July 10, 2015

Entering A Period Of Realism

It’s Friday desk clearing time for this blogger. “China’s stock market bubble is undergoing an epic deflation — and few U.S. industries have as big a stake in the potential economic damage as the tech sector that powers Silicon Valley. Peninsula-based agent Ken DeLeon said that ‘a client who’s building a new home in Palo Alto just texted me this morning. They had their pre-approved plans but wanted to know should they just sell the lot and not build their new home. They’re worried that this steep drop in Chinese equities will impact the value of new construction,’ DeLeon said.”

“Pleasanton-based agent Andrew Greenwell said the volume of overseas investments hinges ‘on Chinese regulations and laws,’ which have been tightening amid the rising economic concerns. ‘You can only get $50,000 a head out of Mainland China, so a lot of people wire money from Hong Kong. And if they clamp down on the amount of money getting wired out of Hong Kong, things could change.’”

“The Chinese share market rout is making Chinese investors more cautious and a small number will have to sell their properties in Australia because of share market losses, real estate agents say. Michael Pallier, principal at Sydney Sothebys International Realty, said one of his clients who bought a new apartment in Sydney had lost money on the Chinese share market. ‘She was young, she hadn’t seen a share market crash before, she was hoping the price would continue to go up of the shares and she made a poor judgement call and she now as a result of that is in some trouble,’ Mr Pallier said.”

“China’s stock market crash has already bled into the iron ore price, and it could have flow-on effects into Australia’s credit-fuelled housing market, economists have warned. Lindsay David of LF Economics has argued the impact of the Chinese crash on the Australian housing market could be twofold. ‘As the Chinese economy starts to deteriorate so will the bank accounts of many Chinese, restricting their ability to purchase real estate overseas,’ he said.”

“Of broader concern, however, are the macroeconomic implications. Mr David believes the iron ore price has much further to crash, which could in turn scare the wholesale lending community overseas lending to Australian banks for home financing. ‘House prices in Australia are dependent on debt growth, and if there’s no credit out there, house prices will begin to fall.’”

“‘The risk from Chinese equities markets is clearly impacting commodities markets,’ IG Markets strategist Evan Lucas said in a note on ‘commodities contagion.’ ‘Iron ore has just logged its worst trading day on record. The steel price in China is now cheaper per tonne than cabbage.’”

“After years of watching Vancouver housing prices climb, driven in part by Chinese investment, Eveline Xia came to a painful realization: Despite having a Master’s degree and solid career prospects, she might never be able to afford a home in the city where she grew up. So the 29-year-old grabbed a marking pen, hand lettered a sign listing her credentials, snapped a selfie, and posted it to Twitter under the hashtag #DontHave1million. ‘Average, hardworking Canadian residents are being forced to compete for housing with the global wealthy,’ said Xia, who immigrated to Canada from China as child. ‘People here are getting angry.’”

“In interviews, five real estate agents who primarily sell homes on Vancouver’s exclusive west side estimated that between 50 per cent and 80 per cent of their clients have financial ties to mainland China. Residents also have questions about the source of Chinese money being invested in Vancouver property, a concern that came to the fore last year when a prominent developer in the city, Michael Ching Mo Yeung, was named as one of the top 100 fugitives wanted by China as part of ‘Operation Skynet’.”

“The Saskatoon Region Association of Realtors warns prices are expected to flatten and drop in the city, thanks partly to a ballooning number of listings. Analysts say the market is soft due to a slowing economy anchored down by lower oil prices. Others say the market is just dropping to a realistic level. ‘House prices went up way more than they ought to have, given the size of the city. Now we’re entering a period of realism,’ says Daphne Taras, dean of the Edwards School of Business at the University of Saskatchewan.”

“The price of an average three-bed semi in Dublin has fallen by up to 7pc in the first indication that Central Bank lending restrictions are cooling the market. Real Estate Alliance (REA) CEO Philip Farrell said: ‘What we are seeing on the ground is a slowdown in interest in the traditional professional properties, as couples find that raising an €80,000 deposit for a €400,000 home is simply beyond their means. The rules were brought in to take the heat out of the market, and they have done that.’”

“According to a new Trulia study, it will take the average Bay Area college grad approximately 29 years to save 20% down for a typically priced home. For those prospective buyers with no degree, forget it. By this study’s calculations, that 20% down savings is impossible for millennials who didn’t earn a college degree. Trulia says, ‘Our study calculates how many years it will take a millennial (young adult aged 25-30) to save a 20% down payment in the 100 largest U.S. metros assuming that home prices and incomes will increase over time – with and without a college degree.’”

“Would-be homebuyers who were forced out of the market by short sales and foreclosures are trickling back in again, but that hasn’t resulted in stable prices, according to real estate experts. The median list price for existing homes in the greater Bakersfield area was $260,000 last month, up 6.1 percent from June of last year but down 0.4 percent from May, according to the Preliminary Crabtree Report, produced monthly by Gary Crabtree of Affiliated Appraisers. Sale prices have been bouncing all over the place, with no clear trajectory, Crabtree said. ‘That indicates to me that there’s not a lot of confidence in the pricing,’ he said.”

“He’s not pleased that lending standards are relaxing, worried another real estate bubble could be forming. ‘I don’t think we’ll see anything like we did before, but history does have a way of repeating itself,’ he said.”

“Investors always seem to be watchful of and enamored by the Federal Reserve, as though it possessed magical powers to restore a moribund economy or cool an overheated one. However, the Federal Reserve has a long and sordid history of miscalculations and misguided policy decisions. ‘The Fed has inadvertently helped create some of the biggest bubbles and trigger the most serious market declines,’ said James Stack, a market historian and publisher of InvesTech Research.”

“In other words, investors should not be under the delusion that current Fed chief Janet Yellen or her predecessors know with any precision when to raise or lower rates. More often than not, they screw it up. The first example Stack cited involved the 1987 ‘Black Monday’ crash, which occurred on Oct. 19, 1987. The Dow Jones industrial average dropped 22.6 percent (508 points) in a single trading day — the largest one-day percentage decline ever.”

“A second example involved the tech bubble of the late 1990s and subsequent market crash in March 2000. Greenspan was still at the helm of the Federal Reserve leading into this debacle. More than three years before the bubble burst, Greenspan at least seemed troubled by the high stock valuations. But he failed to do anything about the market frenzy, and he continued the Fed’s ‘easy money’ policy for another three years, even cutting rates again in 1998 after the collapse of the Long-Term Capital Management hedge fund. Ultimately, the Nasdaq lost 78 percent of its value.”

“A third example came as the housing bubble took flight in the early 2000s, again propelled by the Fed’s easy money policy. Following the collapse of the tech bubble, within 12 months the Fed cut short-term rates from 6 percent to 1.5 percent, and they were held too low for too long as housing prices skyrocketed. ‘The Fed fanned the flames of the housing bubble,’ Stack said. ‘By 2004, we were well into an economic recovery, but the Fed held rates at 50-year lows.’”

“During the height of the housing frenzy in 2006, newly appointed Fed Chairman Ben Bernanke said housing prices reflected a strong economy and he ‘doubted there would be a national decline in prices.’ He was wrong. Today, the Federal Reserve again is trying to extricate itself from an artificially low interest rate environment. The so-called Fed funds rate has been held near zero for six years.”

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Comment by Ben Jones
2015-07-10 04:16:57

Oh boy, this thing is moving fast:

‘China’s dramatic stock market collapse appears to be spilling over into the country’s real estate market, where investors are rushing to sell their homes or abandoning plans to buy a new property as they nurse hefty losses on equities, local media reports.’

‘Several Shanghai-based real estate agents told the China Daily that more apartments and villas had appeared on the market as investors tried to recoup their losses by selling their properties.’

‘Cui Aijun, a real estate agent at Shanghai Junda Property Services said that four of his clients were urgently selling their homes after getting burnt in the stock market, the government-run newspaper reported on Friday.’

“Some investors sold their stocks to buy properties in March and April. But now we see people selling properties after piling up losses in the stock market,” Cui told China Daily.’

‘Those looking for a quick sale typically offer their properties at a price that is 10 percent below the market average, the report said, citing a villa in Shanghai’s upscale Pudong New Area, which is on the market for 17 million yuan ($2.74 million), a steep discount to the other homes in the neighborhood, which are asking for 19 million yuan .’

Comment by Wang6Pack
2015-07-10 15:19:16

This is impossible because the Chinese stock market went up today!

Comment by Selfish Hoarder
2015-07-11 13:30:24

Wow! Sum Tin Wong

Comment by Selfish Hoarder
2015-07-11 13:35:51

My point is that if they have to dump Shanghai McMansions to offset the crash, they would have to dump Canadian and American real estate too.

Comment by Ben Jones
2015-07-10 04:20:43

Check this out Dan:

‘David Fung, vice chair of Canada China Business Council says the Chinese save up to 40 per cent of their disposable income to make up for that shortfall, but savings rates in China are below inflation and only guarantee a loss of income over time.’

So while you are getting your bib on, down to the comments:

‘The govt needs to step in and stop this. People who buy real estate should live in Canada for at least 5 years before they can buy and pay taxes…and only be allowed to buy ONE home and LIVE IN IT. It is the 1% per cent playing their games moving their money around with no real commitment to the place where they temporaily park their money. Lots of empty highrises and expensive mansions with lights off because the foreign owners do not reside there just parking money.’

‘I know a realtor who works in Vancouver. She told me that many of the buyers in Vancouver are Chinese government officials, and that many of them own 10 or 12 houses each.’

‘Oh, because their pseudo-Communist state doesn’t have pensions or employment insurance or health insurance we need to help them out by letting them invest here and drive up house prices, especially hurting our younger first-time buyers. I honestly don’t believe this. If our governments continue to turn a blind eye we should start some kind of civil disobedience. Maybe like refusing en masse to pay property tax and income tax.’

‘Now I know (if I didn’t already) why real estate signs in the desirable seafront part of Nanaimo are in Chinese only. Of course if you point this out you get called a racist, and by doing this the city council and realtors and developers shut down legitimate concern and rub their hands together at the prospect of making more money for themselves.’

‘Why are we handing the keys of the planet over to China? The West is throwing everything we fought so hard for in the last century away in the name of easy money. It is despicable. Remember that China is still a communist country with a deplorable record of human rights abuses, and environmental abuses, etc. All this dribble about the free market, and the global market place doesn’t make any sense. We gave away our manufacturing middle class. We gave away our high tech superiority. We are giving away our natural resources. Now we are giving away the very land stand on. And for what? What, exactly, is our future? Tourism? Service industry? Time to close the floodgates. Enough is enough. We need to protect our own interests from foreign profiteers (like China does, incidentally)’

Comment by Senior Housing Analyst
2015-07-10 04:33:58

Any asset can be seized and liquidated. Including houses.

There’s a reckoning horizon coming fast. And it’s going to be a shocker for anyone who hung their hat on the false notion that a house is an investment. A real painful shocker.

Liquidate now.

Comment by Albuquerquedan
2015-07-10 05:30:04

Confirms that the savings rate is 40% and I need a bib? Yes just like the US what is paid on savings is less than inflation but by similar amounts so the savings pool grows particularly due to 8% plus raises every year and inflation at less than 1.5%. Sorry it is the people that are wrong that wear the bib not the people that are right.

Comment by Ben Jones
2015-07-10 05:35:37

I know, all that crow makes you sleepy, so here it is again: ’savings rates in China are below inflation and only guarantee a loss of income over time’.

‘Iron ore has just logged its worst trading day on record. The steel price in China is now cheaper per tonne than cabbage.’

Cole slaw, Dan, it helps the crow go down.

Comment by Albuquerquedan
2015-07-10 06:05:45

Ben, in which country are savings rates above inflation and how long does it take to seriously erode buying power if inflation is within 1% of the rate paid on savings. And that ignores that the amount saved is surging every year. Sorry Californians look

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Comment by Albuquerquedan
2015-07-10 06:25:20

Thumb too big for cell phone. Ben, do the simplified math, Wang6Pack makes $13,000 per year, he has $100,000 in savings. Inflation exceeds his savings rate due to financial repression that exists virtually everywhere in the world. Thus, he loses 1% on his savings in real purchasing power. He is out $1,000. But he continues to save 40% so he puts in the bank another $5,200. He is up $4,200. Now Wang6pack does not like earning less than inflation on his savings so he turns to (1) Chinese real estate (2) Chinese stock market (3) PMs or (4) U.S. stock market or real estate, with increasing savings it is very likely (3) & (4) will see more and more of Wang6Pack’s money.

Comment by Blue Skye
2015-07-10 07:07:52

“the amount saved is surging every year…”

Actually that is wrong. The savings rate has been dropping.

The CCP published total household savings of $7 Tr. That makes savings per capita $5,000. He does not have $100,000. Magical thinking Dan.

Comment by Mafia Blocks
2015-07-10 07:19:41

Mr. Daniel F. Crowman, Blog AssHat Extraordinaire.


Comment by dizzylizzy
2015-07-10 11:34:18

I’m late to this party, but here goes anyway…

“savings of 40% of disposable income”

How much disposable income does the average Chinese resident have?

“On Monday, the National Bureau of Statistics (NBS) reported a blend of urban and rural household income stats that showed per capita disposable income rose 10.9% to $2,993, or around 18,311 yuan of extra cash floating around people’s houses. Disposable income of China’s urban residents increased 9.7% annually to 26,955 yuan while per capita net income for lower income rural residents rose 12.4% to 8,896 yuan, according to NBS.”

Comment by Mr. Banker
2015-07-10 06:43:05

“Now I know (if I didn’t already) why real estate signs in the desirable seafront part of Nanaimo are in Chinese only. Of course if you point this out you get called a racist, and by doing this the city council and realtors and developers shut down legitimate concern and rub their hands together at the prospect of making more money for themselves.”

Bankers too. Don’t piss me off by leaving me out.

Comment by Combotechie
2015-07-10 06:46:33

“Why are we handing the keys of the planet over to China?”

We handed to them our money and our jobs so why not throw in the keys too?

These people act as they have just woke up after being asleep for twenty years.

Comment by snake charmer
2015-07-10 08:33:06

Awesome comments and I concur completely. It was only a matter of time before these feelings became pronounced. Western political and economic leadership is, as usual, almost grotesquely out of touch with popular sentiment. And also with the facts. What, there’s money laundering going on? Corrupt foreign officials own ten houses? You don’t say!

Comment by Selfish Hoarder
2015-07-11 13:40:30

Maybe I need to read further but I am interested in finding if the Chinese are behind the drive up of shack prices in the San Francisco Bay Area and Southern California. Anyone?

Comment by Ben Jones
2015-07-10 04:30:47

‘Renting a home in the Denver metro area is more affordable than buying, according to a report released by RealtyTrac.’

‘A three-bedroom rental home in Denver County averages $1,696 a month and requires 39 percent of median household income, compared with an average monthly mortgage payment of $2,190 that requires 51 percent of income.’

“We are finding many first time homebuyers in a short-term-versus-long-term quandary along the Front Range in Colorado,” Re/Max Alliance owner broker Greg Smith said in a statement. “In today’s market, many buyers are not willing to take the leap to increase their monthly payment to lock in the fixed payment of a mortgage.”

Comment by Senior Housing Analyst
2015-07-10 04:36:02

Stack on losses to depreciation, taxes, insurance, etc and you’re double the cost of renting.

What homedebtor has the sense or cash to escrow depreciation, taxes and insurance?


Comment by Goon
2015-07-10 04:51:41

The quality of life has deteriorated beyond belief in the 5+ years I’ve lived here

And it’s getting worse every day…

Comment by Mafia Blocks
2015-07-10 04:54:57

That’s what happens when half the population are illegals.

It could be worse. You could be in CA.

Comment by Pangolin
2015-07-10 06:04:18

Huge amount of crowing here yesterday about how California is now paradise again. Ignore the tech fraud scam going on.

Ignore this:

“A second example involved the tech bubble of the late 1990s and subsequent market crash in March 2000″

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Comment by scdave
2015-07-10 07:34:55

Ignore the tech fraud scam going on ??

Yeah right…Google = scam….ETC..

Comment by Mafia Blocks
2015-07-10 07:43:32

California seems to be Ground Zero For Fraud…. a bastion of fraud.

-Realtor Fraud
-Appraiser Fraud
-Mortgage Fraud
-Welfare Fraud
-IPO Fraud
-Tech Fraud
-Medicare Fraud

Is there no end?

Comment by Mafia Blocks
2015-07-10 07:45:16



Comment by Mafia Blocks
2015-07-10 07:56:40

“California Man Found Guilty of Mortgage Fraud After Five-Day Trial”


By now everyone knows what kind of place CA is. Nobody wants to be robbed blind by the Housing Crime Syndicate in California.

Comment by CHE
2015-07-10 12:05:54

Mafia speaks the truth.

California is a disaster and only getting worse. It’s just covered up by this temporary tech bubble. Once it’s gone - all hell will break loose.

There’s hardly any middle class. Anyone that’s middle class will soon be eaten up by ever increasing water rates, electricity rates and gasoline prices all driven up by policies enacted by the one party that rules the state. The ones that supposedly are for the working class and poor.

Over the past week we’ve suffered 2-3 water main breaks a day here in LA. All the money that should have been spent fixing piping from the 1910s and 20s is being funneled in to the outrageous salaries, benefits and pensions of DWP workers. Now they’re coming after us for more. Oh and wasting tens of thousands of gallons of water yet I can’t take a long shower or water the lawn.

California’s budget appears to be ok for now, but what about the billions in unfunded pension liablities.

Those that do get pensions and retire immediately flee to low tax and no-tax states so they’re not even paying their fair share.

Total and utter wasteland. This state is a total scam and nobody seems to care … or maybe those that figured it out are leaving/have already left.

Oh and with all these problems, the state legislature thought it was more important to debate and vote on a resolution condemning Donald Trump.

California is toast. It’s amazing how it happened so quickly.

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Comment by scdave
2015-07-10 13:06:36

California is toast ??

And yet you stay here….

Mafia speaks the truth ??

Now thats funny…LOL

Comment by Mafia Blocks
2015-07-10 14:13:11

It’s reality my friend.

Comment by redmondjp
2015-07-10 14:25:45

Refute the andecote, my friend!

Comment by LiberaceLOL
2015-07-10 16:40:08

It’s your reality my friend.

Comment by SuzyK
2015-07-10 22:44:17

Cali toast? Please don’t let the door hit you in arse. I would LOVE to see LESS people any day. But it’s only a hollow threat. There are still too damn many people here in the places people want to be.

Comment by Selfish Hoarder
2015-07-11 13:50:34

I am thinking that this Fall I will become a California resident. Though I will keep my firearms in Arizona, my rent in OC is pretty low and I will give up my Phoenix apartment. Store up all my junk and return to Arizona in maybe 10 years. My lifestyle of biking on weekends is more suitable to Orange County than to Phoenix in the summers.

Comment by Mafia Blocks
2015-07-12 06:50:15

Toast my friend. Burnt, busted and impoverished.

Comment by Ben Jones
2015-07-10 04:37:24

‘Tao dreamed of buying a new car with his winnings from the stock market’s surge. A 32-year-old professional from Shanghai, he had been egged into investing by his friends and then by media stories of grannies making huge killings on shares.’

‘So he became one of China’s 90 million individual investors in stocks who account for 80 percent of all market transactions in a country where letting professionals manage your money through mutual funds has yet to catch on. There aren’t many places for ordinary Chinese people to put their savings, and the real estate market was weak. Equities looked like a one-way government-backed bet, and China’s citizens began borrowing money to place that bet.’

‘He knew economic growth was slowing, he said Thursday. But he and his friends had decided that China was in a “policy bull market” and that shares would inexorably benefit from China’s economic reforms and President Xi Jinping’s grand plans for regional economic integration and infrastructure development.’

“I thought I could make more if I invested more,” he said, speaking on condition that his full name not be used because of the sensitivity of the subject. He borrowed money and within a month or two invested a further 600,000 yuan in China’s booming market. Then, in the space of a few days, it all went sour.’

“The market started to plunge,” he said. It fell so fast he closed his positions and took huge losses: In one day alone, he says, he lost 200,000 yuan.’

“The moment the position was closed, I really broke down,” he said. “I finally understood why some people jump from buildings after failing in the stock market. Before I used to wonder: How could you jump just because your investment fails? But when I looked at the computer screen and saw the number under my account fall to zero, then I really felt what those people felt.”

‘Many, like Tao, borrowed money in a search for quick and easy profit in recent months.’

“I followed the wind,” acknowledged another young professional working for a state-owned company in eastern Shandong province. His benefits at work had been cut. “Everyone was thinking about how to make money from somewhere else,” he said. “The stock market was booming, so I entered.” Now he can’t afford to close out his investments and take the losses.’

“We all got trapped because of greed,” he said. “I was trying to make money for my family — my wife is expecting a baby at the end of the year. Now I have to wait until the stock market gets better. There is nothing else to do.”

Comment by Professor Bear
2015-07-10 05:06:46

“I followed the wind,”

…only to inherit the wind.

Comment by Combotechie
2015-07-10 07:37:59

“…only to inherit the wind.”

Or inherit the doldrums.

Wikipedia says this about doldrums:

“Colloquially, the ‘doldrums’ are a state of inactivity, mild depression, listlessness or stagnation.”

Plus this:

“The word is derived from dold (an archaic term meaning ’stupid’) and -rum(s), a noun suffix found in such words as ‘tantrum’.”

Comment by Blue Skye
2015-07-10 07:09:27

Adrift, on a sea of deflation.

Comment by Wang6Pack
2015-07-10 15:27:05

“Now he can’t afford to close out his investments and take the losses.’”

My brother. :(

Luckily I bought an apartment in Ordos, so when that goes up I’ll bail him out! :)

Comment by rms
2015-07-11 00:37:50

“Now I have to wait until the stock market gets better.”

Still hasn’t learned. :)

Comment by Selfish Hoarder
2015-07-11 13:55:58

He is young. Give him a break. He will break even at age 70.

Comment by Ben Jones
2015-07-10 04:41:32

‘While many communities in North Dakota’s oil patch are seeing a slowdown as a result of lower oil prices and fewer drilling rigs, that doesn’t seem to be happening in Watford City. In fact, because McKenzie County and Watford City are the epicenter of the state’s oil activity, city and county leaders predict that 2015 will see a continuation of the rapid building of housing and commercial space that was seen in 2014.’

“A few years ago, when things started opening up with the oil boom, the water really started flowing, so to speak,” said Steven Williams, Watford City Building inspector and Code Enforcement official. “With all that’s going on, there’s a lot of confusion with why so many apartment buildings. But projections say we’re going to have the people here. I try not to ask a lot of questions and just do my job.”

Comment by GuillotineRenovator
2015-07-11 00:58:46

Oh my…

Comment by Senior Housing Analyst
2015-07-10 04:45:45

Lakewood, CO(Denver) Housing Prices Fall 13%


Comment by Goon
2015-07-10 05:09:29

My first apartment when I moved here was in Lakewood

The neighbors downstairs from me were too lazy to walk 15 feet to take their dogs outside, so they let them sh*t on the balcony

Move to Colorado and that’s what you’ll get

Comment by Professor Bear
2015-07-10 05:01:25

Aren’t these Chinese stock market worries moot, now that government intervention has finally succeeded to stop the crash?

Comment by Professor Bear
2015-07-10 09:49:09

If intervention in the equity market makes the people wealthier and happier, then where is the downside?

Comment by Professor Bear
2015-07-10 09:50:09

ft dot com > Markets > Equities >
Asia-Pacific Equities
Last updated: July 10, 2015 5:31 pm
Shanghai surges to best two-day run in 7 years
Josh Noble in Hong Kong
Chinese investors look at an electronic screen showing market movements at a securities brokerage house in Beijing, China, 09 July 2015. Chinese stocks jumped sharply 09 July after falling on opening for the third consecutive day, amid aggressive measures by the authorities to shore up share prices.

Beijing’s all-out campaign to avert an equity market collapse finally showed signs of bearing fruit on Friday as Shanghai stocks recorded their biggest two-day gain since the financial crisis.

The Chinese government has deployed increasingly drastic tactics over the past three weeks to reverse heavy selling by the country’s vast number of retail investors, who account for over three-quarters of trading in the world’s second-largest equity market.

Over the past few days, China has barred major shareholders from reducing their stakes, extended “abundant” liquidity to brokers while instructing them to buy stocks, and made short-selling illegal.

The Shanghai Composite finished up 4.5 per cent on Friday, marking its biggest two-day gain — 10.6 per cent — since 2008. The tech-heavy Shenzhen Composite and the small-cap ChiNext board each added 4.1 per cent.

Only seven Chinese stocks fell while more than 1,000 companies hit their daily upward limit of 10 per cent, as investors rushed to buy whatever is still trading. But doubts remain about the sustainability of the rebound as more than 1,400 stocks remain suspended — about half of all listed companies.

Some analysts say the state-led operation shows policy makers will do “whatever it takes” to keep stocks afloat, following a year-long rollercoaster ride during which shares have soared and then fallen sharply. However, many are also critical of the way Beijing has handled the problem.

The [Communist] party’s attempt to intervene in China’s equity markets is futile,” said Andy Rothman, strategist at Matthews Asia, in a note. “There is no valid macro reason for the party’s intervention.”

Comment by Professor Bear
2015-07-10 05:05:18

“According to a new Trulia study, it will take the average Bay Area college grad approximately 29 years to save 20% down for a typically priced home. For those prospective buyers with no degree, forget it. By this study’s calculations, that 20% down savings is impossible for millennials who didn’t earn a college degree. Trulia says, ‘Our study calculates how many years it will take a millennial (young adult aged 25-30) to save a 20% down payment in the 100 largest U.S. metros assuming that home prices and incomes will increase over time – with and without a college degree.’”

I thought folks either paid all cash or bought with very little down. Doesn’t this article discuss a nonexistent category of buyer?

Comment by Cracker Bob
2015-07-10 06:06:14

Yes, a category of buyer from 1978.

Comment by In Colorado
2015-07-10 06:39:38

I thought folks either paid all cash

The ones with a lot of cash, say after cashing out stock options, might do that. Ordinary Joes and Janes, not so much.

or bought with very little down

Can you buy a million $+ shanty in Palo Alto with an FHA loan?

Also, it occurs to me that if if will take a grad 30 years to save up for the 20% down payment, then said grad can’t afford the monthly payments.

Comment by Ben Jones
2015-07-10 05:09:57

‘Kim Herrick and Opie McNeill are itching for a little old-time welcome wagon-ing. The pair, part of the Walkabout Acres Home Owners Association, really are bubbling with excitement as they prepare to welcome eight new resident families this month to their tiny subdivision in the town of Pierce, about 15 miles north of Greeley.’

‘In a matter of months, that will swell to nearly 70, as this long vacant subdivision’s weeds and empty platted lots are replaced with greenery and bay windows, and homes with double the square footage of the newest Greeley homes.’

‘It’s been a long 15 years since this subdivision off Weld County roads 88 and 33 got started on the southwestern side of town. Only about 16 homes were built in the beginning, and more than 110 lots were slated. Then it sat — for years.

“It left a bad taste in people’s mouths with the subdivision being vacant for so long,” said Mayor Sue Spurgeon-Paris.’

‘Existing residents had a front-row seat to overgrown pastures until recently. “When I turned my first permits in, the lady at the front desk said she had only done one permit in 10 years, and we put in 63 in the last 60 days,” said Jeff Demaske, owner of Journey Homes of Greeley, one of the builders in Walkabout. “One of the guys in the office figured it out, when we build out those 63, it will increase the town population by about 20 percent.”

‘The building frenzy comes at almost the perfect time. Greeley and its surrounding area is getting built out; new lots are too expensive to develop at today’s prices, and exorbitant water rates have made new subdivisions all but a pipe dream. It’s left a huge housing gap in which homes continue to get multiple offers within hours of going on the market as the population continues to swell.’

‘In an area landlocked by an area where water rights have been sold to the city of Thornton, there wasn’t much room for any growth in the town. That’s why town officials hadn’t issued a building permit on a new home in over a decade.’

‘“It’s been sitting out there for years,” said Jamie Baessler, owner of Baessler homes of Greeley, which is building on 24 lots there. “The reality is there is such a shortage of housing that with the demand, people are willing to drive there. We definitely had a couple of Fort Collins buyers, too.”

‘Baessler said it was the last of the distressed properties that came with prices that would make it work. “There’s no way you could develop a new lot for the prices we’re paying for a new lot,” Baessler said of Walkabout.’

‘In areas like Greeley, every house the company builds has “at least $100,00 into the house before we put shovel in ground,” Baessler said. “That’s a hard number for people to understand. We have to work really hard to keep all the costs in control.”

‘Journey Homes has 30 pre-sales and crews are building 30 spec homes, Demaske said. His crews are now putting up 15 homes per week in an assembly line approach — three per day. He plans to be done by Aug. 30.’

Comment by In Colorado
2015-07-10 06:48:26

tiny subdivision in the town of Pierce, about 15 miles north of Greeley

15 miles north of Greeley? That’s in the boondocks.

The building frenzy comes at almost the perfect time. Greeley and its surrounding area is getting built out; new lots are too expensive to develop at today’s prices, and exorbitant water rates have made new subdivisions all but a pipe dream

Sounds like Greeley forgot to load up on water rights back when they were much cheaper.

In areas like Greeley, every house the company builds has “at least $100,00 into the house before we put shovel in ground,

In Greeley? The place is a gang infested armpit. When at worked at the old HP Greeley site, NO ONE lived in Greeley. Everyone commuted from Loveland or Fort Collins. And Greeley was much nicer back then.

I guess it’s the oil money. But we all know that won’t last.

Comment by Ben Jones
2015-07-10 06:52:09

‘homes continue to get multiple offers within hours of going on the market as the population continues to swell’

This is one area that one would have thought would have learned. The tales of woe and poor me were about as loud there as any place in the US.

Comment by In Colorado
2015-07-10 07:07:07

Ask any student at UNC (U Northern Colorado) in Greeley if they will be staying in Greeley after graduation. They all say NO. They know that Greeley is a crime ridden, third world infested armpit and can’t wait to leave.

I remember when HP closed the Greeley site and moved what was left of it to Fort Collins and Loveland. That was considered a major loss. Of course now with the EZ oil money that is a forgotten memory. If oil continues to drop, especially if Iran cuts a deal with the US on nukes and sanctions are lifted, they will be singing the Blues in Greeley. Heck, at $50 a barrel I’d think they would already be worried.

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Comment by Arizona Slim
2015-07-10 10:26:43

When I was biking around the country, I spent several days in Greeley. Nice place. But that was back in 1981.

Comment by Ben Jones
2015-07-10 05:12:57

‘Many New Yorker’s have found a new summer destination to invest in and it’s along the Connecticut coast. According to a recent report, New Yorkers have a lot of equity to spend. The prices on their homes in Manhattan have sky rocketed, so their using that money to buy their second home.’

‘But those house purchases are not being made in the Hamptons. New Yorkers are driving on Interstate 95 right to Eastern Connecticut. Realtors refer to as “the Golden Triangle.” It’s the area between Madison, Essex and Stonington. ‘

‘Realtors said more New Yorkers are coming to look for vacation homes, east of Madison. In that area, they’re finding homes for a fraction of the price they’d pay in the Hamptons and with about the same drive time. “The time is probably comparable, but value no question. We’re probably one quarter to one fifth of the Hamptons,” realtor Rick Weiner said.’

‘A 5,000 square foot contemporary in the Hamptons with five bedrooms is $26 million. In comparison, a 5,000 square foot contemporary in Essex with five bedrooms and waterviews is nearly $1.3 million. ‘

‘Realtor Janet Peckinpaugh said she has been showing one New York couple properties for months. She added it’s a buyers’ market for New Yorkers. “It’s a commuter area, but the value of the homes are so much better than they are in the Hamptons,” Peckinpaugh said.’

‘Developer Ray DaDario understands the market and he built a $2.5 million summer home. “With an elevator, all the amenities that these folks are looking for and I think over there you’re talking $20-30 million, same property and the same ocean,” DaDario said.’

‘Realtors told Eyewitness News if the pace picks up, don’t be surprised if you see start to see bidding wars on these shoreline properties.’

Comment by taxpayers
2015-07-10 09:57:14

remember when Mcgovern bought a B&B in Bridgeport ct?
allot nastier than greely folks

worstest place ever

Comment by Ben Jones
2015-07-10 05:14:42

‘Only 1.10% of the total unsold units in Mumbai are ready for possession, according to a new study. In Thane, 1.33% of the total unsold units are ready for possession, said a report by JLL and CREDAI.’

‘Only 2,600 (or 3.35%) of the total unsold inventory of 77,460 residential units have been completed in Mumbai as well as Thane and Navi Mumbai, according to latest figures.’

‘The inventory overhang in Mumbai (including Thane and Navi Mumbai) is more than 30 months, according to latest figure.’

Comment by Ben Jones
2015-07-10 05:17:50

‘NEW DELHI: The cement industry is staring at a dead investment of Rs 55,000 crore in the near term owing to high idle capacity of about 100 million tones (MT).’

‘The capacity utilisation in the cement industry has come down to a mere 70% as against 94% in 2007-08 because of supply and demand mismatch, according to data from the Cement Manufacturers’ Association (CMA).’

“The installed capacity stands at 380 MT per annum and the utilization is just about 275 MT. This extra capacity of 100-105 MT has cost about Rs 55,000-60,000 crore of investment,” says Shailendra Chouksey, whole time director at JK Lakshmi Cement and vice president of CMA.’

‘The demand by real estate players has gone down by 40% in the last three to four years, says Chouksey. The slowdown in the realty sector is coupled with weakness in rural demand and infrastructure development. Faced with the scenario, capacity addition is also expected to take a hit in the next few years. From about 25 MT of capacity added in 2013-14, new capacity additions will come down to 19 MT and 14 MT in 2015-16 and 2016-17, respectively, according to industry estimates.’

“The capacity addition will go down as banks are not lending to cement companies as they know they will not get returns in such a scenario,” says Anil Kumar Pillai, director and chief executive officer, JSW Cement.’

Comment by In Colorado
2015-07-10 06:58:56

Only 1.10% of the total unsold units in Mumbai are ready for possession

But what about the “Black Money”? It should be snapping up all those empty flats, right?

Comment by Ben Jones
2015-07-10 05:21:29

‘SINGAPORE — The glut in the Executive Condominium (EC) market is set to get worse with new launches adding a wave of supply into a housing segment where take-up has been generally lacklustre.’

‘Analysts, including Messrs Ong Kah Seng and Alex Sun from property research firm RST, have recently said that demand for ECs, with the exception of Lake Life in the Jurong Lake District, had been sluggish at prevailing price levels. They said that the median sale price of about S$800 psf can no longer be supported for projects in locations such as Punggol, Sengkang, Woodlands, Sembawang and Choa Chu Kang, but added that sales will improve significantly if developers cut prices as the sandwiched class are still interested in the hybrid housing type.’

Comment by Professor Bear
2015-07-10 05:25:09

CBS This Morning
Stocks rebound but for many Chinese, all is lost
CBS News
Jul 9, 2015 6:49 AM EDT

BEIJING — Asian stock markets rebounded Thursday, led by gains on China’s Shanghai stock index after the government stepped in to stop a massive slide.

CBS News correspondent Seth Doane says it was a much-needed bit of good news in Beijing, as the government continued to work feverishly to shore-up markets. Still, half of all listed companies on the index have suspended trading — freezing about $3 trillion worth of stock.

Despite the upswing, there were no sighs of relief and no smiles at the Beijing trading hall CBS News visited Thursday, as investors gazed at savings lost, or stuck in government-mandated limbo.

China’s government has banned major shareholders and executives from selling shares, and a $19 billion “market stabilization fund” was set up to buy stocks.

“I would call this a major stock market catastrophe,” Zhang Guoqiang told CBS News. “We have never seen anything like this.”

Zhang, a retired electrician, was among the many small-time investors trying to buy and sell stocks at the trading hall, which resembles a dingy gambling parlor.

More than 80 percent of the 90 million-plus Chinese playing the market are average citizens. Many in the trading hall on Thursday covered their faces with newspapers and shawls when the CBS News camera was switched on. They didn’t want to talk, and the reasons were quite clear: they’ve lost a tremendous amount of their money.

Some told Doane off-camera that they’d lost anywhere from 30 to 70 percent of their savings. One man told us quite simply that his heart was broken.

Many were urged by the government to get into the stock market.

“That is real money,” Peng Lixin, a retired manager of a recycling company, lamented. “Those are real fortunes being lost in there… within one month the situation came to this.”

“A lot of people have been talking about a bubble in the Chinese stock markets for a while and saying it was inevitably going to burst,” Gillian Tett of the “Financial Times,” told CBS News. “But not many people expected the kind of crash we’ve seen in the last couple of weeks.”

Comment by Ben Jones
2015-07-10 05:32:19

‘Many were urged by the government to get into the stock market. “That is real money,” Peng Lixin, a retired manager of a recycling company, lamented. “Those are real fortunes being lost in there… within one month the situation came to this.”

Yeah, but these people are going to continue to buy your Miami condos (which they don’t BTW) and precious California crap shacks indefinitely. This is Lehman Brothers times 1,000 and the media is largely asking, “what’s the latest Greek bail-out proposal?”

Comment by Professor Bear
2015-07-10 05:34:36

“This is Lehman Brothers times 1,000…”

In what sense?

Comment by Ben Jones
2015-07-10 05:40:56

We went from, house prices in China will never go down. That was what, a year and a half ago, maybe two? Then it was well, first tier house prices never go down. Then that was shot down. Oh, a solar panel maker defaulted. Then a developer, and a couple more couldn’t make payments.

All of a sudden we’ve got thousands of corporate stocks frozen. Indefinitely. Has anything like this ever happened? What’s the value of their debt, their inventory or other assets?

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Comment by Ben Jones
2015-07-10 05:56:48

‘Others are concerned that Chinese investors who didn’t bail out of stocks quickly enough will be a drag on international property markets, particularly after Beijing on Thursday banned shareholders with large stakes in listed firms from selling for six months.’

‘In London, Naomi Heaton, the chief executive of London Central Portfolio, said she had heard of investors pulling out of new-build purchases because they no longer had the capital.’

‘It was a similar story for Vancouver real estate agent Andrew Hasman, who focuses on the city’s affluent westside area. “I had a call last week from another agent wanting to know if a seller of a transaction we just did would allow the buyer to back out, because they had just recently lost a huge amount of money in the Chinese stock market correction,” Hasman said.’

Comment by Professor Bear
2015-07-10 06:33:59

China’s economy has gone cryogenic.

Comment by Combotechie
2015-07-10 06:59:56

Next up:

Blame it one somebody else. The West, maybe.

Comment by Combotechie
2015-07-10 07:01:55

“one somebody else” = “on somebody else”

Never let a crisis go to waste.

Comment by Professor Bear
2015-07-10 05:32:32

“Today, the Federal Reserve again is trying to extricate itself from an artificially low interest rate environment. The so-called Fed funds rate has been held near zero for six years.”

Has there ever been another period in American economic history this long when the distinction between investing amd casino gambling was this blurred?

Comment by Pangolin
2015-07-10 06:11:12

And pretty much openly acknowledged by any right thinking person.

Comment by Bluto
2015-07-10 09:16:20

Is some cases there is no line, like late last year when Mel Watt announced new looser FHA lending standards from the ballroom of a Las Vegas casino…sounds like a story from The Onion but it really happened.

Comment by rms
2015-07-11 00:46:05

Foolz be needing mo credik!

Comment by Ben Jones
2015-07-10 06:08:33

‘There are two schools of thought on this. One says this is because China’s leaders are smart, the country’s economy is basically healthy, and everything will be fine. The other says that these fixes are temporary, that China’s leaders are kicking the can down the road, and that China’s economy is ultimately unsound.’

‘But, long term, I have always suspected that the pessimists were right, that China’s economic model was unsustainable and doomed to collapse into recession and, possibly, the sort of resulting political turmoil the country saw in the late 1980s. One reason I believe this is that I am joined by some of the people in the best position to know: the Chinese leadership.’

“I want to remind those cadres who are staying on the job beyond me: My biggest worry right now is an overheating economy,” Chinese Premier Zhu Rongji said in a January 2003 Cabinet meeting, his last before leaving office.’

“I’ve already worried about this for a year now,” Zhu said in comments released only years later. “I wouldn’t say this publicly, but only bring it up to the top leadership, that overheating is the one thing that preoccupies my mind. Many signs seem to have emerged, and if we’re not vigilant, the economic situation will be difficult to rein in.”

‘The next premier, Wen Jiabao, warned in 2007 that China’s economic model of skyrocketing export-based growth was “unstable, unbalanced, uncoordinated and ultimately unsustainable.”

‘The Chinese government knows it can’t maintain power through censorship, propaganda, and riot police alone. It needs to maintain economic growth to keep Chinese citizens happy, but it also needs to slow down that growth to keep the economy healthy in the long term.’

‘The basic problem at the core of the Chinese economy is that it needs to be dramatically restructured to remain healthy. But Chinese leaders appear either unable or unwilling to make those changes, held back by the unusual nature of China’s authoritarian, one-party political system.’

‘China’s leaders have seen the problem for a while: They’ve been warning one another for years that their economic model was “unsustainable.” But they never fixed it, which is why we’re seeing this week’s latest economic lurch. The reason they never fixed it isn’t that the economy was unready, or that they didn’t know what to do. It’s that they are incapable of doing it.’

‘The very nature of China’s authoritarian model, by basing its power on a sprawling governing elite that is heavily invested in the status quo, might now make it impossible for officials to do the things they need to do to keep the system afloat.’

‘The stakes here are enormous. Since not long after the 1989 Tiananmen massacre, China’s government has premised political stability on delivering consistent economic growth. No one is sure what will happen if Beijing fails on that implicit promise, but Chinese leaders certainly fear the worst. In a democracy, if people feel their government has failed them, they can vote that government out of office. But in an autocracy like China’s, popular discontent can be more dangerous.’

‘There are several ways in which China’s political system makes it very hard for it to confront its economic challenges. One of them is something that I sometimes shorthand as China’s steel problem.’

‘A few years ago, China announced that the country would cut steel production. I asked a journalist who covers Chinese industry if this was good news. After all, China was producing and exporting way too much steel, flooding global markets and dropping prices — not to mention keeping China’s economy on the export-led model it needs to drop. So this must be a good step, right?’

‘He responded that it probably would be if not for the fact that China had been announcing this policy for years, and for years Chinese steel production had been rising. Beijing, he said, could make all the declarations it likes, but there are a lot of high- and mid-level officials, not to mention the powerful state-run industries, that might not see it as in their interest to go along. Often, they don’t, sometimes rewriting policy as it happens.’

‘If what China wants is a healthy, consumer-driven economy that will keep the country prosperous and stable, then one thing it really needs to get there is freer financial institutions. This is a big part of how you direct money to serve domestic consumption, building up things like local businesses. And, indeed, Chinese leader Xi Jinping has talked a lot about making this a priority.’

‘But it turns out that China’s leaders didn’t really mean it. As we learned this week, much as they might have seen the long-term benefits of freer markets, they are unwilling to bear the short-term costs — and they want to keep control of banks to keep diverting money to those entrenched state-run industries and elite interests. The 2011 Eurasia Group report predicted exactly this: “The senior political leadership is not receptive to reforms that would weaken the Chinese Communist Party’s power over the financial system and thus jeopardize its ability to bankroll massive industrial policy spending on powerful constituencies, which constitutes another major 12th FYP priority. Given this discord, Beijing is unlikely to articulate or pursue a convincing plan for remedying the financial sector’s most glaring inefficiencies over the next five years.”

‘That goes a long way to explain why the Chinese government responded to this week’s stock crash with such drastic interventions.’

“The economic hopes invested in Xi [Jinping] and [Premier Li Keqiang] stemmed from their pledge in late 2013 to let market forces play a ‘decisive role’ in allocating resources,” the Economist’s Simon Rabinovitch wrote. “The actions of the past ten days have made abundantly clear that it is still the other way around: the Chinese government wants a decisive role in markets.”

(Chenggong, one of a number of Chinese “ghost towns” of vast housing developments that sit largely empty.)

‘Everyone is focused right now on the enormous bubble in the Chinese stock market — driven in part by regular Chinese investors who followed the terrible logic of bubbles by dumping money into investments that looked like they would grow forever. But maybe a more instructive example is the enormous real estate bubble. In 2011, 13 percent of Chinese GDP came from real estate investment. Urban housing stock constituted 41 percent of Chinese household wealth.’

‘The result of this is that China watchers have been just sort of waiting for China’s real estate to implode, and hoping that it wouldn’t be totally catastrophic when it did. The same goes for the Chinese stock market, which has been in an obvious — and obviously dangerous — bubble for some time. That bubble currently appears to be, to at least some extent, popping.’

‘The fact that the current downturn was entirely foreseeable and yet not prevented speaks to the larger danger looming over China. Its ever-worsening failure to make the necessary economic transition is just as obvious, and the consequences just as foreseeable. China’s leaders are really smart people who can see all of this coming. The fact that they haven’t taken the necessary steps to avert either this little disaster or what could be the potentially much larger disaster of a failed transition tells you something pretty scary: It might just not be in their power.’

Comment by Ben Jones
2015-07-10 06:14:54

‘Does the decline of China’s stock market matter? Yes, but not only — or even primarily — for the reasons being proffered in mainstream media coverage of the bubble’s bursting. Media attention has focused on the risk of systemic financial instability within China stemming from the rapid buildup of margin loans in the weeks and months leading to June 12, when the market peaked.’

‘There is the threat of social unrest as tens of millions of ordinary Chinese watch some or all of their savings disappear overnight. The media has also given attention to the risk of international financial contagion as the Chinese market collapse intersects with political and economic chaos in Greece to drive worldwide investor confidence down.’

‘In Stratfor’s view, the significance of the stock market decline lies elsewhere. First, there is the question of whether and to what extent the collapse of stock prices will affect corporate financing in the Chinese economy. Historically, Chinese companies (state-owned enterprises and well connected private companies, at least) have relied on credit lines from state-controlled banks for virtually all of their financing. Stock markets, while a useful ancillary source of capital and a good diversion for Chinese citizens looking to gamble some portion of their savings, were far too fickle and opaque to be a significant means of raising funds in the real economy.’

‘But during the past year, with the government’s increased focus on market-oriented reforms and its effort to consolidate key industries, the flow of credit from China’s banks has tightened, creating a growing financing gap for many enterprises. The stock market helped fill that gap.’

‘Its decline could exacerbate hundreds of Chinese companies’ already immense difficulties in repaying outstanding debts — debts that are now well in excess of 100 percent of China’s GDP. If the market declines too rapidly and banks or shadow lending markets fail to ramp up credit, China could begin to experience destabilizing corporate debt crises in the months ahead.’

‘In addition, as we wrote earlier this week, a collapsing stock market affects private household consumption. The Chinese government looks to private household consumption not only as the basis for the new economic model China’s leaders want to put in place but also as a means of maintaining stable employment in consumption-related industries while the housing and heavy industrial sectors decline.’

‘As more Chinese citizens lose more money on the market, the impact on spending on nonessential goods will likely become more pronounced, especially considering that stock market participation is highest in cities — the central drivers of household consumption nationwide.’

‘Though there is no reason yet to believe that Chinese President Xi Jinping or any other central leaders have lost the Party’s or the people’s confidence because of the government’s troubles with the stock market, the risk remains. And if such a loss of confidence materializes, it could well change China’s fate.’

Comment by Arizona Slim
2015-07-10 14:15:11

Historical question about Greece: Wasn’t Aristotle Onassis’ interest in Jackie Kennedy driven largely by the tax benefits he’d enjoy by being married to an American? ISTR reading that it was a loveless marriage.

Comment by Ben Jones
2015-07-10 06:20:10

‘The great Charles Kindleberger described the pattern of how bubbles form and then burst in his book “Manias, Panics and Crashes”. His model, which was linked to the work of the economist Hyman Minsky, saw the process as having five stages: displacement, boom, over-trading, revulsion and tranquillity. China looks like it is following the model pretty closely, having reached stage four already. The Shanghai Composite rose 130% between September 2014 and June 12 this year and has fallen 31% since then, with another 6% decline today. More than half of all Chinese stocks are now suspended from trading.’

‘One can debate what the “displacement” was in China. Perhaps it was that money moved out of an overhared housing market and into shares; perhaps it was the perception that China is moving up the value chain of production, creating enthusiasm for technology stocks. The doubling in price brought retail investors into the market and there was a huge surge in buying on margin; loans to investors rose 300% in a year. And now we are in the revulsion stage. Investors are having to cash in other investments to pay off their margin loans; commodity prices are falling.’

‘Even with the recent retail interest, the wealth effect on Chinese households should not be the same as the impact of a Wall Street plunge on the US (remember also that the bursting of the dotcom bubble had limited macroeconomic effects). But the fall in commodity prices may point to a broader economic slowdown; Taiwan’s exports were down 14% year-on-year in June (and imports down 16%). Both the South Korean and Taiwanese manufacturing PMIs were around 46, indicating sharp contraction. All told, emerging market PMIs now average below 50.’

A comment:

‘Half of shares suspended from selling, short selling becoming crime, trillion debt local governments start buying at discount some of 65 M empty housing from broke developers, corporate debt world record and state enterprises incl. steel mills sell at minus. It is growth as usual, but if SSE now for a second time in eight years wiped out ordinary people`s life savings, God save the CPC, who stimulated all these bubbles more than the rest of world combined their own.’

Comment by Ben Jones
2015-07-10 06:21:45


‘Did you hear the one about the Chinese stock market investor and the Greek depositor?’

‘They both can’t get to their money.’

Comment by Arizona Slim
2015-07-10 10:30:36

Happened in my family during the Great Depression. My aunt and grandmother were out doing errands. Grandma had “go to the bank” on her list, but, uh-oh, the bank was closed.

I don’t know if Grandma and Grandpa lost everything that they had in that bank. My aunt doesn’t either. Nothing was ever said.

But, with that generation of my family, if nothing was ever said, a very BAD thing happened.

Comment by redmondjp
2015-07-10 14:46:56

And that’s why my grandparents had cash, not to mention $20 gold pieces, stashed all over, even into the 1980s.

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Comment by Selfish Hoarder
2015-07-11 14:11:35

Yup. Stash cash under the mattress. Inside waterproof cans in culverts, whatever secret non obvious places you can figure. And gold and silver too. Buy Bitcoin.

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Comment by Ben Jones
2015-07-10 06:26:47

‘For the first three weeks after those markets peaked, Chinese stocks listed in the relatively stable US exchanges were largely unaffected…That has changed quickly this week. NetEase, a Chinese gaming company traded in New York, has lost 10% of its value in the past two days. Sina has fallen 15% while its peers in the online-media industry have slipped further: Yoku down 19%, Sohu and Weibo both down 20%, Changyou, another gaming company, is down 25%.’

‘When stock prices collapse, they prompt margin calls that require investors to either put up more money against the loans or sell the stocks, which only accelerates the selloff. But if investors in the US aren’t getting margin calls, why are the shares of Chinese companies traded on the NYSE and Nasdaq suddenly diving?’

‘There are two key reasons. The first is that the declines on the Chinese exchanges have gone from a simple correction to a full-fledged selloff and now seems to be on the verge of something much more perilous: an all-out market panic.’

‘The second thing that changed this week is that it became apparent that the Chinese government, with its formidable ability to control many aspects of its economy, has met its match in the stock market.’

‘China’s efforts to stem the panic selling may end up like the Japanese government’s campaign to shore up stocks in Tokyo when that market collapsed in the early 1990s. Then, government money was spent only to slow an inevitable decline, as well as its recovery.’

‘For Chinese companies, this is bad news because it threatens to stall consumer spending. As China’s growth has slowed, the government has tried to shift the economy away from a reliance on infrastructure and housing toward consumer spending. Many of China’s Internet companies listed in the US rely heavily on consumer engagement with e-commerce, games and ad-supported content.’

‘If the selloff in China does turn into a panic-driven meltdown, it could be bad news for US companies that have come to rely on the growing Chinese market for sales. GM said Tuesday its China auto sales were flat in June, even after it slashed prices 20% on dozens of models. Apple’s fortunes have revived recently on the success of its iPhones in China.’

‘Until now, the rise and fall of the Chinese stock bubble this year has been a fascinating spectacle to many in the US. And it remain that if the government does shore up the market or if the sense of panic dissipates. If not, the turmoil could end up slowing down China’s economy even further, and that could also become a drag for many US companies in this globally interconnected era.’

Comment by In Colorado
2015-07-10 06:28:24

‘You can only get $50,000 a head out of Mainland China, so a lot of people wire money from Hong Kong. And if they clamp down on the amount of money getting wired out of Hong Kong, things could change.’

Why are so many people trying to get their money out of China, so much so that the government has had to impose capital flight restrictions? Why does the PRC want to keep as many USDs in their possession? I thought the Renminbi was going to replace Uncle Buck as the world’s reserve currency.

Comment by taxpayers
2015-07-10 06:28:29

flat markets re & stock will cause local re taxes to zoom
they have to pay out wages and DB pensions regardless of returns.

Comment by Ben Jones
2015-07-10 06:31:06

‘Watching an asset bubble burst is a little like watching a tornado: you know lives are being destroyed, yet nature’s awesome power has a strange, terrifying beauty.’

‘But why did investors believe the Chinese stock market was headed for the stratosphere, even as some folks on the sidelines saw all the classic symptoms of a bubble?’

‘Economists realised long ago that if all investors were rational, it would be difficult for speculation to exist. So to get speculation, you typically need the rational investors to be beset by herds of irrational investors.’

‘So there are many theories of why bubbles exist, but there’s no consensus yet. As for China - well, if you bought into that bubble, it’s probably too late by now.’

Comment by In Colorado
2015-07-10 06:51:01

‘But why did investors believe the Chinese stock market was headed for the stratosphere, even as some folks on the sidelines saw all the classic symptoms of a bubble?’

Fear of missing out. It’s a powerful motivator.

Comment by Professor Bear
2015-07-10 07:19:23

“The bust we’re seeing now is in China, where a spectacular year long stock-market boom has turned into a rout. After soaring about 100% since late 2014, the Shanghai Composite index has now lost about a third of its peak value in a few days. The Chinese government is pulling out all the stops to prop up the markets, no doubt to preserve the illusion that it controls the economy. ”

Why is there such widespread doubt that this crash containment policy will succeed?

“Perhaps not coincidentally, its interventions also allow party cadres and the well-connected to cash out without taking a big loss.”

There is an angle I hadn’t heard previously.

“But why did investors believe the Chinese stock market was headed for the stratosphere, even as some folks on the sidelines saw all the classic symptoms of a bubble? Economists have been struggling with this question for years. Though there are no definitive answers, there are a few leading theories.”

Dan, do you want to weigh in here?

Comment by Combotechie
2015-07-10 08:06:30

“But why did investors believe the Chinese stock market was headed for the stratosphere, even as some folks on the sidelines saw all the classic symptoms of a bubble?”

“Economists have been struggling with this question for years.”

Economists certainly do a lot of struggling.

“Though there are no definitive answers, there are a few leading theories.”

“Leading theories”.

My financial advisor, who also doubles as my paperboy, offered to me his theory, which is:

People - people everywhere - are stupid.

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Comment by Ben Jones
2015-07-10 06:34:43

‘Back in February the Collingwood Group wrote about President Obama’s housing plan. “A new survey finds mortgage and housing industry professional believe President Obama’s recent announcement to reduce the price of FHA annual premiums will have a minimal impact on the size of the home purchase market.’

‘The White House says the President’s plan to reduce fees, which the FHA charges borrowers, is designed to help jump-start the housing market. But 47% of respondents to the Collingwood Mortgage Outlook Report for February say that President Obama’s estimate that 250,000 new mortgage borrowers will be added as a result of a reduction in the FHA annual premium is ‘too high,’ while only 34% said it is ‘on the mark’ and 19% said it is ‘too low.’

“In addition, approximately twenty-five percent of respondents opined that this announcement was more of a political move by the Obama administration than a major change in the market. They said the impact, while positive, will be minimal.”

‘In something more prescient, False Claims Investigations placed first on the survey’s list of the most concerning type of FHA monitoring and associated enforcement actions.”

Comment by Combotechie
2015-07-10 07:29:15

“The White House says the President’s plan to reduce fees, which the FHA charges borrowers, is designed to help jump-start the housing market.”

“Jump-start the housing market” the same way you jump-start a car?

After a car gets jump-started then the car’s engine keeps on running due to the fuel that is contained in the car’s gas tank.

But where’s the fuel to keep the housing market supposed to come from to keep the housing market running after it get jump-started?

Comment by Ben Jones
2015-07-10 06:39:02

‘The post-recession housing crisis sent millions of American homes into foreclosure or made the loans underwater. While wealthy neighborhoods have rebounded, many working-class neighborhoods are still stuck in a housing slump where the homes are worth less than what owners paid for them.’

‘As of March, 15 percent of homes worth less than $200,000 are still underwater, a situation in which the borrower owes more on the house than it’s worth. This is compared with only 6 percent of homes over $200,000, according to CoreLogic.’

‘But working-class communities like Trenton, New Jersey; Memphis, Tennessee, and Lithonia, Georgia, a suburb of Atlanta, have bleak prospects and represent a divide in the housing market, according to The Wall Street Journal.’

‘Not only have residents lost homes, but they “don’t have good access to mortgage credit; don’t have wage growth. Everything is going wrong”.

‘Shirley Jones, a Lithonia resident who bought her house in 1996 for $80,000, saw its value reach $325,000 during the housing bubble. Now it is worth just $50,000, she told the Journal. Her neat brick home is down the street from overgrown lots and boarded-up houses that have been abandoned or foreclosed. “It make the community look dead, like a ghetto,” she said.’

‘In addition, more blacks and Latinos had money tied up exclusively in their homes — wealth that disappeared when they lost them, according to the ACLU report, and after the collapse, the Federal Reserve found that the net worth of black families fell 17 more percentage points than the 23 percent it had fallen during the collapse, while worth had started to increase again for white families. Some of this wealth transferred to Wall Street, according to New Republic, as hedge funds and investors snatched up foreclosures in low-income neighborhoods and converted them to rentals.’

Comment by Professor Bear
2015-07-10 07:29:41

‘The post-recession housing crisis sent millions of American homes into foreclosure or made the loans underwater. While wealthy neighborhoods have rebounded, many working-class neighborhoods are still stuck in a housing slump where the homes are worth less than what owners paid for them.’

My siblings and I helped my folks sell the family homestead earlier this year, within a five mile radius of Ferguson ground zero. No Chinese investors stepped up to make offers above asking price. What’s worse, it seems that recent nearby riots can have a terrible effect on market valuues. I had the feeling of conducting a fire sale as we repeatedly dropped the asking price to lure a buyer.

Not long after the sale, a “For Rent” sign went up on the lawn.

Comment by Professor Bear
2015-07-10 07:37:30

PS The neighborhood where I grew up went from 100% white to 90%+ black over the past four decades.

Comment by Arizona Slim
2015-07-10 10:32:33

The neighborhood where I grew up has a zombie foreclosure. Back in the 1960s, that house was built by the richest man in the neighborhood. Subsequent owners walked away from the house.

(Comments wont nest below this level)
Comment by Ben Jones
2015-07-10 06:47:49

‘In the past three weeks, China has experienced a stock market free-fall that’s depleted nest-eggs, crushed dreams of timely retirement, and sent central authorities scrambling to exert control. And Chinese Internet users think they know who’s at fault.’

‘He’s the one who, to hear a web user tell it, “bears all the responsibility for this disaster, for destroying China’s stock market, and for breaking the Chinese economy.” He’s been called “trash” and a “running dog.” Online, many are calling for his resignation, others insist that he be fired out right, or that government authorities investigate him for unspecified crimes.’

‘They insult his mother, call for the arrest of his son for illegal short-selling, and have even urged him to kill himself. In excoriating him, some won’t deign to use his name. Instead they call him Xiao Rectum, an appellation which rhymes with his given name. He is Xiao Gang, China’s chief securities regulator, who, at this moment, appears to be the most reviled man in Chinese cyberspace.’

‘Xiao likely never expected to become a public scapegoat when he assumed the chairmanship of the Chinese Securities and Regulatory Commission in March, 2013 after a stint as chairman of Bank of China, Ltd.’

‘And this is what has made Xiao the man Chinese Internet users love to hate. The CSRC used to be a non-entity on Weibo, a Twitter-like platform in China and the closest the country has to a digital public square. But under Xiao, the CSRC’s Weibo presence has gone from just another sleepy, government-backed account eliciting little fanfare to a favorite gathering place for jilted investors. In recent weeks, each fresh announcement from the beleaguered regulator has been greeted with howls of derision, often in the form of vicious comments directed squarely at Xiao.’

‘A July 8 post provides an apt example. In the wake of a massive sell-off that left the Shanghai Index 5.9 percent lower for the day, the CSRC announced that high-level managers, board members, and major investors in a given company would be banned from selling that company’s shares for six months and that “severe punishment” awaited those who flouted the rules. In an odd bit of wording, the announcement called the latest stock market drop “unreasonable.”

‘The dictat was an obvious effort to halt the price plunge, but it hit social media with a thud. Out of thousands of responses on Weibo, the most popular called the regulator “Xiao Dog” and urged him to quit. Predictably, many commenters asked the CSRC to spell out what rendered a drop “unreasonable” and to distinguish it from a healthy correction. One popular response complained that CSRC’s response had already been “too slow, in the bureaucratic style” and that there had been “seemingly no reforms this year” beyond government efforts to prop up prices. The user lamented, “The people managing the markets don’t understand markets.”

‘Xiao’s role in blowing air into China’s stock bubble traces to remarks first reported on March 11, 2015, by China Central Television, where Xiao picked up on a concept occasionally bandied about in Chinese media in late 2014: that of a “reform bull,” meaning a rising stock market driven by the strength of Chinese economic reforms. Xiao said then he “applauded the concept” because he felt that “this round of rising stock prices reflects an expectation of a bonus from Reform and Opening,” a program of economic liberalization that began in earnest in the early 1990s. In remarks at once bureaucratically hedged and breathlessly — even irresponsibly — optimistic, Xiao said that rising prices “had some inevitability and some reasonableness.” A report days later in Securities Times interpreted Xiao’s remarks as having “agreed to” the term. Xiao reportedly repeated his endorsement of the “reform bull” concept on June 12 in a speech at the Central Party School, the day on which the stock market peaked.’

‘Taken together, statements from state media outlets and leaders like Xiao have not just helped build investor expectations that the government would “save the market” when needed. By negative implication, they have made a large drop in the markets look like a failure in governance, rather than the re-discovery of rational prices. Chinese authorities have obliged this notion, which plays to their own hubris, by rolling out measure upon measure intended to reverse the latest swoon, gambling more and more political capital to chase after already-lost prestige.’

‘Although comments critical of Xiao are legion, so are (uncensored) complaints that veer dangerously close to criticizing other more powerful leaders by name. “Stocks aren’t something for common people to play around with,” concluded one web user in the wake of the July 8 prohibition on sales by big shareholders. People with connections and inside knowledge “buy low and sell high, while [average people] buy high and sell low. It’s not that we’re stupid or naive,” wrote the investor, perhaps referring to the millions of investors in their 20s, or the millions more who have entered the market without the benefit of a high school education. “But we can’t escape the exploitative crush, with expensive goods, expensive housing, poisonous food — I don’t even have the heart to talk about vacation, health insurance, student scholarships. Every time we try to do anything, [the elites] make things difficult at every turn.”

‘The Wall Street Journal reports that Xiao “has worked nearly around the clock” in recent weeks and was recently seen “eating alone in the empty cafeteria at the regulator” one evening. His head of hair, once jet black, now shows grey. Still, he’s unlikely to find much sympathy close to home.’

“Xiao Gang, you may live a long life,” one user wrote on July 8. “But there will be many investors waiting for you in hell.”

Comment by Professor Bear
2015-07-10 07:33:46

The world loves a scapegoat. My suggestion for Chinese stock market investors who honestly want to know whom to blame for their crushing losses is to take a look in the mirror.

Comment by Ben Jones
2015-07-10 07:14:50

‘Fan Xiaolin, an engineer in Changsha in central China, thought he was safe when he deposited his family’s savings of 800,000 yuan ($130,000) in a private finance company he said was recommended by employees of state-owned Bank of China.’

‘The company, part of an informal industry of lenders and investment managers that operates outside China’s state-run banking system, collapsed six months later as economic growth slowed and businesses struggled. Today, Fan said he and about 100 other depositors in Hunan Bofeng Asset Management Ltd. protest several times each week outside state banks and government offices, demanding their money back.’

“The security people at the bank hit us,” said Fan, 50. “The police ask us to go home and wait.”

‘Beijing allowed underground finance to flourish over the past decade to support entrepreneurs who generate jobs and wealth but get little credit from state banks. Communist leaders reaped the benefits of a thriving private sector without tackling the political challenge of giving entrepreneurs more access to an official financial system supports government companies.’

‘Now, as losses rise, Beijing faces political tension and pressure to help investors recover their money.’

‘The industry’s popularity reflects the Chinese public’s urgent search for an alternative to low interest paid by banks, which has driven repeated bouts of boom-and-bust speculation in real estate and other assets. It propelled the flood of money from novice investors that fueled this year’s explosive rise of Chinese stock prices, which peaked in June and have plunged since then.’

“I went to deposit money in the bank and the bank manager recommended this to me,” said an ICBC customer, Sheng Weimin, a 48-year-old engineer for an aviation company. He put 100,000 yuan ($16,000) into Bofeng in January 2014.’

‘Fan, the engineer, said he got similar advice at Bank of China to put money into one-year Bofeng contracts that promised 7 percent annual interest — double the rate at state banks. “There was no talk about risk,” said Fan, who earns 4,000 yuan ($625) per month. “The counter staff at Bank of China said anybody who still uses certificates of deposit is a fool.”

“Many investors don’t realize the risk until something goes wrong,” said Guo Tianyong, director of the Banking Research Center at Central University of Finance and Economics in Beijing.’

You said a mouth full there Guo.

‘The counter staff at Bank of China said anybody who still uses certificates of deposit is a fool’

Oh, the counter staff said that? And you dropped 130k and who’s the fool now?

‘The security people at the bank hit us…The police ask us to go home and wait’

Sounds like you won’t be buying a Miami condo anytime soon Fan. Put some ice on that, BTW.

Comment by In Colorado
2015-07-10 08:45:17

“There was no talk about risk,” said Fan, who earns 4,000 yuan ($625) per month. “The counter staff at Bank of China said anybody who still uses certificates of deposit is a fool.”

How much money can someone who makes $625 a month save? And buy a car and a $200,000 flat?

Comment by Senior Housing Analyst
2015-07-10 07:25:02

Centennial, CO Housing Prices Fall 5%; Inventory Skyrockets 95%


Comment by Ben Jones
2015-07-10 08:08:39

‘Several listed Chinese companies at the heart of Australia’s apartment construction boom have been caught in China’s sharemarket meltdown, raising concerns about the strength of their balance sheets amid warnings they’re carrying too much debt.’

‘Fuxing Huiyu Real Estate, Beijing Capital Development Holdings and one of China’s largest real estate players, China Poly, are all listed on either the Shenzen or Shanghai Stock Exchanges and this week saw their share prices tumble by as much as 26 per cent. Hong Kong-listed giant Greenland, which is building one of Sydney’s tallest residential towers, saw its share price collapse 20 per cent.’

‘This week’s extraordinary volatility in China saw Fuxing Huiyu Real Estate, known as Starryland Australia, slip into a trading halt as its share price sank 21 per cent. It is building 774 apartments near the University of Western Sydney after having paid $58 million for a site on the Parramatta riverfront – or more than double what the previous purchaser paid.’

​’Ausbao, a subsidiary of Beijing Capital Development Holdings, listed on the Shanghai exchange, sank 25.57 per cent this week. The company is planning a $280 million development called the The Quay with 270 apartments in Sydney’s Ultimo. It is also planning another 170 apartments for a property in Sydney it purchased for $55 million – almost double what was paid two years earlier.’

‘S&P China’s Matthew Kong has repeatedly warned that the sector needs to reduce debt. “For some developers, improving sales and reducing debt are critical for their credit health this year due to large obligations from land acquisitions and aggressive increase in borrowings in the past few years,” he said/’

‘Mr Kong said this week’s sharemarket rout may pose “some minor problems” for reducing debt. “Some developers do have difficulty reducing debt as they are still under pressure to expand and the growth in [apartment] prices is smaller.”

‘In Australia, estate agents who are selling dozens of development properties to Chinese groups are showing some apprehension over how Chinese developers’ debt and share prices will affect their demand for property in Australia.’

“The Chinese raise a lot of money and they borrow as much as they can, but sometimes that can hit home and that is what is happening in Shanghai,” McVay Real Estate’s Dan McVay said.’

‘In Melbourne, CBRE’s Mark Wizel has also been selling sites to Chinese buyers. “The unknown factor will be which ‘new’ Chinese groups had planned to come to Australia to invest who may now be shelving plans and waiting to see if stability can be restored within the Chinese landscape,” he said.’

‘Another one of China’s largest real estate players, the Shanghai-listed China Poly, saw its shares lose 9 per cent before recovering. That company is planning a massive apartment development in Epping in Sydney’s northwest. It bought the development site for $110 million last December at the end of an intense bidding war with local developers.’

‘It also bought the NSW Water Board building in Sydney for $100 million among other transactions. Another of the giant Chinese residential developers R&F, whose share price slumped 7 per cent this week and did not recover, has also built a reputation for some massive development site purchases. It paid $46 million for a former TAFE college in south Brisbane last year which could see hundreds of apartments built. The price tag was more than twice the $22 million the seller had bought the site for less than 12 months earlier.’

‘The risk of offshore troubles for Australia’s commercial and residential real estate market has been raised several times by the Reserve Bank of Australia.’

“The risk of a large repricing and associated market dislocation in the commercial property sector has increased,” the RBA said in its March Stability Review. “This could be triggered by several factors, such as … a sharp fall in foreign investor demand, perhaps due to a rise in global interest rates or weaker conditions in foreign investors’ home countries.”

“Property developers in some apartment markets are facing similar risks. Prices for development sites have risen sharply over the past year or so, largely reflecting strong demand from foreign residential developers.”

Comment by Ben Jones
2015-07-10 08:11:09

‘paid $58 million for a site on the Parramatta riverfront – or more than double what the previous purchaser paid’

‘planning another 170 apartments for a property in Sydney it purchased for $55 million – almost double what was paid two years earlier’

‘It paid $46 million in south Brisbane last year. The price tag was more than twice the $22 million the seller had bought the site for less than 12 months earlier.’

‘It bought the development site for $110 million last December at the end of an intense bidding war with local developers’

Dumbest investors in history.

Comment by Senior Housing Analyst
2015-07-10 08:09:31

Castro Valley, CA Housing Prices Fall 7%


Comment by Jus7tme
2015-07-10 15:15:25

Wow, Ken de Leon has a big mouth for revealing his own client’s worries to a newspaper. I wonder if that might be a breach of contract? I do not know, but I certainly would never use an Agent that was blabbering to the press about my private business. And not, Ken De Leon, is not a nobody. He is, I think, the largest dollar volume broker in Palo Alto.

Comment by Ben Jones
2015-07-10 17:00:44

‘Mainland China’s heavy-handed intervention in its stock market raised plenty of eyebrows in the financial community this week and damages the credibility of its broader efforts to become a more open market. In reaction to the roughly 30 percent plunge in mainland shares from their June highs, the Chinese government stepped in with a slew of policy changes, including a virtual ban on short-selling, serious restrictions on selling by major shareholders and the loosening of margin lending regulations.’

“The last week has put back financial reform for a decade,” said Shaun Rein, founder and managing director of the China Market Research Group. “Rather than ‘the omnipotent Chinese government,’ they created panic. I’m shocked at what they did.”

“We believe that the biggest damage caused by the A-share market’s roller-coaster ride since the middle of last year has been to investors’ faith in the government’s ability to manage asset prices (stock, RMB, debt and even property) reasonably smoothly,” Merrill Lynch Singapore strategist David Hui said in a Thursday note.’

“Also, the ripple effect from the market correction has yet to show up-we expect slower growth, poorer corporate earnings and a higher risk of a financial crisis,” he added.’


These guys are being kind. The Chinese government showed their a** and it wasn’t pretty.

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