Asian Crisis Redux?

[EJ]

Re: Asian Crisis Redux?

I think one needs to make a distinction between "energy independent" (which the USA already is) and "petroleum energy independent" (which as you say is problematic to say the least)...

A U.S. that is petroleum independent net of Canada is extremely problematic.

[jwr]

Re: Asian Crisis Redux?

Hot money flowed big also in real estate markets. In Uruguay (small example, yes) land prices grew ten fold between 2003 and 2012.
Urban RE prices multiplied as well.
And I am sure it was not an exception.
AS to GDP growth maybe the rate of same has slowed, but growth itself continues to be much faster in EM's than in developed countries.
Of course al EMs are not equal. China is the steadiest fastest growth example.
Argentina and Uruguay have experienced about 50% growth from 1998 to 2012. Not extraordinary, but much better than historic rate.
Low interest rates and high commodities prices are the first reason.

I admit I had no trouble seeing how there was hot money going into the EM's from 03-07 but as far as the last few years, no. And this recent article doesn't exactly make EM's GDP growth appear that great. http://online.wsj.com/article/SB1000...abs%3Dcomments

[bill]

Re: Asian Crisis Redux?

I admit I had no trouble seeing how there was hot money going into the EM's from 03-07 but as far as the last few years, no.

See my link regarding deals done in asia last few years.
http://www.itulip.com/forums/showthr...46106#poststop ( last post see Carlyles, Rubenstein interview at Davos saying he likes US for 2013)
http://www.itulip.com/forums/showthr...465#post145465

[Southernguy]

Re: Asian Crisis Redux?

I admit I had no trouble seeing how there was hot money going into the EM's from 03-07 but as far as the last few years, no. And this recent article doesn't exactly make EM's GDP growth appear that great. http://online.wsj.com/article/SB1000...abs%3Dcomments

Couldn`t open link

[GRG55]

Re: Asian Crisis Redux?

I'm just asking if so much hot money went into EM's why wasn't it reflected in equity prices in general. I don't see how the four countries you list here are indicative of anything different than what has been in the past. I mean by that that over the last 20 years or so (maybe longer just going by memory here) there has been a different country every year (Turkey topped the list twice) lead the world in equity returns. Usually they are emerging markets and usually they are enormous gains and I'm pretty sure these one year gains are enough to make them very good gains over any 3 year period that includes them. Anyway, EEM down 10% in the time frame I mentioned in my OP. The BRIC's have been crushed down anywhere from 20-30% in USD terms. Anything I punch up is the same result. Small caps, regional, dividend oriented, doesn't matter and I just don't see how cherry picking individual countries indicates a Fed-induced hot money flow. As far as EM bonds go EMB was up about 5% sans interest and EMLC was flat. TLT crushed both of them price wise. I'm just saying that I don't see it on my radar screen and granted my radar screen is probably not that great so that's why I'm asking.

Have you looked at what passes for company listings on many EM stock exchanges? Most of the foreign direct investment into EMs is unlikely to have gone into their largely immature, illiquid stock markets. When I lived in the Middle East I spent a few hours one afternoon on the floor of the Dubai stock exchange. Very entertaining and instructive: Mostly local speculators with little understanding of markets, borrowing heavily to buy poor quality companies at astronomical prices (this was circa winter 2005/06).

Most of these markets are filled with companies with only a small, minority portion of the equity in the public float on the exchange. The private companies remain controlled by the founding families and are run for their benefit. Too many of the larger company listings are minority floats of state owned enterprises, run and controlled for political, not shareholder return, objectives and on the exchange only because the each banana republic government wants to be seen "supporting their local capital markets".

There's been a huge amount of FDI poured into China since the financial crisis. Check out the Shanghai stock market performance. Not much of it seems to have gone into Chinese equities? Just like the present situation in the Dow Jones Industrial average or the S&P 500 index, the stock market and the economy are not the same thing...confusing the two can be fatal to our health.

[touchring]

Re: Asian Crisis Redux?

Can someone explain why the "hot money" flows into EM's over the last four years didn't translate into higher GDP growth or buoyed stock prices? Since the end of 2009 the EM's percent of global GDP growth has been in a distinct downtrend and is now being passed by the developed world. EEM has been flat during that time. Even since the announcement of QE2 on Nov 3, 2010 to May 1 of this year (pre-taper talk) returns from EM countries have been -10 to -30% with Thailand (and a few others?) being the rare exception. Even EMB (bonds) wasn't that impressive. It looks like EM equities have just tracked commodity prices, both of which have been anything but hot. If someone just took a cursory glance at investment returns over the last several years I believe they'd be inclined to say that the hot money flowed into the S&P and the Russell 2K.

It all went into property and real estate. Prices in China doubled and tripled and even quadrupled since 2009.

[Bundi]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

The force is strong with this one.

Thought the U.S. was already >80% energy self sufficient. EIA claims (figure 9) 81% in 2011 vs. 70ish% a handful of years ago. Transportation wise, not so much, but overall the U.S. is already benefitting. http://www.eia.gov/forecasts/aeo/er/...83er(2013).pdf

[coolhand]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

The force is strong with this one.

Cheap energy? Then how come Bakken total barrels added per day over the past 6 months (rolling) have gone into free fall over the past 12 months, as seen in the chart at this link, from ND DMR data: http://peakoilbarrel.com/bakken/#comments

[coolhand]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

The force is strong with this one.

And so the biggest debtor in the world is going to pull their money printing, & crash the EM's like Latin America in the 1980's & Asia in the 1990s? LOLOLOL!!!

The US is the biggest debor in the world. Those EM's are our creditors. In June, those creditors fled our bond market at a faster rate than Oct-08...that is the "Ka" portion of the phenomenon formerly known as "Ka-Poom" in these parts...

And so now we have a race - if the Fed doesn't then reverse tapering of QE, then it becomes a race of will China run out of spending it's $3T in reserves to defend itself & trade partners, or will the US blow up.

Given that the US stock market is driving the only two strong areas in the US economy (housing & auto), my bet is that the EMs will be able to hold their breath longer. And push comes to shove, they can simply change the currency system (China says "yuan/$ peg is no more - now it's a yuan/gold peg").

I don't think the " 'Merica, f#ck yeah" investment meme has legs for that much longer...

[lektrode]

Re: Asian Crisis Redux?

.... In June, those creditors fled our bond market at a faster rate than Oct-08...that is the "Ka" portion of the phenomenon formerly known as "Ka-Poom" in these parts...

And so now we have a race - if the Fed doesn't then reverse tapering of QE, then it becomes a race of will China run out of spending it's $3T in reserves to defend itself & trade partners, or will the US blow up.

Given that the US stock market is driving the only two strong areas in the US economy (housing & auto), my bet is that the EMs will be able to hold their breath longer. And push comes to shove, they can simply change the currency system (China says "yuan/$ peg is no more - now it's a yuan/gold peg").

I don't think the " 'Merica, f#ck yeah" investment meme has legs for that much longer...

somethings goin on, seems to be getting more apparent by the day, eh?
with the 10yr bouncing off 2.9 yest and another boost today in the yellow stuff, we see this one:

China Will Invest $1 Trillion Globally; How Much Will U.S. Get?

are we getting closer to or has the Ka- already began, is the question???

Gold Surges to 9-Week High on Technical Buying and as U.S. Dollar Index Sinks, Euro Rallies

and will the 'smart money' dump even more to drive it lower if the equities head down (a sell off manipulated by the big money to force further QE = more free trillions for them) - so they can buy it back cheaper (just before it rockets back over the prev high, as the rumors seem to indicate they sold off their 'paper' gold and are converting the proceeds to metal???)

the contrarian POV seems to be getting more enthusiastic all of a sudden - and kinda fishy that there were "delays in reporting"
of their selloffs of the ETF's - esp considering that some said earlier this year that 'gold is no longer a safe haven' - never mind when 'those in control' declared it was time to short the yellow stuff - meanwhile there seems to be quite a bit of attention to the miners - which seems to be both a 'seasonal thing' and some sort of play the most observant are noting....

all in all, methinks we need a comment from Mr J (and/or the finster and mr bart.... PLEASE??? ;)

[touchring]

Re: Asian Crisis Redux?

somethings goin on, seems to be getting more apparent by the day, eh?
with the 10yr bouncing off 2.9 yest and another boost today in the yellow stuff, we see this one:

China Will Invest $1 Trillion Globally; How Much Will U.S. Get?

are we getting closer to or has the Ka- already began, is the question???

In my opinion, this is only a technical bounce. Due to the abundance of liquidity, markets don't go down in a straight line.

There are tens of millions of units of empty and gleaming apartments and office blocks around Asia and banks are still laden with hundreds of billions of dollars of unrecoverable debt.

30x annual income to buy a new apartment in Beijing and Shanghai plus ever rising cost of living inflation, is there any disposable income left for the ordinary Chinese consumer? Has anyone thought of that?

[aaron]

Re: Asian Crisis Redux?

Would China be able to do a massive debt forgiveness for millions of people? They could certainly justify it morally and the people would probably love it. Can they just cancel debt and do a reset? How might it work?

Or, are they just adopting the American way of debt slavery? It keeps people in line when they can't escape a mortgage. And, it is "freedom".

[aaron]

Re: Asian Crisis Redux?

What a great time in the world! 20 years ago, China was begging for investment, now the rest of the world is begging for Chinese investment.

If they are good about it, they can spread their investments wide enough that the dollars do not lose too much value. People back at home will see their wealth increase (hopefully down to the little guys) and we get jobs again.

Or, we get Poom.

[touchring]

Re: Asian Crisis Redux?

Would China be able to do a massive debt forgiveness for millions of people? They could certainly justify it morally and the people would probably love it. Can they just cancel debt and do a reset? How might it work?

Or, are they just adopting the American way of debt slavery? It keeps people in line when they can't escape a mortgage. And, it is "freedom".

Since asset and land prices had been going up in China for like the past 20 years. I guess they have not come to a stage whereby they need to handle foreclosures.

But one thing I'm quite sure of is there's no concept of debt forgiveness in the Chinese mentality. In fact, the traditional thinking is that if a family member owes a debt, the parents and children must also pay for it. In the not so distant past, even in Hong Kong and Taiwan, people sold their children into prostitution to pay off debt. I believe this practice still exists in the inland provinces of China.

http://www.taipeitimes.com/News/taiw.../21/2003434282

Most children still live under shadow of inherited debt


By Loa Iok-sin / STAFF REPORTER


Despite amendments to the Civil Code last year to prevent children from inheriting debt, the Taiwan Fund for Families and Children (TFCF) found that more than 90 percent of children born into debt continued to suffer.


“We had hoped that children would be spared the burden of inherited debt from deceased family members when the limited inheritance clause was added to the Civil Code on Jan. 4 last year,” TFCF executive director Miguel Wang (???) told a news conference in Taipei yesterday. “A year has passed and sadly most children born into debt are still suffering from it.”


The amendment stipulates that an inheritor may apply for a waiver within three months of a family member’s death if the deceased had more debt than assets. He or she can also only pay off a debt equivalent to the inherited assets.


But there are problems.


“For many people, the three-month period may have long passed and it’s unreasonable for one to have to make an application to give up inherited debt,” Legal Aid Foundation secretary-general Kuo Chi-jen (???) said.
Many people do not understand the process, he said.


“It’s an outdated concept that children have to inherit debt from their parents. Everyone should be responsible for his or her own debts only,” he said.


Tracking 350 children born into debt since before the amendment was adopted, the TFCF found that 98 percent were still living with inherited debt, while 2 percent managed to have the debt erased after negotiations with banks.


“It’s quite difficult to ask a bank to forgive debt,” Kuo said.
To help resolve the problem, Children’s Bureau officials have agreed to assist children with the negotiation process.


Wang, however, didn’t think this was enough.


“The matter can only be resolved if the legislature revises the law [to get rid of debt inheritance altogether],” Wang said.

[ProdigyofZen]

Re: Asian Crisis Redux?

A U.S. that is petroleum independent net of Canada is extremely problematic.

Problematic for the structure of the IMS...? and capital inflow based accounting.