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[tpaulbeaumont] 05/7/2012 12:31

Ordos, China: A Modern Ghost Town
Meant as home for one million people, the Kangbashi district remains nearly empty five years after construction began

[tpaulbeaumont] 30/5/2012 11:15

If you believe in the China story BarCap have some obvious trades for you :)

[tpaulbeaumont] 14/5/2012 09:14

As its testing 9975 now and $s and other major crosses arent at significant levels id imagine its headed for the other levels in time.

[tpaulbeaumont] 12/5/2012 10:54

AUDUSD been trending down beautifully from the recent 1.0850 high, and although its not one I trade I ran the ruler over it and fwiw next Buy signal is 0.9975, then looks like 9840ish, 9450ish, 9200ish and 9150ish for now.

[tpaulbeaumont] 12/4/2012 13:53

China's economic growth may slide to a 13-year low in 2012 as a sluggish world recovery damps export demand and domestic investment and consumption growth decelerate, the World Bank's latest forecast shows.

[tpaulbeaumont] 12/4/2012 13:46

Chinese Banks 'Great Shorts,' Won't Be Broken Up: Chanos
Published: Thursday, 12 Apr 2012 | 7:42 AM ET Text Size By: Jeff Cox
CNBC.com Senior Writer

With growth slowing, particularly in the real estate sector, Chinese banks have been a great place to bet against, hedge fund titan Jim Chanos told CNBC.

Chanos, the head of Kynikos Associates, has been betting against China - despite its role as a global economic leader - primarily because he believes the country is overbuilt and does not have the internal demand to support its ambitious growth plans.

Nowhere has that trend been more apparent than in the banking system.

"If you looked at the performance of the banks over the last two years...they have been great shorts," Chanos said during an interview on "Squawk Box." "They have been going down - they're down 30 percent over the last two years."

An exchange-traded fund that tracks the Chinese banks, the Global X China Financials [CHIX] is off about 27 percent since peaking in November 2010.

Much like in the U.S., there has been talk about breaking up China's large financial institutions because of the danger their failure would pose to the broader economy. And, like the American quandary, taking down the big banks is be easier said than done.

"I would believe it when I see it to break up the banks," Chanos said. "In China, remember, the the banks are arms of state policy. They loan because the local party official or regional party official tells them we need a new stadium. They are instruments of state policy. I really doubt the party is going to give up a lever of power by breaking up the banks."

The Communist Party has been rocked lately by scandal, as the wife of local party chief Bo Xilai is a suspect in the murder of British businessman Neil Heywood.

For the Chinese political system, the case is a game-changer, in that Bo was considered a rising star in the party and possibly headed for its top position.

"Some people have dubbed the party 'The Family,'" said Chanos, comparing the communists to the American Mafia. "We're seeing more than a peek behind the curtain, we're seeing a real struggle."

[tpaulbeaumont] 16/3/2012 08:14

AUD is not your friend
Posted by Kate Mackenzie on Mar 15 21:55.

Well, not if you are short the AUD because of all that hard landing business. Or, if you are an Australian exporter.

[tpaulbeaumont] 15/3/2012 18:33

Bubbles always burst. Moreover, it should be plain to see

1.China has a huge property bubble
2.China's banking sector is unsound
3.China's state-owned-enterprises (SOEs) are in horrible shape
4.China's over-reliance on investments with no genuine economic feasibility guarantee China's current boom is not sustainable.

[tpaulbeaumont] 14/3/2012 18:26

China's new growth targets
Year of the tortoise
China seeks (slightly) slower growth

[tpaulbeaumont] 06/3/2012 11:00

Goldman Sachs Group Inc. (GS) lost money in Asia last year for the first time since 2008 as the Wall Street firm's stock investments in the region, led by a holding in China's biggest bank, backfired.
[...]
The holding that matters most is Goldman Sachs's stake in Industrial & Commercial Bank of China Ltd., which generated a $517 million pretax loss in 2011 compared with a $747 million gain a year earlier, the firm disclosed on Jan. 18. Goldman Sachs, which acquired its ICBC stock in 2006, doesn't report other stock investments in Asia in its annual filing.

[tpaulbeaumont] 22/2/2012 10:56

When you walk around a big city in China, it feels like an entrepreneurial free-for-all - guys selling stuff on street corners, lots of little shops, everybody hustling.

But when you pull back the curtain on the country's economy, you find the government everywhere. The government owns, among other things, the country's biggest cell phone carrier, the three biggest airlines and the four biggest banks.

Those state-owned banks in particular play a central role in the country's economy.

Chinese people have one of the highest savings rates in the world, and they don't have many options for investing the money they save. So they put lots of their money in ordinary savings accounts at those state-owned banks.

The banks, in turn, lend a lot of that money out to other government-owned companies, typically at very low interest rates. Those companies go out and build lots of new stuff. All that building contributes a huge chunk of China's growth.

But the building can't go on forever. In fact, China may already have built too much stuff with borrowed money.

[tpaulbeaumont] 15/2/2012 09:06

Patrick Chovanec, associate professor at Tsinghua University's School of Economics and Management in Beijing, China stopped by the RGE offices in NY for a discussion on the likelihood of a hard landing in China and we consider the short and medium term implications of policy adjustments, leadership transitions, and technology advancements. [22:20]

[tpaulbeaumont] 06/2/2012 10:29

China's economic expansion would be cut almost in half if Europe's debt crisis worsens, a scenario that would warrant "significant" fiscal stimulus from the nation's government, the International Monetary Fund said.

Based on the IMF's "downside" forecast for the global economy, China's growth could drop by as much as 4 percentage points from the fund's current projection, which is for 8.2 percent this year, the organization said in a report released today by its China office in Beijing.

The outlook expands on the IMF's warning last month that the world could plunge into another recession if Europe's woes deepen. Premier Wen Jiabao reiterated last week his government will "fine-tune" policies to support growth amid the region's debt crisis and the cooling domestic property market.

"China's growth rate would drop abruptly if the euro area experiences a sharp recession," the Washington-based IMF said. "However, a track record of fiscal discipline has given China ample room to respond to such an external shock."

The government should cushion the impact of a deeper slowdown with measures including tax cuts that amount to about 3 percent of gross domestic product, it said.

[tpaulbeaumont] 31/1/2012 09:10

Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as "Australia". For convenience I will refer to the country by this older name. We will now turn to the outlook.


A Fork in the Economic Road ...

The commodity boom has created a "two track" economy – as your Excellency know economists prominent in the media love glib "sound bites". The mining and commodity boom benefits a small part of the economy whilst simultaneously creating problems for other parts.

The mining and energy sector account for less than 10% of the Australian economy. This is smaller than the Australian finance sector or manufacturing industry.

Mining and mining-related sectors, such as construction, manufacturing and services industries which benefit from mining activity, make up about 20% GDP. These sectors will contribute approximately two-thirds of the projected 4% GDP in 2011/12. The remaining 80% of economy will contribute one-third of growth.

Mining employs 1.5% of the workforce reflecting its capital intensive nature. Unfortunately, a portion of the equipment needed is imported adding to the current account problem, especially in the short run. A combination of high domestic costs and the strong Australian dollar means that a significant portion of project related work is now done offshore.

The revenue earned and the overall contribution to national income does boost the economy and creates employment. But dividends and interest payments to overseas investors reduce the amount of earnings that stays in Australia.

The concentration of mining activity in Western Australia and Queensland also creates imbalances within the domestic economy. Skill shortages in mining means rising salaries, attracting workers from other industries and placing pressure on general wage levels. It also exaggerates property price increases in some areas. This creates inflationary pressure that forces the Reserve Bank of Australia to raise interest rates.

The rising demand for Australia's mineral exports also pushed up the value of the Australian dollar. Since deregulation in 1983, one Australia dollar has purchased, on average, around 77 US cents. The commodity boom and Australia's high interest rates relative to the rest of the world increased the value to around 95 to 100 US cents, peaking at around 110 US cents.

The high Australian dollar places exporters at a cost disadvantage and also makes it difficult to compete with cheaper imports. Affected sectors include key Australian export industries that are significant employers such as education services, tourism and manufacturing. Australia may lose up to 170,000 manufacturing jobs over the next 10 years, almost double lost jobs in the past decade.

Unhappy Homes...

The domestic economy remains lack lustre. Consumers are affected by significant debt levels and weak wage growth. Public spending has fallen reflecting pressure to return the budget to surplus. Business investment has been weak, reflecting sluggish demand.

Debt levels remain high. Between 1991 and 2011, household debt rose from around 49% to 156% of disposable income. In 1989, when mortgage rates were 17%, the ratio of interest payments to disposable income was 9%. Currently, despite the fact that mortgage rates are around 7.5%, the ratio has increased to around 12%. As households increase savings and reduce debt, consumption is lower contributing to slower growth.

Slow growth in credit, reflecting households reducing debt and problem in the banking sector, also constrains growth. Employment in manufacturing, retail and financial services is weakening, with major employers announcing layoffs.

There are other unresolved problems. Housing prices remain high based on traditional measures such as affordability and rental returns.

According to the latest Economist survey (published on 26 November 2011), Australian house prices were overvalued by 53% based on rents and 38% measured against income levels relative to long run averages. According to The Economist, Australian home prices are overvalued by at least 25% based on the average of these two measures. The level of overvaluation is greater than in America at the peak of its housing bubble.

As your Excellency personally experienced during his visit to Australia, no subject excites greater passion among the locals than house prices. This is a staple of conversation and people excitedly compare the size of their mortgages and the value of their accommodation. There is heated disagreement between those who believe that house prices will not fall and other who forecast substantial price falls.

The real issue is over investment in housing stock, which produces low or nil return. Encouraged by complex subsidies, large amounts of capital are locked up in housing, unavailable for more productive wealth creating activities such as new industries.

In international rankings, Australia regularly performs poorly in competitiveness, productivity and innovation. This is inconsistent with the national character, which prides over achievement in competitive sports. Australia believes it can "punch above its weight".

In a recent paper entitled "Productivity – The Lost Decade", economist Saul Eslake found that Australia's productivity growth during the 2000s was 0.50% below that of the 1990s, when it was broadly comparable to the OECD average. Between the mid 1990s and the mid 2000s, annual labour productivity declined from 2.8% to 0.9% per annum. Over a similar periods, broader measures of productivity that incorporate capital as well as labour fell from 1.6% to near zero.

The GE Global Innovation Barometer ranked Australia 16th out of 30 countries, well behind the leaders like the US and Japan. While 18% of local business leader, perhaps blinded by patriotism, nominated Australia, only 2% of global senior business executives citing the country as an innovation champion.

The GFC also significantly reduced the wealth of individuals, especially retirees. The value of their investments declined. At the same time, income and returns from investments also declined. The "wealth effect" limits consumption but also encourages those planning for retirement to increase their savings.

These problems mean that Australia's non-mining sector is forecast to grow at a modest 1% per annum, compared to the mining sector which is forecast to grow at 5%.

Where are We Now...

Your excellency, the country is a fest of complacency. Locals are convinced that there is no end in sight for the mining boom driven by China's growth. They believe that they are protected against the problems in Europe and elsewhere. Anyone who points out the risks is dismissed as a pessimist and doomsayer.

Despite the recovery, many parts of the economy, other than the buoyant mining sector, remain subdued. The stock market, although not an accurate measure of economic health, remains over 30% below its levels before the crisis. Interest rates for 3 and 10 year government bonds have fallen sharply to record lows, reflecting increased pessimism amongst investors about economic prospects.

Australia remains vulnerable. A slowdown in Chinese growth and fall in commodity prices and volumes would affect the economy adversely. Australian history suggests that mining booms are finite and end suddenly causing significant disruption.

Problems in sovereign debt and attendant pressures on banking system may decrease available funding and increase borrowing costs for Australian banks and companies. Overvalued house prices and high household debt increases vulnerability to an economic slowdown, with an accompanying rise in unemployment or to higher mortgage rates. A credit crunch or recession could cause house prices to fall worsening domestic conditions, which would in turn affect domestic banks.

The perfect storm for Australia would be the coincidence of those events.

Australia has some flexibility. Public debt around A$250 billion is a modest 22% of GDP providing flexibility to stimulate the economic. But this capacity can be over estimated. Prior to the GFC, Ireland's debt levels were modest around 25% of GDP but the need to bailout troubled banks and the collapse of the real estate market led to debt levels increasing rapidly.

Australian interest rates are relatively high (official rates are 4.25%), providing flexibility to cut borrowing costs to buffer any shock. The currency is flexible and a fall in value of the Australian dollar would help cushion any weakness, as was the case in 1997/1998 Asian crisis and again in the GFC.

Your Excellency will also be aware that Australia Treasurer Wayne Swan was recently anointed as the world's best Finance Minister. His skills may assist in navigating through any crisis, should such an event occur. But it is worth noting that a previous Australian Treasurer received similar accolades in 1984, only to subsequently preside over a deep recession, which "the country had to have".

Your Excellency has requested my recommendations for whether we should launch our bid for Australia, to be renamed the "Great Southern Province of China". I believe that we should await developments. We should be able to acquire Australia at a cheaper price in the not too distant future.

Yours truly

The Chinese Envoy

[tpaulbeaumont] 14/1/2012 10:41

Against last years 1.1050 high (at 1.1080) I have to assume AUDUSD is still heading lower, however its certainly been rising over recent weeks and the next shorter term sell signal I have prior to the Oct '11 high lies at .0420, with .0575 looking likely thereafter. There is also an open 15pt gap around .0700 i believe.

[tpaulbeaumont] 14/1/2012 10:25

The Big Mac index
Jan 12th 2012, 16:53 by The Economist online

Burgernomics shows Switzerland has the most overvalued currency