The Housing Bubble

Is Greece fixed? Is China fixed? Are the rising tensions between Sunnis and Shias in the Middle East or the shooting war between Saudi Arabia and its coalition allies, vs. the Iranian-backed Houthis, on the mend? Are Russia and Ukraine still at war?

I’d hold off on loading up at the peak of the bubble, if I were you.

Lots of black swans circling.

http://www.businessinsider.com/finance-officials-are-warning-of-big-risks-to-the-global-economic-recovery-2015-4

When Wall Street starts worrying about leverage in China’s stock market, you know things are bad.

Drudge Report link gonna rally that base

http://www.timesofisrael.com/iran-marks-army-day-with-cries-of-death-to-israel-us/

P.S. Sheldon Adelson is worth $36,000,000,000

World Net Daily gon rally some base yo

http://mobile.wnd.com/2015/04/reports-from-israel-reveal-startling-rerun-of-history

“startling rerun of history”

Is that what they call Iraq War III now, LOLZ

For a guy who spent most of his medical career making sure he got paid by Medicare, Rand Paul sure doesn’t like other people getting government benefits.

Rand Paul endorsed the corporate statist Mitt Romney. He talks the talk, but unlike his old man, he’ll cave on principle to get elected.

rallying the base ??

After Citizens United won their Supreme decision It does not matter anymore…Undisclosed contributions through Billionaire’s and Multi-National Corporations now have full control of the show and will pick the candidate of their choosing and it won’t be Paul…

But when 95% of voters are stupid ??

Kind of a stupid statement…

I am not as superior as you, who sits around all day blogging and does nothing about the situation. At this time I have decided to support Hillary Clinton. And I have made this decision as an informed voter who has been involved in the processes for the last 15 years.

We have a democracy in the apathy stage. It is corrupted and dysfunctional. Our POTUS is serving those who are exploiting the apathy, including Soros who makes no bones about being out to destroy the dollar. You need to review how he crashed the British pound in 1992 and destroyed the retirement savings of working class Brits.

It was Soros who made the decision to install Obama instead of Clinton as the Democratic Candidate in 2008. He is the main source of the dark money that has funded his campaigns. Obama will continue to double down on his policies throughout the end of his term and cross Clinton out of the running. As an example I will tell you that Valerie Jarret was the one who red flagged Clintons private server. That server was not for hiding things from the public, she was trying to maintain her privacy from Obama.

As part of the working middle class, I am voting for Clinton as my best bet. So you can mark me here. I say her platform matches my values 80% and that I think she is willing and able to deliver on about 40% of that. So I may get around 30% of my interests promoted.

With all the other candidates I see less than ZERO.

If the Repubs come up with a reformer, I may change my mind. But I do not think they have one that packs the gear to be POTUS.

If she is not what I expect, I will actively campaign for whoever is running against her in 2020.

Unless it is Soros.

why did uncle fed let stocks crash in 2008-2009 ?

Deferring the financial reckoning day just like all other central bankers and policymakers. But what day can’t and won’t be held off foreover, and when it comes, it’s going to be cataclysmic.

The latest cut, the deepest single reduction since the depth of the global crisis in 2008, shows how the central bank is stepping up efforts to ward off a sharp slowdown in the economy ??

Paging Adan……

And all the individuals that use to invest in high yield trusts are now putting that money into the stock market. Who will keep China’s zombie companies going through the next interest only loan payment? When will defaults start cascading through economy?

Must…not…allow…Ponzi Markets…to crash….

http://www.zerohedge.com/news/2015-04-19/china-cuts-reserve-ratio-most-2008-attempt-preserve-equity-bubble-boost-economy

Meanwhile, we can all do our part….

http://www.theburningplatform.com/2015/04/19/lets-all-help-save-california/

When are we going to see a reverse dustbowl migration out of drought-stricken California ??

Don’t hold your breath…The water problem is easily cured…Don’t let the business that contributes 2% to California’s economy control 80% of the water…If it starts adversely effecting business in the urban centers you watch how fast it gets legislated…

Around where I live, we have these amazing inventions called water delivery systems…

The more aggressive gender promotes itself. Yea, we need more of that because they have done so well running the world so far.

When men define feminism it is always bad.

There is a price being paid as a consequence of woman independence…Young men are saying No Thanks…

+1

Unless you don’t care about winning, since you are playing with somebody else’s chips.

Tim Worstall
Contributor
Economics & Finance 4/19/2015 @ 6:32AM 4,451 views
ECB’s Mario Draghi Makes A Dreadful Mistake Over Greece And The Euro

At least this is the way that I am reading this, when Mario Draghi said that the euro is irreversible, a one way street only. Therefore no one should be speculating about Greece leaving the single currency. The reason why that’s such a dreadful mistake to my mind is that it takes away the Great Big Bargaining Cluebat that the Eurogroup has over Greece. I am of course starting from the point that at least some of the expressed desires of at least some of the participants in this Greek debt standoff are in fact true. Perhaps that’s not the way to start given that this is politics but that’s where I indeed am. And what we think we know is that the European Union itself would very much prefer to see the euro continue with Greece in it. So would the ECB and the Eurogroup. So also would the Greek citizenry. And Syriza has at least said that it prefers that too: although there are some members of that party who over the years have differed from that line. So, everyone’s getting what they say they want with Greece staying in. However, I still think this from Draghi is a horrible mistake:

European Central Bank President Mario Draghi on Saturday rejected speculation that Greece may be forced to abandon the euro, reiterating that Europe’s single currency is irrevocable.

At a news conference during meetings here of the world’s top finance officials Mr. Draghi said he stood by a comment he made in August 2012 that the euro “cannot be reversed.”

…

What are the implications of a Greek default sans Grexit?

Funny…. Once the realt-liar gets called out on just what realt-liars are he begins to invokes the word “professional”.

professional. LOLOLOL

Other than that, Mrs. Lincoln, how was the play?

“An evening out often lifted his spirits.”

And this evening was no different. Mine eyes have seen the gory.

Paul Craig Roberts on the Lincoln mythology: The Power of Lies. Scroll down for an interesting read.

“As Professor Thomas DiLorenzo writes: “Lincoln spent his entire political career attempting to use the powers of the state for the benefit of the moneyed corporate elite (the ‘one-percenters’ of his day), first in Illinois, and then in the North in general, through protectionist tariffs, corporate welfare for road, canal, and railroad corporations, and a national bank controlled by politicians like himself to fund it all.”

http://www.paulcraigroberts.org/2015/04/13/power-lies/

And my great great grandfather was there to see that Lee’s army never made it past Appomattox.

Huckabee is the worst of them all. I don’t see a single republican worth voting for. Rand is no Ron.

Dudes are too irresponsible to take birth control pills.

Individual solar power for homes or cars without grids or subsidies.

LOLZ. Hope you don’t want the lights on at _night_!

Dude,

Give it up.

I live in Redmond. Zillow data is junk.

It’s like trying to use Twitter as a news feed.

He who borrows to grossly inflated prices for depreciating assets losses!

The change of heart by Clinton and other Democratic leaders enabled congressional passage of a Colombia trade deal that experts say delivered big benefits to foreign investors like Giustra.
————————————————————————–
WTF? Clinton is now running congress? And Info Wars is maintaining her platform on the issues?

You Hillary haters need to keep scrounging for some better swill than that.

Comment by phony scandals
2015-04-19 09:21:53

More Hillary Cronyism Revealed: Cisco Used Clinton Foundation To Cover-up Human Rights Abuse In China
infowars.com/more-hillary-cronyism-revealed-cisco-used-clinton-foundation-to-cover-up-human-rights-abuse-in-china/

From the International Business Times:

Cisco Systems had a public relations problem: Having invested $16 billion in the Chinese market, the technology giant was suddenly facing congressional scrutiny over its alleged complicity in building the so-called Great Firewall that helps China’s authoritarian regime censor information and surveil its citizens.

The San Jose, California, company endured a high-profile Senate hearing about its Chinese operations in 2008 and reaffirmed its “continued commitment to China.” But the issue wouldn’t die. A group of investors stormed the company’s annual meeting in November 2009, pressing a shareholder resolution that would force the company to prevent the Chinese government from using Cisco technology to engage in what critics said was widespread human-rights abuse.

That’s when then-Secretary of State Hillary Clinton tossed the company a lifeline. Weeks after Cisco executives killed the shareholder initiative, Cisco was honored as a finalist for the State Department’s award for “outstanding corporate citizenship, innovation and democratic principles.” The next year, the company won the award. While the honors were for the company’s work in the Middle East, they gave Cisco a well-timed opportunity to change the subject and present itself as a champion of human rights.

What Clinton did not say at the State Department award ceremonies was that Cisco had been pumping money into her family’s foundation. Though the foundation will not release an exact timeline of the contributions, records reviewed by International Business Times show that Cisco had by December 2008 donated from $500,000 to $1 million to the foundation. The company had hired lobbying firms run by former Clinton aides. After the money flowed into the foundation, Clinton’s State Department not only lauded Cisco’s human rights record, it also delivered millions of dollars worth of new government contracts to the company.

Internet freedom advocates say Clinton’s moves helped Cisco whitewash its image and also raise questions about the sincerity of her often-stated commitment to human rights.

“Crony capitalism has defined Clinton’s career, from her tenure on the board of Walmart, to the Wall Street execs whom she surrounded herself with at the State Department, to her allegiance to Cisco, even as it violated principles on which she staked her tenure,” said David Segal, executive director of the Internet freedom advocacy group Demand Progress.

But the issue of Chinese repression — and Cisco’s role — was already known by then. In 2009, weeks after Clinton’s State Department had named Cisco a finalist for the secretary of state’s Awards for Corporate Excellence (ACE), a report from the Electronic Freedom Foundation noted “Cisco’s deep involvement” in building the Chinese government’s censorship system. The report pointed out that “Cisco engineers gave a presentation acknowledging the repressive uses for their technology.”

In 2010, the Clinton Foundation gave Cisco CEO John Chambers a high-profile speaking role at its “Turning Ideas Into Action” annual meeting. Cisco also won an ACE that year — just before the Human Rights Law Foundation filed a lawsuit against Cisco outlining what the foundation’s executive director, Terri Marsh, said was the “key role Cisco played in the design, construction, and maintenance of China’s Internet surveillance system.”

In an interview with IBTimes, Marsh said that “Cisco’s conduct has enabled an unprecedented and widespread crackdown on religious minorities, Tibetans, and democracy activists in China.” Cisco’s work in China, she said, “runs contrary to Secretary Clinton’s stated commitment to ‘a single Internet where all of humanity has equal access to knowledge and ideas.’”

She added: “We are disappointed that the State Department has chosen to reward rather than condemn such a company, and believe that the United States should instead be sending a clear message to American technology corporations that complicity in global human rights abuses is not acceptable.”

Daniel Wade, an attorney who represented Chinese dissidents in a lawsuit against Cisco, told IBTimes that “Cisco knew full well that its products were going to be used to suppress and facilitate the torture of democracy activists.”

The Electronic Frontier Foundation, which today works with Cisco on an Internet encryption project, said Cisco technology enabled violent repression by the Chinese government.

“We have ample evidence to indicate that the technology Cisco created was instrumental in the tracking down of religious minorities, detaining them, and murdering them,” said Rainey Reitman, the EFF’s activism director. “Unfortunately, there hasn’t been a full public accounting.”

There’s shameless, and then there’s Hillary Clinton. She is in a league all by herself.

Stop pretending. You will vote Hillary.

Where are you operating these days? My friend in Delaware says things are slowing down in the Wilmo area. We met a nice couple from NOVA on spring break, and they said things were nuts.

Clearwater/St. Pete area is insane. We just wrapped up a record-breaking spring season. It’s possible that in any meaningful timeline, I am priced out of Pinellas County.

How’s Allena these days?

“We renewed our lease through June of 2016 (small increase). Paying 17% of take-home to rent”

Good for you.

When did house prices hit their false floor over there? I figure is was about 2010 - 2011 over here which in some cases had them around prices in 2000. They have been pushed back up to about a 2004 equivalent now.

+ 1

Is it time for a deflationary cycle so wall street can scoop up some more cheap assets?

There is a feeling out there that the bottom could fall out at any time now.Makes you feel real confident buying risk assets doesn’t it?

No worries now, as Draghi has signaled that Greece gets to stay in the Eurozone no matter what happens…

how many years have you been on unemployment rolls?

I know you would buy a house if you could get a loan.

Home Prices Fall in Fewer Chinese Cities as Demand Grows
6:00 PM PST
April 17, 2015
China home prices
Residential buildings in Beijing. Housing sales last month fell from a year earlier, while property investment growth slumped to the slowest since at least 2013.
Photographer: Tomohiro Ohsumi/Bloomberg

Fewer Chinese cities saw home prices fall last month as demand got a boost from two interest-rate cuts since November and the removal of property curbs.

New-home prices dropped from a month earlier in 49 of the 70 cities tracked by the government, the National Bureau of Statistics said on Saturday, compared with slides in 66 in February. The average price fell for an 11th consecutive month, bringing the decline from a year earlier to 6.1 percent, the steepest on record, according to Bloomberg calculations.

The government eased mortgage policies at the end of March, adding to loosening steps since September to aid an industry that has been weighing on economic growth. Home prices fell from a year earlier last month in all 70 cities, while property investment growth slumped to the slowest since at least 2013 in the first quarter.

“Improving prices and turnover showed a seasonal recovery by the market itself,” Xia Dan, a Shanghai-based analyst at Bank of Communications Co., wrote in a research note. “As policies start to take effect, transactions are expected to keep improving slightly. In case the recovery of the housing market doesn’t meet expectation, there will be further policy adjustments.”

Home sales surged 66 percent from February, a period typically weak due to a week-long holiday, and will stabilize further in the coming months as the looser policies take effect, the statistics bureau said in a separate statement.
…

Barron’s Cover
Nearing Peak, U.S. Home Price Gains to Slow
The three-year rally in housing prices is losing a little steam but should continue for another year or two.
By Jonathan R. Laing
April 18, 2015

Go figure. Just as several measures of U.S. economic growth appear poised to accelerate, the three-year residential real estate market recovery is showing signs of slowing.

Strong job growth, falling unemployment, ultralow mortgage rates, and encouraging consumer confidence figures haven’t been enough to boost monthly sales of existing homes, as tracked by the National Association of Realtors. They’ve been running below their previous annual pace of around five million transactions in recent months, much to the surprise of most experts.

Of course, some slowing is to be expected, following their stellar climb from the depths of the financial crisis, when home prices nationally fell 35%, subtracting nearly $8 trillion from Americans’ home equity. More recently, prices rose 8% in 2012, 11% in 2013, and 5% in 2014, much as Barron’s had predicted they would in each of those years. Rising sales in Dallas and Denver, for example, mean houses now cost more than they did back in 2006; and other markets, such as Boston, Charlotte, Portland, and San Francisco, are very close to their peaks, according to figures from Standard & Poor’s/Case-Shiller.

Various housing experts, including Mark Zandi, chief economist at Moody’s Analytics, and Lawrence Yun, chief economist at NAR, see solid growth continuing, albeit at a more languid pace of 4% or so this year and next. That would be a little more in line with an expected increase of 2.7% in U.S. output in 2015 and 2016 and rising average wage rates.

Helping sustain the recent healthy pace of growth is the strength in housing prices in major cities that don’t include outlying, poorer-performing blue-collar counties and exurbs. For instance, another realty data cruncher, Local Market Monitor, which takes into account an area’s income and employment figures, as well as job and population growth and building-permit activity, sees more boom areas than S&P/Case-Shiller. The company’s founder, Ingo Winzer, says San Francisco, Dallas, Houston, and Denver have all moved to peak valuations, while Honolulu, Nashville, Raleigh, Salt Lake City, Portland, and Seattle also are near or at all-time highs.

We think 4% growth in prices is a reasonable expectation over the next year or two, particularly in light of the strange dichotomy between economic and housing data that could prevent more rapid increases. While the split between a gradually rising rate of economic growth and a gradually slowing housing market is unlikely to result in a dramatic immediate change in housing prices in the next couple of years, it’s enough to raise questions about whether a more important, longer-term shift is under way.

Looking out a little further, say to 2017-2019, Bank of America Merrill Lynch mortgage-backed securities strategist Chris Flanagan sees the possibility that home prices could start to decline. By then, he says, prices will be subject to slowing growth in buyers’ disposable income and the inevitable end in speculative purchases by professional investors.
…

Analyst Predicts Home Price Decline In Report to White House
September 18, 2014

Former Goldman Sachs executive Joshua Pollard sent a sobering 18-page report to the White House on September 17 warning of a potential downturn in home prices that could put the country back into a recession before the ripples of the previous one settle.

According to Pollard, the former head of the Goldman’s housing research team, home price appreciation is outpacing income, and the United States is on the brink of a 15 percent decline in home prices over the next three years. Rising interest rates and values will cause already overvalued homes (Pollard says values are 12 percent higher than they should be) to be even further out of sync with reality and generate an unnatural surplus that will itself lead to a slowdown in investor purchases.

Flipped homes have declined 50 percent in the last year, and home flippers are losing money outright in New York City, San Francisco, and Las Vegas according to the report.

If Pollard is correct, the impact on the U.S. economy would be seismic. Overvalued homes, according to his report to President Obama, make up $23 trillion of consumer asset value and “serve as the psychological linchpin” for $17 trillion of invested capital.

Put together, that 15 percent decline translates to a $3.4 trillion cut to consumers’ net worth.

“As an economist, statistician and housing expert, I am lamentably confident that home prices will fall,” he wrote. “Home price devaluation will expose a major financial imbalance that could lower an entire generation’s esteem for the American dream.”

Student debt and a 45 percent underemployment rate for recent college grads has handicapped millennial buyers already, Pollard wrote.

Pollard outlined three distinct stages of the decline—the first of which, the “hot-to-cool” stage, is already underway. This is where home price growth slows and turns negative in large markets across the country. Investors slow their purchases, homebuilders lose pricing power as absorption rates decline, and press outlets shift their market pieces from positive to mixed.

In Stage II, the “demand-to-supply” phase, new negative shocks cause investors to shift from raising prices in an effort to outbid competition to reducing prices to beat future declines. In Stage III, the “deflation and response” phase, consumers come to the decision that now is a bad time to buy a home. Fewer people seek mortgages and banks become less willing to lend. Consequently, deflation hits, taking jobs with it and triggering calls for new policy.
…

What does “rallying the base” mean exactly?

For the Democrat party, it means any opportunity of redistribution, any shred of an opportunity to poke their greedy beaks in and TAKE.

For the Sheldon Adelson bought and paid for Republican self-proclaimed “conservatives” watching anyone wearing a uniform (badge optional) kicking the sh*t out of, or just murdering, somebody with brown or black skin

Markets Live: China easing shrugged off
Date
April 20, 2015 - 1:02PM
Patrick Commins, Jens Meyer

Shares are sharply lower in a broad sell-off, as Friday night’s heavy losses in global markets spills on to the ASX, despite news of Chinese policy easing.
…

China’s economy
Coming down to earth
Chinese growth is losing altitude. Will it be a soft or hard landing?
Apr 18th 2015 | ZHENGZHOU | From the print edition
Timekeeper

WHEN “60 Minutes”, an American television news programme, visited a new district in the metropolis of Zhengzhou in 2013, it made it the poster-child for China’s property bubble. “We found what they call a ghost city,” said Lesley Stahl, the host. “Uninhabited for miles and miles and miles and miles.” Two years on, she would not be able to say the same. The empty streets where she stood have a steady stream of cars. Workers saunter out of offices at lunchtime. Laundry hangs in the windows of the subdivisions.

The new district (pictured), on the eastern side of Zhengzhou, a city of 9m in central China, took off when the provincial and city governments relocated many of their offices there. Then, high schools with university-sized campuses began admitting students, drawing families to the area. Last autumn one of the world’s biggest children’s hospitals opened, a gleaming facility with cheery colours and 1,100 beds. Chen Jinbo, one of the area’s earlier residents, bemoans the lost quiet of a few years ago. “Rush hour is a hassle now.”

The success of Zhengzhou’s development belies some of the worst fears about China’s overinvestment. What appear to be ghost cities can, with the right catalysts and a bit of time, acquire flesh and bones. Yet it also marks a turning-point for the Chinese economy. Zhengzhou still has ambitious plans, not least for a massive logistics hub around its airport. With such a big urban area already built up, though, vast construction projects have a progressively smaller impact on the economy. The city’s GDP growth fell to 9.3% last year from an average of more than 13% over the preceding decade. The downward trend will continue. As the capital of Henan, one of the country’s poorest provinces, Zhengzhou had anchored the country’s last, large, fast-growth frontier. Its maturation signals that the slowing of China’s economy is not a cyclical blip but a structural downshift.

When growth flagged in powerful coastal provinces a few years ago, the poorer interior picked up the slack. It was large enough to do so, for a time. Henan and the other inland provinces that have a similar level of income per head have 430m residents, nearly a third of China’s total. If they were a sovereign country, they would form the world’s seventh-biggest economy, ahead of both Brazil and India. The far west is China’s final underdeveloped region but it carries much less weight: it makes up less than a tenth of the national population.

So the question for China is not whether growth will rebound to anything like the double-digit pace of the past. Instead, it is whether its slowdown will be a gradual descent—a little bumpy at times but free from crisis—or a sudden, dangerous lurch lower. Figures released on April 15th revealed a further loss of altitude: GDP in the first quarter grew by 7% from a year earlier, the lowest since the depths of the global financial crisis in early 2009. Signs of stress are emerging: capital is leaving the country, public finances are more stretched and bad debts are rising.
…

China to Investors: Don’t Forget That Stocks Can Lose Money Too
by Ye Xie
Stephen E Stapczynski
9:17 AM PST
April 19, 2015

After the longest-ever rally in Chinese equities, investors are getting a reminder that the $7.3 trillion market isn’t just a one-way bet.

China’s securities regulator jolted traders after the close of local bourses Friday when it banned a source of financing for margin trades and made it easier for short sellers to wager that stocks will fall. Offshore futures and exchange-traded funds linked to the world’s second-largest stock market sank, with the iShares China Large-Cap ETF tumbling 4.2 percent in the U.S. The Shanghai Composite Index dropped 0.4 percent at 9:54 a.m. local time.

While China bulls will draw some comfort from the central bank’s biggest cut to lenders’ reserve requirements since 2008 on Sunday, last week’s sell-off in offshore markets shows how vulnerable the Shanghai Composite is to a pullback after going 452 days without a 10 percent drop from a recent high. The benchmark gauge posted an average peak-to-trough retreat of 28 percent after six previous rounds of policy intervention to curtail stock speculation since 1996, according to Bank of America Corp.

“Institutional investors as well as authorities have had some concerns over the sharp rise in prices and trading,” Michael Kass, a New York-based money manager at Baron Capital Inc., whose $1.53 billion emerging-markets fund has outperformed 95 percent of peers tracked by Bloomberg over the past three years, said by e-mail on Friday. “This will likely cool some of the recent enthusiasm.”
…

Key-rash…

China Market Called Sharply Lower On Monday
By RTT News, April 19, 2015, 09:00:00 PM EDT

(RTTNews.com) - The China stock market has tracked to the upside in consecutive trading days, surging more than 200 points or 5 percent on its way to a fresh seven-year closing high. The Shanghai Composite Index finished just below the 4,290-point plateau, although the market is primed for some major damage on Monday.

The global forecast for the Asian markets is soft thanks to ongoing concerns over growth in Europe and debt woes in Greece. The European and U.S. markets were down on Friday and the Asian bourses are expected to open in similar fashion.

In addition, China shares figure to fall under heavy pressure not just on profit taking, but because Chinese regulators have expanded the supply of shares available for short sellers while clamping down on over-the-counter margin trading.
…

Craig Stephen’s This Week in China
Opinion: Can Beijing tame China’s bull market?
Published: Apr 19, 2015 10:50 p.m. ET
By Craig Stephen
Columnist

HONG KONG (MarketWatch) — Authorities in China face the delicate task of taming an equity bull market of their own making, which could now be spiraling out of control.

Last week, the announcement of new measures to allow fund managers to short stocks not only hit Chinese shares, but also spooked the global markets. This was followed up by warnings from China’s securities regulator to small investors not to borrow money or sell property to buy stocks.

A warning for equity bulls to cool off certainly looks overdue. Stock turnover reached a record 1.53 trillion yuan ($247 billion) on Friday, with stock-trading accounts reportedly being opened at a rate of 1 million every two days. Margin account balances reached a record 1.16 trillion yuan.

But should global markets worry if day traders in Shenzhen or Shanghai are about to lose their shirts?

China’s casino-like equity markets are largely sealed off from the outside world, after all. Foreign ownership of domestic Chinese shares is still a fraction of 1%, even with new initiatives such as the recent opening of the Shanghai-Hong Kong Stock Connect.

The concern for global markets, however, is not equity-market contagion but the potential hole a stock-market bust could blow in the world’s second-largest economy.

This bull run is taking place as the Chinese economy slumps under a sea of debt, with exports now also going south along with the property market.

This hardly sounds like conditions ripe for rallying shares — but this is no normal rally.

The real wild card to consider is the fact that this bull market has the fingerprints of the ruling Communist Party all over it. They initiated it, meaning an official policy shift could also see it reverse — although that looks unlikely for now.

Official state media have been cheerleading this rally by extolling the benefits of share ownership in a series of articles since last year.

But what has really unleashed “animal spirits” of day traders has been the re-opening of the domestic initial public offering (IPO) market. Thanks to systematic underpricing orchestrated by the state regulator, investors have been all but guaranteed spectacular gains.

According to a first-quarter report from accountants Ernst & Young, there were 70 domestic Chinese IPOs, all of which rose by the maximum 44% allowed on the first day of trading. Average gains for IPOs have been around 200% this year.
…

China not trying to chill red-hot stock market, says regulator
Dow Jones
April 20, 2015 12:45PM

SHANGHAI-A day after it warned small investors about trading risks and expanded the use of a mechanism investors can use to bet against stocks, China’s securities regulator moved to allay fears that it wants to kill a breathtaking rally in the country’s stock market.

Analysts said the abrupt nature of the China Securities Regulatory Commission’s actions betrays a dilemma faced by the regulator between cooling a market that has doubled over 12 months and causing panic among vulnerable retail investors that account for the vast majority of stock trading in China.

In a statement published Saturday evening, the commission said measures rolled out on Friday, including tightening rules on margin lending and promoting the use of short selling, aren’t aimed at clamping down on a red-hot market.

The measures are about “maintaining the healthy development of the market,” the CSRC said in the statement. “They aren’t intended to encourage short selling, let alone depressing the market…the market shouldn’t over-interpret the measures.”

In separate announcements late Friday, the CSRC banned a type of financing called umbrella trusts that have provided cash for margin trading, the practice of borrowing against the value of common shares held at a brokerage, and placed limits on margin trading for high-risk small stocks that trade over the counter rather than on exchanges.

In an apparent effort to take some heat off a soaring market, the CSRC also announced that it would allow fund managers to lend shares for short selling, or betting against stocks. To short a stock, an investor borrows shares and sells them, hoping the price will fall so that they can repurchase them and repay the loan with the cheaper shares and make a profit.

The Shanghai and Shenzhen stock exchanges also announced that they would make it easier for investors to engage in short selling by pushing for an increase in the supply of shares available for lending and increase the number of stocks whose shares can be borrowed.

Compared with the recently robust margin-financing business, which benefits from a rising market, short selling businesses have grown at a much slower pace in China because of difficulties in borrowing shares.

“The market has indeed risen too fast and the regulator clearly wants to clamp down on speculation and pierce the bubble. However, Chinese retail investors have a very fragile state of mind,” said Shen Meng, executive director of Chanson Capital, a boutique investment bank.

The Shanghai Composite Index, home to China’s biggest stocks, surged 6.3 per cent last week and has jumped 14 per cent this month. After years of listless trading, the index has doubled over the past 12 months.

By contrast, the small-company-rich ChiNext Price Index-up 73 per cent for the year when the week began-recorded its first weekly loss since January, dropping 3.5 per cent. Among its components are startups listed on the Shenzhen stock market.

Friday’s announcements raised fears of a selloff in China.
…

Most Chinese stocks drop as new margin rules overshadow RRR cut
Date
April 20, 2015 - 12:57PM
Kyoungwha Kim
Chinese investors have been piling into the equity market after the central bank cut interest rates twice since November
Photo: Reuters

Most Chinese stocks fell on high volume as investors weighed new restrictions on using leverage for share trading and a move by the central bank to cut reserve ratios.

Shanghai Wangsu Science & Technology Co. slumped 5 per cent to lead declines for technology companies. The China Securities Regulatory Commission announced measures on Friday to clamp down on the use of shadow financing for equity purchases and increase the supply of shares available for short sellers. PetroChina Co. plunged 2.3 per cent. Agricultural Bank of China Ltd. jumped 2.7 per cent in Hong Kong as the People’s Bank of China said reserve- requirement ratios will be cut 1 percentage point from Monday.

About three stocks slid for every one that rose on the Shanghai Composite Index, which slipped 0.1 per cent to 4,281.76 at 10:11 a.m. Shanghai trading volumes were 93 per cent above the 30-day average, while 100-day volatility was the highest since January 2010, according to data compiled by Bloomberg.

“The market will be very volatile in the next few days,” said Jeffrey Chiu, a Hong Kong based trader at Winnington Capital Ltd. “We will monitor demand for short selling.”
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Are the results predictable when central bankers tap the brakes and push the pedal to the metal at the same time?

Do y’all recall how Ben Bernanke used to constantly comment on how many tools he had left in his toolbox to combat the financial crisis?

CNNMoney (New York) April 15, 2015: 10:10 PM ET
Bubble trouble: China’s stock market looks too hot
By Matt Egan
Stock market fever is sweeping China.

Chinese equities are officially on fire. The Shanghai Composite has skyrocketed 78% since just before Halloween. It recently crested the 4,000 level for the first time since the financial crisis.

Yet stocks in China have achieved red-hot status just as the country’s economy is going through a cooling off period. Growth slowed to the weakest pace since 2009.

In other words, exuberance for Chinese stocks isn’t being backed up by fundamentals. Instead, the market is being carried higher by various forms of government stimulus and investor frenzy.

All of this raises the question: Is China in the midst of a bubble? And if it is, what should American investors do?

“Certainly a bubble exists,” said Ankur Patel, chief investment officer at R-Squared Macro Management.

Rather than enjoy the ride up or try to profit from its eventual popping, Patel said the prudent move for U.S. retail investors is to stay away from the Chinese market altogether.

“The problem with any bubble is if you try to bet against it, bubbles can become even more irrational. The herd mentality can essentially run investors over,” he said.

In recent years, people in China — who tend to save significantly more than their Western counterparts — sunk their excess savings into the real estate market.

Now that the bubble in housing is deflating, they are latching onto the skyrocketing stock market. Investors opened 4.8 million new stock trading accounts in March and then another million more in early April, according to the Financial Times.

“There’s no question there’s a lot of domestic euphoria about equities within China,” said Albert Brenner, director of asset allocation strategy at People’s United Wealth Management.

Several Chinese retail investors polled by CNNMoney said they trade stocks frequently — up to several times a day — in part to have fun. One Shanghai woman, who didn’t give her full name, said she’s not worried about trading expenses hurting performance because “fees tend to drop during bullish markets anyway.”

Non-Chinese investors are also taking notice. Exchange-traded funds that track China — the best way for U.S. investors to play China — have soared. The iShares MSCI China ETF (MCHI) and SPDR S&P China ETF (GXC) are both up over 20% so far this year.

Liquidity-fueled bubble?

Hoping to avoid a so-called “hard landing,” China’s central bank is pumping liquidity into the market by cutting rates. That’s good for risky assets like stocks, but liquidity-driven moves are susceptible to bubbles.

Liquidity is also being pumped by the Hong-Kong Shanghai Stock Connect Program, which allows investors to buy Shanghai stocks through Hong Kong — and vice versa. Not only is fresh foreign capital flowing onto Mainland China for the first time, but excess liquidity inside China is flooding into Hong Kong.

Goldman Sachs isn’t worried: Of course, not everyone believes it’s time to call China’s rapid rise a bubble.

Timothy Moe, co-head of macro research in Asia at Goldman Sachs, told CNBC the market “certainly is getting frothy” amid “very frenetic retail activity.”

“Is that a bubble that will crash the system? The answer is not yet,” Moe said.

In other words, just because Chinese stocks look very speculative doesn’t mean the party has to end today.

One possibility, Patel said, is for the bubble to end “benignly” if China’s growth regains momentum, justifying current valuations. He said that looks unlikely and there’s a better chance the opposite will occur.

Another possible outcome is the stock market keeps roaring ahead before imploding, like it did the last time.

“To be clear, what’s underway in China is an out-and-out bubble, but there’s plenty of money to be made riding bubbles up a bit,” Bespoke Investment Group wrote in a note to clients. The firm said it “may be worthwhile to consider a small position” in Chinese ETFs like the SPDR S&P China ETF (GXC).

Just remember: Bubbles are notoriously difficult to time, even for sophisticated investors.
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The Wall Street Journal
Europe braces for messy Greek endgame
Published: Apr 19, 2015 6:42 p.m. ET
Reuters
Greek Prime Minister Alexis Tsipras in a photograph from February.
By Simon Nixon

It’s still possible that Greece can remain in the eurozone — though that is no longer the base case for many policy makers. At the very least, most fear the situation is going to get much, worse before it gets any better.

No one now expects a deal to unlock Greek bailout funding at this week’s meeting of eurozone finance ministers in Riga — originally set as the final deadline for a deal. The new final, final deadline is now said to be a summit on May 11.

But among European politicians and officials gathered in Washington DC last week for the International Monetary Fund’s Spring Meetings, there was little optimism that a deal will be agreed by then.

The two sides are no closer to an agreement than when the Greek government took office almost three months ago. “Nothing, literally nothing has been achieved,” says an official. In fact, it is worse than that: so far, the bulk of Athens’s reform plans would actually cost money or reduce government revenues, according to eurozone officials.

They say that when you add up all the government’s proposals, the budget surplus required under the current program turns into a 10-15% deficit while debt soars far above the 120% of GDP targeted for 2022. There is no way that the eurozone — let alone the IMF — could disburse funds on the basis of such fantastical numbers.

The bottom line is that Athens won’t get any money unless it can reach a deal that satisfies the IMF that Greek debt is on a sustainable path and that it has a medium-term funding plan in place. The eurozone won’t disburse its own bailout funds without a deal that carries this IMF seal of approval.

The IMF has agreed to streamline its demands, but that hardly diminishes the scale of the compromise required of Prime Minister Alexis Tsipras; even a slimmed-down deal will require either Athens to commit to an ambitious third bailout program or the eurozone to agree to provide substantial debt relief—which it won’t until Athens can convince the eurozone it is serious about reform.
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Comments

Ravil D
2 hours ago

It appears that the global market is being hijacked by Greece issue. And that too it appears that Greece wants free handouts and that too under their own terms - Beggars can’t be Chooser!

China’s media cheers stocks, as market hits seven-year high
Published: Apr 20, 2015 1:14 a.m. ET
By Laura He
Asia markets reporter
Reuters

HONG KONG (MarketWatch) — Despite a weak start on Monday as investors digested Beijing’s new market measures announced late last Friday, the Shanghai Composite Index (SHCOMP, -0.26%) managed to set a new seven-year intraday high.

The recent run-up for stocks is making big news in China. Here’s what the media were saying about the market Monday — as you’ll see, most of it is very optimistic about the future direction of shares:

Can’t stop the market

“New rules to curb margin trading won’t change the bull market, “ the People’s Daily (the Communist Party’s official newspaper) said Monday in an editorial. “They are aimed at regulating the market and will be positive for the market in the long term.”

It noted that some investors have been speculating that the Chinese government may be seeking to suppress the hot stock market with Friday’s moves by curbing margin trading and encouraging short-selling. However, the report quoted Ren Zeping, managing director for Guotai Junan Securities, as saying that “no matter whether the news is bullish or bearish, it won’t change the current big trend of a bull market.”

The report concluded that “the bull market is not over yet. Nevertheless, hopefully we’ll enter a market phase of a ‘slow bull’” with more moderate gains.

‘A healthy bull’

The state-run Xinhua News Agency also published a special report Sunday night, which like the People’s Daily, quoted Guotai Junan’s Ren, focusing on his desire for less volatility.

“Transitioning from a quick bull to a slow bull will be a win-win situation for both the regulators and markets, while a sharp rise or a steep fall will be a lose-lose,” Ren told Xinhua.

The report looked not only at Friday’s new market rules, but also a sharp easing of monetary policy announced earlier Sunday by the People’s Bank of China. All of these government actions were intended to fight the economic slowdown and create a “healthy bull market,” Xinhua said.

Year of the Blue Chip

“The upward trend of stock markets will not change, despite short-term volatility,” the state-run China Securities Journal said on Monday, claiming Sunday’s central-bank move — which involved cutting banks’ required reserve ratio — had laid a solid foundation for the bull market and was a positive factor for stocks.

While it admitted that some shares were entering bubble territory, the report said investors were reacting by turning to reliable blue chips, as well as the “lowland stocks” (meaning “dogs,” or stocks with lower valuations).

“The bull market is entering a ‘blue [chip] season’,” the newspaper said.
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