Monday, January 11, 2010

The Great Consensus Wall of China

Both of my favorite commentators (William Pesek and Andy Xie) are tag teaming China this week.

Short Sellers Home In on China’s Balance Sheet: William Pesek

As the Great Recession wanes, there’s no better example of the Great Consensus than China. The overwhelming view is that it can grow 10 percent indefinitely, its potential is boundless and it’s run by omnipotent geniuses who can’t lose. China is today’s New Economy and anyone who disagrees just doesn’t get it.

Trapped Inside A Property Bubble: Andy Xie

The overwhelming desire for getting rich quick dominates every nook, fissure and strata of Chinese society. Such desires cannot be fulfilled; the terrible logic of economics is that money must circulate. Creating bubbles can temporarily blind people to this logic, as overvalued assets substitute for money to fill psychological needs. This is why, whenever conditions permit, China seems to have asset bubbles.

Jim Rogers vs Jim Chanos: Is China in a bubble?

But global commodities investing guru Jim Rogers has blasted Chanos for what he has said on China. Rogers, who has been passionately investing in China for the last few years, says that China is not in a bubble as Chanos has predicted. Rogers, who shifted his residence to Singapore two years back as he felt that Asian countries like China have huge investment potential, says that Chinese economy is on strong and sound foundations.


...ruled by intense emotion...

In my opinion, never become emotionally attached to your investments.

December 3, 2007

China's Stock Market: Two Years Later

I started this blog at the very peak of the Chinese stock bubble. I heckled China on my very first day. Perhaps the humor is funnier now though, at least in hindsight, so let's try again. The part that heckles China's stock market starts at the 1:20 point in the video. It still cracks me up!

Here's another blast from memory lane...

China vs. Monster Zero

China didn't stand a chance.


EconomicDisconnect said...

See this one:
"In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000."

Somehow this does not seem good to me.

mab said...


I don't know how Rodgers can see U.S. bubbles and money "printing" and yet ignore China's bubbles and credit creation idiocy. I think Rodgers is a baffoon - Cramer with a bow tie.

From the above linked article:

In bubble-era Japan, a byword for manic real estate speculation, apartment prices peaked out at 12 to 15 times average household income. In major Chinese cities, the multiple is currently 15 to 20 times. Asset market bubbles of any scale and duration usually have their equivalents in the real economy. The biggest distortion in the Chinese economy is the explosion in fixed asset investment to an eye-popping 50 per cent of GDP. By comparison, Japan in its miracle decade clocked up economic growth rates similar to China’s today by investing between 30 per cent and 35 per cent of its GDP.

"Financial professionals" = snake oil salesman. End the fed and all these inflation surfers/gatherers would be permanently unemployed.

mab said...

OMG, it just hit me. My word verification from the previous comment was something very close to "twoply".

Yikes! Maybe I should make a late night Walmart run.

EconomicDisconnect said...

It is surely a sign mab!

Stagflationary Mark said...

GYSC (& mab),

From your link...

"China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan."

China will also create a monster called Megachina. It will devour Jupiter and convert it into pure energy. That energy will power a billboard stretching from Mercury to Mars. On it will be a digital image of a Panda bear and in its paws will rest a product very familiar to all of us.

It has been foretold.


Stagflationary Mark said...

China stocks end down 3.1 pct after tightening

SHANGHAI, Jan 13 (Reuters) - China's key stock index closed down 3.1 percent on Wednesday in its biggest single-day percentage loss in 7 weeks, led by banks, after the Chinese central bank surprised late on Tuesday by raising the proportion of deposits that banks must hold in reserve.

Score one for Jim Chanos.

I started this blog on August 31, 2007.

China's SSE Composite Index has gone from 5,218.83 on August 31, 2007 to today's 3,172.658. That's a 39.2% loss.

Meanwhile, our S&P 500 Index has gone from 1,473.99 on August 31, 2007 to today's 1,136.22. That's only a 22.9% loss.

In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore. Rogers claimed that he moved because now is a ground-breaking time for investment potential in Asian markets. Rogers' first daughter is now being tutored in Mandarin to prepare her for the future. He is quoted as saying: "If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia."

In hindsight, if you were smart in 2007 you moved to the sidelines.

mab said...


Imo, China is ground zero for credit stupidity. Here's yet another report detailing the out of CONtrol credit creation in China.

Real estate price to income levels from the above link:

Chongqing: 12 (What a bargain!)

Chengdu: 12 (A steal! Buy now or be priced out forever!)

Shenzhen: 25 (It must be good, look at the high price!)

Beijing: 18 (Location, location location!)

Shanghai: 18 (Get your Shanghai surprise today!)

Jim Rodgers sold his over-priced Manahattan pad and bought an even more over-priced crib in Asia. Brilliant. How does he CONtinually sell idiocy as investment acumen?

Here's an anecdote. There used to be a bar in Jersey City, NJ called "Buns". On the sign out front, next to the word "Buns" was the slogan "ain't no bakery". I'm sure you can all figure out what type of establishment it really was.

You'd think some things would be obvious. Like the fact that financial experts are nothing of the sort. And that Wall St. bonuses are not earned, rather they are gifted.

To preserve the aggregate value of ponzi credit, the Fed offers real cash for trillions in crap assets. Suddenly, the values jump by 30 or 40%. Voila! The banks suddenly "earn" huge profits and pay out enormous bonuses. I guarantee CONgress and the Financial Inquiry Comission will ignore this simple process. What a sham. Free market capitalism - bah!

We'll get Bread and circuses.

watchtower said...

mab said:

"We'll get Bread and circuses."

Does that come with a "Shanghai surprise"?

G.H. said...

When I start seeing photos and videos of Chinese teenagers wearing backwards baseball caps and hideously oversized cargo shorts I'll know it's time to SELL SELL SELL!

EconomicDisconnect said...

if they are wearing their jeans backwards we are in real trouble!!!

"Kriss Kross will make you JUMP, JUMP!!"

EconomicDisconnect said...

Oh man I really did type and submit that one...............

G.H. said...


I'm guessing by 2012 China will be Totally Krossed Out.

EconomicDisconnect said...


Stagflationary Mark said...


Great link!

There's a great deal of info to ponder in it.

Stagflationary Mark said...


Does that come with a "Shanghai surprise"?

This can only end in tears (i.e., a Crying End Game).

Stagflationary Mark said...

G.H. & GYSC,

The jeans will be worn around the ankles, in the ultimate show of antiestablishmentarianism. Older folks like us just won't "get it".

The baseball cap will be worn sideways and the visor will be made of aluminum to help protect at least one ear from government propaganda.