A Tale Of Two Bubbles

Tyler Durden's picture

China's biggest blue-chip stock index - the CSI-300 - dropped over 3% overnight and fell to its lowest level since Feb 2009. Corporate bond and trust defaults (crushing confidence in credit markets), shadow-banking collateral unwinds (crushing commodity prices), and exports collapsing (crushing dreams of a global economic recovery) are all weighing on Chinese stocks. This comes, ironically as the US equity "market" celebrates the 5 year anniversary of the Mar 2009 lows and soars to new highs in the face of turmoil. There is, of course, another outlet for China's massive money-printing - that dwarfs the Fed's - its real estate market.. and that is the bubble that the PBOC is trying to tamp down.



Charts: Bloomberg

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Groundhog Day's picture

Another alliagator formation which will be manipulated very soon to make all the pix look nice

NoDebt's picture

I remember talking with a friend of mine who does securities analysis a few years back.  He was really on about the growing middle class in China and how that's something I ought to sleep well at night thinking about over the long term.  I'm looking at that chart and thinking "Japan, ~1989."

skwid vacuous's picture

lol that was the "meme" on CNBS for quite some time, especially during the commodities bubble of 2007-2008, all these people are tired of eating rice, etc.

max2205's picture

Funny how china's at lows while china adr's and china us listed stocks are at all time highs running at 45 deg angles


No dislocation here...thanks Ben

Johnny Cocknballs's picture

China's real estate problem, to my knowledge {correct me...} is largely due not just to the fuckery we've come to expect in real estate generally, but they have had an influx of people into cities that just aren't prepared to handle them - there's too much demand, and not enough supply, because of the allocation of both.

So what I'm wondering is, why doesn't China try to do more to build up suburbs and rail so that people streaming into the cities are diverted into new suburbs?

I think this is different from what's gone on in the US which was too much easy credit, over-valuation from appraisal on up to P+S and up to securitization, and just building more houses than the real consumer market could afford - as they structured those loans.  Lest we forget, a lot of people got in trouble because of balloon or ARMs the people signing them didn't understand - but the bankers and brokers did.... blame the banks and originators, not the borrowers.

The CSI is bound to rebound, and quickly, because they aren't particularly worse off, fundamentally, than anyone else.

This is a global meltdown.  As I noted before, we China to not print and deficit spend, they would be effectively subsidizing the debt/deficit spending of the US and the West, all while accepting increasing risk of never being repaid anything like the anticipated value of the bonds they bought. 

In other words, given what the US, Japan and many {most} other nations are doing - do you think, and I'm asking, China would be better off, or worse off, if it tried to rein in deficits and refused to print right now? 

NOTaREALmerican's picture

Re:  So what I'm wondering is, why doesn't China try to do more to build up suburbs

They are.    If you drive around large chinese cities they've got ads for suburban real-estate just like in the US.

I'm not sure if they are using the same tacky Subdivision names tho.  



mumbo_jumbo's picture


you sound a bit out of touch, there are ghost cities all over China and i recently read that in a city of 5.5 million they have built 5 million new housing units over the last 5 years so "building" isn't the problem. I also read, (and this was a few years ago) there were 64,000,000 vacant homes in China

from what i keep reading and hearing about from customers who visit there many people in China own 2 homes

pragmatic hobo's picture

what is the bid/ask spread on chinese home prices?

adr's picture

There wouldn't be a bubble if it were just the chinese buying property in China just like there wouldn't be a bubble in the US if it were just Americans buying property.

QE around the world has to find somewhere to go. A lot of it went into equities, the rest went into real estate. A friend of mine from China says a lot of people own property, but most don't live there. They bought it like an investment in paper gold. There's no telling how many people own the same property in China. As long as nobody asks for the keys there isn't a problem.

LawsofPhysics's picture

This is relevant because TPTB in both contries have been on the same page since 1971.  It really is a club folks.

CaptainSpaulding's picture

And i aint in it

   - George Carlin

NOTaREALmerican's picture

yeah yeah yeah.  China's a bubble too.  Ghost cities.   Fiat currency.   Central Bank.   Elysium Class running the country.   Gonna blow-up any minute...

Looks like 1.5 billion Chinese are still optimistic enough to keep going.

FieldingMellish's picture

Another S&P record coming today or tomorrow. Reality is irrelevant.

Rising Sun's picture

better check the river for floating dead pigs again


same old ending for the communists - stupid fuckers

Tsar Pointless's picture

China is to communism as McDonald's is to health food.

The Most Interesting Frog in the World's picture

Bubble?  What bubble?

hugovanderbubble's picture

TSU NA MI coming xd:)



Hongcha's picture

Ha ha, another miserable frustrating day to be short.  So happy I gave it up.  How does it feel to watch the market gap down and collapse to {gasp} -.37% only to recover ALL in a sloooow meltup while MSM reports the market DOWN on xyz horrendous portentious news?

Yes, today was a SELLOFF in the new normal.

Welcome, shorts.  It will be like this forever and ever and ever ...

Imagine Jigsaw's puppet in Saw; he gives you the choice of staying short or ripping your eye out with a fork!  He's rolling away laughing!  THAT's how it feels


Hongcha's picture

JC&B your comments are astute but not as to Chink housing.  They have a bubble there because they can.  Pure and simple.  It's big ticket debt and it also employs a lot of people.

There is no demand overwhelming supply in RRE anywhere in China of which I am aware; whereas anywhere you go there are empty blocks of condos.  China is just surreal, the pollution, the huge teevees in the squares, it's an Orwellian carnival.  The very, very large middle-class of mouthbreathers is sooo happpy to have Yuan to buy shit, they are happy as clams.  They don't want freedom, they are content and they can barely see the outside world.  All media is controlled, all.   It's the poor ones who are pissed and they are just ground under with the boot.  

Conditions can stay this way for a long time, boys.

Iam_Silverman's picture

So, I wonder how Leo K's bet on China is playing out?  I hope all of the Canadian pensions he was handling all came out unscathed!