July 19, 2015

Denying Us The Truth

A weekend topic on data. The news we read and how it’s interpreted. How numbers and statistics are used within it. From yesterday: “One thing that isn’t going away despite the hot market is the payment of financial concessions by sellers. Financial concessions, such as paying a buyer’s closing costs, were paid on 65 percent of all the existing homes that sold in the second quarter, up from 48 percent during the same period last year. Stacey Anfindsen, a Cary appraiser, said the continuing payment of concessions remains one of the most baffling aspects of the local housing recovery.”

“‘With a two-month supply of housing, it’s economically illogical that somebody should have to incentivize someone to buy something when there’s a shortage of something,’ he said.”

I’ll throw this out there; maybe the old six months inventory standard is out of date. With so much information available, and possibly not many buyers, if it doesn’t sell in a month it’s over-priced?

The Victoria Advocate. “In May, if every house on the market in Victoria were to be sold with no new homes added, it would take 3.6 months to sell them all, according to the Texas A&M Real Estate Research Center. This number is also known as month’s inventory, or inventory divided by average monthly sales, which is used as an indicator of the housing market. A balanced housing market for both buyers and sellers has about 6.5 months of inventory, said Mark Dotzour, chief economist and research director at the center.”

“The median home price in Victoria for May was $171,500 compared to $113,700 for the same month five years ago.”

“The low inventory is causing homes prices to spike, which will hurt more than just the consumers in the long run, Dotzour said. ‘I guarantee you Caterpillar across the street doesn’t hope house prices go up 10 percent a year in Victoria for the next decade,’ Dotzour said. ‘Because you know what? They won’t be able to hire people for the same wage level anymore.’”

Is he saying soaring house prices aren’t good for the economy? The same data, an about-face on what it means.

Then there’s what we are told and not told. First Coast News, “The housing market may appear to be on the upswing, but a new study finds that on average, one in 379 homes in Jacksonville will go into foreclosure. The study by Realtytrac ranks Jacksonville as the fourth worst market for foreclosures in the U.S. Seven other Florida cities ranked in the top 10, including Ocala and Tampa.”

“Vystar chief lending officer Kathy Bonaventura said the numbers may not reflect the current state of the housing market. ‘There was a shadow inventory of foreclosures that lenders really had not done anything with and they finally started to move those through the pipeline so we’re seeing that result now,’ Bonaventura said.”

“In short, the banks held onto foreclosure properties and waited for the housing market to bounce back in an effort to make money.”

The Tyee in Canada. “You could tell that famously leisure-obsessed Vancouver’s heated housing debate had taken a bizarre turn when 150 people bearing protest placards gathered outside the city’s library on June 24 to demand: ‘Give Us Data.’ The rally’s organizer, Eveline Xia, admitted it was all a bit ‘nerdy to be at the library talking about data.’ Nonetheless, ‘by denying us the data” about who’s buying what in the city’s housing market, she said, ‘they’re denying us the truth’ about why home prices are more out of line with incomes in Vancouver than almost anywhere else on Earth.”

The Asian Pacific Post piece is interesting because it takes a long look into the subject, which is an effort the MSM avoids. “The flood of money from China into Canada has not only distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. And, in a bizarre piece of absence of mind and lack of attention, it has hitched the future of Vancouver to the fate of the Chinese Communist Party.”

“The basic reason for the money flight is simple. After nearly 70 years in control, the Communist one-party state has almost exhausted its political legitimacy. Egalitarian ideology has been abandoned. The low hanging fruit of economic reform have all been picked and eaten, and the Communist Party has no intention of embarking on the political reforms necessary for the next stage of economic development. All that is left to sustain the regime is intensified repression — much in evidence in the last three years – and crass appeals to nationalism.”

“Lack of self-esteem has deterred Greater Vancouver from responding to warning signs about the money fleeing China. Part of this may be what a friend of mine calls ‘the Komagata Maru syndrome.’ That is the fear of singling out any ethnically identifiable group for fear of being labelled a racist. Just look at the city’s media. It has taken it years to pluck up the courage to say that it is torrents of money from China that is distorting Vancouver’s economy.”

“Some people, most of them in Vancouver’s economic and political ruling class, have been unwilling to look critically at what is happening because they are doing so well out of it. Developers, building contractors, engineers, lawyers, luxury goods retailers (or, often more accurately, retailers of goods with luxury prices), sellers of expensive cars have all done very well out of the Chinese cash tsunami. The municipal and British Columbia provincial government have also seen their revenues grow, making them reluctant to curb or even gather useful data on what is happening. Vancouver City Council is reported to make about $700 million a year on property transfers, and the province is making over $1 billion.”

From Bloomberg. “On June 10, as the Shanghai Composite Index was heading for a seven-year peak, Wan Xinjian borrowed the maximum he was allowed from his brokerage to buy more stocks. As the market started to plummet on June 12, the 49-year-old businessman had to make contingency plans and eventually sell a 7.8 million yuan ($1.3 million) flat he was renting out for investment income in Shanghai after Haitong Securities Co. called in his margin loans.”

“‘I’d rather keep the flat, but I have no choice,’ Wang said in a telephone interview, declining to specify how much he lost. ‘Where else can I get so much money?’”

“Wan, who had to break a lease with tenants as he rushed to sell his flat, said he was unlikely to go back to investing in the housing market anytime soon. ‘I still have place to live, so it’s hard to say whether I’ll buy flat again,’ said Wan. ‘Real estate is not a place to make quick money today.’”

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Comment by Ben Jones
2015-07-18 06:05:25

The APP article is exactly what you won’t see in the MSM. ‘Vancouver has the double affliction of a deeply embedded lack of self-esteem and an overdose of self-obsession.
A result is a temperamental inability to make sound judgments about communal pressures, including those coming from outside. Sad to say, the vain and vacuous “Real Housewife of Vancouver” is the perfect civic emblem for the Western Canadian metropolis.’

‘Forget the verdict of a writer in The Economist that Vancouver is among the world’s most “mind-numbingly boring” cities. Immeasurably more important in recent years is the inability to address the seismic problem of money flooding in from China.’

Check this out:

‘A story posted briefly on the People’s Daily newspaper website earlier this week said a recent survey found that over 50 per cent of wealthy Chinese are determined to emigrate. It didn’t take long for the censors to take the story down, however.’

‘At the hub of the current anti-corruption campaign and the Communist Party’s equivalent of the Spanish Inquisition is the Commission for Discipline Inspection. As a matter of interest, a couple of years ago the Commission did a study of the 204 members of the party’s Central Committee, China’s third most important administrative body after the Politburo and the Politburo Standing Committee.’

‘The Commission found that 91 per cent of Central Committee members have relatives abroad. Then, perhaps as a comparison test on these results, the commission looked at its own members. It found that 88 per cent of its own staff have close relatives who have emigrated and acquired foreign citizenship.’

‘Clearly, an extraordinary proportion of the senior echelons of the Chinese Communist Party has one foot out the door, having already moved a good deal of their wealth, much of it ill-gotten, to politically sunnier climes.’

Comment by In Colorado
2015-07-18 08:47:36

‘A story posted briefly on the People’s Daily newspaper website earlier this week said a recent survey found that over 50 per cent of wealthy Chinese are determined to emigrate. It didn’t take long for the censors to take the story down, however.’

As the wheels fall off the Global Economy bus, the well to do from around the world face the possibility of revolts, revolutions, wealth confiscation and even the loss of their lives. Greece is but the tip of the iceberg, every country is up to its eyeballs in debt and so are its citizens and businesses.

So what do you do if you are a richie in BRIC or third world nation? You get the heck out of Dodge, taking as much money as you can to a safe haven, and make no mistake, the US is the ultimate safe haven for their wealth and their lives.

I saw this in first person in Mexico in the late 1970′ and early eighties. Anyone who had a non trivial amount of money deposited it in a Texas bank and those who swing it would buy a house, paying cash. San Antonio was a popular destination as it was very Mexican friendly. Houston, and San Diego were other popular destinations. Miami was not, because it was “Cuban”.

Comment by X-GSfixr
2015-07-18 09:56:10

Screw the wretched refuse program………except where it works to hold down J6P wages

” Give us your Robber Barons, your oligarchs, your Multi-National corporate execs, yearning to be free. (To steal) ….”

Comment by redmondjp
2015-07-19 12:17:23

+1 on safe haven in the US, with a vast majority being all-cash sales. These buyers will not be selling en masse if the market drops. So that is something I see that is different about Bubble 2.0 (and it took me a long time to come around to this position).

Bellevue, WA is another up-and-coming western Chinese outpost. I’m calling it Bellevue, R.O.C. now. And Bellevue’s SFH prices are still significantly lower than either Vancouver BC or SFO, so I think that will sustain the market longer in this area.

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Comment by Mafia Blocks
2015-07-19 13:11:09

It’s all falling apart on the west coast. Techs hiring is falling, firing is rising, borrowed money evaporating.

Comment by Professor Bear
2015-07-19 21:20:07

“…with a vast majority being all-cash sales. These buyers will not be selling en masse if the market drops.”

If a Chinese investor borrowed at home to make an all-cash purchase on the U.S. West Coast, why wouldn’t he dump in a heartbeat when the market drops?

Makes no sense…

Comment by redmondjp
2015-07-19 22:24:03

You don’t get it. They have cash coming out of their ears. It’s called a trade surplus, which allows them to come back into the US and buy out our own country from under us.

Chinese people buying over here are not borrowing to do so.

Comment by Mafia Blocks
2015-07-20 05:34:55

It’s all dumb.borrowed. money. My friend. And it’s drying up fast as china collapses.

Comment by In Colorado
2015-07-18 13:13:52

‘Forget the verdict of a writer in The Economist that Vancouver is among the world’s most “mind-numbingly boring” cities. Immeasurably more important in recent years is the inability to address the seismic problem of money flooding in from China.’

When things “back home” are looking very scary, “boring” becomes very enticing and desirable.

Comment by Mafia Blocks
2015-07-19 13:12:56

The tide of borrowed Chinese money is evaporating quickly. Hang onto your hat cowboy because you’re in for the ride of your life.

Comment by Ben Jones
2015-07-18 06:08:58


‘These princely families are widely despised, and quite often some outlandish piece of boorish behaviour in public will lead to an outraged burst of unrest. But unrest is constant anyway. There are about 180,000 “mass incidents” a year in China, and the number has remained about the same for several years.’

‘These are defined as involving a violent protest by more than a thousand people and requiring the deployment of the People’s Armed Police or a riot squad. That’s an average of just under 500 riots a day. Translated into Canadian terms, that would be an average of 13 Stanley Cup riots across the country every day. No wonder China’s wealthy feel that the ground under their feet is unsteady.’

‘There are several common causes for these daily riots. The most common is the theft of peasants’ land by local party and government officials in order to sell it to crony developers. The bribes flow in all directions, except to the peasants.’

‘An increasing cause of unrest is the extraordinary environmental destruction of China, the run-off from its fast and furious economic development. Chinese government reports say that most of underground aquifers, which provide 70 per cent of China’s drinking water, are irredeemably polluted. The water in more than 75 per cent of Chinese rivers is unsuitable for drinking or fishing.’

‘And, incredibly, about 30 per cent of China’s rivers are too polluted for their waters to be used for agriculture or industry. Nearly 700 million people, over half the population, drink water contaminated with human or animal waste.’

‘Air pollution in China has been well publicized. It is now so bad that foul air is directly responsible for the death of well over a million people a year.’

‘For those who can, there is every reason to get out of China. And the perfect landing spot is somewhere where the people don’t ask too many questions and are easily manipulated through flattery.’

Comment by Ben Jones
2015-07-18 06:12:59

‘Congratulations, you have just “closed” on the purchase of a beautiful condo in Miami overlooking the water. However, a word of warning: Did your real estate broker or anyone else advise you of the potential U.S. federal income, estate, and gift tax consequences of owning that condo before you purchased it? For example, did you purchase the condo in your individual name or through an entity such as a limited liability company or corporation? Is the condo for purely personal use or do you plan on renting it?’

‘Depending on the form of ownership (i.e. individually or through an entity) and whether the condo will be used for personal or business use, the potential U.S. tax consequences can vary greatly. As briefly discussed below, there are a number of potential U.S. taxes that may be imposed but, with proper tax planning before closing on the condo, potential tax liability can be reduced or avoided.’

‘Through proper U.S. tax planning, there are various ways to mitigate, if not completely eliminate, exposure to some of the above described U.S. taxes and avoid having to file a tax return in the United States. Such planning should be coordinated with tax professionals in the foreign person’s home jurisdiction to ensure that any U.S. tax planning has no unintended tax consequences back home.’

‘Through the use of partnerships, corporations, trusts, debt, life insurance, treaties (where the foreign person resides in a country that has an income and/or estate tax treaty with the United States), and other planning methods, the transaction can be structured in a manner that is tax efficient for U.S. taxes purposes and tax purposes in such foreign person’s home jurisdiction.’


Comment by Ben Jones
2015-07-18 06:26:54

‘‘With a two-month supply of housing, it’s economically illogical that somebody should have to incentivize someone to buy something when there’s a shortage of something,’ he said.’

It is illogical, and the easy answer might be the best; there is no shortage.

I’ve been asking this for years; how is it there is a shortage of housing in every corner of the US. Have we all been living in cardboard boxes?

‘Des Moines doesn’t have a reputation for being particularly hip … or space-constrained. In this city of a bit more than 200,000 people, you can buy a three-bedroom house for less than $150,000 and find yourself a short drive from acres of rolling farmland.’

‘That makes the city a surprising place to find a growing market for micro-apartments—an imprecise term describing units that are smaller than traditional studios. The emergence of micro-apartments, a phenomenon more often associated with big, expensive cities, such as New York or San Francisco, signals an effort to attract young renters who are inclined to make the city their living room, as the pitch goes, and sleep on beds that fold into walls.’

‘And yet here they are in Des Moines—in a converted, century-old office building, and in a new development with such luxury amenities as a yoga studio and cinema room. Renters can expect to pay about $850 for about 450 square feet—assuming there’s a vacancy. Rick Tollakson, chief executive of Hubbell Apartment Living, says that the micro units in his company’s Cityville on 9th development are fully leased. “Like any other city, there’s a demand for downtown living,” he says. “And if you want to want to lease an apartment for under $1,000 and live by yourself, it pretty much has to be a micro.”

‘Indeed, the micro-apartments cropping up in Des Moines and other less-likely metros, including Columbus and Omaha, also signal two overlooked conditions. Interest in downtown living has extended beyond coastal cities known for vertiginous housing prices.’

‘And the rental crunch that has long led residents in crowded coastal cities to pay high prices for tiny abodes is surprisingly widespread. Nationwide, more than two of five renters spend 35 percent of their income or more on housing, according to the Urban Institute, and the rental affordability crisis has landed in boom towns such as San Jose as well as such busts as Detroit.’

Wait for it:

‘In that light, the shift toward smaller apartments can be seen as simple economics: Smaller apartments are more profitable for developers…”I could paint a cooler picture about value of design, efficiency, and all of that,” says Alexander Grgurich, a development analyst at Nelson Construction & Development, which converted a century-old office building in Des Moines into 425-square-foot apartments in 2013. “For us, it’s about getting a higher price per square foot…”

Comment by X-GSfixr
2015-07-18 10:03:16

Youngest just rented a 900 sq ft loft apartment in a recently rehabbed three story building/warehouse, two blocks south of the Sprint Center, three blocks north of the “Crossroads Art District” in KC.


Comment by X-GSfixr
2015-07-18 10:11:22

True, its “rent controlled”. But almost all of the tenants are staffers of the various food and entertainment venues downtown. Druggies, troublemakers get kicked out pronto.

The -fixr, being neither poor nor rich, gets to pay full freight on his two bedroom/two bath aprtment with carport, ten minutes from downtown KC in Johnson County, KS. Rent? $825/month. Most of my neighbors seem to be H-1B techies from Bangalore, and students/employees/interns at the KU Med Center

Comment by X-GSfixr
2015-07-18 10:43:54

The point being……..the Real Estate industrial complex continues to push the prices are going up theme.

Ground Zero reality in most of the country is that asking prices are higher, but nobody is actually selling anything. While you can still find reasonable rentals. In a still poor job market, where 90% of the working stiffs are looking for the first opportunity to GTFOOD.

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Comment by In Colorado
2015-07-19 08:16:43

With a few exceptions, Bubble 2.0 has passed over flyover.

Comment by Ben Jones
2015-07-19 08:53:16

‘Bubble 2.0 has passed over flyover’

Oh really? Do you know where Victoria Texas is?

‘The median home price in Victoria for May was $171,500 compared to $113,700 for the same month five years ago’

Comment by Professor Bear
2015-07-18 06:44:02

Will state-sponsored margin lending be sufficient to revive the China stock market bubble?

Comment by Professor Bear
2015-07-18 06:48:18

China’s biggest banks lend 1.3tn yuan in attempt to halt stock market meltdown
- Reports suggest more than dozen banks have lent cash to state-backed Chinese Securities Finances, which provides so-called margin lending to investors
- Investors look at stock information at a trading hall in a securities firm in Shenyang, north-east China, on Friday.
Photograph: Pan Yulong/Xinhua Press/Corbis
Friday 17 July 2015 12.20 EDT
Last modified on Friday 17 July 2015 12.53 EDT

China’s biggest banks have lent 1.3tn yuan (£134bn) in an attempt to halt a meltdown in Chinese shares, local media have said.

Financial magazine Caijing cited unnamed sources as saying that 17 commercial banks had provided the cash for the state-backed China Securities Finance (CSF), which loans money to investors for buying shares in a practice known as margin lending. The move points to the extent to which the recent rebound in the country’s stock market has been reliant on state intervention.

The loan came after China’s central bank said it wanted to extend funding to the CSF, which was set up in 2011.

The Shanghai composite index began to plunge mid-June, wiping 24.8tn yuan off stock values in a few weeks – much of it belonging the country’s 90 million private investors.

At its low point the index had lost nearly a third of its value, but concerted measures by Beijing, including a selling moratorium on major shareholders, the suspension of trading on many stocks and cancellation of numerous flotations have helped it recover about 15%. On Friday it rose 3.5%.

Caijing said on Friday that China Merchants Bank was the biggest financier in the latest move to shore up the market, lending 186bn yuan to the CSF.

The CSF is the only institution that provides margin financing loans to Chinese brokers, and is seen as an important conduit for the government to counter volatility in the stock market.

“It doesn’t have to use up all the money, as long as it can make the rest of the market believe that it has enough ammunition,” Hao Hong, a China strategist at Bocom International in Hong Kong, told Bloomberg. “It is a game of chicken. For now, it seems to be working.”

The stock market plunge followed a 150% rise between June 2014 and last month that at its height attracted up to 1.4 million new investors a week eager to bet on soaring prices.

But investors were spooked by speculation that China’s central bank was about to end its monetary policy easing, as well as moves in Beijing to crack down on the margin financing system. That system was thought to be exacerbating the swings on the market as the broker can demand more cash or other collateral if the price of the stock has fallen – known as a margin call.

Bloomberg reported separately on Friday that the CSF had 2.5tn yuan to 3tn yuan of funding available as of this week to shore up the stock market if needed, citing people familiar with the matter.

Comment by Professor Bear
2015-07-18 07:14:12

July 15, 2015
The Real Risk Behind China’s Stock-Market Drama

By Evan Osnos

On April 21st, People’s Daily, the newspaper that the Chinese Communist Party calls its “throat and tongue,” published an online commentary exhorting the masses to place their trust, and savings, in the stock market. Even though share prices had soared by more than eighty per cent in less than four months, this was “merely the start of a bull market,” since blue-chip stocks remained “undervalued,” the author, Wang Ruoyu, explained. Like a CNBC stock picker, Wang mocked fears of a bubble—“What’s a bubble? Tulips and Bitcoins are bubbles”—and assured readers that continued gains would enjoy the full “support from China’s grand development strategy and economic reforms.” The commentary was quickly shared across the Web, accompanied, in some cases, by a cartoon of a bull ramming a giant arrow toward the sky.

The public had reason to believe. Official and quasi-official Chinese pronouncements carry the ring of prophesy. In the heyday of socialism, the Party forecasted the size of the following year’s harvests and the quantity of steel production, and the final numbers were rarely permitted to deviate much from the predictions. More recently, the Party has offered annual targets for economic growth that almost always bear out, no matter what sort of creative policy, or accounting, steps are required. For months, President Xi Jinping and his generation of leaders had been vowing to give the market (instead of the government) a more “decisive” role in China’s economic growth, and investors did not miss the signal conveyed by the People’s Daily commentary. “It gives psychological support to the market,” Wu Kan, the head of equities trading at Shanshan Finance, an investment firm in Shanghai, told Reuters. “Obviously, regulators hope to see a steady and healthy bull market.”

The next day, share prices surged to their highest point in seven years. Over the next two and a half months, investors opened thirty-eight million new stock accounts, more than quadruple the number of accounts opened in all of 2014. In some cases, individuals or institutions held multiple accounts, so it was not quite the stampede of mom-and-pop investors that figures might suggest; nevertheless, it was, for many, a new era of risk and reward. Retail exchanges, equipped with audience seating, attracted retirees and other small-time investors who spent hours scanning the digital displays, like visitors to the dog track. In recent years, two-thirds of China’s new investors have been individuals who do not have a high-school diploma. With the property market weakening and few other reliable investment options available, the stock market looked like a good bet, and banks permitted people to take out loans to buy even more shares. By June, around eleven per cent of China’s four hundred and forty-three million households held stocks, representing the assets of tens of millions of members of China’s new middle class.

On June 13th, stocks began to fall. After nearly two weeks, trillions in paper wealth had been erased, and, in its first effort to arrest the slide, China’s central bank made a surprise interest-rate cut. Days later, regulators stopped new offerings of stock. Still, the fall continued, and the measures grew more desperate: regulators halted trading on thousands of stocks, banned major shareholders from selling for six months, and threatened to arrest the “shorts”—speculators who bet that the market will fall. (Shorting itself is legal in China, but authorities were worried about improper manipulation.) After a month, anxiety about the collapse of “A-shares,” the main market available to Chinese investors, had taken hold, and, in an old-fashioned moment, graduates of élite Tsinghua University were led in a chant at their commencement ceremony: “Revive the A-shares, benefit the people!

Comment by X-GSfixr
2015-07-18 10:16:16

Seems like the ChiComs are actually worried what might happen if Xian6pak end up being the patsy/knifecatcher.

Compared to us US Americans, where the PTB are more than happy to hand off the s##tbag to the wretched refuse.

Comment by AmazingRuss
2015-07-18 15:32:59

Our rabble conveniently blames the liberals or conservatives for all it’s problems.

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Comment by Professor Bear
2015-07-18 10:25:01

In the heyday of socialism, the Party forecasted the size of the following year’s harvests and the quantity of steel production, and the final numbers were rarely permitted to deviate much from the predictions. More recently, the Party has offered annual targets for economic growth that almost always bear out, no matter what sort of creative policy, or accounting, steps are required.

Some things never change.

Comment by Professor Bear
2015-07-18 10:29:50

Retail exchanges, equipped with audience seating, attracted retirees and other small-time investors who spent hours scanning the digital displays, like visitors to the dog track.

Sounds like an effective way to keep Grandpa Chen out of trouble.

Comment by X-GSfixr
2015-07-18 10:33:27

They need to change it to pay per view. Put a quarter in the slot, and pull the lever.

Then all you would need is a buffet and complimentary drinks

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Comment by Ben Jones
2015-07-18 07:07:27

‘There was a shadow inventory of foreclosures that lenders really had not done anything with and they finally started to move those through the pipeline so we’re seeing that result now,’ Bonaventura said.’

‘In short, the banks held onto foreclosure properties and waited for the housing market to bounce back in an effort to make money.’

This little racket has been interesting too. “Oh Ben, are you saying there’s a conspiracy?” I don’t care what you call it. It’s well know in the foreclosure biz. I’ve found many dozens of insider references to it over the years. Why after all these years haven’t the bank rules to sell off foreclosures been reinstated? Nobody even talks about that.

Comment by Professor Bear
2015-07-18 07:11:12

Seems little different from China’s efforts to manipulate the stock market.

Comment by X-GSfixr
2015-07-18 10:18:03

We are teaching them everything we know.

Comment by Ben Jones
2015-07-18 07:33:25

A long time reader/poster just sent me this:

‘Nationally, U.S. home prices are increasing more than expected, suggesting a definitive recovery from the 2008 recession—and causing some experts to mistakenly speculate that another bubble is in our midst.

New research conducted by real estate experts Norm Miller, Hahn Chair of Real Estate Finance in the School of Business Administration’s Burnham-Moores Center for Real Estate at the University of San Diego (USD), Michael Sklarz, president of Collateral Analytics and Jim Follain, senior vice president for research and development at Collateral Analytics, indicates that while there are some isolated price bubbles around the nation, we are far from bubble territory on a national or metropolitan level.’

“In essence, a bubble is an unsustainable price trend fueled by speculation that prices will continue to increase,” says Miller. “A bubble occurs when prices keep rising only because they are expected to keep rising, rather than being based on the fundamentals of income, wealth and debt costs. While we’re not seeing that trend nationwide, there are some cities and/or ZIP codes which are exhibiting frothy behavior.”

‘Specifically, ZIP codes in and around seven areas—Miami, Denver, Portland (OR), San Diego, Oakland/Berkeley, San Francisco and San Rafael—may be near bubble levels that could pop. In particular, those metropolitan areas driven by tech stock capital appetites are more volatile and possibly more vulnerable.’

“When the next recession hits, prices could decline in the ‘San’ markets, including San Francisco, San Rafael and San Diego,” says Miller. “Less a real estate bubble, this is more of a ‘tech bubble’ that will affect some real estate markets when the stock prices dip significantly.”

‘Miller and his co-authors identified and monitored approximately 400,000 neighborhoods around the U.S. along with approximately 20,000 surrounding ZIP codes. The analysis is detailed in their white paper, titled “Is a New Home Price Bubble Forming” and prepared using the Collateral Analytics Home Price Forecast Model. The paper references this model as using a “number of fundamental and technical drivers (independent variables) which provide a more economically based way to analyze home price intrinsic value and, thus, overvaluation (or undervaluation).”

‘As a Center of Excellence within the School of Business Administration, the mission of the Burnham-Moores Center for Real Estate is to help recruit, educate and mentor our real estate students with the goal of facilitating their career pursuits in a socially responsible manner and with a global perspective. We accomplish this mission through support of outstanding faculty and professional staff, dedicated career services, active industry involvement and outreach and cutting-edge research.’

‘Collateral Analytics (CA) develops analytic products and tools to support financial institutions, investment banks, appraisers, real estate brokers, and real property capital market activities.’

Comment by X-GSfixr
2015-07-18 10:30:13

Crazy bubbles in trendy locations, and/or settlements for Chinese Robber Barons.

In flyover?

Mom just cut her asking price for her condo from $52k to $39k. (2 br, 2 bath, not a dump, in a area close to bus stop and shopping). One offer………$32k.

Yeah, but her income taxes are low. Ooops, forgot………she has no income. And the state sales tax just went up to 6.5%

Comment by Professor Bear
2015-07-18 10:42:59

I helped my siblings cell our parent’s home one state to the east of KS. We learned first-hand how far prices fell in the wake of the Ferguson riots, which occurred 4 miles away. The home was on the market this past March.

Side Effects
Ferguson home values are plummeting, and residents are feeling the pain
Down nearly 50 percent since Michael Brown’s death, new data show.
by Daniel Rivero
March 16, 2015 7:33 AM

FERGUSON, Mo. — Peering outside the office window of his tire shop, John Zisser grumbles about the pile of burnt rubble that lies on the opposite corner of a busy intersection.

“If you come here to my shop and you see that,” he says, as gestures out the window, “is that going to give you a warm, fuzzy feeling like you want to come back here to do business?”

“Short answer: no, no it’s not,” he says.

Zisser, 55, has owned and operated Zisser’s Tires in this city since 1987. He says the still-visible damage from the November protests that followed a grand jury’s decision not to indict Ferguson officer Darren Wilson for the shooting death of teenager Michael Brown is hurting property owners. His store’s insurance is in the process of being cancelled after it was twice vandalized during the unrest, he says.

“If I sold this place today, I could probably get $300,000 for it, if anyone is crazy enough to buy. Last year, the county said this lot was worth almost a million,” he says. “The value here is all going down. There’s about nine burnt-out buildings this way,” he says, pointing. “And about four more behind me.”

Zisser is one of many Ferguson residents feeling a financial toll from the months of protests, media attention, and now another high-profile shooting. They’re worried not just about their own situations, but about the city coffers, too. The future of Ferguson, they say, is anyone’s guess.

“How much money are we going to lose?” Zisser asks. “How much money is the city and the county going to lose in taxes because of this? And how much is the school district going to lose here? They’re the biggest losers.”

Comment by Prime_Is_Contained
2015-07-18 11:07:14

Ooops, forgot………she has no income.

Not even SS? If not, why not??

Comment by In Colorado
2015-07-19 08:20:24

Perhaps he meant taxable/earned income.

I find it amusing when millenials support the end of Social Security. Just wait until parents are too old to work and they face the prospect of supporting their parents. You’ll see how quickly they’ll change their tune.

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Comment by redmondjp
2015-07-19 12:29:33

You mean, the millenials that are still being supported, in one way or another, by their parents? Many of them are still living at home already . . .

Comment by Professor Bear
2015-07-18 10:33:51

Is this the first MSM prediction in print for a post-2008 popping of the ‘San’ bubbles?

Just imagine the wailing and gnashing of teeth when this goes down!

Comment by Professor Bear
2015-07-19 08:51:36

Head’s up! There’s a housing “bubble” forming in markets beyond San Francisco
Denver, Dallas, Seattle to name a few
July 9, 2015
Lynn Effinger

Admittedly, the recent article published in HousingWire titled, “San Francisco exhibiting potential signs of a housing bubble,” focuses on one specific anomalous Left Coast housing market. But, this is clearly, in my view, a precursor to more markets, particularly in California, exhibiting the same signs. Housing bubbles will surely not be confined to the Golden State.

The article, which was written by HousingWire reporter Brenna Swanson, states that according to Collateral Analytics’ California Home Price Forecast Models, the San Francisco Bay area is showing, “… some warning signs of a bubble,” but goes on to quote that it is important to clarify that this is only happening in the San Francisco Bay Area, according to the report.

Michael Sklarz, president and CEO of Collateral Analytics, a provider of automated valuation solutions, is also quoted in the piece as saying, “When discussing price bubbles, we feel that there are few terms which are more widely used and less understood.” Perhaps, but if it walks like a duck and quacks like a duck, it is, quite possibly, a duck.

Furthermore, while Collateral Analytics explained that, “some economists and real estate observers are trying to sensationalize an issue that does not exist,” I submit that many real estate and mortgage-related organizations spin the facts to persuade consumers/homebuyers and homeowners that the housing sector is recovering across the country and getting even stronger – which it is not.

California and New York housing markets, particularly the San Francisco Bay Area and Manhattan are not representative of what is taking place in countless markets in between.

There are numerous real estate professionals I know, with whom I stay in contact throughout California and elsewhere, who disagree that the signs of a housing bubble are confined to the San Francisco Bay area.

Indeed, it has been widely reported that Denver, Dallas, Seattle and Salt Lake City are among other markets where home prices have outstripped income growth, which is a leading indicator of a bubble, or “echo-bubble” as this next one will be.

Without a vibrant economy, the housing market cannot truly recover. And the national economy is far from vibrant.

Comment by Professor Bear
2015-07-19 08:55:19

“I submit that many real estate and mortgage-related organizations spin the facts to persuade consumers/homebuyers and homeowners that the housing sector is recovering across the country and getting even stronger…”

No way!

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Comment by taxpers
2015-07-18 13:33:18

5x income is cool
Forget the last 200+ year of financial history

Comment by Professor Bear
2015-07-18 13:38:27

And now, for something completely different…(CoreLogic’s fair and balanced view of the San Diego real estate situation)

Real Estate
Housing market has banner month
By Jonathan Horn | 11:38 a.m. July 16, 2015
View of the Cabanas at Coral Cove housing complex on Vulcan Avenue in Encinitas. It’s a Shea Homes project. — Charlie Neuman

San Diego County’s housing market had a banner month in June, with sales reaching pre-recession levels and the median sale price rising to a nearly eight year high.

Last month, the median price home in the county sold for $476,000, up 5.8 percent from June 2014, real-estate tracker CoreLogic reported Thursday. The June median was the highest since it was $489,000 in July 2007.

The number of sales rose to their highest level since before the Great Recession. In June, 4,467 properties changed hands, up nearly 21 percent from the same month of last year. That was the highest since the 4,533 transactions during June 2006, the midst of the housing bubble.

“This year’s buying season came with a lot of enthusiasm, and people have a high comfort level to make a purchase decision,” said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. “Rates are great, there’s a perception of a rate increase, so it’s a measured ‘buy now’ state of mind.”

Mortgage rates ticked up in June to 3.98 percent for a 30-year-fixed loan, Freddie Mac reports. Despite the slight increase, those rates are still considered near historic lows. There has been speculation that the Federal Reserve will begin to raise key interest rates — that could influence mortgage rates — as early as September.

Housing supply in the county remains constrained, which increases demand and pushes up price. The San Diego Association of Realtors reported that there were 7,153 active listings in June, a little more than a month and a half of inventory. Analysts would like to see about six months in a healthy market.

The region’s housing market had a markedly slow spring and summer buying season in 2014, with sales dropping over the year in each month from April to August. It was part of a decline in the pace of annual appreciation from a peak of 24.1 percent in June 2013, led by fix and flip investors. As foreclosure resales waned, the market returned to being paced by normal factors like employment, wages, supply and demand, with the pace falling into the single digits. In May, prices rose 3.1 percent annually.

“I think a greater majority of the participants in the market now are end users, either they’re going to live in it or they’re going to rent it,” Goldman said.

The increased sales were not limited to San Diego County. Andrew LePage, analyst for CoreLogic, said June home sales were the highest in Southern California since June 2006.

“Sales haven’t risen this sharply on a year-over-year basis in nearly three years,” he said in a statement. “Continued job growth, low mortgage rates, more confident consumers and other factors have put more wind in the housing market’s sails.”

Comment by taxpers
2015-07-18 13:29:00

Por Que?
4 unit condo buildings
When the roof leaks it must create a circular firing squad

Comment by Ben Jones
2015-07-18 19:30:15

RK just posted this in the BB> Caw!

‘Turbulence on China’s equity market is starting to rock the country’s property market. Investors are quickly pulling their cash out of housing they purchased to cover losses incurred by stock investments. Some have begun offering discounts on property due to difficulties with finding buyers. Continued turmoil on the stock market looks as though it will have a heavy impact on the country’s real estate market.’

‘In early July, the Shanghai Composite Index dropped more than 30%, after hitting a seven-year high in mid-June. Investors who suffered big losses on the stock market were forced to sell property and cancel real estate purchase agreements. The Hong Kong Economic Times said that consumers are increasingly asking real estate firms for grace periods on down payments for mortgage loans, as they run out of cash because of weak stocks.’

‘Some canceled home purchase contracts, while others canceled mortgage loans, according to China’s largest property developer China Vanke, which has a strong foothold in Shenzhen. Local media reported that an official at China Vanke is concerned about massive numbers of cancellations in the future.’


Comment by Professor Bear
2015-07-18 23:09:18

‘In early July, the Shanghai Composite Index dropped more than 30%, after hitting a seven-year high in mid-June. Investors who suffered big losses on the stock market were forced to sell property and cancel real estate purchase agreements.’

Selling property, gold or even U.S. Treasurys are all excellent means to raise the cash needed to repay underwater margin loans.

Comment by Ben Jones
2015-07-19 07:07:52

‘Corporate China’s debts, at 160 percent of GDP, are twice that of the United States, having sharply deteriorated in the past five years, a Thomson Reuters study of over 1,400 companies shows. And the debt mountain is set to climb 77 percent to $28.8 trillion over the next five years, credit rating agency Standard & Poor’s estimates.’

‘Beijing’s policy interventions affecting corporate credit have so far been mostly designed to address a different goal - supporting economic growth, which is set to fall to a 25-year low this year. It has cut interest rates four times since November, reduced the level of reserves banks must hold and removed limits on how much of their deposits they can lend.’

‘Though it wants more of that credit going to smaller companies and innovative areas of the economy, such measures are blunt instruments.’

“When the credit taps are opened, risks rise that the money is going to ‘problematic’ companies or entities,” said Louis Kuijs, RBS chief economist for Greater China.’

‘China’s banks made 1.28 trillion yuan ($206 billion) in new loans in June, well up on May’s 900.8 billion yuan.’

‘The effect of policy easing has been to reduce short-term interest costs, so lending for stock speculation has boomed, but there is little evidence loans are being used for profitable investment in the real economy, where long-term borrowing costs remain high, and banks are reluctant to take risks.’

‘Manufacturers’ debts are increasingly dwarfing their profits. The Thomson Reuters study found that in 2010, materials companies’ debts were 2.8 times their core profit. At end-2014 they were 5.3 times. For energy companies, indebtedness has risen from 1.1 to 4.4 times core profit. For industrials, from 2.5 to 4.2.’

‘Much of the new lending is going to China’s notoriously inefficient state-owned enterprises (SOEs) as part of the government’s fiscal stimulus. “They are lending more to fund infrastructure projects, and some may be done by SOEs where leverage is increasing as a result,” said Tao Wang, UBS head of China research. “Prices are declining and revenue is slowing, and in this environment you cannot force too quick a deleverage – that would lead to a hard landing,” said Wang.’


So there’s a downside to reviving the A-shares and benefiting the people?

Comment by Ben Jones
2015-07-19 07:09:54

‘you cannot force too quick a deleverage – that would lead to a hard landing’

You’re not getting that money back Wang.

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Comment by Mafia Blocks
2015-07-19 12:03:47

Poof. The “equity” that the degenerate gamblers claim to exist just evaporated.

“Equity” is a fallacy.

Comment by Professor Bear
2015-07-19 08:59:13

Is the perpetual 7% China GDP growth forecast going the same way as the Rasmussen poll prediction for a Romney win in 2012 (i.e. straight down the toilet)?

Comment by Professor Bear
2015-07-19 09:00:13

Up & Down Asia
Investors Aren’t Buying China’s Fairy Tales
China’s 7% growth is too good to be true and can’t hide the challenges of rebalancing the economy.
By Wayne Arnold
July 16, 2015
Workers labor in front of the Oriental Pearl Radio & TV Tower at a construction site in the Lujiazui district of Shanghai, China. Photographer: Tomohiro Ohsumi/Bloomberg

Oh boy! The unicorn index is out and, guess what? Unicorns are up, led by rainbows and surging demand for hugs!

Just when you thought you couldn’t stomach any more news on China and its efforts to bend the stock market to its will, out comes China’s latest GDP number. Lo and behold, GDP in the second quarter expanded by 7%, just like it did in the first quarter and right on pace for the government’s 7% target for growth this year. Nailed it! That ought to teach all those economists who looked at the indicators coming out of China and predicted growth might slow to a slightly more credible 6.8%.

You do have to sympathize with the economists, though. Most already privately admit that China’s GDP data is about as accurate as a fish tale told at a bar. GDP data are more of a directionally accurate fairy tale, meant to steer public expectations and behavior. It’s not that they’re completely fictional, but GDP accounting is a tricky business in the most advanced of economies, much less in a developing economy as vast as China’s. And while Beijing has stopped evaluating provincial officials on their ability to hit GDP targets, the political pressure to exaggerate remains somewhat elevated.

Comment by Albuquerquedan
2015-07-19 09:51:19

Anybody can say anything on the Internet but the World Bank, IMF, Asian Development Bank etc. all say China is growing at 7% and an increasing number say it actually is accelerating. You can always find someone being forced to sell a house but the overall housing market in China is improving.

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Comment by Professor Bear
2015-07-19 10:57:04

I can’t wait for the MSM to confirm that China has been overstating its GDP growth figures. It’s only a matter of time.

Comment by Mafia Blocks
2015-07-19 11:44:14

Those kinds of thing are usually discovered by bloggers then reported to the msm eventually. And that is true in the case of China too and it was done so right here.

Comment by Professor Bear
2015-07-19 18:47:19

Marketwatch dot com
Caixin Online
Rare look inside China’s stock-intervention war room
By Jiang Fei, Liu Caiping, and Yue Yue
Published: July 19, 2015 9:15 p.m. ET
Shutterstock/Songquan Deng
The Shanghai Stock Exchange building

BEIJING (Caixin Online) — Top executives from 21 securities firms spent the morning of Saturday July 4 pinned to government office chairs while the future of China’s stock markets hung in the balance.

They’d been summoned on a day off to the Beijing office of the China Securities Regulatory Commission (CSRC) for talks aimed at pulling the Shanghai and Shenzhen stock exchanges out of a three-week tailspin.

The dramatic sell-off had pushed the Shanghai Composite Index (SHCOMP, -0.23%), a gauge of A-share market performance, to 3,629 points on July 3 from a June 12 peak of 5,178. The CSRC said the index had fallen too far too fast, threatening the nation’s financial system. So the government decided to prop up share prices and ordered securities firms to get involved.

In the early days of the sell-off, regulators were relieved to see the Shanghai index cool off. Share prices had been rising quickly since mid-2014, and the index hit a nearly eight-year high in early June. At a press conference on June 26, a CSRC spokesman called corrections necessary components for a stock market’s healthy, long-term development.

But within a few days, the government’s attitude had swung the other way. The CSRC started preparing emergency measures to counteract the correction. And at the July 4 meeting, securities firms were enlisted to support the market-intervention strategy.

A person who attended the meeting but asked not to be named said the securities firms’ executives were told what to do — and that there would be no room for negotiating with regulators.

After the sit-down, the firms announced in a joint statement that to stabilize the stock market, they would spend at least 120 billion yuan ($19.3 billion) combined to buy exchange-traded funds linked to blue-chip stocks listed on the Shenzhen and Shanghai bourses. Moreover, the firms pledged to hold all stock that had been bought with their own money until the index reached at least 4,500 points.

The CSRC ordered the firms to hand over that 120 billion yuan to the China Securities Finance Corp. (CSF), a four-year-old agency co-founded by the country’s major securities and commodity exchanges and clearinghouse to finance brokerage firms’ margin trading and short-selling business, the person said. They were told the money would be used for stock purchases.

At the meeting, the person said, a disagreement arose over how the securities firm’s funds would be managed. One executive proposed forming a committee with representatives from securities firm to make all investment decisions, but that idea was rejected.

All money transfers from the firms were to be completed by 11 a.m. the following Monday, the person who attended the meeting said. The firms complied.

Then on July 8, as part of the CSRC strategy, the CSF said it would set aside 260 billion yuan to finance stock purchases by the 21 securities firms.

The Chinese government’s stock-market rescue campaign was under way, but far from over.

Comment by Ben Jones
2015-07-19 19:03:45

Short selling provides liquidity:

‘Critics of the CFFE clampdown said the agency actually put more pressure on the stock market because some investors deprived of access to index futures during the Shanghai slump decided to simply dump their holdings.’

“I wanted to short (index futures), but the tools were not working,” said a securities-firm trader who did not want to be named. “I had to sell all of the stock.”

‘The trader said he was not alone. “Everyone was paranoid and rushing to protect themselves,” he said.’

These guys are really smart.

Comment by Ben Jones
2015-07-19 19:15:26

‘Shang Zheng Fa (2015) No. 66 Document’

‘All listed companies,

‘To support shareholding increase by listed companies’ shareholders and their concerted actors as well as stabilize the capital market and protect investors’ interests, the Shanghai Stock Exchange (SSE) hereby makes notification on relevant issues as follows’

‘1. Relevant regulations in Article 9 of “Code of Conduct for Shareholding Increase by Listed Companies’ Shareholders and Their Concerted Actors” and Subparagraphs (1), (2) and (4) of Article 4.5 of “Code of Conduct of Controlling Shareholder and Actual Controller of Listed Company” published by the SSE shall not be applicable to the following situation: a listed company’s shareholders, controlling shareholders and their concerted actors holding more than 30% of its shares increase shareholding and promise not to lessen shareholding in the next 6 months, when stock price of the company has accumulatively dropped by over 30% for 10 consecutive trading days.’

‘2. Restrictive conditions of “having been listed for more than 1 year” and “after one year since the date of occurrence of the above-mentioned facts” in Subparagraph (1) of Article 2 of “Code of Conduct for Shareholding Increase by Listed Companies’ Shareholders and Their Concerted Actors” shall not be applicable to the following situation: a listed company’s shareholders and their concerted actors holding 30% or more of its shares increase holding of not more than 2% of its issued shares every 12 months.’

‘3. The SSE-listed companies’ shareholders and their concerted actors, directors, supervisors and senior managers are encouraged to stabilize stock prices by shareholding increase or in other ways when the companies’ stock prices slump.’

‘Shanghai Stock Exchange July 8, 2015′


Yes! We Have No Bananas


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Comment by Senior Housing Analyst
2015-07-19 09:40:28

With housing demand at 20 year lows(30 year lows in CA) the notion that “the market is hot” is laughable.

What we do know is that mortgage, realtor and appraiser fraud is at unprecedented levels.

Comment by Senior Housing Analyst
2015-07-19 15:12:27

“Obama collecting personal data for a secret race database”


Unprecedented abuse of power by the federal government. Gov is destroying the economy.

Comment by Professor Bear
2015-07-19 20:55:00

Negative signs and red numbers are creeping back into reports on China stock market “gains”.

Comment by Professor Bear
2015-07-19 20:57:29

Marketwatch dot com
Market Pulse
China stocks reach for third day of gains
By Laura He
Published: July 19, 2015 10:48 p.m. ET

HONG KONG (MarketWatch) — Chinese stocks added to recent gains Monday morning, looking to extend a three-day winning streak after the Chinese government’s recent, drastic supportive measures. The Shanghai Composite Index (SHCOMP, -0.43%) rose 0.4%, adding to a 2.1% advance the previous week. The rise came amid news that margin lending in mainland China increased slightly by 7.05 billion yuan ($1.13 billion) to 1.43 trillion yuan on Friday, according to the latest statistics released by the Shanghai and Shenzhen stock exchanges. In Hong Kong, the Hang Seng Index (HSI, -0.25%) edged up 0.2%, with the mainland-China-tracking Hang Seng China Enterprises Index (HSCEI, -1.01%) nudging 0.1% higher.

Comment by Professor Bear
2015-07-19 21:25:23

China’s impossible dream: A capitalist stock market without large losses
Investors monitoring displays of stock information at a brokerage house in Beijing last week. Now, as the realisation sinks in that Chinese stock prices will not keep rising indefinitely, the Communist Party is taking desperate, if clumsy, measures to control the correction.
Photo: AP
By Pranab Bardhan
Published: 4:16 AM, July 20, 2015

The recent dizzying plunge in the Shanghai and Shenzhen stock exchanges has posed a unique test for China’s Communist rulers. So long as the markets were rising, the paradox of vigorous capitalist development overseen by the world’s largest and strongest Communist party confounded only academics and old-school Marxists. As the Chinese Communist Party (CCP) elite and their relatives, foreign financial institutions and some Chinese small investors (enabled by margin lending) made money on stocks, no one bothered to comprehend the mutant creature they were milking.

But now, as the realisation sinks in that Chinese stock prices will not keep rising indefinitely, the CCP is taking desperate, if clumsy, measures to control the correction. All new initial public offerings have been halted and much trading has been curtailed; the central bank has been asked to help the China Securities Finance Corporation induce investors to buy shares and thus stabilise the market. Indeed, even the country’s sovereign wealth fund has gotten in on the act.

But, unlike in other capitalist economies, money is not the only tool at the authorities’ disposal. If your brokers in China advise you to sell shares, they must be careful not to appear to be rumour-mongers, subject to official punishment. And there are reports that the sales of large holdings may trigger investigations by the authorities. Causing public disorder or financial instability can be a serious offence in China, where conspiracy theories about foreigners’ efforts to undermine the economy abound.

What Chinese officials desire is a capitalist stock market without the possibility of large losses that can shake confidence in the CCP’s credibility and control. But that is a market that no one has yet invented.

The spectacle of a Communist regime trying to jack up a casino-like capitalist market is only one of the many contradictions that have been accumulating in almost every corner of China’s economy and politics. And now, their weight is perhaps becoming too heavy for the party hierarchy to bear.

Indeed, the composition of the CCP is itself a contradiction. The revolutionary party of peasants and workers is now dominated by businessmen, university students and professionals. One-third of the people listed in the Hurun Report, the Shanghai-based monitor of China’s wealthiest people, are party members.

The average wealth of the richest 70 members of the National People’s Congress, China’s Parliament, far exceeds US$1 billion (S$1.37 billion). (The richest 70 members of India’s Parliament or even the United States Congress, both now controlled by right-wing political parties, are substantially less wealthy.)

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