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

[ProdigyofZen]

Re: Capital MisAllocation...

China Trade Implies Slower Growth




China’s external sector is probably expanding much more slowly than overall export growth implies.Have a look at “unusual surges” in China’s “reported shipments to Hong Kong.” It seems the entire country is either channel stuffing or dumping goods or ever cooking books via inflated invoices. Another thesis is that Exporters are “repatriating capital through export transactions rather than through traditional methods” to avoid Mainland’s controls and/or taxes.

In other words, China’s exports as well as growth prospects have been somewhat exaggerated...

Looks like China has found it's next Capex investment....

http://www.businessweek.com/articles...=email_article

In China there’s a giddy feeling that the next energy gold rush is about to begin. Beneath the mountains of Sichuan province, the deserts of Xinjiang, and elsewhere, China contains twice the shale- gas reserves as the U.S., says the U.S. Energy Information Administration. China’s national planners enthusiastically back boosting natural gas production, which accounts for just 4 percent of the country’s total energy mix now. The government wants to double that share by 2015. “There’s a lot of exuberance,” says Zhou Xizhou, who leads the research firm IHS Cera’s China Energy practice. “In Beijing, if you work in energy, you probably receive a sha

[Polish_Silver]

Re: Capital MisAllocation...

In other words, China’s exports as well as growth prospects have been somewhat exaggerated...

The business model of vendor financed purchases was always somewhat suspect. I am just amazed it lasted this long.

[GRG55]

Re: Capital MisAllocation...

China Trade Implies Slower Growth




China’s external sector is probably expanding much more slowly than overall export growth implies.Have a look at “unusual surges” in China’s “reported shipments to Hong Kong.” It seems the entire country is either channel stuffing or dumping goods or ever cooking books via inflated invoices. Another thesis is that Exporters are “repatriating capital through export transactions rather than through traditional methods” to avoid Mainland’s controls and/or taxes.

In other words, China’s exports as well as growth prospects have been somewhat exaggerated...

[Polish_Silver]

Re: Capital MisAllocation...

Misallocation of capital in China? Never...

After all those planners in Beijing are so smart such a thing could not possibly be allowed to happen, eh.

Wow!
That rings a bell! I was in Taiwan around 2006, and a guy was telling me there was a shortage of steel. Prices rising world wide. But China was working on some humungous steel mill. I'd be curious to see the P/L on that mill at this point.

Another intesting example is the Nowa Hutta steel works build near Krakow, Poland.

Poland had a reputation for disliking communism. Polish farms were never centralized, but remained under the control of individuals. Krakow always had a high opinion of itself, having long been the national capital and having the oldest university in the nation.
To give the region more class consciousness, a large steel mill was built there.

From Wikipedia:

The reasons for building such an industrial town near Cracow (Kraków) were mostly ideological and were against laws of economy (coal had to be transported from Silesia and iron ore from the Soviet Union; the products were shipped to other parts of Poland since local demand was relatively small). This became visible in the 1980s, when the economic crisis halted the city's growth.

The locals resented the whole thing. Valuable farm land had been taken up by this pollution belching monstrosity. During the 1990's there were attempts to privatize the steel mill, all unsuccessful to my knowledge.

China's a bit smarter than that, but still, you have to wonder.

[GRG55]

Capital MisAllocation...

Misallocation of capital in China? Never...

After all those planners in Beijing are so smart such a thing could not possibly be allowed to happen, eh.

China’s cooldown: Charting a new path for commodities

BEIJING AND OTTAWA — The Globe and Mail

Published Saturday, Apr. 20 2013, 8:00 AM EDT

Last updated Saturday, Apr. 20 2013, 10:13 PM EDT

Zhang Lianjin remembers the 2008 global financial crisis well. It nearly shuttered his brand-new metal casting factory in Wuhan, the steel centre of China.

Sales for the firm, SAFE-Cronite Asia, have been recovering slowly since the crisis. But while orders are still rising, so far this year they’re growing at only about half the pace the company was expecting. The company’s automotive business is strong, but there’s been a drop-off in orders tied to heavy machinery. And the broader steel industry in China is a worry.

“Many steel mills are really impacted. Some are even closing. There is too much [capacity] in steel mills in China, the economy is slowing down, the market doesn’t need so much and the production is much higher than the market needs,” said Mr. Zhang, the Beijing-based general manager of the European-owned company.

On top of overcapacity and massive overstocking, some competitors are also caught in a shadow banking crisis in which companies borrowed money against their inventory and find themselves unable to repay. [Not to mention those firms that became part of the shadow banking system because they lent retained cash into the property market as the speculative returns there were much better than the beaten down margins in their own businesses].

Now, firms like Mr. Zhang’s are having to adjust to the reality that China’s economy is maturing, and double-digit growth is a thing of the past...

...There are signs of further slowdown ahead, with Chinese exports to the U.S. and Europe dropping sharply. Iron ore stocks are a third more than average, now piling up into three-storey mounds at Qingdao port, while copper stocks are double the usual average, filling Shanghai’s bonded warehouses and spilling into their parking lots.

Property developers are complaining of slower starts and fewer purchases...

...“If you’re talking about the new normal, we think 7.5-per-cent growth is not necessarily the new normal. We think the new normal is an ongoing deceleration of growth over the next decade,” said Andrew Polk, resident economist for the Conference Board China Centre in Beijing, which says China’s trend growth – the amount the economy can sustain without exceptional inflationary pressures – should look more like 5.5 per cent between 2013 and 2018...

[Polish_Silver]

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

And Goldman Sachs, Morgan Stanley, Bear Stearns, Lehman Brothers, Citigroup, Bank of America...

The Chinese are running this experiment on a scale we haven't seen before (Chanos' "Dubai times 1000"). Who knows how it ends? But I'll bet it looks very much like all the other splatter patterns when the SHTF, only bigger. Much bigger.

I think any country that grows rapidly will have a convulsion after the rapid growth. The reason is that during the growth a lot of people are working on the new infrastructure, new housing, new factories, roads, everything. When the growth slows down, all the carpenters, road pavers, etc. have much less work to do---they are just maintaining existing stuff. They have to learn new professions. Companies have to be liquidated.

[GRG55]

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

I liked that part. So much like Enron, Greece, et. al.

And Goldman Sachs, Morgan Stanley, Bear Stearns, Lehman Brothers, Citigroup, Bank of America...

The Chinese are running this experiment on a scale we haven't seen before (Chanos' "Dubai times 1000"). Who knows how it ends? But I'll bet it looks very much like all the other splatter patterns when the SHTF, only bigger. Much bigger.

[Polish_Silver]

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

Local governments are prohibited from directly raising debt, so they have used special purpose vehicles to circumvent these rules, issuing bonds under the vehicles’ names to fund infrastructure projects.

I liked that part. So much like Enron, Greece, et. al.

[GRG55]

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

And like all good bubbles it goes on much longer and inflates to a much greater extent than anyone could have imagined.

Is it finally the beginning of the end? Maybe. Maybe not...

China’s riskiest property market just collapsed. Is this how it starts?

February 25, 2013 at 11:05 am

...

Repeat after me:

China property is a "cash market";

The Chinese government "won't let" the property market crash;

China has 1.1 Billion people that need homes so all the empty apartments will get filled;

It's different in China because a centrally planned economy and a totalitarian government can make and implement good economic decisions so much more quickly and effectively than the USA or any other democracy...

(feel free to add your own China myth to the list)

Misallocation of capital? In China? Perish the thought...

Last updated: April 16, 2013 5:32 pm

China local authority debt ‘out of control’

By Simon Rabinovitch in Beijing

A senior Chinese auditor has warned that local government debt is “out of control” and could spark a bigger financial crisis than the US housing market crash.

Zhang Ke said his accounting firm, ShineWing, had all but stopped signing off on bond sales by local governments as a result of his concerns.

“We audited some local government bond issues and found them very dangerous, so we pulled out,” said Mr Zhang, who is also vice-chairman of China’s accounting association. “Most don’t have strong debt servicing abilities. Things could become very serious.”

The International Monetary Fund, rating agencies and investment banks have all raised concerns about Chinese government debt. But it is rare for a figure as established in the Chinese financial industry as Mr Zhang to issue such a stark warning.

“It is already out of control,” Mr Zhang said. “A crisis is possible. But since the debt is being rolled over and is long-term, the timing of its explosion is uncertain.”...

...Last week, Fitch cut China’s sovereign credit rating, in the first such move by an international agency since 1999. On Tuesday, Moody’s cut its outlook for China’s rating from positive to stable.

Local governments are prohibited from directly raising debt, so they have used special purpose vehicles to circumvent these rules, issuing bonds under the vehicles’ names to fund infrastructure projects.

Investment companies owned by local governments sold Rmb283bn of bonds in the first quarter of 2013, more than double the total for the same period last year. Such an increase would normally be expected to boost the economy, but China’s growth unexpectedly slowed to 7.7 per cent in the first quarter of 2013...

...Mr Zhang said many local governments had invested in projects from public squares to road repairs that were generating lacklustre returns, and so were relying on financing rollovers to pay back their creditors. “The only thing you can do is issue new debt to repay the old,” he said. “But there will be some day down the line when this can’t go on.”

Mr Zhang added that he grew alarmed when smaller towns and counties discovered that investment vehicle bonds were an easy way to raise financing. “This evolution was quite frightening,” he said. “China has more than 2,800 counties. If every county issued debt, it could lead to a crisis. It could be even bigger than the US housing crisis.”...

[bart]

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

Makes oil look like a stable commodity.

So is this the ultimate "Risk On/Risk Off" asset?

Keep in mind that the chart is Shanghai, not China - but yes, it's a top quality roller coaster.


RORO wise, there are so many outrageous assets around the world the last few years that my mind boggles.
I think I might blow my tinfoil hat off the top of head if I thought about it too much. ;-)

[GRG55]

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

For what its worth:

Makes oil look like a stable commodity.

So is this the ultimate "Risk On/Risk Off" asset?

[bart]

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

For what its worth:

[GRG55]

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

China’s Home Prices Increase Most in 26 Months, SouFun Says
By Bloomberg News - Apr 1, 2013 1:31 AM MT

China’s March new home prices posted the biggest gain in more than two years as buyers rushed into the market ahead of property curbs by local governments, driving real estate stocks higher.

Prices climbed for the 10th month, rising 1.1 percent to 9,998 yuan ($1,610) per square meter (10.76 square feet) from February, SouFun Holdings Ltd. (SFUN), the country’s biggest real estate website owner, said in a statement today after a survey of 100 cities. That’s the biggest increase since January 2011.

“The earlier property policy uncertainty drove quite a lot of buyers into the market, while supply, usually low in the first quarter, couldn’t catch up with the demand,” said Zhao Zhenyi, a Shanghai-based property analyst at Industrial Securities Co. “Home sales will weaken in the coming months as more local governments announce curbs for the cities.”...

[GRG55]

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

Let's take a little trip back in time...to the days of Alan Greenspan before the "Sir" was added. To the bucolic days of the spring of 2005:

Greenspan Is Concerned About 'Froth' in Housing

Published: May 21, 2005

WASHINGTON, May 20 - Alan Greenspan, chairman of the Federal Reserve, suggested on Friday that the red-hot housing market is becoming a little too exuberant for its own good...

...Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over "froth" in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are "a lot of local bubbles" around the country...

Just imagine the feeling of "déjà vu all over again" when I read this...

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...

Who is going to fill those empty apartment blocks now???

Beijing Bans One-Person Households From Buying Second Homes


By Bloomberg News - Mar 30, 2013 6:00 AM MT

The city of Beijing banned single- person households from buying more than one residence and increased the minimum down-payment for all buyers of second homes as the government seeks to cool the property market.

The new measures take effect tomorrow, according to the official Xinhua News Agency, which said the city will also enforce a 20 percent tax on capital gains from property. Current rules allow each household with a Beijing residence permit to buy a second home, opening the way for couples to divorce on paper to double their ability to invest.

Prices in the capital jumped 5.9 percent from a year earlier in February, the biggest increase since February 2011, China’s National Bureau of Statistics said March 18. Prices across the country rose 160 percent in 1998-2011 after ownership passed into private hands, government data show.

“This will help to calm people’s panic about home prices,” said Yi Xianrong, a Beijing-based researcher at the Chinese Academy of Social Sciences, which advises the cabinet. “At the same time, restrictions on home purchases don’t change the fundamental demand, and it seems the new measures in Beijing are aimed more at short-term problems rather than long-term healthy development of the property market.”

The city government of Shanghai, where new home prices in February rose 3.4 percent from a year earlier, also issued a notice saying the city will increase down-payment requirements and interest rates for second-home mortgages, while strictly prohibiting banks from providing credit to third-home buyers...

...China has “very serious” property market bubbles in some regions, Xiang Songzuo, chief economist of Agricultural Bank of China, told a forum in Beijing yesterday. China’s property curbs have seen “very limited” results as these measures are focusing on limiting demand while China should instead focus on boosting supply, Xiang said...

[shiny!]

Re: honesty in relations

Romance isn't what makes a marriage work(but it certainly makes for some wonderful milestones),

It sure does :-)

I reckon what makes a marriage work is mutual support, sacrifice(my wife is looking after our family single handed while I deploy yet again), and serving each other like you posted.

Robert Johnson wrote "Love is stirring the oatmeal."

Sounds like you and your wife have a good relationship. I hope your deployment goes well and your dog has a speedy recovery.