clarification, as our subscribers are aware, our position is that debt deflation began in early 2008 and took the stock market down more than 40%, exactly as we forecast. The market then had a First Bounce off March 2009 lows due to re-inflation by global fiscal and monetary stimulus, again as forecast. As the re-inflation cannot produce a self-sustaining recovery in the U.S., China, Europe or any nation without economic restructuring, debt deflation will continue.

The U.S. fiscal deficit at 12% of GDP in 2009 exceeds twice the level that was previously considered tolerable in an advanced economy without the bond market and currency selling off. We expect long term that the U.S. will deflate the debt against the monetary unit of debt, the dollar, by allowing oil producers to facilitate the devaluing of the dollar against oil rather than gold as in the 1930s. That is the essence of Ka-Poom Theory.

And tax the excess profit back into the treasury as a "carbon tax"?