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  1. #1
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    WSJ: Property Bubble in China Deflating

    a new financial crisis in the making after the US subprime ? looks like China and Asia is next,

    The Great Property Bubble of China May Be Popping - WSJ.com
    Quote Originally Posted by WSJ
    After years of housing prices gone wild, China's property bubble is starting to deflate. Residential prices are heading downward, raising the prospect that the Chinese economy may slow more rapidly than anticipated.

  2. #2
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    and among the good news, famous Hedge Funds exposed to China losing big

    and that was after Paulson has lost 6% last month for being overexposed to Gold

    Big Funds See Red in China - WSJ.com
    Hedge-fund titan John Paulson is hardly alone in his wager on a Chinese company whose stock lately has swooned. Several other prominent money managers, including mutual-fund giants that invest individuals' money, made similar bets on stocks now struggling.

  3. #3
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    Quote Originally Posted by Butterfly View Post
    and among the good news, famous Hedge Funds exposed to China losing big
    I can't see how the asset management industry losing money is going to be beneficial for you, B.

  4. #4
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    I couldn't be less shocked- anyone who thought China's economy wasn't due for a major 'correction' was a fool.

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  6. #6
    disturbance in the Turnip baldrick's Avatar
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    as long as they do not all rush to the USD as a "safehaven"

  7. #7
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    ^Thanks, Moog

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    ^^I think we are running out of safe havens.

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    Quote Originally Posted by baldrick View Post
    as long as they do not all rush to the USD as a "safehaven"
    That would be the unwise choice.

  10. #10
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    Just because China's stock markets fall, it doesn't mean that China is going to stop making things, that its factories are going to grind to a halt.

    Yes it means that its reserves have to be used up internally rather than buying foreign sovereign debt, that commodities prices (soft and hards) fall, that factory gate prices for goods being exported are increased.

    ....oh, but hold on, who do those last few factors really hurt.....ah yes Western nations, .....that's you isn't it !

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    disturbance in the Turnip baldrick's Avatar
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    Quote Originally Posted by The_Ghost_Of_The_Moog
    it doesn't mean that China is going to stop making things
    I would say that its demand for external commodities will decrease which will stall countries like australia - but china's reduction in building stuff with steel will mean a reduction in employment which could well be the biggest issue to everyone.

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    ^Japanese companies I work for are bitching about labor shortages in China, so maybe some unemployment will help them. Otherwise, there will probably be a fall in commodity prices which could burst bubbles elsewhere (but maybe be good for Thailand), and also there will probably be some unforeseen effects in China if the bust is as big as some people reasonably anticipate.
    “You can lead a horticulture but you can’t make her think.” Dorothy Parker

  13. #13
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    Quote Originally Posted by The_Ghost_Of_The_Moog View Post
    Quote Originally Posted by Butterfly View Post
    and among the good news, famous Hedge Funds exposed to China losing big
    I can't see how the asset management industry losing money is going to be beneficial for you, B.
    it won't for anyone,

    the "board room" rumors I am hearing from certain big banks (director friend working at UBS) is that they all expect another shit storm in the next 6 months, and it's going to be brutal. Banks are trying to save money as much as they can.

    In contradiction, they also have been hiring like crazy, so not sure what to think of it

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    Quote Originally Posted by The_Ghost_Of_The_Moog
    Just because China's stock markets fall, it doesn't mean that China is going to stop making things, that its factories are going to grind to a halt.
    that's the problem, they will stop making things when their massive "offshore loans" will come into play and the bondholders will ask for immediate payments

    Old Europe lower currency and softer demand is also going to put some additional pressure on asian companies profit margin, above all when their currencies are going stronger.

    What is Marc Faber saying ? is he expecting another shit storm ? I know that a clock can only be right twice, but maybe he has an angle to it ?

  15. #15
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    Quote Originally Posted by Butterfly View Post

    the "board room" rumors I am hearing from certain big banks (director friend working at UBS) is that they all expect another shit storm in the next 6 months, and it's going to be brutal.
    So ask him why UBS just hired as their new Chief Risk Officer the woman who was the architect of Lehman's collapse. And from what I hear, she has already started futzing around with UBS' risk department.

  16. #16
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    Quote Originally Posted by The_Ghost_Of_The_Moog
    So ask him why UBS just hired as their new Chief Risk Officer the woman who was the architect of Lehman's collapse. And from what I hear, she has already started futzing around with UBS' risk department.
    is that on the US side ? UBS is really 2 companies these days, completely dysfunctional

    I know he has been complaining about putting down fire every other day in every department, new day, new fuckup, things that never make the news, but huge financial scandals involving a lot of investors money. No wonder everyone there is abandoning ship. It's a miracle they survived 2008 actually.

    I will ask him about the new Chief Risk Officer and will let you know, what's her name ?

  17. #17
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    Yves Smith's take:
    Chinese Real Estate Bubble Finally Imploding?
    THURSDAY, JUNE 9, 2011
    Chinese Real Estate Bubble Finally Imploding?
    The warnings of successful shorts like Jim Chanos, old Asia hands like Frank Verneroso, and economists like Victor Shih and Michael Pettis have failed to curb enthusiasm for the belief that the rise of China is inevitable and unstoppable. As someone who was deeply involved with Japan when it was seen as destined to replace the sclerotic US, I’ve learned to regard more or less straight line growth projections with considerable skepticism. (Update: I think the US is a mess, but that does not mean that the China bull case is not a tad overdone)
    China has accomplished the impressive feat of bringing literally hundreds of millions out of poverty in a comparatively short time frame. It has also studied the Japanese playbook and managed to avoid some of its pitfalls (of course, it has the advantage of not being a military protectorate of the US), in particular refusing to liberalize its financial markets (some accounts of the Japanese bubble and burst give considerable weight to overly rapid deregulation and the growth of what was then called zaitech, or financial speculation). is also hostile to neoclassical economists.

    China escaped much of the impact of the global financial crisis by ramping up investment even higher than its pre-crisis level. It now has investment approaching 50% of GDP, an unheard of level on a sustained basis. A big chunk of that is housing related (housing is an estimated 13.5% of GDP), and prices have long been considerably out of line with incomes, a telltale sign of a bubble. In Beijing, admittedly one of the hottest markets, an average priced new apartment was equal to 57 years of average worker savings (and if you tried to pay for it with a super-long dated mortgage, you’d be in hock even longer, since you would also need to cover the interest charges).

    Another warning sign is inventory overhang; the Wall Street Journal reports tonight that Standard Chartered forecasts that level of unsold apartments in secondary cities will amounts to roughly 20 months of sales by year end (and that’s before considering that many of the apartments are being acquired as investments rather than for use).

    The Journal story tonight provides evidence that the Chinese housing market is going into reverse. A nine-city price index by the firm Dragonomics shows housing prices in April 4.9% lower than the level a year prior (the increase in 2010 was 21.5%). A consultancy, Sofun, has property prices rising an average of 5.1% over the past twelve months, but that represents a slowdown. Standard Chartered projects that housing prices in some second-tier cities will fall 10% to 20%.

    The Wall Street Journal describes the broader ramifications:

    Real estate is a foundation of China’s phenomenal growth record in the past two decades, and its health is crucial to China’s construction, steel and cement sectors. Real estate is also a favored investment of Chinese looking to get better returns than bank deposits pay. Local municipalities and provinces depend on rising prices for land sales as well to fund infrastructure projects….

    If the Chinese housing market slows faster than people had expected, the impact would be felt in a number of markets that export heavily to China. Many Latin American and African economies have shifted their focus toward Chinese demand for their raw materials, and many Western firms, including U.S. retailers and fast-food chains, now bank on Chinese consumers feeling wealthier to make up for stagnating sales elsewhere. Also, plans by local Chinese governments to improve infrastructure loom large for heavy-equipment makers like Caterpillar Inc.

    And this development comes on top of other signs of economic slowdown:
    Last week, two surveys of purchasing managers showed a slowing of manufacturing activity.

    China, the world’s second-largest economy after the U.S., grew at 9.7% in the first quarter from a year earlier. In late May, Goldman Sachs lowered its estimate of Chinese second-quarter growth to 8% from its previous estimate of 8.8% as the government continues to tighten monetary policy to fight inflation and import demand from the U.S. weakens.UBS economist Tao Wang says she thinks the price decline will be short-lived as Chinese investors, with few other options, will again pour money into real estate and as local governments push up the price of land they sell to developers. Real-estate prices will rise for another three to five years, she estimates. A sharp fall then would batter investors, banks, construction firms and other sectors.

    In other words, when this party ends, it’s likely to get pretty ugly.

  18. #18
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    "UBS economist Tao Wang says she thinks the price decline will be short-lived as Chinese investors, with few other options, will again pour money into real estate and as local governments push up the price of land they sell to developers. Real-estate prices will rise for another three to five years, she estimates. A sharp fall then would batter investors, banks, construction firms and other sectors."

    Like I said, running out of safe havens.

  19. #19
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    Quote Originally Posted by baldrick View Post
    Quote Originally Posted by The_Ghost_Of_The_Moog
    it doesn't mean that China is going to stop making things
    I would say that its demand for external commodities will decrease which will stall countries like australia - but china's reduction in building stuff with steel will mean a reduction in employment which could well be the biggest issue to everyone.
    Good then maybe they can send some of their laborers down here to Macau... right now the Macanese don't want to build anything, there are still about 4 to 5 casinos that should be built in the next 3 to 4 years and with unemployment around 2% and the Macanese unwilling to do any sort of physical labor this is a great match.

  20. #20
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    ^^ it's a good point though, with little alternatives, it's either Gold or properties

    Thailand in that regard is not much different,

  21. #21
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    Quote Originally Posted by drawp View Post
    Quote Originally Posted by baldrick View Post
    Quote Originally Posted by The_Ghost_Of_The_Moog
    it doesn't mean that China is going to stop making things
    I would say that its demand for external commodities will decrease which will stall countries like australia - but china's reduction in building stuff with steel will mean a reduction in employment which could well be the biggest issue to everyone.
    Good then maybe they can send some of their laborers down here to Macau... right now the Macanese don't want to build anything, there are still about 4 to 5 casinos that should be built in the next 3 to 4 years and with unemployment around 2% and the Macanese unwilling to do any sort of physical labor this is a great match.
    And thats another useless bubble, Macau gaming.

    Though a good friend of mine has made tens of millions of dollars on commercial real estate there.

    (Not Stanley Ho - though I have met him a few years back)

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