#CHINA 'S REALTY #BUBBLE TO BURST

Bust looming over China property
 market?

New home prices
 in China have 
soared, more than quadrupling in
 Beijing and Shanghai since 
2003, and more
 than doubling in the country as a 
whole. — Reuters pic - 

BEIJING, June 1 — After years of boom that have seen prices rocket, the prospect of a bust is looming over China’s vast property sector, with authorities hoping to avoid a meltdown that could send shock waves through the world’s second-biggest economy.Housing was doled out by the state when Communist-style collectivism dominated economic management. But in the past two decades that has given way to market-oriented principles as China’s economy has opened.

New home prices have soared, more than quadrupling in Beijing and Shanghai since 2003, and more than doubling in the country as a whole, according to a report by Jeremy Stevens, Beijing-based Asia economist at South Africa’s Standard Bank.

The increases have been a key source of wealth for China’s rising middle classes, and a major driver of the economy.

Now some — including individuals who have made fortunes — foresee imminent disaster.

“I think Chinese property is the Titanic about to crash into the iceberg right in front of it,” Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, China Business News reported last week.

Read More


 Insights: 


How big is the real estate bubble in China? On good authority we understand that the number of empty homes exceeds 53 million. Clearly we are nearing a collapse, but the big problem will be the ripple effect on the the global economy that could be crippling for years to come.

You knew this  was going to happen sooner or later. Shorting the banking sector is starting to look attractive and it bolsters the prospects for precious metals including Gold!


Investors' Insights
June 2, 2012

Why is the boom ending?   

Investor

Jim Rogers Blog - Uncle Ben is a Historic Disaster?

Bernanke Is Going To Go Down In History As An Absolute Disaster

Not true? Everybody is printing money is an effort to debase their currencies so that exports remain competitive, while consumers will suffer with rising prices that will not be reflected in inflation indices. The game is on.

First, we are not promoting Uncle Ben's actions and decisions in anyway - it is just that all these guys are boxed in and have few choices to consider. They are boxed in for a number of different reasons, but if we cut to the chase, physical-reality's constraints are now governing what both central bankers and their abstractionist economics can and can't do. 

So, what's really going on? The secret is we are past "peak everything" making the inputs needed for production and consumption outputs scarcer. As a result, if you are chasing these scarce physical objects with abstracts (money) and all the other chasers are doing the same, how would you try to win the chase? You are right, have more abstracts than the other chasers - which translates into what? Print more money.

What does the end game of this chase look like? Simple extrapolation says we will ultimately have printed lots of money, but for some reason it didn't create anymore inputs for the economic process anywhere. I wonder why that is?

So in a funny way we do not really blame Uncle Ben and his friends because not even Jimmy has come up with a solution to fix this predicament. Why? Simply because there isn't one.

INVESTORS' INSIGHTS

First Financial Insights

September 13, 2013  

Poor Uncle Ben and friends...are just boxed in. Reality Check!

    

Jim Rogers Blog - Banks Stop Printing Artificial Money

The Problem will appear when the Central Banks stop Printing Money Artificially

Read More

There is one big problem with Jim's statement - Central Banks have alway and will always print money artificially. Why? First: How is money created? Where is it born? Who creates it? The answers to  these questions are actually quite simple. Money is created by virtue of a journal entry by a Central Banker in their books of account. There is little "physical" rhyme or reason for its creation, as the basis for authorizing the entry is a decision made by policy-makers based on the circumstances of the time. So the amount of entry is not determined by a set tried and true formula tied to GDP or any similar economic measure. It is largely arbitrary. 

So the paper you hold in your hands, bank accounts or use to ascribe other assets value is existentially nothing more than the fiat offspring of a Central Banker's accounting entry. It is not tied to national resources or future resource output potential in anyway - that would put  too much science into this mystical journal entry and money printing process. By the way, the more we print the more global stock markets go up as shown:

Global Stock Market Growth Flat J -Curve (Exponential Upwards)

. 

Therein lies the real issue, because as national resources behind the money supply are exponentially depleted by expanding populations, so is the de facto value of each money unit that had ever or will ever be printed.Thus, creating the basis for another exponential J-curve, as there is an inverse relationship between printed money and exponential resource output depletion. (see charts below) More and more printed money is simply needed to preserve the statu quo perceptions and defer social unrest.

Global Money Supply Flat J-Curve (Exponential Upwards) 

Global Resource Depletion Flat J-curve (Exponential Upwards)

Global Population Growth Flat J-Curve (Exponential Upwards)

Debasement in a sense actually started when the very first dollar was printed. The above hockey-stick charts show a fairly clear relationship between the expanding expanding money supply, resource depletion and population growth, leading to two logical questions: What's left? How long will it last?  The chart below uses oil as a surrogate for resources - and as expected the J-curve is inverted to the money, depletion and population J-curves above.



Global OIL Production (Extraction) Declines - Flat J Curve (Trending to Exponential Downwards)

Not only do these charts paint an obviously  bleak picture - the most important observation is that they are all going the wrong way - Exponentially!  And so is the climate right along with it as population growth spurs a J-curve in climate change as well as can be seen in the undernoted chart.



Global Climate Change - Flat J Curve (Exponential Upwards)

Bottom line is that the printing of money actually correlates with the respective J-curves population growth, resource depletion and climate change. While they correlate the printing of money appears to affect everything in the wrong way. But regardless of causation or correlation all these charts are forming J-curves going the wrong way.  But most importantly, they are doing in EXPONENTIALLY!   

Now try explain these simple J-curves to Central Bankers in Greece, Cyprus, Spain, Portugal, Nauru, Japan, Italy, Ireland, and the rest. Money is de jure or legal evidence from the issuing state that it is obliged to pay its holder the stated value of resource outputs through its various agencies. All is fine until there are no further resource outputs because inputs no longer exist for conversion by the nation's economic processes . As we can see in individual real nations noted, as these J-Curves continue to accelerate, the economic effects and value of money diminishes by country, and should ultimately do so in an exponential manner globally.   

What next? Just keep reading the international headlines.

INVESTORS' INSIGHTS
First Financial Insights
September 2, 2013

"Stop Printing Artificial Money"

     

BIG Mac Measures Inflation

BIG Mac Measures Inflation
(Read More)

Over 350,000 Trillion Served

The BIG point here is that no one in their right minds trusts or believes the CPI numbers anywhere on the planet. It is a number that by its very nature is subject to all forms of manipulation. Yet it is perhaps the most critical economic metric in the field of abstract economics.From this number investors set their expected rates of return inclusive of inflation. There are many pundits, economists and advisers who are saying this number has been pushed deliberately downwards to match the current policies of government.

We believe them because the grocery store bill, gas pumps and McDonald's prices seem to be way ahead of reported national CPI figures. Who do you believe? What is the real CPI?

One approach, as suggested is to look at the hours of work required to buy a staple or basket of staples. But even that is open to transgressions, such as: who is the average worker and what are their wages? Then do you apply local,  regional or national wages? Is there a solution?  Not really, save for doing you own personal calculations, both for personal and investment purposes. That number is probably as good as any, but certainly of more relevance to your circumstances.

Remember that in the end money is a medium - being a communication device intended to transmit a subjective value idea from sender to receiver. The message of value transmitted is an abstract that will never be subject to object scientific measure. It is simply the best social device we have to facilitate human activity.

INVESTORS INSIGHTS

First Financial Insights

August 27, 2013 

"Money ain't everything it's true, but what it can't get...?"

Beatles, Circa 1961

FIRST FINANCIAL INSIGHTS: #TORONTO CONDO BUBBLE CRASHING - @wallstjournal

FIRST FINANCIAL INSIGHTS: #TORONTO CONDO BUBBLE CRASHING  
TORONTO CONDO bubble CRASHING – WHAT NEXT? - READ MORE   2008 Meltdown or Japanese Bubble... (read more)

When will they ever learn? Or is it simply in the nature of our species to always create these gigantic credit-driven asset bubbles? And why is it a social phenomenon that no country, culture or region is immune to through-out history? 

From a investment view, we are seriously perturbed about Toronto's Condo Bubble and the possible outcomes that could occur when the bubble further deflates. As a result, we have placed a number of sectors on our watch list; obviously including  retail, financial, property development and construction industries. In the weeks ahead, we will provide further.comments and analysis regarding the much anticipated fall-out with more specific industry assessments.  

Remember also how globalization was sold to us as the best way to improve national economic well-being, standards of living, create jobs and lower risk levels. Now everything is so deeply inter-connected financially, physically and politically, yet these promised improvements seem to be moving us in the opposite direction. Do you think it was all a big lie serving a few special global interests? Do you think that they pulled the wool over the eyes of our political geniuses?  If you do - then you are not alone!

It begs the question - who is really governing sovereign nations given all the operative trade agreements, and organizations, such as the WTO, EU, IMF, World Bank and others, with relegated powers? Have all these supra-constitutional connections watered-down sovereign constitutions so much that national destinies have been moved beyond elected officials' powers? This may explain why Canada patterned its monetary policies after the FED - they have to!

This is a big issue that requires a good deal more analysis and thought, but there are clear hints that "globalization" was just a crafty synonym disguising "annexation". What does that have to do with the price of Condo's in Toronto?

Lots! Just ask its Mayor.   
  

INVESTORS' INSIGHTS
First Financial Insights

August 12, 2013

Asset Bubbles 101: 

In the end, remember nothing is...

  

US BANKS HUGE PROBLEM PERSISTS - Unofficial Problem Banks - FDIC Report

US BANKS HUGE PROBLEM PERSISTS -Unofficial Problem Banks - FDIC Report

(Read More)

Hmm ... Emerging Pattern?

Despite how others are interpreting the latest figures, reported by the FDIC - we do not share their same enthusiasm. In fact, we have grave concerns, as the pattern appears to mimic the one experienced during the credit humbling days of the Great Depression. Here are some numbers to consider. 

In Q2 2009, nine months after the meltdown, only 4.7% of the 8,195 insured banks were classified as problems. By the second quarter of 2012, the percentage rose to 13.3% of 7,513 insured creditors - at the same time, over 600 banks had vanished for a host of reasons. Today, we are looking at a figure of 10.3%, on a total report of 7,018 insured banks. Now these percentages do look somewhat comparable, in shape, to the 1930-32 period graph for bank failures, prior to the big collapse of 1933. Spooky.

Add to this numerical and graphic analysis, the fact that we have seen an extended period of monetary and quantitative easing, that has not seen benefits flow down to the Main Street banks. Disturbing! These banks are indeed no where near the numbers reported just nine months after the great 2008 meltdown - 4.7% to 10.3%. Meaning the problems have not been fixed to any great extent by policy measures, so far.

But could there be another 1933 in a year or two? The odds are good that a further market and credit meltdown is in the cards. First, because policy has had very little impact on the credit system's organic health; and secondly, a rise in interest rates would deflate financial and property assets, and thereby wipe out much of the equity in an already problematic and highly levered system. Thirdly, let's not forget that the global economy is fragile and exposed to contract widely with minor tremors.

These numbers and analysis are forewarning, so it would be wise for policy-makers to have the toxic-asset bail-out (disaster) plans in place well before events transpire, breaking the bank machine.  But, should we ever expect them to Think ahead? Perhaps as 2008 indicates, the idea is just too novel.

Investors should also take note that another credit crunch is, not only terrrible for markets, but also the domestic economy, as the banking system that is even numerically weaker than it was back in 2009, cannot quickly act to stabilise both activity and valuation contractions. Meaning that the breach in valuations could also be much greater than the September 2008 meltdown losses, as market liquidity is also more susceptible to rapid tightening with weaker banks.

To close, analyse and draw your own conclusions, but we cannot help having this sinking feeling inside - there is something in the Autumn Air.

INVESTORS' INSIGHTS 

First Financial Insights

August 2, 2013

When the bank machines are broken, expect...