While BofA's base-case calls for "no crisis," the soaring levels of bond-sale cancellations hitting the non-government credit markets is starting to make Asia strategist David Cui nervous...
It now appears that we've reached the point in the China speculative frenzy game where instead of waiting around to be arrested, those running shady ponzi schemes are now pulling the ripcord, clearing out as many bank accounts as possible, and just disappearing.
"Money was a lazy b*tch, until you put it to work! And look how it works! Look how it grows! Materializes out of nowhere! As leaders, innovators, captains of finance, you will always be subject of the jealous resentment, the petty tantrums of the unwashed masses, the insolvent, the irresponsible, the invidious, the losers. They will envy you, your successes, they will despise you, but they secretly want to be like you! Irresponsible single mothers, uneducated immigrants, lead-drinking ghetto-strutters, homeless, crying, babies, starving senior citizens, obnoxious, entitled African Americans who object to having bullets pumped into their bodies by police: all these people are angry, entitled, and making noise, and they are endangering our democracy and economy, our greatness."
China's massive credit growth in March (and $1 trillion surge in total social financing in Q1) is a "warning sign" according to billionaire George Soros, "because it shows how much work is needed to stop the slowdown." Speaking at an event in new York this evening, Soros commented on "troubling developments" in China, the anti-corruption drive's impact on capital outflows and the real-estate bubble "feeding on itself." His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China "resembles US in 2007-8," before credit markets seized up and spurred a global recession.
Massive borrowing to pay the interest is everywhere and always a sign that the the end is near. The crack-up phase of China’s insane borrowing and building boom is surely at hand.
"Where Else Can I Put My Money?" - China Starts Arresting People As Crisis It Created Comes Full CircleSubmitted by Tyler Durden on 04/10/2016 09:21 -0400
Just like their foray into stocks, Chinese investors are finding out that it isn't easy to make money in short-term lending either. Defaults are on the rise and China's subprime lending bubble has burst. And just like it responded to "malicious short sellers" when stocks went down, China is now arresting those involved in the shadow banking world.
We have noticed a sharp jump since mid-2015 in the total value of reported defaults of shadow banking products, defined here as non-bank-loan debt instruments that include bonds, trusts, and credit products offered by peer-to-peer (P2P) and various offline wealth management companies (WMCs).... The question is whether the government is closing the stable door after the horse has bolted. We suspect that the answer is yes.
Silver was battered so low in recent years’ gold bear that it’s spent 2016 trading near stock-panic levels relative to gold. Such super-low prices aren’t sustainable, so silver is due for a massive mean reversion higher
The scale of China's outbound investment wave is so great that the value of deals announced in the third quarter of 2015 exceeded China's current-account surplus for the same period, according to data compiled by Bloomberg. That trick will be repeated in the current quarter, unless China puts in its best current-account performance since 2008. What is going on here? The answer is quite simple: following Beijing's ramp up in capital outflows, China has found a new and innovative way to export funds offshore.
“Funds used for down payments cannot be borrowed." You might think that what’s implied there is too bad to be true - even in the increasingly ludicrous world of P2P and marketplace lending. But in fact, P2P lenders in China have indeed been funding down payments on homes, embedding an enormous amount of excess leverage into the market while simultaneously driving up prices in Tier-1 cities.
The "unsinkable" global financial system is rushing headlong toward its encounter with the iceberg, while the passengers and crew remain supremely confident and unaware of the risks, risks that will only become "obvious" after the global financial system has broken in half and sunk to the bottom, destroying most of those who believed it unsinkable.
After January's record-smashing CNY3.4 trillion (half a trillion dollars!) surge in aggregate credit expansion in China, the post-lunar-new-year hangover hit hard in February as credit growth tumbled 77% from Janaury's level to just CNY780 ($112bn). This is the weakest February loan growth since 2011. Drastically missing expectations, and following authorities comments on the need to "monitor" excess credit growth, all categories of total social finance registered a sharp drop... which as Goldman warns, means China's GDP growth target will be "challenging."
Everything from iron ore to copper to the Baltic Dry Index to stocks to bat guano is rallying. The problem is not a single rally passes "the sniff test:" is the rally the result of changing fundamentals, or is it merely short-covering and/or speculative hot money leaping from one rally to the next? Every one of these rallies is bogus, a travesty of a mockery of a sham of price discovery, supposedly the core function of markets. What shift in fundamentals drove this rally? Higher profits? No, profits are declining, especially once the phony adjustments are stripped away. Is the global economy strengthening? Don't make us laugh!
All of life’s odds aren’t 3:2, but that’s how you’re supposed to bet, or so they say. They are not saying that so much anymore, or saying that history rhymes, or that nothing’s new under the sun. More and more 'they's seem to be figuring out that past economic and market experiences can’t be extrapolated forward - a terrifying prospect for the social and political order.
China never had an actual economic model or growth model. It simply printed an obscene amount of money, especially after 2008, and used it to build factories, 30-storey see-through apartment blocks and highways into nowhere cities, without giving much if any thought to where this would lead when their formerly rich western customers had less to spend on its ever increasing amount of ever more useless products. It was "to infinity and beyond" from the start, but that’s a line from a kids’ fantasy story, not a 5-year plan or an economic model.