Yes Virginia...It's a Bubble...

[GRG55]

Re: Yes Virginia...It's a Bubble...

Just be careful to watch the premium over NAV if one decides to buy or sell CEF [and sister closed-end fund GTU].

[lektrode]

Re: Yes Virginia...It's a Bubble...

I've been tempted:

http://online.wsj.com/article/SB1000...812076888.html

Do You Need a Chinese Bank Account?
Why? Five reasons.

wouldnt one be better served by putting ones money into CEF ?

or is this one now nearing bubble land too?

Today 5d 1m 3m 1y 5y 10y
	52wk high:	23.46
	52wk low:	14.03
	EPS:	N/A
	PE:	N/A
	Dividend:	0.01
	Yield:	0.044783
	Market Cap:	5.34 b
	Volume:	626.35 k

[GRG55]

Re: Yes Virginia...It's a Bubble...

I've been tempted:

Do You Need a Chinese Bank Account?

...

I have been using the Singapore Dollar, which is quite easy to buy and sell, as a proxy for the yuan...

[Jay]

Re: Yes Virginia...It's a Bubble...

That elastic band tied to the brick on the tabletop got stretched a bit more this morning...

CHINA: INTEREST RATES RISE BY 25 BASE POINTS

14:51 05 APR 2011

(AGI) Beijing - China's central bank raised interest rates by 25 base points on one-year deposits and loans, to 3,25 and 6,31%. It represents the fourth increase this year and will be effective from tomorrow. It was decided in order to bring inflation back under control, after it rose by 4.9% in February, which was well above the government target of 4%. . .

I've been tempted:

http://online.wsj.com/article/SB1000...812076888.html

Do You Need a Chinese Bank Account?

• By BRETT ARENDS

We're perfectly happy eating in a Chinese restaurant. But will we start banking in a Chinese bank?
It's not as crazy as it sounds. As The Wall Street Journal's Lingling Wei reported Wednesday, the Bank of China here in the U.S. has started allowing American customers to open an account and to invest up to $4,000 per day—and a total of $20,000 a year—in Chinese yuan, or renminbi. Until now, you had few options to hold money in yuan, which is a "closed" currency managed, and protected, by Beijing.

Brett Arends explains why he thinks opening a Chinese Bank Account isn't as crazy as it sounds for American investors.


The bank has three U.S. branches—two in New York, and one in Los Angeles. You'll have to fill out paperwork to open an account and provide two forms of ID. And there's a minimum deposit of $500.
Is this a good idea? You may wonder why anyone would do this. Investing in Chinese currency may sound like something best left to speculators.
But in reality this may be no more exotic than, say, Peking duck. Holding some of your money in Chinese currency—as part of a diversified portfolio, as they say—might be a very sensible move for all of us.



AFP/Getty Images China solidified its financial might in 2010, becoming the world's second-largest economy.

Why? Five reasons.

[GRG55]

Re: Yes Virginia...It's a Bubble...

i think i would have highlighted this sentence:

That elastic band tied to the brick on the tabletop got stretched a bit more this morning...

CHINA: INTEREST RATES RISE BY 25 BASE POINTS

14:51 05 APR 2011

(AGI) Beijing - China's central bank raised interest rates by 25 base points on one-year deposits and loans, to 3,25 and 6,31%. It represents the fourth increase this year and will be effective from tomorrow. It was decided in order to bring inflation back under control, after it rose by 4.9% in February, which was well above the government target of 4%. . .

[jk]

Re: Yes Virginia...It's a Bubble...

given the coming demographic problems, perhaps the empty cities are full of nursing homes.

[BiscayneSunrise]

Re: Yes Virginia...It's a Bubble...

It looks like frightening misallocation of resources. I understand the Chinese want to populate and modernize the hinterlands. But it looks like a case of grand central planning gone all wrong. Of course, as with any misallocation of resource, legitimate needs will go wanting.

[GRG55]

Re: Yes Virginia...It's a Bubble...

A picture may be worth a thousand words. Here's 14 interesting pictures...

[ht to Tim Iacono at The Mess That Greenspan Made]

A few more pictures, courtesy of the Daily Mail:

The ghost towns of China: Amazing satellite images show cities meant to be home to millions lying deserted

By Daily Mail Reporter

Last updated at 10:53 AM on 18th December 2010

These amazing satellite images show sprawling cities built in remote parts of China that have been left completely abandoned, sometimes years after their construction.

Elaborate public buildings and open spaces are completely unused, with the exception of a few government vehicles near communist authority offices.

Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year in the country's vast swathes of free land.

The photographs have emerged as a Chinese government think tank warns that the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent...

[GRG55]

Re: Yes Virginia...It's a Bubble...

Sorry to disappoint you but all fiat money eventually returns from whence it came. That's just the way it works.

You have good company...I'm sure that's the basis for TurboTax Timmy's repeated assertions that the US Taxpayers will "get all their money back". :-)

[Fiat Currency]

Re: Yes Virginia...It's a Bubble...

Let's hope it's not the "western taxpayer", bailing out their banks who once again lent foolishly for speculation...

Sorry to disappoint you but all fiat money eventually returns from whence it came. That's just the way it works.
Cat Chasing Tail.gif

[GRG55]

Re: Yes Virginia...It's a Bubble...

What bubble?

January 19, 2010

Residents of big Chinese cities are worried about bubbles. It's easy to see why: Shanghai mortgages rose 1,600% in 2009 from 2008 to US$15.58 billion, while residential property prices in the city shot up 68% from 2008 to US$4,571 per square meter. The rapid growth has prompted moves to curb speculation, including – in Shanghai at least – tightening of tax and financing policies on second-home purchases.


Such high rates of growth are of course unsustainable, but it remains too early to talk of bubbles nationwide. Yes, Wang Shi, chairman of developer Vanke, warned that property markets in Beijing, Shanghai and Guangzhou were frothy, but there is more to China than first-tier cities...

"It's different this time" with Chinese characteristics. Headline sounded encouraging...until I read the fine print. Clearasil anybody?

Vantone sees tougher 2011 for China developers

SHANGHAI/BEIJING | Tue Dec 14, 2010 11:50pm EST

...Feng Lun, Chairman of Beijing-based Vantone Group, said he expects stubbornly high real estate prices to remain a top policy focus of the central government over the next two to three years.

But Feng believes the government may have taken the issue of high property prices too seriously, calling it a "puberty problem" akin to a teenager overreacting to acne...

..."This is just pimples triggered by puberty. It's not an illness that you need to go the hospital to see a doctor," Feng said of the country's property price fever.

He also dismissed talk that the Chinese property sector is a huge bubble waiting to burst.

"Nobody, either Western or Chinese economists, has ever gotten China's property market right in the past," he said.

"This is not a market economy and this is not a planned economy. We have created this thing that is neither a horse nor a mule. I don't think it's correct to see it from a such a simplistic point of view," he added, referring to the bubble theory championed by some analysts and foreign investors.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Chanos Says China's Real Estate Boom Continues `Unabated' Even With Curbs

By Bloomberg News - Dec 17, 2010 12:39 AM MT


China’s property boom continues “unabated” and has even picked up since the government enacted policies to cool speculation, said Jim Chanos, the hedge-fund manager who predicted the market may crash as early as 2010.

Home prices in 70 Chinese cities climbed 7.7 percent in November from a year earlier, even after the government suspended mortgages for third-home purchases and pledged to introduce a property tax. Sales volume jumped 14.5 percent.

“A lot of regulations in China, they are designed to be skirted,” Chanos said in an interview with Carol Massar and Matt Miller on Bloomberg Television’s Street Smart program. “The boom has continued to be unabated. It’s actually even picked up a little bit recently towards the end of year.”

Chanos repeated his view that China is on a “treadmill to hell” because of the country’s reliance on property development for economic growth...

...Chanos, who was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp., said some Chinese developers are getting more leveraged and are taking more money from international investors, providing opportunities for hedge funds. He didn’t name specific stocks.

“They all look very interesting from a short-sellers perspective,” said Chanos, founder of Kynikos Associates LP. “The western investor is the one who’s going to end up holding the real estate bag here.”...

Let's hope it's not the "western taxpayer", bailing out their banks who once again lent foolishly for speculation...

Re: Yes Virginia...It's a Bubble...

Yeah, not a "new twist" in the least to those who've been paying attention, unless the new twist is that these predictions were being made by banks (RBS and Societe Generale) who were themselves so recently nearly swept down into the vortex of a collapsing bubble.

[GRG55]

Re: Yes Virginia...It's a Bubble...

I read your post earlier jk, and noted the 2012 date reference, which is consistent with Xie's various interviews and writings for the past couple of months at least.


However, I listened to the roughly nine minute Bloomberg HK interview [available on AOL Video here] and he does say that property developers could "get trapped" this year. Summary of the interview:

• Liquidity still plentiful so China will still see reasonable growth in 2010, but perhaps not as quick as last year;
• Domestic investment is overheating, particularly in property, despite the fact that the overall economy with its large export sector cannot grow very fast [due to employment situation in the USA];
• Monetary policy needs to be tightened before the domestic investment bubble gets out of hand;
• In the wake of the US Budget and deficit announcement yesterday, expects US Treasury yields should rise significantly this year. Expects that China will continue to buy US Treasuries, but will need a higher yield to buy the same or more "There is a price for everything";
• Situation in China driven mainly by the property market and local government investment, both of which were "blown up" by excessive bank lending. Chinese government now in a dilemma as cutting back lending too fast will halt this growth, but doing nothing will create a bigger bubble and inevitable crash;
• Xie estimates that new property sales in China in 2009 rose to 14% of GDP, which he called "unprecedented", rental yields are 2% to 3% and described the amount of sold but vacant property as "humongous". Said "There is a bubble and property prices may be 100% overvalued";
• Property bubble in China differs from the bubbles in the USA and Japan as it involves new property, not existing property. Possibly half of local government revenues come from property sales and this is why land sales at record prices continue as revenue raising activity despite efforts by Beijing to cool things off.
• Lending conditions for buyers of second and third flats have been tightened considerably. This market is dominated by speculators. Difficult to see this demand continuing this year. Developers paying record prices could get trapped this year. After 7 years of rising prices [up 10 to 20 times depending on location] developers believe that land prices only go up, and that may not be the case this year, and some could "lose big money";
• Thinks the resource sector story will be much more long lasting than other stories, like the "economic recovery story" or the "property story". China has a "huge resource shortage" and "huge foreign exchange reserves" so a significant amount of money will be put into the resource sector. "It's not just a 2010 story...it will last for the next few years. This is the only story I have faith in"

Others are starting to pick up on Andy Xie's themes, and even though Evans-Pritchard says this is a"new twist" some like Jim Chanos have been warning about this for some time...

China's credit bubble on borrowed time as inflation bites

The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist.

By Ambrose Evans-Pritchard 6:43PM GMT 05 Dec 2010

It warns that the Communist Party will have to puncture the credit bubble before inflation reaches levels that threaten social stability. This in turn may open a can of worms.


"Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, the bank’s emerging markets chief.


Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month...

...Diana Choyleva from Lombard Street Research said the money supply rose at a 40pc rate in 2009 and the first half of 2010 as Beijing stoked an epic credit boom to keep uber-growth alive, but the costs of this policy now outweigh the benefits.

The economy is entering the ugly quadrant of cycle – stagflation – where credit-pumping leaks into speculation and price spirals, even as growth slows. Citigroup’s Minggao Shen said it now takes a rise of ¥1.84 in the M2 money supply to generate just one yuan of GDP growth, up from ¥1.30 earlier this decade.

The froth is going into property...

...Prices are 22 times disposable income in Beijing, and 18 times in Shenzen, compared to eight in Tokyo. The US bubble peaked at 6.4 and has since dropped 4.7. The price-to-rent ratio in China’s eastern cities has risen by over 200pc since 2004.

The IMF said land sales make up 30pc of local government revenue in Beijing. This has echoes of Ireland where "fair weather" property taxes disguised the erosion of state finances...

...It is sobering that even a slight cooling of China’s credit growth led to economic contraction in Malaysia and Thailand in the third quarter, and sharp slowdowns across Asia. Japan’s economy will almost certainly contract this quarter.

Albert Edwards from Societe General said the OECD’s leading indicators are signalling a "downturn" for Asia’s big five (Japan, Korea, China, India, and Indonesia). The China indicator composed by Beijing’s National Bureau of Statistics has fallen almost as far as it did at the onset of the 2008 crash.

"I remain convinced we are witnessing a bubble of epic proportions which will burst – catching investors as unawares as the bursting of the Asian bubbles of the mid-1990s. Ignore these indicators at your peril," he said...

[jk]

Re: Yes Virginia...It's a Bubble...

i think i would have highlighted this sentence:

Without devaluation benefits on rising exports, QE just leads to inflation, first through rising oil prices.