China

[crs223]

The CCP identified a housing bubble and intentionally popped it.  The fact that CCP hasn’t pulled out the monetary or fiscal bazooka (or some other hair-brained hack) tells us that they are fine with the way this is playing out.

 

This is entertaining… blow up an obvious bubble and let the market sort it all out.  In my lifetime these problems have always been “handled” by the Central Planners in DC

 

 

 

 

[mattee2264]

What I always find scary is how correlated the S&P 500 is to the Fed balance sheet. Since 2009 the Fed balance sheet has increased fourfold. And the S&P 500 has as well. 

 

It does beg the question as to how much of this long long bull market is simply just the result of asset price inflation. 

 

And of course the Fed has no serious intention of decreasing its balance sheet especially as the banking system will continue to need bailouts and the market will taper tantrum if QT ever picked up any kind of speed.

 

[gfp]

2 hours ago, mattee2264 said:

What I always find scary is how correlated the S&P 500 is to the Fed balance sheet. Since 2009 the Fed balance sheet has increased fourfold. And the S&P 500 has as well. 

 

It does beg the question as to how much of this long long bull market is simply just the result of asset price inflation. 

 

And of course the Fed has no serious intention of decreasing its balance sheet especially as the banking system will continue to need bailouts and the market will taper tantrum if QT ever picked up any kind of speed.

 

 

I'm not sure what the difference would be between a bull market and asset price inflation, but I wouldn't read to much into any correlation with the Fed balance sheet and the S&P 500.  QE doesn't create "real economy" money that can be invested in stocks.  Excess bank reserves don't do much at all since US bank lending is not constrained by bank reserves.  I believe QE does basically nothing, but it is possible that the way the US did it, there was a tightening of MBS spreads that goosed the refinance boom a little bit more on the margin that what would have occurred with slightly wider spreads.

[crs223]

If the Fed unwound its balance sheet back to 2007 levels, would that impact the stock market?

 

Im no economist, but I would guess that such an action would at minimum increase interest rates, which would cause stock prices to adjust to revise a competitive earnings yield.

[gfp]

11 minutes ago, crs223 said:

If the Fed unwound its balance sheet back to 2007 levels, would that impact the stock market?

 

Im no economist, but I would guess that such an action would at minimum increase interest rates, which would cause stock prices to adjust to revise a competitive earnings yield.

 

They would have to be methodical about it.  If they tried to unwind the balance sheet in an aggressive all-at-once move it would be messy.  If they just plugged away and actually brought it down and kept it down it wouldn't necessarily result in higher rates.  Long term interest rates are set by the market primarily on long term expectations for inflation and economic growth and demand for safety and liquidity over other assets.  Supply isn't an important a factor as many people think.  "supply" of new bonds is pre-funded by the deficit spending that preceded it / "caused" it.

 

Government bonds are money and the Fed swapping one government liability (bonds) for another (bank reserves) isn't a big deal for the economy.  The bond is actually more useful out in the private sector than the bank reserve is.  And in the old days it used to have a higher yield than the bank reserve.

 

I can pledge a government bond as collateral and multiply it, transform it into virtually anything.  A bank reserve is trapped and somewhat sterile.  Certainly can't invest a bank reserve into stocks.

Edited February 14 by gfp

[james22]

11 hours ago, crs223 said:

The CCP identified a housing bubble and intentionally popped it.  The fact that CCP hasn’t pulled out the monetary or fiscal bazooka (or some other hair-brained hack) tells us that they are fine with the way this is playing out.

 

This is entertaining… blow up an obvious bubble and let the market sort it all out.  In my lifetime these problems have always been “handled” by the Central Planners in DC

 

 

 

 

 

[Hektor]

12 hours ago, crs223 said:

 The fact that CCP hasn’t pulled out the monetary or fiscal bazooka

Could it be that the bazooka is not as big as they thought it was? $3T during zirp is probably less than $3T at 5%?

[Ulti]

 

[Hektor]

Giraffe and China. Interesting story. Here are some excerpts from the 2 articles (links below). On another note, it seems that money might flow from the Chinese markets to the US markets via ETFs. 

 

Giraffes might just be the next thing banned on China's social media.

 

The animals became an overnight symbol of discontent with the Chinese economy when the US Embassy in Beijing's social media account uploaded a post on February 2 about the animals. The post doesn't mention China and instead promotes US efforts to track down endangered giraffes in Africa using GPS technology.

 

As their losses pile up, Chinese investors are losing confidence not only in the stock market but in the government’s ability to turn the economy around.

 

With their frustrations piling up, Chinese investors recently found a way to vent that wouldn’t be quickly censored. They started leaving comments on an innocuous post about giraffe conservation on the official Weibo social media account of the U.S. Embassy in China. 

 

The giraffe post has been liked nearly one million times since Feb. 2, much more than what the embassy’s Weibo posts usually get. Many of the comments also offered admiration for the United States, as well as unhappiness about their own country.

 

"The US government, please help Chinese stock investors," said another, per CNN on Monday.

 

"Arise! All giraffes who refuse to be slaves," another wrote, referencing the People's Republic of China's national anthem, CNN reported.

 

https://www.nytimes.com/2024/02/15/business/china-stocks-a-shares.html

 

https://www.businessinsider.com/giraffes-might-be-next-banned-thing-on-china-social-media-2024-2#

[Hektor]

Not sure how much of this is true.

 

"China Revives Socialist Ideas to Fix Its Real-Estate Crisis. Xi Jinping aims to put the state back in charge of the crumbling property market, part of a push to rein in the private sector.

 

Under the new strategy, the Communist Party would take over a larger share of the market, which for years has been dominated by the private sector. Underpinning it are two major programs, according to policy advisers involved in the discussions and recent government announcements. 

 

One involves the state buying up distressed private-market projects and converting them into homes that the government would rent out or, in some cases, sell. The other calls for the state itself to build more subsidized housing for low- and middle-income families. 

 

The goal, the policy advisers say, is to increase the share of housing built by the state for low-cost rental or sale under restricted conditions to at least 30% of China’s housing stock, from 5% or so today."

 

 

https://www.wsj.com/world/china/china-real-estate-crisis-state-housing-656c5093

[Libs]

Classic. The property bubble was driven by central planning mistakes - 1) they incentivized local governments to raise revenue by selling land to developers; 2) They made sure Chinese had no other good investment options. 

 

And of course, the bubble finally blew up. And the solution? More central planning!

 

I see China as basically a battle between their hard-working, resourceful people and the CCP, which is constantly doing stupid things to hold them back ( one child policy, Covid, etc.) 

 

It's the same race we have here in the U.S., but here the people still have a shot to overcome the idiots we elect. I think.....

 

 

[Luke]

Hong Kong births rose in 2023 for first time in 6 years, government figures show

 

https://www.scmp.com/news/hong-kong/society/article/3252599/hong-kong-birth-rate-shows-small-rise-first-time-6-years-and-population-also-increases-2023-figures

[Gamecock-YT]

also coincides with housing prices going down. Been a couple of articles recently about Hong Kongers moving to Shenzhen, especially among the youth

Edited February 20 by Gamecock-YT

[Blake Hampton]

China be like:

 

- CSRC bans net selling by major firms in first, last 30 minutes

- Regulator is creating a task force to track short selling

[Blake Hampton]

The China Securities Regulatory Commission, led by newly appointed Chairman Wu Qing, has also created a task force with the nation’s stock exchanges to monitor short selling and issue warnings to firms that profit from the wagers, the people said.

[Luke]

@blakehampton That's the beauty of emerging markets, cheap prices and more risky governance. If you dont want that, feel free to pay up for similar quality with prices more than double+less growth in your local country in the west.

Edited February 21 by Luca

[Luke]

We have got to appreciate how far china has come the last 20 years and extrapolate how much governance will likely improve in the next 20 years. I think, looking at their numbers and the development, things will look a lot better in the future. 

 

Naspers and Bekker had balls to invest 32m 20 years ago, it was a lot worse and people would have probably screamed similar things as they do today. Meanwhile that stake more than 1000x in that period

 

Buy quality in China if you buy at all, even Damodaran says so: 

 

 

 

[zippy1]

"Hong Kong (CNN) — 
Chinese companies are doing something rarely seen since the 1970s: setting up their own volunteer armies. At least 16 major Chinese firms, including a privately-owned dairy giant, have established fighting forces over the past year, according to a CNN analysis of state media reports.
https://edition.cnn.com/2024/02/21/business/china-corporate-militias-resurgence-int-hnk/index.html

[Parsad]

Excellent 60 Minutes look at China/US relationship:

 

https://www.cbsnews.com/news/china-crackdown-on-american-business-leaves-investors-in-us-wary-60-minutes-transcript/

 

Recommend you watch the 60 Minutes overtime on China as well...discusses significant demographic issues China faces.  Cheers!

 

 

[Parsad]

1 minute ago, Parsad said:

Excellent 60 Minutes look at China/US relationship:

 

https://www.cbsnews.com/news/china-crackdown-on-american-business-leaves-investors-in-us-wary-60-minutes-transcript/

 

Recommend you watch the 60 Minutes overtime on China as well...discusses significant demographic issues China faces.  Cheers!

 

 

 

 

Also Ambassador Burns seems like a fantastic candidate to run for President for either party...why can't the U.S. get guys like him to run?!  Geez!  Cheers!

[juno323]

https://www.bloomberg.com/news/features/2024-02-28/piano-sales-fall-in-china-amid-stock-rout-real-estate-bust

Middle class taking quite a hit.

[Luke]

I worked in the industry and can only point out how RIDICULOUS the prices increased in that sector, everything became more expensive, wood, labor, shipping. I want to buy a Bechstein piano but i am not buying now because prices are 30-40% higher than pre covid and i simply do not see it, waiting to buy something used.

[zippy1]

The sooner people get this behind us, the better.
https://www.reuters.com/world/china/chinas-country-garden-faces-winding-up-petition-failure-pay-2045-mln-loan-2024-02-28/

[Hektor]

2 hours ago, juno323 said:

Middle class taking quite a hit.

 

Pay cuts! Sound like what happens in a capitalist system.

 

"her husband’s salary and bonus as a bank worker were slashed in half over the past two years"

 

"After her husband’s pay at a tech company was cut last year, quitting piano seemed the obvious choice."

[Hektor]

2 hours ago, juno323 said:

https://www.bloomberg.com/news/features/2024-02-28/piano-sales-fall-in-china-amid-stock-rout-real-estate-bust

Middle class taking quite a hit.

Thanks @juno323. Looks like people were incentivized to learn piano

 

"Its popularity also grew as China began providing incentives for children to learn music, leading to a strong correlation between piano playing and educational success. For the past couple of decades, students who hold advanced certificates in classical piano have been able to earn bonus points toward highly competitive college entrance exams."