China

[Hektor]

5 hours ago, Parsad said:

That might be tough.  Cheers!

 

https://finance.yahoo.com/news/china-facing-us-financial-crisis-234945940.html

And this doesn't make it any easier for China, I think.

 

https://www.nytimes.com/2024/02/07/business/economy/united-states-china-mexico-trade.html

 

For First Time in Two Decades, U.S. Buys More From Mexico Than China

The United States bought more goods from Mexico than China in 2023 for the first time in 20 years, evidence of how much global trade patterns have shifted.

[james22]

China is going to make Japan's real estate bubble look insignificant.

[Hektor]

Also, the game of tariffs and avoiding tarrifs

 

https://www.wsj.com/economy/trade/a-china-u-s-decoupling-you-aint-seen-nothing-yet-12c0828e?mod=hp_lead_pos6

 

https://archive.is/E3ysM

 

A China-U.S. Decoupling? You Ain’t Seen Nothing Yet

Tariffs haven’t reduced U.S. trade links with China much. Would a 60% rate do it?

[james22]

The Chinese economy is already sucking. If the housing oversupply is really as bad as Zeihan makes out, China is in for an economic upheaval that makes 1929 look like a mild case of the hiccups.

 

https://www.battleswarmblog.com/?p=57128

 

 

[Gmthebeau]

The average US investor has no ability to analyze China.  Have you traveled there?  Hit the ground talking to people, companies, etc?  China is notorious for lying, fraud, fake accounting, entire companies that are total frauds.  If you are hellbent on investing in China at least hire a fund manager who lives there or Hong Kong.  Otherwise, stop wasting your time and money on this garbage.

[james22]

He Keng, a former deputy head of the National Bureau of Statistics, spoke on Saturday about the struggling housing market in China. When commenting on its vast oversupply of homes, He said some experts have suggested that these empty homes available in China would be enough to accommodate a whopping 3 billion people.

 

"How many vacant homes are there now?" said He at an economic forum in the city of Dongguan. "The experts are presenting figures that vary greatly. The most extreme believe the number of vacant homes are now enough for 3 billion people. We only have 1.4 billion people."

 

"That estimate might be a bit much, but 1.4 billion people probably can't live in all of them," He added.

 

https://archive.ph/psE7c#selection-1685.0-1699.50

 

LOL

[ValueArb]

On 2/7/2024 at 2:05 PM, james22 said:

He Keng, a former deputy head of the National Bureau of Statistics, spoke on Saturday about the struggling housing market in China. When commenting on its vast oversupply of homes, He said some experts have suggested that these empty homes available in China would be enough to accommodate a whopping 3 billion people.

 

"How many vacant homes are there now?" said He at an economic forum in the city of Dongguan. "The experts are presenting figures that vary greatly. The most extreme believe the number of vacant homes are now enough for 3 billion people. We only have 1.4 billion people."

 

"That estimate might be a bit much, but 1.4 billion people probably can't live in all of them," He added.

 

https://archive.ph/psE7c#selection-1685.0-1699.50

 

LOL

 

China has solved the homeless crisis and all the west can do is criticize, SMH!

[Parsad]

So much for Evergrande's bond holders...I wonder what the CCP reaction would be to bondholders in other companies if they failed.  Cheers!
 

https://finance.yahoo.com/news/99-bond-wipeout-hands-hedge-110000940.html

 

[Hektor]

“So US and European hedge funds piled into the debt, envisioning big payouts to juice their returns.”

 

Did they not hedge?

[formthirteen]

The CCP is clearly not interested in sharing common profits with foreign investors. From now on, I will definitely assume 99% of profits from BABA and other Chinese utilities will not reach foreign investors until it's been proven otherwise; I have no interest in giving my money to the CCP. Sometimes greed get's the better of me though. BABA no more, LOL.

[Parsad]

6 minutes ago, formthirteen said:

The CCP is clearly not interested in sharing common profits with foreign investors. From now on, I will definitely assume 99% of profits from BABA and other Chinese utilities will not reach foreign investors until it's been proven otherwise; I have no interest in giving my money to the CCP. Sometimes greed get's the better of me though. BABA no more, LOL.

 

I think they have to.  Think about how big the non-performing real estate loan portfolio must be in China...if Evergrande is $260B in assets...think 10-15 times that at a minimum.  It's like the government warrants issued by US banks during the GFC...they want to recover losses if there is any upside!

 

So, any value left in these companies after equity and bond holders are wiped out, is money the CCP is going to use to stabilize the system and refill their coffers for stimulus or losses already incurred.  Foreign governments and entities can withstand China exposure losses...but China cannot withstand China's own losses!  So international investors...suck it up!  

 

Cheers!

[ICUMD]

The wager here is that if the CCP wants to get the donkey (economy) to move, they will now need to dangle more than a single carrot.

 

It's not just a 'want' anymore, but a need.

They have no alternative.

Countries like China cannot progress without FDI.

 

They are getting desperate.

Let's see what treats they have in store.

Things are bound to get worse before they get better.

[Luke]

Its hard to hold chinese positions due to the horrible sentiment and bleak outlook/capitulation. I also get doubts sometimes and need some inner dialogue to maintain being bullish but its hard. It speaks for the distress and dislocation in the market.

[mattee2264]

Perhaps the analogy doesn't work with China. But for the USA at least I have a healthy respect for the power of shock-and-awe bailouts/stimulus to lift markets. 

And for the know-nothing investor index funds are probably the vehicle of choice with the added benefit that if the plunge protection team decides it wants to support markets it will buy index funds. 

 

MSCI China is at levels last seen almost 15 years ago. While some of that does reflect that GDP growth has been offset by massive dilution of shareholders with probably some more to come especially in financial/property institutions because the bath has been thrown off with the bathwater if you buy the index you'll end up owning some of the companies that will see an impressive recovery when the crisis is over. 

[Spekulatius]

6 hours ago, Parsad said:

 

I think they have to.  Think about how big the non-performing real estate loan portfolio must be in China...if Evergrande is $260B in assets...think 10-15 times that at a minimum.  It's like the government warrants issued by US banks during the GFC...they want to recover losses if there is any upside!

 

So, any value left in these companies after equity and bond holders are wiped out, is money the CCP is going to use to stabilize the system and refill their coffers for stimulus or losses already incurred.  Foreign governments and entities can withstand China exposure losses...but China cannot withstand China's own losses!  So international investors...suck it up!  

 

Cheers!

I think the holes are going to be plugged by bond holders of these companies, banks and insurance (Ping An etc) cos who are going to be forced to buy assets.  China has the so called “National Team” to do this. Tech is only indirectly affected via economic malaise and deflation. Think what happened during the GFC and housing bubble - same issue although the players are different. In both cases, the goal was to save the existing financial system. I believe China will drag the solution out over many years unlike the GFC. Tech will be the first one to bounce back, just like what happened to the GFC in the US and rest if the world.

 

All they really need to do is ease up on tech regulation but that’s a different issue than the Evergrande Chinese housing bubble.

Edited February 9, 2024 by Spekulatius

[Hektor]

8 hours ago, Parsad said:

It's like the government warrants issued by US banks during the GFC...they want to recover losses if there is any upside!

The situation sounds to me more like the Fannie/Freddie saga in the US.

[Blake Hampton]

11 hours ago, formthirteen said:

The CCP is clearly not interested in sharing common profits with foreign investors. From now on, I will definitely assume 99% of profits from BABA and other Chinese utilities will not reach foreign investors until it's been proven otherwise; I have no interest in giving my money to the CCP. Sometimes greed get's the better of me though. BABA no more, LOL.

I want to start by saying that I'm not an advocate for investment in China. I followed Munger into BABA and then proceeded to slowly bleed to death until I decided that China was a no-go, especially when I thought about the structure of ADRs.

 

However, I don't see anything wrong with this particular situation, I believe bondholders should be punished. They are essentially financing a company that built property developments on down payments without ever finishing them. The bottom line is the customers who were sold a false promise are higher up on the claim ladder than some foreign bond owners.

[Hektor]

54 minutes ago, blakehampton said:

However, I don't see anything wrong with this particular situation, I believe bondholders should be punished. They are essentially financing a company that built property developments on down payments without ever finishing them. The bottom line is the customers who were sold a false promise are higher up on the claim ladder than some foreign bond owners.

+1

[SongDonkey.AI]

Read the latest issue of Economist! Guys!

[Parsad]

10 hours ago, Luca said:

Its hard to hold chinese positions due to the horrible sentiment and bleak outlook/capitulation. I also get doubts sometimes and need some inner dialogue to maintain being bullish but its hard. It speaks for the distress and dislocation in the market.

 

That generally is when markets start to get towards a bottom...you need that capitulation where essentially everyone bails one day/one week.  The more you start to doubt yourself, the closer you are to the bottom.  Cheers!

[Parsad]

5 hours ago, Hektor said:

The situation sounds to me more like the Fannie/Freddie saga in the US.

 

Yes, exactly...very similar.  Cheers!

[Parsad]

2 hours ago, blakehampton said:

I want to start by saying that I'm not an advocate for investment in China. I followed Munger into BABA and then proceeded to slowly bleed to death until I decided that China was a no-go, especially when I thought about the structure of ADRs.

 

However, I don't see anything wrong with this particular situation, I believe bondholders should be punished. They are essentially financing a company that built property developments on down payments without ever finishing them. The bottom line is the customers who were sold a false promise are higher up on the claim ladder than some foreign bond owners.

 

Sure.  Bond holders would naturally take a cut after stock holders are wiped out and there isn't enough in assets.  But in this case, there is and bond holders who naturally would be the owners of the remaining assets are also being wiped out.  That's not right.  That wouldn't happen in virtually every other Western economy or for that matter most developed economies.  Cheers!

[crs223]

4 minutes ago, Parsad said:

But in this case, there is and bond holders who naturally would be the owners of the remaining assets are also being wiped out

 

How “remaining assets” were there?  Who received them instead?

[Parsad]

6 minutes ago, crs223 said:

 

How “remaining assets” were there?  Who received them instead?

 

There were $260B in assets on the books...are you suggesting the real estate portfolio was completely wiped out?  That $260B in real estate holdings in China are completely worthless?

 

If so, they've got far bigger problems than I even imagined!  Cheers!

[crs223]

14 hours ago, formthirteen said:

I will definitely assume 99% of profits from BABA will not reach foreign investors

 

According to yahoo finance, BABA is paying out 18% of earnings as a dividend (1/5.44)