wisdom

Look at the history of Vancouver RE: 40% drop in 1 yr in 1981. 25% over 4 yrs starting in 1994. If you say it is CHinese money - then look at HK RE history - it is not unusual for them to have a 50% drop once every decade. HK is the only city more expensive in the developed world based on median household income to median housing prices in the developed world. Vancouver was about 11x median household income v about 5x back in early 2000s. Why cant a severe drop happen in Vancouver?

Canada stopped the class of immigration that allowed rich immigrants to come to Canada as of 2012. Look at the what is happening to sales to high end homes in Vancouver - they have slowed. Look at jobs in the financial and construction industry - it is not easy in those industries any more. If your asset prices increase because of hot money coming in, it can drop just as fast. If Chinese money can defy economics, then why are real estate prices in Chinese cities dropping? At some point the excessive debt will catch up with the people and leverage is scary on the way down.

http://finance.yahoo.com/news/fairfax-signs-agreement-acquire-general-040100888.html

https://www.youtube.com/watch?v=enRnv2RLXmw Kyle Bass on Canadian RE

It is still early days for them and they have to learn newer ways of doing things. Nothing says things will always remain the same. People will get better with time and experience.

China may have had lower levels of literacy in the past but that is not the case anymore with the younger generation. My understanding is that the literacy levels in China are high and they are increasing even in India and Africa. As a society gets richer - it will find the money and ways to educate it's people. I beleive the literacy levels across the world today are over 80%. It is not the same world that existed 30 years ago.

For the Chinese this is a new phenomenon as they could not buy real estate for themselves until recently. This is the first time they have been able to buy and they have only seen prices go up. Just like all other markets - they will learn their lesson's that there is a limit to what price makes sense or else you destroy capital. I dont see how this will be good if it happens - but yes Chnia should do well in the long run. This implies better buying opportunities at some point in time.

His concern at this point is deflation in Europe. He thinks ECB is already behind the curve and if they do not start printing by June then it will be too late to arrest deflation. He also believes policy is tight in China and is of the belief that US growing at under 2% cannot pull the world by itself. He stated he had expected the US to be growing faster. He seems to be moving into the FFH camp.

http://finance.fortune.cnn.com/2014/05/14/david-tepper/?iid=HP_LN Tepper concerned about deflation and stocks. Holding cash though not ready to short.

http://finance.yahoo.com/news/chinese-developers-pull-back-property-downturn-hits-economy-210416240--sector.html Chinese developers pulling back. This is going to get interesting - especially for China's trade partners. Are we in 2007 or early 2008 in China - for comparison. I do not expect this to become a credit issue globally - but if this gets out of hand - there will need to be a major reset about the future growth and commodity pricing, etc. Could get interesting.

http://www.gmo.com/websitecontent/GMO_QtlyLetter_1Q14_FullVersion.pdf

http://www.economonitor.com/blog/2014/04/chinas-shadow-banking-system/ Good read on local govt borrowing in China by Das: Many of the LGFVs do not have sufficient cash flow to service debt, being reliant on land sales and high property prices to meet debt obligations. The LGFVs also have significant mismatches between short term borrowings and long term investments being financed. With cash flow insufficient, many LGFVs now use new borrowings to repay maturing debt. Probably something more than 50% of LGFVs have unsustainable debt levels and face the risk of insolvency. Local governments also may not have the financial capacity to guarantee the solvency of their LGFVs. According to the World Bank, China’s local governments have responsibility for 80% of total spending but only receive about 40% of tax revenue.

A lot of Chinese numbers are higher eg: 100% house ownership, etc. My fear is the impact a slow down will have on commodities and inflows from China on Canadian real estate.

Has impacted me in many ways that I might not even understand yet. I definitely live a far better life as a result. If all of us can pay it forward, I believe the biggest impact will be as his efforts are compounded through people like us. Will make for a much better world.

Racemize - I would not go by what Munger and Buffett say - watch what they do. If you read up on what Munger did with DJCO before 2008 and Buffett's personal portfolio going into 2008 - you will find Gio is right.

http://www.valuewalk.com/2014/04/prem-watsa-warns-of-bubbles-in-dot-com/

Lewis was on Charlie Rose

http://finance.yahoo.com/news/autonation-ceo-declares-epic-winter-154620693.html AN CEO says the US customer is coming back.

http://www.bloomberg.com/news/2014-04-01/steel-defaults-seen-by-s-p-as-yuan-ruins-ore-loans-china-credit.html Chinese steel companies struggles. 40% of iron-ore in Chinese ports is being used as collateral for financing. What if there are margin calls? http://www.bloomberg.com/news/2014-04-02/china-s-overnight-rate-in-longest-rising-streak-since-october.html overnight bank rate jumped .95% on March 27th. A large portion of the trusts are coming due later this year. Could be interesting. http://www.bloomberg.com/news/2014-04-01/hong-kong-wins-from-china-credit-woes-as-lending-reaches-record.html Chinese companies getting financing from HK, increasing HK's exposure to the mainland.

Even Dalio has been increasing cash as of last year. He is not bullish on equities anymore.

In a capitalistic system - shouldn't the profit margins be mean reverting over time? If I am earning 2% while others are earning 10%+ in any given business, shouldn't my capital go into that industry and reduce the margins by increasing supply? This is why I believe that the long run average has been around 6% and will be so in the future as well.

http://www.bloomberg.com/news/2014-03-31/draghi-europe-scenario-points-to-lowflation-still-painful.html Euroope non-inflation. http://www.cnbc.com/id/101538075 China's PPI deflation

http://www.ft.com/intl/cms/s/0/21bcfac0-b661-11e3-b230-00144feabdc0.html?siteedition=intl#axzz2xQATpo1v ft article on inflation in spain and europe

thanks - Nnejad

Chou funds letter is usually out by mid- March. But, I haven't seen one for 2013. Any idea when it is likely to be out?