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China Hikes RRR, Faber Sees Chinese Crash In 9-12 Months
The chorus of anti-Chinese sentiment is becoming troubling: after virtually every major hedge fund manager has recently voiced in support of a Chinese bubble pop, with today's most recent statement by Marc Faber just the cherry on top, could Farrell's rule #9 be relevant here and with everyone expecting the endgame, one would end up not occurring? Earlier Marc Faber said in a Bloomberg TV interview that "China’s economy will slow and possibly “crash” within a year as
declines in stock and commodity prices signal the nation’s property
bubble is set to burst. The market is telling you that something is not quite right. The Chinese economy is going
to slow down regardless. It is more likely that we will even have a
crash sometime in the next nine to 12 months." Roger's sentiment comes on the heels of the latest Chinese increase in the reserve requirement (RRR) which has had a nasty effect on Asian markets overnight (and, briefly, on US futures as well). Alas, the Chinese action is not enough, as even JP Morgan admits: "PBOC’s 50bp RRR hike underlines two messages on monetary policy: (1) More tightening in China is needed; (2) Pace of action will be moderate. BI should again signal it is in no hurry to hike."
At this point it is glaringly obvious to anyone that without the Chinese liquidity and fiscal dynamo, the recovery is dead in its tracks. China, which is basically a US replicant in its monetary policy thought its currency peg, is critical to reinforce the actions of Bernanke. Which is why the fact that if even the slowest of momos, BlackRock, see the imminent meltdown and have decided to stay away, is troubling. Per Bloomberg:
BlackRock Inc. is among money managers reducing their
holdings on Chinese stocks on expectations that economic growth
has peaked. The BlackRock Emerging Markets Fund has widened its
“underweight” position for China versus the MSCI Emerging
Markets Index to about 7.5 percent from 4.6 percent at the end
of March, the fund’s London-based co-manager Dan Tubbs said.
The true contrarian play here would be that China will not moderate voluntarily until it is really too late and the events in the country are no longer under the control of the PBoC. Faber, Chanos, Hendry - they all appear to assume rationality will eventually prevail. We are skeptical.
In the meantime, below is the groupthink chart of how JPM sees future rates and FX rates for Asia.
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Well it was either that or increase direct interest rates. Personally I think it was a better way to drain liquidity. The US on the other hand has only one option, the deadly one.
Faber is worthless. He spent the entire last 18 months talking about how US Treasuries will implode and he compeltely missed the PIGS/Greece bond disaster.
How is Faber's hyperinflation theory doing these days? Don't hear him mentioning that much recently.
Being early looks almost exactly like being wrong. I too am surprised at how creative TPTB have been, and how long they have managed to keep so many balls in the air. It can't and won't last though.
Faber's predictions will still turn out to be accurate in substance, if not timing.
True that. Hedgies on TV are funny since they are all basically neutered house pets at this point.
I like Faber, but he's always calling for somethng to collapse or crash in the near term. Not many of his recent predictions have played out have they?
IF the recession becomes a rout in China, they will have to raise cash quickly. They may do this by dumping treasuries.
That type of analysis isn't necessarily bad. But if there is one thing China has a lot of (besides people and human rights atrocities) it's cash.
He spoils the surprise to many times, and people can react and fix it in time.
He should shut up and let it explode and just say: I knew it all along!
that bandwagon is getting crowded. you make a great point,
from which i just wrote this post:
Are There More China Bears Than Panda Bears?http://www.sinocism.com/archives/487
Ahh I tried to make a similar point in my post at the end of this, I read your blog only because it had an awesome name (which helped it to also end up on my facebook) and the lack of skill I have in communicating ideas through the medium of text became apparent!
???
OH NO HIS EXACT PREDICTIONS HAVEN'T COME TRUE EXACTLY WHEN THEY SAID IT WOULD HAPPEN.
Lol. What the fuck are your investing timelines.
I'm young (read: not old) so you can all seriously just fucking go to hell. Thanks for fucking everything up, world. Great to see I'll be able to drive around in my solar-powered hover car to deliver robotic limbs to African children in a few decades.
Does anyone really understand China, in early 2008 everyone wanted a piece of them, was moving there now everyone says there is a bubble, and the price of their real estate has gotten as ridiculous as everywhere else, or worse...but I think they and their banks operate under very different rules than Europe, US...we'll see.
I know all real estate is local, it seems worldwide real estate is so expensive, everywhere... some of the most affordable places are in the US now...will the whole world's real estate bubble pop?
Every few years or so The Economist has an article laying out exactly how screwed up the Chinese banks are due to having to make politically driven loans to state owned or closely affiliated companies for the purpose of maintaining social order.
In their last few reports they've covered how screwed they also are on real estate loans.
The numbers are staggering, 45% of loans would be considered non-performing if they weren't constantly issuing fresh loans to keep them current.
The problem is I can first remember reading about the bankrupt Chinese banking system in the 90s! And the economy has kept booming and none of the banks has gone bust or even seemed to have any problems.
Its just impossible to make any predictions about China as the rules they operate under are just so different to what we are used to.
+1
I've got an idea about this, don't take it out of this context it's just an idea, responses are definetly appreciated.
Historically, nobody has owned their own property, after the industrial revolutions, it somehow became common practise for the ordinary peasant (now a citizen) to own their own home. It is socially thought to be reasonable but economically perhaps it is not reasonable? It's entirely possible that the massive wealth redistribution that occured during those times was a mere blip in human history and house prices continue to rise out of the average persons price range indefinetely.
Just got an email from a paid publication in Australia, basically saying to offload stocks that might be affected by a China crash this year. If so the Austalian commodity market will get hammered. Interesting timing too as the current socialist government there has just announced a new massive tax on mining companies, as those idiots always get it wrong that only confirms the hypothesis.
Most hedge fund managers talking about a collapse in China including Faber.
I believe, they have short positions, have shorted Chinese stock market, and real estate market and things are not happening in the same direction with their predictions and they cannot make money.
So they all want China is to crash. But i don't believe anybody has much more detailed information, the chances are less. They cannot read, write and speak Chinese, they trust information coming from other sources which they cannot verify the validity, but talk about Chinese bubble all the time. If Chinese economy collapses then whole world should also enter into a depression.
First Chanos, now Faber joins the short China bandwagon. At least we have them on record.
Well, there is seldom any intellectual scope included in responses on here. Tyler gets most of what he prints right but also gets a substantial amount wrong. This he gets wrong. To apply sentinment to an economy writing new loans at a rate of greater than 20% for a decade is a fool's game. China is witnessing inflation on a never before seen scale. Ever. There can be two possible outcomes. They either keep printing at an explosive rate or the economy collapses. There can be no other outcomes. This is a scientific fact. You must understand basic monetary theory and then you can write intelligently about this topic. Getting the specifics right about the future are not easy but they are predictable on a macro level. That is, China is finished.
Trying to apply sentiment to this situation is preposterous. You must apply reason. Did the Russians believe the end of World War II was just around the corner when ten million of its citizens had been killed? Could it get any worse? Why yes it did. Another ten million lost their lives.
You simply cannot apply sentiment to a macro situation like this. It's ridiculous. You cannot stop a collapse from happening after printing money at a pell-mell rate for a decade. It would be like applying sentiment to whether the volcanoes in Iceland are going to stop erupting.
Countless people saw the collapse in the United States in 1929 and in Japan in 1989. If you know what is happening in China and actually follow the statistics, the collapse has already begun. There are tens of thousands of factories that have already closed. Now money is rolling into real estate and prices are up 50% year over year. A two bedroom condo in a posh Shanghai suburb is going for $500,000 and the average income is $5,000. I know because I have a friend whose parents live in that suburb.
Faber is smarter than anyone posting on this board and has 30 years of scars to prove it.
If China collapses, we are heading into a deflationary depression. It's that simple.
+1
Maybe they can get a Greek bailout
Absolutely spot-on.
I should load up on Chinese solar stocks....
this is just plain wrong:
China is witnessing inflation on a never before seen scale. Ever.
China had horrible inflation before world war 2. the chinese maybe as sensitive to inflation as the germans are
China suffered hyperinflation less than 70 years ago. Are you predicting inflation worse than hyperinflation of the 1940s?
Plus, Faber is a dirt-bag par excellence. He chains smokes, drinks like a fish and hangs out with dirty Thai bar-dancers in his spare time. Plus he's rich. Seems like he knows how to make it, and how to spend it. An amoral dirt-bagging self-avowed anarchist with bucks who cynically struts his stuff on MSM calling Bernanke a criminal... where's the downside?
What is his problem exactly? Whatever his vices he probably pays for them himself.
No problem at all DD. I have nothing but admiration for a man who shows continuity is his personal predilictions. If I bump into him in Thailand - the drinks will be on me.
I always found it interesting that a quasi-communist government was trying to create a capitalist economy. I think that anybody with large short positions is taking a big, big risk. For one, I believe they are underestimating the average chinese in their appetite for bubble creation. The average Chinese loves a punt - apparently to purchase stocks in China, you can go to a bank. A friend of mine was talking about 150m lines of people waiting every day just to buy stocks.
Apparently monks had changed a popular song and were singing it that was along the lines of 'we'll keep buying and never get out'.
If you mix this attitude of the public with the rampant nationalism and the inability to question party doctrine and decisions (including data relaese). The government has a truckload of money and a worldview that allows the 'truth' to be whatever they say it is.
On top of this, all of these behaviour's have been pervasively reinforced through their significant economic success and the rise of extremely rich Chinese businessmen and a larger middle class. Nobody in China is seeing a bubble.
Their not capitalists their communists and no bubble exists if they say it doesn't exist. Although I have no doubt that at least the real estate bubble there certainly exists and there will be a day of reckoning, I just think that what you are up against is too complicated to give it a timeline where you can safely bet money. Having said that, encouragingly the new futures (finally shortable!) were down over 5% on the second day it was possible to trade them! I guess if you want technical reinforcement there it is. It's a dangerous play though and if it does happen, there is probably a better side-bet where people know the rules of the game!
The market can stay irrational longer then you can stay solvent!
I always found it interesting that a quasi-capitalist government was trying to create a communist economy.
He effectly coppied Hugh, boarderline word for word. He could at least have cited him.
Do not trust this guy.
Faber is the man.
He called the 87 stock market crash.
He successfully shorted the Nasdaq bubble (was a bit early on that one)
He sucessfully shorted the housing market bubble
He called the bottom in March of 09 on bloomberg.
Faber has been warning on Treasuries but also has stated that it could take years. He doesnt put a timeline on it.
Jesus Christ! You are a moron. You being TK. No, Jesus Christ is not a moron. You are. People post on here by pulling bullshit out of their ass. If you believe the Chinese government can keep its economy from collapsing, I have some land to sell you in St. Bernard's Parish. I suppose you also believe the Federal Reserve can save the American economy. If you have tens of thousands of factories closing and real estate prices going up at a rate of 50% per annum, why don't you share with al of us in sound understanding of economics, monetary theory and capital theory, how they are going to keep this scheme going? If the communists were able to make reality whatever they wanted it to be, then I would be the first in line to be a communist. My reality would be the one someone painted of Faber's antics above. That is, plenty of porn, good cigars, white sandy beaches and an unlimited bank account. Don't post on here if you don't have a clue as to what you are talking about.
Jesus Christ! You must have trouble reading! Or no understanding of markets! Do you know where China is trading?
Economics, monetary theory, capital theory - Have you ever had a single position in your entire life? These may continue to be irrelevant for the next 2 years. My point was that it's possible that the Chinese can juggle their problems long enough for a short to be squeezed out of their position if they initiate a large short at current levels. They've been trained to ignore their problems and I think it would be a mistake to think they can't fight it for a lot longer then you would normally expect. It's likely that the internal conditions are completely misjudged by those outside the country.
What are you an academic but can't read? You obviously have no experience trading please get some more experience reading.
Can you even explain wtf you just typed? You remind me of the political idiots. Their mouth is moving but they make no sense. Don't try to back out of your stupidity. Then, you change the topic because you have no idea what you are talking about. I'll beat your ass down on trading to if you care to take that challenge.
You are not getting it. My original post said China was a dangerous short because the chinese will be in denial about any problems they have. A completely legitimate point, it could prove to be wrong but it's the reason why I wouldn't be heavily short China. I also believe that the guys who are heavily short are having trouble because the market is not reconciling what their seeing which is why they keep harping on about how it's in a bubble.
You came back with macro-economic reasons for why China is doomed. You are the one who is not making sense. Your original post didn't make sense in the context of the point I was making
So what's your position on china, if it's so doomed for destruction as your happy to tell anyone who will listen, how many multiples of your net wealth are you short China exactly? (This is all I should have replied to you in the first place)
Your just another internet mouth and I highly doubt you would 'beat my ass down on trading'.
DOW/SP500 intra day chart gives bullish signal.
Interesting ...
MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0
I don't think there's an excessive chorus on China. Many are still bullish- Jim Rogers, O'Neill at GS, HSBC. Only negative viewpoints get the airplay.
guys, any thoughts on whats happening with the carry trade (EURJPY) if China crashes
thanks