He says: "I am shorting a stock market index in the US, I am shorting an emerging market index and I am shorting one of the large western international financial institutions."
"It is an emerging market index; it is not a specific country. It is an index of many emerging markets and that is mainly because the emerging markets have grown more than most things here during this big recovery. So that is where some of the excesses are developing."
Which major financial institution might he be shorting?
He describes it as a bank which people think is 'extremely sound', but which could be taken down by currency problems.
So, who is it? Citigroup (C) JPMorgan (JPM)? Goldman Sachs (GS)?
My Guess is who has the most Tier 3 assets in their Books.
We foget about BOFA too.
Thursday, May 6, 2010
Wednesday, May 5, 2010
People now are more greedy than people of the past thus crisis happen faster.
This is why we need to be more fearful of the coming crisis.
The Moral and Greediness of the people now has become worst than the great depression of the 1929. This is why we have not earn a single lesson yet from the crisis of 2008.
Thus we can expect crisis to happen in a faster rate than the past.
The Moral and Greediness of the people now has become worst than the great depression of the 1929. This is why we have not earn a single lesson yet from the crisis of 2008.
Thus we can expect crisis to happen in a faster rate than the past.
Jim Chanos still shorting China
Chanos, obviously, is a skeptic. Roach is a bull.
Roach thinks migration from the rural areas to the city will continue. Chanos thinks we could see reverse migration, as the property boom ends and peasants are forced back to the countryside.
Another point, which we can't agree with enough, is the absurdity of Western commenters going out of your way to praise Chinese government policy moves, while slamming government intervention in the economy domestically.
When asked by a member of the audience what might prompt him to cover his short, Chanos obviously didn't say, but did hint he's done well so far -- not surprising given some of the recent carnage in China and elated markets.
Forw what it's worth, Chanos reiterated that he's not short Shanghai stocks directly. Hong Kong property plays and commodity firms are more likely.
Roach thinks migration from the rural areas to the city will continue. Chanos thinks we could see reverse migration, as the property boom ends and peasants are forced back to the countryside.
Another point, which we can't agree with enough, is the absurdity of Western commenters going out of your way to praise Chinese government policy moves, while slamming government intervention in the economy domestically.
When asked by a member of the audience what might prompt him to cover his short, Chanos obviously didn't say, but did hint he's done well so far -- not surprising given some of the recent carnage in China and elated markets.
Forw what it's worth, Chanos reiterated that he's not short Shanghai stocks directly. Hong Kong property plays and commodity firms are more likely.
Tuesday, May 4, 2010
This is a Madoff Economy
Investors have looked past the effects of temporary stimulus and opaque accounting, maybe on the Madoff-like thesis that neither sustainability nor accurate disclosure really matter as long as the numbers are good. Yet there's also no denying that this thesis has worked beautifully, and we've missed out by questioning it. As I detailed last week in Looking Back, Looking Forward, the criteria for accepting risk - on the basis of valuation and market action - have been more stringent in periods of credit crisis (both U.S. and internationally) than we could have, in hindsight, got away with last year. I continue to believe that the market's enthusiasm may turn out badly, given the extent to which GDP gains have been induced by unparalleled deficit spending, and earnings gains have been predominated by financials enjoying suspended accounting transparency. But we'll see how this plays out over time
Monday, May 3, 2010
Eight Torpedos to blow up the Global Economy into recession.
1.)The Greek Bailout
"Markets were unimpressed with the size of the just-announced $145 billion rescue package or the ability of Greece to meet the terms. A bailout of all Club Med countries would, according to estimates I’ve seen,
approach $800 billion. This is bigger than LEH."
2.)China tightening
"China raised reserve ratio requirements 50bps for the third time this year (to 17%). A decisive slowing in China and the U.S.A. is a crimp in the near-term commodity price outlook."
3.)Goldman Sachs
"Possible criminal probe on Goldman weighing massively on the stock price; financials being re-rated by rising spectre of financial re-regulation. Shades of Sarbanes-Oxley. There has never been a financial crisis that
was not met afterwards with regulatory reform — it’s how the SEC was created in the first place."
4.)The Current State Of The Economy
"ECRI leading economic index just slipped to a 38-week low. With the restocking phase complete and fiscal stimulus waning, prospects of a second half slowdown loom large. Buy the recovery story when ISM is at
30 and policy stimulus in full swing (13 months ago); fade it when ISM approaches 60 and stimulus subsides. Market Vane sentiment is pushing towards 60% too — yikes! Too much priced in. As for the macro scene, the U.S. economy is barely growing at all, net of all the federal stimulus (+0.7% SAAR in Q1). And net of housing impacts, neither is Canada … should set us up for a fascinating second-half."
5.)Terrorism
"Attempted terrorist attack in Times Square a reminder that geopolitical risks have not gone away. "
6.)The bond market
"Treasury yields have collapsed nearly 35bps from the nearby highs and are not consistent with the recent move by equities to price in peak earnings in 2011. Junk bonds trading back to par for the first time in three years."
7.)Housing
"The latest Case-Shiller house price index confirmed that we are into a renewed leg down in home prices. Financials, retailers and homebuilders are not priced for this outcome."
8.)Jobs
"Initial jobless claims, around 450k, are not consistent with sustained employment growth, notwithstanding what nonfarm payrolls tell us this Friday. A new peak in the unemployment rate and a new trough in home
prices stand as the most pronounced downside surprises for the second half of the year."
"Markets were unimpressed with the size of the just-announced $145 billion rescue package or the ability of Greece to meet the terms. A bailout of all Club Med countries would, according to estimates I’ve seen,
approach $800 billion. This is bigger than LEH."
2.)China tightening
"China raised reserve ratio requirements 50bps for the third time this year (to 17%). A decisive slowing in China and the U.S.A. is a crimp in the near-term commodity price outlook."
3.)Goldman Sachs
"Possible criminal probe on Goldman weighing massively on the stock price; financials being re-rated by rising spectre of financial re-regulation. Shades of Sarbanes-Oxley. There has never been a financial crisis that
was not met afterwards with regulatory reform — it’s how the SEC was created in the first place."
4.)The Current State Of The Economy
"ECRI leading economic index just slipped to a 38-week low. With the restocking phase complete and fiscal stimulus waning, prospects of a second half slowdown loom large. Buy the recovery story when ISM is at
30 and policy stimulus in full swing (13 months ago); fade it when ISM approaches 60 and stimulus subsides. Market Vane sentiment is pushing towards 60% too — yikes! Too much priced in. As for the macro scene, the U.S. economy is barely growing at all, net of all the federal stimulus (+0.7% SAAR in Q1). And net of housing impacts, neither is Canada … should set us up for a fascinating second-half."
5.)Terrorism
"Attempted terrorist attack in Times Square a reminder that geopolitical risks have not gone away. "
6.)The bond market
"Treasury yields have collapsed nearly 35bps from the nearby highs and are not consistent with the recent move by equities to price in peak earnings in 2011. Junk bonds trading back to par for the first time in three years."
7.)Housing
"The latest Case-Shiller house price index confirmed that we are into a renewed leg down in home prices. Financials, retailers and homebuilders are not priced for this outcome."
8.)Jobs
"Initial jobless claims, around 450k, are not consistent with sustained employment growth, notwithstanding what nonfarm payrolls tell us this Friday. A new peak in the unemployment rate and a new trough in home
prices stand as the most pronounced downside surprises for the second half of the year."
Sunday, May 2, 2010
Roubini: A Greek Bailout Solves Nothing Since Spain Is The Real Time Bomb That Will Destroy The Euro
As the world remains fixated on the financial problems of Greece, Nouriel Roubini warns that Spain is actually a far larger and deadly financial time bomb.
The Spanish economy is so enormous relative to Greece that a major financial crisis there would easily destroy the euro currency union:
Irish Independent: "Down the line -- not this year or two years from now -- we could have a break-up of the monetary union. It's a rising risk," he said. "The eurozone could drift, essentially with a bifurcation, with a strong centre and a weaker periphery, and eventually some countries might exit the monetary union," he warned.
For all the focus on Greece, however, he also said that Spain may eventually pose an even bigger threat to the eurozone because it is the region's fourth-largest economy and has higher unemployment and weaker banks. "If Greece goes under, that's a problem for the eurozone. If Spain goes under, it's a disaster," he said.
If Roubini's warning is true, it would mean that a Greek backstop by Europe solves nothing. The euro as a currency would still have massive threats ahead regardless.
The Spanish economy is so enormous relative to Greece that a major financial crisis there would easily destroy the euro currency union:
Irish Independent: "Down the line -- not this year or two years from now -- we could have a break-up of the monetary union. It's a rising risk," he said. "The eurozone could drift, essentially with a bifurcation, with a strong centre and a weaker periphery, and eventually some countries might exit the monetary union," he warned.
For all the focus on Greece, however, he also said that Spain may eventually pose an even bigger threat to the eurozone because it is the region's fourth-largest economy and has higher unemployment and weaker banks. "If Greece goes under, that's a problem for the eurozone. If Spain goes under, it's a disaster," he said.
If Roubini's warning is true, it would mean that a Greek backstop by Europe solves nothing. The euro as a currency would still have massive threats ahead regardless.
Saturday, May 1, 2010
I’ll Tell You When Chinese Bubble Is About to Burst: Andy Xie
April 26 -- “My maid just asked for leave,” a friend in Beijing told me recently. “She’s rushing home to buy property. I suggested she borrow 70 percent, so she could cap the loss.”
It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time.
There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.
Another friend recently vacationed in the southern island- resort city of Sanya in Hainan province and felt compelled to visit a development sales office. Everyone she knew had bought there already. It’s either buy or be unsocial.
“You should buy two,” the sharp sales girl suggested. “In three years, the price will have doubled. You could sell one and get one free.”
How could anyone resist an offer like that?
The evidence in official-corruption cases no longer involves cash stashed in refrigerators or starlet mistresses in Versace clothing. The evidence is now apartments. One mid-level official in Shanghai was caught with 24 of them.
China is in the throes of a vast property mania. First, let me make it perfectly clear that calling China’s real-estate market a “bubble” isn’t denying China’s development success. As optimism is an essential ingredient in a bubble, economic success is a necessary condition. Nor am I saying that prices will drop tomorrow. A bubble evolves and bursts in its own time. When it is about to burst, I’ll let you know.
Free Lunch
Expectations of a Chinese currency revaluation are, perhaps, the most important force inflating the bubble. First, it plays to the latent human desire for a free lunch. You just need to exchange your money for Chinese yuan. According to all the experts on Wall Street, you can only gain. The money has been gushing into China.
Second, the revaluation story has kept Chinese money inside the country. The dollar has always been the safe-haven asset for Chinese. This is why Chinese banks had a large dollar deposit base. Of course, anybody who was somebody had dollars offshore. Now all that money is back. More importantly, any income, legal or otherwise, now stays in China.
Flats Beat Cash
Why would corrupt officials keep apartments rather than cash? Well, according to Wall Street, the yuan is going to appreciate. So holding dollars is out of the question. And why hold Chinese cash when property prices are always going up? The corruption money can be turbocharged in the real-estate market. Only when they are caught do they understand the downside of holding fixed assets.
The massive liquidity waves have prompted Chinese banks to lend as much as possible. One Wall Street tradition adopted quickly in China was bonus recipients signing company checks to themselves. All you need is to report eye-popping quarterly earnings. It is an easier game than on Wall Street: The Chinese government keeps the lending spread wide by fixing both the deposit and lending rates. You just have to lend. The earnings will follow. Might the loans turn bad in three years? Well, I’m not going to give back my bonuses, right?
For a bubble to last you need a force to hold it together when it stumbles. Wall Street kept pumping out new natural or synthetic products to turn debt into demand for assets. Local governments play this role in China.
Future Profits Now
When it comes to interested parties, Chinese governments are knee-deep in the bubble. They get all the money from land sales. Land values have risen to half of the development cost. In hot spots, land costs more than the development -- the governments want to collect the future price gain immediately.
When properties are sold, transaction and profit taxes kick in. Developers pay more levies to the governments than they earn. When developers finally book their earnings, they must put it to work, as good Wall Street analysts would recommend, so they buy land. As land prices are much higher, their measly earnings aren’t enough, so they have to borrow. The governments get all their earnings and debt repayments. Can you blame them for boosting the market whenever it slips?
Land obsession is another force at work. China was a rural economy not so long ago. The most important asset was always land. “Be a government official and become rich” is a millennium-old Chinese saying. It didn’t explain where the money went. It always went into agricultural land. In cities, you only see buildings, not paddy fields. But the buildings sit on land.
Now housemaids are in the market. Who else? Never underestimate 1.3 billion people. In China, they say you should take the shoeshine boy’s advice. Many would listen to him.
Welcome to China, the land of getting rich quick.
It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time.
There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.
Another friend recently vacationed in the southern island- resort city of Sanya in Hainan province and felt compelled to visit a development sales office. Everyone she knew had bought there already. It’s either buy or be unsocial.
“You should buy two,” the sharp sales girl suggested. “In three years, the price will have doubled. You could sell one and get one free.”
How could anyone resist an offer like that?
The evidence in official-corruption cases no longer involves cash stashed in refrigerators or starlet mistresses in Versace clothing. The evidence is now apartments. One mid-level official in Shanghai was caught with 24 of them.
China is in the throes of a vast property mania. First, let me make it perfectly clear that calling China’s real-estate market a “bubble” isn’t denying China’s development success. As optimism is an essential ingredient in a bubble, economic success is a necessary condition. Nor am I saying that prices will drop tomorrow. A bubble evolves and bursts in its own time. When it is about to burst, I’ll let you know.
Free Lunch
Expectations of a Chinese currency revaluation are, perhaps, the most important force inflating the bubble. First, it plays to the latent human desire for a free lunch. You just need to exchange your money for Chinese yuan. According to all the experts on Wall Street, you can only gain. The money has been gushing into China.
Second, the revaluation story has kept Chinese money inside the country. The dollar has always been the safe-haven asset for Chinese. This is why Chinese banks had a large dollar deposit base. Of course, anybody who was somebody had dollars offshore. Now all that money is back. More importantly, any income, legal or otherwise, now stays in China.
Flats Beat Cash
Why would corrupt officials keep apartments rather than cash? Well, according to Wall Street, the yuan is going to appreciate. So holding dollars is out of the question. And why hold Chinese cash when property prices are always going up? The corruption money can be turbocharged in the real-estate market. Only when they are caught do they understand the downside of holding fixed assets.
The massive liquidity waves have prompted Chinese banks to lend as much as possible. One Wall Street tradition adopted quickly in China was bonus recipients signing company checks to themselves. All you need is to report eye-popping quarterly earnings. It is an easier game than on Wall Street: The Chinese government keeps the lending spread wide by fixing both the deposit and lending rates. You just have to lend. The earnings will follow. Might the loans turn bad in three years? Well, I’m not going to give back my bonuses, right?
For a bubble to last you need a force to hold it together when it stumbles. Wall Street kept pumping out new natural or synthetic products to turn debt into demand for assets. Local governments play this role in China.
Future Profits Now
When it comes to interested parties, Chinese governments are knee-deep in the bubble. They get all the money from land sales. Land values have risen to half of the development cost. In hot spots, land costs more than the development -- the governments want to collect the future price gain immediately.
When properties are sold, transaction and profit taxes kick in. Developers pay more levies to the governments than they earn. When developers finally book their earnings, they must put it to work, as good Wall Street analysts would recommend, so they buy land. As land prices are much higher, their measly earnings aren’t enough, so they have to borrow. The governments get all their earnings and debt repayments. Can you blame them for boosting the market whenever it slips?
Land obsession is another force at work. China was a rural economy not so long ago. The most important asset was always land. “Be a government official and become rich” is a millennium-old Chinese saying. It didn’t explain where the money went. It always went into agricultural land. In cities, you only see buildings, not paddy fields. But the buildings sit on land.
Now housemaids are in the market. Who else? Never underestimate 1.3 billion people. In China, they say you should take the shoeshine boy’s advice. Many would listen to him.
Welcome to China, the land of getting rich quick.
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