The Housing Bubble

You can look at isolated trees or you can look at the forest it is up to you:

http://seekingalpha.com/article/3102136-china-where-slower-growth-is-part-of-the-plan

From the Alpha link:

The new numbers are out, and the trend remains in place: In the first quarter of 2015, China’s economy grew 7 percent-the slowest quarterly pace since 2009. The data comes on the heels of 7.4 percent growth in 2014, a figure that missed the Chinese government’s target and was the slowest annual tally since 1990. The most fearful of economic observers still see a possible hard landing in the future. But the optimists see China’s economy changing according to plan.

For some years now, China has been in deliberate transition to an economic model as reliant on domestic consumption as it is on exports, as well as one that is less driven by public investment. In the process, the country’s economic targets have expanded beyond its historical single-minded focus on GDP growth to include things like healthy employment numbers, income growth and social well-being. The 7 percent growth rate isn’t even really a surprise; rather, China’s current Five-Year Plan, which expires this year, included a target of 7 percent growth in 2015. Indeed, that growth rate is what Premier Li Keqiang was referring to last month when he said the economy had entered a “new phase of slower and better-balanced growth.”

In 2010, China aimed to keep urban unemployment under 5 percent through 2015, and it has averaged 4.1 percent over the past five years. There’s been plenty of job creation in the cities-51 million new urban jobs in the past four years. China has also successfully boosted income in the countryside, reducing the income gap between urban and rural workers. Overall, income has risen by 67 percent in rural areas and 51 percent in urban areas. “This is one of the important objectives of the government in order to promote inclusive and balanced growth,” Credit Suisse analysts Amlan Roy, Anais Boussie and Mengyuan Yuan write in a recent report detailing China’s progress on its Five Year Plan.

In order to bolster income growth and thereby consumption, the government has also sought to provide its citizens with better social welfare. The government plans to increase the retirement age in order to ease the government fiscal pressure imposed by an aging population. The state has also increased subsidies for health services: more than 1.3 billion people are covered by the country’s basic medical insurance, a coverage ratio of more than 95 percent. And then there’s infrastructure. China’s railway network is already over 100,000 kilometers, and it’s getting longer: in 2015, more than $128 billion will be invested and more than 8,000 new kilometers of railways will be built.

The Chinese government has also started governance reforms. The party is carrying out an unprecedented anti-corruption campaign across all levels of government, while also trying to improve transparency and accountability to the general public. This could help the global perception of China on many non-economic qualitative indicators.

This is a profound structural change, of course, and the transition continues to be anything but easy. The Chinese economy could slow even further, especially as China deals with increasing labor costs, oversupply in the housing market and weak demand from Europe. “It’s difficult to confront slower growth and make structural adjustments at the same time,” Roy, Boussie and Yuan write. “Policy makers have to seek a delicate balance between sometimes conflicting objectives.” To this point, however, they appear to be finding that balance.

China’s external debt is just over 6% of GDP and falling, the United States unfunded liabilities is approaching 96 trillion dollars almost six times its GDP. The U.S. will collapse decades before China. If China was having trouble meeting its seven per cent goal for GDP growth it could double that train spending since it can afford it due to its low governmental debt.

BTW, Brazil continue to implode just like I predicted years ago, supply side out performs Keynesian demand side economics every time.

More big picture, have to go will post later in the day:

LONDON, April 25 (Xinhua) — HSBC Holdings plc sees and cheers for the huge opportunities in China’s urbanization process, growing number of middle class and outward investment blueprint, said the group’s chairman Douglas Flint Friday.

Speaking at the group’s annual general meeting here in London, Flint said that the global economy today witnesses some “unstoppable key trends”.

The developed world contemplates more “subdued growth” than enjoyed historically and as emerging markets enter a phase of consolidation, deregulation and greater market based reforms, these trends will shape the global economy in the near to mid-term, he noted.

He said the first trend is the urbanization in emerging markets, most notably in China as migration from the rural economy accelerates in order to achieve a more balanced distribution of economic prosperity.

“One hundred million people will move into China’s middle-class in the next 10 years — creating major opportunities for increased trade and consumer spending,” he said.

HSBC makes most of its money overseas, with Asia accounting for around 80 percent of its profit. It sets Britain and Hong Kong, China as its two home markets.

The second trend is that there is “clearly huge demand of massive investment” in new infrastructure to support the growth in urbanization in emerging markets and at the same time to refresh ageing infrastructure in developed markets, said Flint.

He appraised China’s investment investing in a network of highways, railways, logistics centers and other critical infrastructure, as it is supposed to eliminate the connectivity bottleneck within Asia and between Asia and the West - the new Silk Road.

Across Asia, investment needs are estimated at eight trillion dollars, he added.

Flint said:” We are very encouraged by the trends in outward investment from China and the reshaping of the Chinese economy from export dependence to domestic consumption.”

“We see great opportunity from further liberalization and internationalization of the Renminbi (RMB, or Chinese yuan), where we are the leading international bank supporting that internationalization,” he said.

According to its latest quarter macroeconomic forecast, HSBC Global Research estimates a 7.3 percent GDP growth for China, higher than the market consensus of 7.0 percent.

Brazil has all of the natural resources other countries dream of.

More and more new articles out f China say that China is in contraction and that China is growing, both in the same article. An economy rapidly expanded on credit must grow or die. The escalating defaults of major players is a tell.

I bought a short China ETF last year (FXP) so far, so bad for me. My bio-tech fund offsets it. So even-steven as usual.

Lola and Dan.

Did you know lawyers are liars?

Lawyers and Realtards™ are liars.

More big picture:

Chinese developer Kaisa’s default could be the start of a bloodbath for overseas investors
Just ride on by. (Reuters/Carlos Barria)
Written by Heather Timmons
April 21, 2015

The announcement April 20 that the long-troubled Shenzhen property developer Kaisa Group has defaulted on $1 billion in debt may mark just the beginning of the bad news for investors in China’s moribund property market, particularly the overseas ones.

Chinese companies have some $207 billion in international corporate bonds outstanding, according to Dealogic data, and real estate companies account for nearly a third of that at $66 billion. Kaisa’s particular problems include a string of mysterious management departures and an unexpected cash shortage, and it is the first-ever Chinese property company to default on overseas debt.

But the entire sector is looking shaky, analysts warn. “Dark clouds over China’s property sector are unlikely to pass anytime soon,” Standard & Poor’s wrote just days before Kaisa’s default. China’s largest property developers are “in a significantly worse shape” than in the previous year, the ratings agency said, adding: “More defaults are in the cards.” (Less than 24 hours after Kaisa’s announcement, China had its first-ever government company bond default, but not in the property sector.)

China’s property market slump has been accompanied by a slowing local economy and the drying up of credit for the property sector, a trifecta that’s sure to hit investors that bought tens of billions of dollars in stock and debt.

So who is going to get burned? Figuring that out right now is difficult. First of all, there’s a lot of this potentially risky property developer debt out there, and much of it is now held outside of China. China’s property developers issued a record $26 billion in dollar-denominated international bonds last year, according to Dealogic, almost four times what they issued in 2010:
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And even more big picture:

Commodities Corner
Iron Ore Prices: Grim and Grimmer
Iron ore prices, which have recently steadied at around $50 a metric ton, are expected to continue to slide as supplies keep piling up.
By Rhiannon Hoyle
April 24, 2015 11:55 p.m. ET

Bulk-commodity investors have needed a cast-iron stomach as iron-ore prices plunged more than 50% over the past year.

While prices have recently steadied at about $50 a metric ton, analysts are predicting the slide will resume as supplies of the ingredient for steelmaking continue to pile up.

The oversupply of iron ore is the result of the global commodities boom. China’s appetite for iron ore and other raw materials in the early part of the 21st century seemed endless, and mining companies gambled on new projects to feed the fast-growing Asian nation. But mining projects take time to develop, and by the time many of the new mines became operational, China’s demand had faded.

With supply outstripping demand, iron-ore prices are likely to fall to at least $40 a ton. Iron ore traded at $49.98 a ton on the CME Globex on Friday.

“The scale of the recent price decline mirrors the steep price increases 10 years ago,” Goldman Sachs wrote in a recent note.

Some iron-ore producers have been forced to shutter unprofitable mines this year as the price slide deepened, but those shutdowns pale in comparison with the amount of new supply flooding into the market. For years, the amount of iron ore transported by ships nearly equaled the demand. Then, in 2015, the balance tipped into a supply surplus. UBS now predicts that the surplus will top more than 200 million tons in the next few years.
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There is really too much big picture out there to post!

China’s Cnooc to slash spending on low oil price
Published: Apr 24, 2015 7:54 a.m. ET
By Brian Spegele

BEIJING– Cnooc Ltd. is likely to slash spending further after low oil prices led to a sharp drop in the Chinese state-controlled oil giant’s first-quarter revenue.

The partial results released on Friday by the listed unit of state-owned China National Offshore Oil Corp. indicate further pain ahead for the Chinese oil industry as it grapples with a price slump that is challenging energy companies around the globe, as well as softer demand at home.

Cnooc has pledged to cut spending by roughly one-third compared with a year ago, but its figures indicate it has more cutting to do to reach that goal.

“Capital expenditure was reduced significantly,” said Neil Beveridge, analyst at Bernstein Research. “It needs to be cut more to achieve the full-year guidance.”

Cnooc Chief Executive Li Fanrong praised the company’s performance under what he called “harsh circumstances,” but pledged greater efforts throughout the rest of 2015.

“We will continue to strengthen our internal operations management, exercise strict cost control and enhance efficiency to proactively respond to the impact of low oil prices,” Mr. Li said in a statement.

First-quarter revenue fell nearly 40% to 36.72 billion yuan ($5.93 billion) from 60.46 billion yuan a year earlier because of falling energy prices. Cnooc said realized oil prices–the average price it earns for each barrel sold–fell 49% in the first quarter versus the same period last year. Spending in the first quarter fell about 16%, led by a 35% drop in exploration costs.

The company didn’t disclose net profit for the first quarter.
…
Like oil companies everywhere, Cnooc is being forced to adjust to swift changes in global energy markets. Rapid oil-and-gas production out of the U.S. and elsewhere has flooded global markets with new supplies. Meanwhile, a slowing economy has been suppressing demands at home for the major Chinese oil companies.
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China: The Real Reason for the Great Oil-Price Crash?
China’s economy has certainly played a role in the dramatic fall of oil prices. Beijing could, however, benefit from the drop in multiple ways.
Anthony Fensom
January 9, 2015

Plunging oil prices have sent shockwaves around the world, threatening to topple governments and bankrupt businesses even while U.S. consumers celebrate cheap gasoline.

Yet while rising supply has been largely blamed for the precipitous price fall, China’s lower demand growth and its long-term implications for the global economy have been largely ignored. Is Beijing a winner or loser from cheap oil?

On January 7, U.S. benchmark oil prices dipped below $48 a barrel, the lowest since April 2009 and half the level of just five months ago. The slump follows November’s decision by the Organization of Petroleum Exporting Countries (OPEC) not to curb production, despite surging U.S. shale supply and weakening Asian and European demand.

China’s role in oil’s rise and fall reflects its re-emergence on the world stage. During the past decade, the communist giant’s industrialization spurt saw it become the world’s second-biggest economy and top consumer of resources such as iron ore and coal, as well as the world’s largest net oil importer.

According to Societe Generale, a French multinational banking and financial services company, Beijing’s opening to world trade at the start of the 21st century, signified by its joining of the World Trade Organization in 2001, was responsible for increasing the oil price from around $20 a barrel to $100. During this period, China’s demand grew by the equivalent of Japan and the United Kingdom’s total oil consumption, giving oil markets a similar shot in the arm to that of other commodities.

As a result, China became the world’s largest oil importer in 2013, surpassing the United States, and currently imports nearly 60 percent of its supply.
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Lower oil prices is good for China. Not wasting so much money on useless crap is good for China. What lies ahead will be incrementally less catastrophic for China.

Nothing anyone posted refuted the fact that China is growing at a 7% rate this year, not just the government is saying it outside sources are saying it as stated in the articles. BTW, a few weeks ago, I said that someone should go back and look at the “ghost cities” from a few year years ago and see if they still are ghost cities. Well the Economist Magazine went back to the city showcased by 60 minutes and this is what they said in its April 18, 2015 magazine, first the quote from sixty minutes and then the follow up:

‘We found what they call a ghost city’ said Lesley Stahl, the host. ‘Uninhabited for 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.”

But hey folks don’t let the facts get in you way and the fact that I am being proved correct and you are widely mistaken bother you.

“Brazil has all of the natural resources other countries dream of.”

Despite that due to its left wing economics it is barely growing and getting per capita poorer the last three years.

“Nothing anyone posted…”

Now that right there is interesting. Apparently these things are invisible. I have a suspicion that when you personally are the empty handed bag holder, the rose colored glasses will come off with a vengeance.

Volvo = vulva, after changing just two letters

My maroon Volvo 740 wagon disagrees. Pd $2500 it in 1999, sold it for $2500 3 yrs later with 246k miles. Just drove it, 5 spd, sunroof, good mpg, great turning radius. I dont like depreciation.

You’re a maroon.

My grandfather( an old sweed from the “old country”) used to call volvos, “vulvas”. I always got a hoot out of that.

They were worried they’d get blackballed if they didn’t.

‘at the very least half a million and possibly twice as many troops were killed on both sides, at least half a million became permanent invalids, some 228 billion dollars were directly expended, and more than 400 billion dollars of damage (mostly to oil facilities, but also to cities) was inflicted, mostly by artillery barrages. Aside from that, the war was inconsequential’

http://www.history.com/topics/iran-iraq-war

And around 300,000 civilians killed. Unless one advocates genocide, which you have before, killing such a number with no outcome can only be described as a crime against humanity. That’s the most terrible crime on the books, BTW. It’s noted Dan. I hope you are proud of justifying every bit of animosity people around the world feel toward this country. And to the readers who see this, think about what it means to have a citizen willing to say such a thing in a public forum, and what this country has become.

He’s an attorney. What do you expect him to say?

Reminds me that the reason economists use decimal points in their forecasts is to show the rest of the world that they have a sense of humor.

Yeah I thought that number was odd too.

However I refuse to believe Arabic people are monolithic ants. It is very likely 1% of them are atheists. Just like in any populated area.

A far higher amount of course would not believe in any organized religion.

Just like in America there are atheists who quietly go to church with their spouses who are religious. I know one. he confessed he is an atheist but his wife is religious and they go to church.

I could not handle that. I would have to have ear buds while sitting with my wife so that I could listen to Led Zepellin while the man at the podium preaches hate.

Most people usually gravitate towards being in a club, and want someone to explain things to them that are mysteries. I doubt that will change.

Well, there may be a lot of good mathematicians in Russia. On the other hand, you mention Hitler. He certainly had a lot of highly talented scientists, engineers and so forth working for him, not to mention very talented generals in his army.

Another interesting thing in your writing is the heavy use of words ending in -ist or -ism.

Housing my friend.

“He certainly had a lot of highly talented scientists, engineers and so forth working for him, not to mention very talented generals in his army.”

Lots of the best German scientists were Jewish, which ultimately played a significant role in the downfall of the Axis powers.

Edward Teller Biography
Father of the Hydrogen Bomb
Date of birth: January 15, 1908
Date of death: September 9, 2003

Edward Teller was born into an affluent, educated Jewish family in Budapest, Hungary. As one of the great cities of the Austro-Hungarian Empire, Budapest was part of a larger central European world of predominantly German language and culture. Edward was only ten when the First World War brought an end to the Empire and Hungary became independent for the first time in centuries.

Young Edward was a mathematical prodigy, educated in private schools, but his education was frequently disrupted by the political turmoil engulfing the new nation. In 1926, Edward left Budapest to study chemical engineering in Karlsruhe, Germany.

In Karlsruhe, Teller became intrigued by physics, particularly the new theory of quantum mechanics. The young chemical engineer transferred to the University of Munich in 1928 to pursue this interest. In Munich, disaster struck. A streetcar accident cost Teller his right foot.

Once Teller had recovered from his injury and learned to walk with a prosthesis, he transferred to the University of Leipzig to study with Werner Heisenberg, who was in the forefront of the new physics. Teller received his doctorate in physics in 1930 and took a job as research consultant at the University of Göttingen. His first published paper, “Hydrogen Molecular Ion,” was one of the earliest statements of what is still the most widely held view of the molecule.

Teller might have settled down to a long, productive career in Germany, but again political events intervened. Adolf Hitler came to power in Germany and Teller knew immediately that there was no future for him in Germany. With the help of the tight-knit community of advanced physicists, Teller was able to emigrate to Denmark in 1934. There he joined the Institute for Theoretical Physics, where the great Niels Bohr led a team of young scientists attempting to unlock the secrets of the atom. In this year, Teller married Augusta Harkanyi, a marriage that weathered half a century of expatriation and controversy.

At Bohr’s institute, Teller met the Russian physicist George Gamow, also a political refugee. After a year, Gamow and Teller went their separate ways. Gamow headed for George Washington University in Washington, D.C., while Teller headed for England. He worked briefly at the University of London, but within a year received an invitation to join Gamow in Washington. Teller gratefully accepted the offer and entered the United States in 1935; he became a naturalized U.S. citizen in 1941.

In Washington, Teller and Gamow worked together closely, formulating the so-called Gamow-Teller rules for classifying subatomic particle behavior in radioactive decay. They also attempted to apply the new understanding of atomic phenomena to astrophysics. Teller had settled down to what he hoped would be a quiet academic life, but events in Europe intervened again.

The development of nuclear physics had continued at a slower pace in Hitler’s Germany, but by 1939, German scientists had discovered nuclear fission. It was theoretically possible to split the atom, releasing energy as heat. It appeared to Teller and the other refugee physicists that the most destructive force ever known to man might fall into the hands of Adolf Hitler. Their fear was amplified by the knowledge that the German nuclear program was led by Heisenberg himself.

Teller’s friend Leo Szilard enlisted Albert Einstein to bring this danger to the attention of President Franklin Roosevelt. Roosevelt appealed to the scientific community to mobilize for the defense of freedom. In 1941 Teller joined America’s best physicists in the top secret Manhattan Project. Their mission: to develop the atom bomb before the Germans did.

After preliminary work in Chicago with Enrico Fermi, and in Berkeley with J. Robert Oppenheimer, Teller moved to the isolated laboratory at Los Alamos, New Mexico. Here, under Oppenheimer’s leadership, the first atomic bomb would be built.
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It is in my 401k dude

I agree Ol’ Bubba. That was my point. The others don’t understand it’s not hypocritical.

What am I going to do? Avoid investing in the sector of large growth companies in a mutual fund JUST BECAUSE FB is 3% of the portfolio? PUHLEEZE. Besides, the Contrafund was the best performing choice over the long haul in that sector compared to others I had to choose from in that 401k.

Maybe they don’t tell about their losses because they have none. It’s a rigged game and everybody who plays is winning atm.

I like this rigged game. Have been realizing gains and with the proceeds after taxes been buying movable and hidable assets that people don’t want.

“Maybe they don’t tell about their losses because they have none. It’s a rigged game and everybody who plays is winning atm.”

Hey bungabunga - if you believe they don’t have any losses then I have a bridge for you at a very attractive price.

What do they cool the plant with?

Cooled with reclaimed water. 20 billion gallons of waste water from Phoenix annually.

Where does the original water come from so they can “reclaim” it?

Colorado river through the ACP http://www.cap-az.com/ . Ground water. Salt River from the east.

http://www.azcentral.com/story/news/local/arizona/2014/08/11/arizona-water-supply-drought/13883605/

From the article in AZ Republic on water:

“If there is a shortage on the Colorado River, the first people to lose it are farmers in central Arizona. Their rights are lowest on the list.Homes and businesses in the three counties served by the CAP Canal (Maricopa, Pinal and Pima) get higher priority.

Even under the worst case outlined in the drought plan, about 1 million acre-feet would continue to flow down the canal each year during the shortage, enough to provide what cities currently take from it. (That’s as long as the river can supply that much water. If things get bad, biblically bad, the CAP would have to shut down. The only people with rights to the very last drops of Arizona’s share are the farmers in Yuma - their rights are the most senior of all.)”

— If there is a shortage on the Colorado River, the first people to lose it are farmers in central Arizona. Their rights are lowest on the list.

There you go. California farmers have been given the top priority in water while Arizona farmers are up $hit creek without a paddle. That is why Arizona is not in a crisis and will not be.

Interesting tid-bits. Thanks, Bill.

farmers cant farm on their hundreds of acres….hmmm… no consequences for AZ mortgage owners??

really?

Paying a 200% premium for a depreciating asset is not “making money”.

Santa Clara, CA Sale Prices Plummet 10% YoY; Demand Craters Statewide

http://www.zillow.com/santa-clara-ca/home-values/

Thirty-year conventional mortgage rate historic levels

Wow. You are a poster child for the MSM’s conditioning of the sheeple. Look at what Fauxahontus does, not what she says. Like rushing to block a real audit of the Fed, the single greatest destroyer of the middle class.

As I’ve said before, Warren was against the so-called “audit” because all Congress wanted to do was use hearings to interfere with Fed operations. She’s right, the last thing we need is for goofballs like Ted Cruz to start monkeying with monetary policy, something he has no clue about.

Oh, so she argued in favor of an audit, and just against the political grandstanding?

Great, let’s get on with the audit, then.

“Audit the Fed”

Bahahahahahahahaha … what does this term even mean?

I don’t think it means what you think it means.

What do you think you will find if you “audit the Fed”? Thin air, maybe? Do you think you just might find a substantial amount of thin air?

Wow! What a shocker that would be!

Bahahahahahahaha … dumb ‘em down, and profit.

It’ll be thin air that you will find but it will be HIGH QUALITY thin air - AAA rated thin air.

Thin air backed up by the full faith and credit of the United States of America.

That’s what naysayers always say about disruptive technologies. It won’t work. It’s too expensive. It’ll never be popular.

“I think there is a world market for maybe five computers.” — IBM, 1943

“There is no reason anyone would want a computer in their home.” — DEC, 1977

Look at the graphic in the link I’m about to post, and see if you can understand the reason this is not at all like the computer revolution.

Hint: shrinking feature size produced exponentially-increasing computing power for the same die-size and power consumption. This was commonly referred to as Moore’s Law, which predicted a doubling of the number of transistors on a die approximately every 18mo.

Stronger hint: there is no exponential improvement in battery technology. Yes, it has improved, but not nearly at that rate.

http://www.technologyreview.com/view/424996/why-your-battery-life-is-terrible-in-one-handy-chart/

Agree, have heard many people try to extrapolate Moore’s Law to technology in general and it just doesn’t work that way in general. Solar cells are another good example, no doubt there will be improvements in efficiency but they will NOT be exponential and are limited to 100% efficiency at best (actually not even 100%, but close enough for the sake of argument/example)….i.e. efficiency might double or even triple maybe but cannot improve by 10X, 100X, etc.

http://en.wikipedia.org/wiki/Solar_cell_efficiency

The two don’t compare

Moore’s Law: number of transistors per square inch on a CPU doubles every year

Swanson’s Law: cost of solar panels drops 20% for each doubling of solar panel shipments

http://upload.wikimedia.org/wikipedia/commons/thumb/2/29/Swansons-law.png/450px-Swansons-law.png

For solar panels, operational efficiency is somewhat less important than the primary factor, which is cost per watt.

The two don’t compare

Of course the two don’t compare. That was MY point!

You are the one who compared them—not I. You used examples of people underestimating the potential growth of computing power to suggest that I was similarly underestimating the potential growth of battery technology.

Don’t try to weasel your way out of it now.

of course you cant… nothing is possible deep in your depression.

Got Prozac?

Pick yourself up off the floor and cheer up Lola. We all benefit from falling prices to dramatically lower levels. Including your “friend”.