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

[GRG55]

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

As with every bubble, eventually emerges the widespread fraud that permeates society and the economy. Why would China be an exception?

OSC orders Sino-Forest executives to resign

Last updated Friday, Aug. 26, 2011 9:31AM EDT

The Ontario Securities Commission has ordered senior officers and directors of Sino-Forest Corp to resign and has cease-traded the company’s shares.

The commission said in a release Friday that it has reason to believe the company and certain of its officers and directors have “misrepresented some of its revenue and/or exaggerated some of its timber holdings” and that some of the officers and directors – including chief executive officer Allen Chan – appear to be engaging in acts “they know or reasonably ought to know perpetuate a fraud.”...

If the name of this company sounds familiar, it may be because at least one rather high profile fund manager got taken in by the fraud:

Paulson’s Main Fund Lost 11% on Sino-Forest

July 7, 2011 12:25 PM MT

John Paulson lost 11 percent in his biggest fund in June, according to an investor, as the firm sold off Sino-Forest Corp. (TRE) after a short-seller’s allegations.

The drop left Paulson’s Advantage Plus Fund, which uses strategies designed to profit from corporate events such as takeovers and bankruptcies, down 18 percent this year...

...Paulson & Co., which manages $37 billion overall, posted declines across all of its strategies in June, as the firm sold its shares of Sino-Forest, the Chinese forestry company accused of overstating timberland holdings and production in the Yunnan province, at a C$462 million ($482 million) loss since May 31...

[GRG55]

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

Chongqing: The largest construction site in the world

July 12, 2011
Chongqing, China

By some accounts, Chongqing is the largest metro area in the world with a population of some 32 million. They ought to call it the largest construction site in the world.

This is a place that, if you believe the official numbers, posted 17% GDP growth in 2010. It doesn’t take too long to figure out how that happened. Driving around town, I found that Chongqing is in such a building frenzy, they’re actually tearing down perfectly good (and reasonably new) buildings and infrastructure, and rebuilding them.

To give you an example, next to my 45-story downtown hotel was a building site where the constant drone of jackhammers signaled to me that there was some breaking of concrete going on. The new tower under construction had reached the 11th floor, but then they decided to tear it down and start all over again with something even bigger (102-stories).

[There are a half-dozen other such towers in Chongqing. Most of them are officially "on hold," signaling to me that China is getting ever closer to facing its bubble reality-- that demand simply cannot support such investment.]

Then there are the pavement workers… half of them digging up the road, half of them putting it back together...

[GRG55]

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

No further comment needed...

The Boom And Bust Of China's Rise

...After so many years of fast growth the bubbles are not only busting on the economic level but also on the Chinese mindset up from the corporation leaders to the average citizens. Recently Liu Chuanzhi, the Chairman of Lenovo and the iconic figure of Chinese manufacturing, faced a serious dilemma while asked why of Lenovo Group’s profit in 2009 60% came from asset investment and only 40% came from manufacturing. He said “when the typhoons come, even a pig can fly in the sky. Everybody is profiteering from this. Why can’t we?” The typhoons refers to the property frenzy and the easy ways to make money. The strategic marriage between Lenovo and China Oceanwide Holdings Group, a private investment firm heavily involved in the property market, can attest to that sentiment. That sentiment manifested in ordinary people’s logic is a common saying by many: “ buying house rather than saving; buying house rather than stock trading.” That sentiment is also manifested on many other levels: from inflated municipal officials' performance to the fate of a young Chinese man’s marriage...

[Sharky]

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

I guess Letters of Credit are too "old fashioned" these days? Maybe they'll see a resurgence -- it would certainly be good for the banks.

[Jay]

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

If you guys keep this up I just might take out some shorts soon.

[jk]

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

let's see.. amsc can file suit against sinovel where, exactly? no recourse? this should give pause to any entity selling to a chinese customer.

[GRG55]

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

Another dot to connect. This is something the Japanese used to do all the time back in the 1980s. Initially it was in the belief that they had the negotiating advantage and could force desperate suppliers to keep cutting price and terms, but later it was because their own bubble economy had blown up...by then most North American suppliers had already weaned themselves off their overdependence on Japanese customers.

My guess is that a somewhat similar cycle has been repeating, but at a faster pace compared to three decades ago.

A contract is a contract. Maybe...

AMSC warns of Q4 loss as top customer refuses shipments

Tue Apr 5, 2011 6:34pm EDT


April 5 (Reuters) - American Superconductor Corp , which makes electrical systems for wind farms, said it will post a loss in the fourth quarter, as a slowdown in China's wind power market forced its top customer to refuse shipments.

Shares of AMSC tumbled about 50 percent in after-market trade, after China's Sinovel Wind , the world's third-largest wind turbine maker, refused to accept contracted shipments of some wind turbine components.

AMSC also said it is reviewing its books after Sinovel failed to pay for certain contracted shipments worth about $56 million, which it has already accounted for...

...China's wind turbine sector, a stable source of growth for AMSC, experienced explosive growth in the past few years aided by hefty government subsidies. However, it is expected to be flat in 2011.

"They (AMSC) are still going to have to remain very focused on China, but obviously they are going to continue to diversify to more components with this market slowing down so significantly," Gleacher & Co analyst John Hardy told Reuters.

AMSC has been trying to diversify its customer base away from Sinovel, which accounts for about 75 percent of its revenue, through new wind turbine orders and emerging power grid opportunities...

[GRG55]

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

Does not CEF price change on supply and demand?

...

To some degree. As jk mentioned, CEF is issuing new units, and this has depressed the premium.

...Being 50/50 gold/silver esp at a premium under 4% earlier this AM seems to make CEF more compelling-especially with long awaited breakout of gold this AM.

...

More compelling than what? Gold alone?

Silver has always struck me as driven more by the euphoria of abundant liquidity and expected consequent economic expansion, versus gold which is ultimately a vote of "no confidence"...

[jpetr48]

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

Chairman of Wisdom Tree tells it like it is on CNBC- gotta love this guy
http://www.cnbc.com/id/42432108

[jk]

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

Just remember: China is the roach motel of money: it goes in, but it doesn't come out.



I don't follow these at all, but normally I'd expect premiums to decrease with rapid underlying price increases but then increase as money flows increase/price increases level off/reverse.

The net effect is to then force you to either buy high or pay a high premium.

Is this a wrong understanding?

the premium tends to expand as metal prices rise, and contracts on sell-offs. the current situation with cef is rare- they're issuing new stock in order to buy more bullion. the increase in supply lowers the premium.

btw, the premium is also a reflection of the different tax status- cef is NOT an etf, it's a closed end mutual fund for tax purposes, and thus eligible for capital gains treatment. [but there's a special form, passive foreign investment form, to file in the first year you hold it, iirc, in order to do this.]

[jpetr48]

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

Does not CEF price change on supply and demand? Being 50/50 gold/silver esp at a premium under 4% earlier this AM seems to make CEF more compelling-especially with long awaited breakout of gold this AM.

On a tech chart basis, CEF fell back to its daily trend line at low 22. Upper targets are 25 and 28 in next six months. I like that upper target better than slv at 45.

[Jay]

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

Just remember: China is the roach motel of money: it goes in, but it doesn't come out.

The main reason I haven't pulled the trigger...

[c1ue]

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

I've been tempted:

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

Just remember: China is the roach motel of money: it goes in, but it doesn't come out.

cef's premium is very low right now [around 4% and change last i looked], and gtu's even lower. [cef is issuing more shares to buy more bullion. that lowers the premium.]

I don't follow these at all, but normally I'd expect premiums to decrease with rapid underlying price increases but then increase as money flows increase/price increases level off/reverse.

The net effect is to then force you to either buy high or pay a high premium.

Is this a wrong understanding?

[Jay]

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

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

Reasonable diversification is a good hedge for the unforeseen. The right foreign currencies are a very smart play in my mind. G, how do you play the the Singapore Dollar?

[jk]

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].

cef's premium is very low right now [around 4% and change last i looked], and gtu's even lower. [cef is issuing more shares to buy more bullion. that lowers the premium.]