Note: This post is availabe in Chinese at my blog...
China’s economy continued to overheat in April despite substantial
liquidity withdrawals, leading to expectations of further tightening
measures.
Inflation continued to pick up during April because of rising feed
costs, fuel costs, and housing prices, but the government pork purchases
helped limit downward pressure on food prices and higher producer input
costs being passed on to consumers.
There are signs of broad monetary tightening as the People’s Bank of
China drained RMB437 billion of interbank liquidity through open-market
operations, but China’s overall monetary policy remains excessively
loose as April’s low CPI reading may delay an interest rate hike at
least until June.
Strong output in manufacturing could keep industrial production above
potential, which will eventually be inflationary.
The government announced tighter regulatory measures on the real
estate sector on every other day for about a week in mid-April, and
investment growth showed signs of slowing.
After a trade deficit in March caused by a slow restart of the
processing trade after the Chinese New Year Holidays in late February,
Purchasing Managers’ Index (PMI) data suggests that the processing trade
has returned to normal, shifting the trade balance back into surplus.
The trade surplus is expected to narrow to US$120 billion for the year,
down about 40% y/y due to weakening G-3 demand.
Retail sales have been supported by income growth and strong consumer
confidence but may be affected by the cooling housing market. Even
though Chinese consumption is expected to increase 11% in real terms in
2010, it will not be enough to make up for the drop in G-3 consumption.
Commentary on Relevant BoomBustBlog China Macro, Strategic, and
Forensic Valuation Subscription Content
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Thus
far, our  A Note On Potential Short Opportunity Opinions
in China (475.18 kB 2010-01-21 01:13:06) has proven to
be right on target. As excerpted from the first page of this report…
The FXI has rallied and broken trendlines on the downside since then.
Oct options since the trendline piercing would have been quite
possible. As time progresses and we have more clarity in Europe, the
timing of the China short should become more definable…
BoomBustBlog Speculative China Industrial Short (366.23
kB 2010-02-26 18:32:58)
BoomBustBlog Speculative China Industrial Short
Overview, pt2 (532.89 kB 2010-02-28 06:09:51)
As excerpted from page two of part 2 (be sure to read both parts, for
the relation to China was not fully developed in the first part as its
primary focus was excessive debt and contingent liabilities)…
Oct. 22.5 puts on the same…
The Contagion models below are a very, very unique method of tying in
the Pan-European Sovereign Debt Crisis with
what we see as the coming crash in China…
In order to derive more meaningful conclusions about the risk
emanating from the cross border exposures, it is essential to closely
scrutinize the geographical break down of the total exposure as well
as the level of risk surrounding each component. We have therefore
developed a Sovereign Contagion model which aims to quantify the
amount of risk weighted foreign claims and contingent exposure for
major developed countries including major European countries, the US,
Japan and Asia major.
- We have followed a bottom-up approach wherein we have first
identified the countries/regions with high financial risk either owing
to rising sovereign risk (ballooning government debt and fiscal
deficit) or structural issues including remnants from the asset bubble
collapse, declining GDP, rising unemployment, current account
deficits, etc. For the purpose of our analysis, we have selected
PIIGS, CEE, Middle East (UAE and Kuwait), China and closely related
countries (Korea and Malaysia), the US and UK as the trigger points of
the financial risk dissemination across the analysed developed
countries.
- In order to quantify the financial risk emanating in the selected
regions (trigger points), we looked into the probability of the risk
event happening due to three factors – a) government default b) private
sector default c) social unrest. The probabilities for each factor
were arrived on the basis of a number of variables determining the
relative weakness of the country. The aggregate risk event probability
for each country (trigger point) is the average of the risk event
probability due to the three factors.
- Foreign claims of the developed countries against the trigger point
countries were taken as the relevant exposure. The
exposures of each developed country were expressed as % of its
respective GDP in order to build a relative scale for inter-country
comparison.
- The risk event probability of the trigger point countries was
multiplied by the respective exposure of the developed countries to
arrive at the total risk weighted exposure of each developed country.
Sovereign Contagion Model – Pro &
Institutional (1003.48 kB 2010-05-04 12:30:48)
Sovereign Contagion Model – Retail (961.43
kB 2010-05-04 12:32:46)
China Macro Discussion 2-4-10 (922.25 kB
2010-02-04 13:10:26)
An unbiased, independent retrospective
comparative review – April 2009 (781.96 kB 2009-06-09 01:40:40)
Chinese ETFs with Exposure to Real Estate,
Banks, Insurance and Export Industrials (377.96 kB 2010-01-22
02:27:03)
 Asian ETF Spreadsheet (91 kB 2008-11-07
04:23:32)
Business Cycle Comparison (7.44 MB
2009-06-09 01:40:24)
Stagflation Data (3.02 MB 2009-06-17
04:00:11)
The Butterfly Effect – Paulson, Bernanke, the
Asset Securitization Crisis & their impact on the Industrial and
Manufacturing Sectors (5.9 MB 2009-06-09 01:38:50)
The Potential Effects of RMB appreciation on
China’s Economy (611.88 kB 2010-01-29 06:11:08)
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im mostly sitting in cash on my 401k... but we have a brokerage link account in 401k that i can buy options with.. woohoo
I'm fairly new to zerohedge (about 3 months in) and I also read boombustblog. I am keyed in on the fact that most of you are spot on in where all of this is taking us. My question though is what does the little guy (me!) do with my Fideltiy 401K plan at work that only allows one to buy your company stock, a few bond "investements", Large Cap, Small Cap and International funds and then a bunch of "blended" fund investments (ie. Fidelity Freedom 2010, 2015, 2020, etc.)? I can't even go in to cash if I wanted to!
In my own investments I have purchased about 300 ounces of silver bullion and then have bought about $10K in SLV. I don't have a clue if this is the right approach. I have talked to a few "investment advisors" and they are flippin clueless on anything that is going on in the world and apporach the market as though it's still 1995.
If I can get specific direction great! But I'd really like zerohedge discussions to not only talk about what is happending, but what that means to the the average joe. What should we do???
How does your 401k plan not have a money market or stable value fund? Yikes! Everyone says not to market time but shit, I would be perfectly happy going to cash and waiting for the market to crash, then buying again once Europe is straightened out, accounting standards are corrected, and we start seeing bankers prosecuted. You may not get in at the bottom but it will feel a lot better selling at 10k+ and buying at 5k instead of riding it all the way down. Just my .02 and probably not worth that.
You should ask your employer to add a money market or stable value option if you don't have one.
Reggie,
I have instinctively believed that China, for along time, has been a bubble ready to blow; but, as always, you provide the rock hard analysis and interpret the facts lucidly and concisely. Query: If these guys go, where does that leave the U.S.?
Query: If these guys go, where does that leave the U.S.?
The US has already gone- the media is keeping it under wraps
Good point.
Reggie
In the past, I have had a hard time reading your posts, because they were littered with self-promotion. You have moved leaps and bounds with this post and I look forward to reading more like it.
excellent... all eyes will be turning to China shortly.