Wednesday, November 21, 2012

A couple morning news notes


BI - housing starts "go vertical". OK, the minute BI gets this hyperbolic on a topic, we can assume it's entirely baked into the market. Too bad; I was starting to like the idea of the S&P going up from here.

 Reuters - China banks turn blind eye as bad corporate debts pile up. I put this forward because I still think the third crash of this secular bear will be caused by China. They have a demographic cliff coming up in just a couple years; the same kind of demographic cliff (short-term, which has since reversed) was associated with the US housing crisis. The Chinese banking industry is weak in the same way that the US banking industry was in 2005-6 when the prescient folks started warning of a US collapse.

This'll be the thing that caves in commodity prices, and heck maybe we'll even see $800 gold as the Chinese economy falls to bits. The only way to avoid this is if the new Chinese leadership can do something radical that purposefully violates the rules of economics.



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3 comments:

  1. Compare the demographics with the potential of growth:
    China:
    50 cars/1000 people.
    Germany:
    +500 cars/1000 people.

    Look how many Americans are obese.
    And how few Chinese.

    There's lots of room to pump up the consumer-bubble.

    ReplyDelete
    Replies

    1. There still remains the problem of the Chinese dependency ratio and its effect on growth.

      Several months ago I remember reading a large number of articles - dunno if it was Chovanec, or some other China blogger, or even FT - that said China needed >6% growth just for its economy to remain stable. Once you lose the demographic driver for the growth, you get in trouble.

      Now, maybe the Chinese leadership moves to improve state supports for senior citizens? A proper liveable state pension for seniors would reduce the extreme love of saving that the Chinese have, and that money could flood into the system and be a boost to counter the demographic drop. It's possible, we'll see.

      Delete

  2. ...but remember gold is not a commodity (http://www.incakolanews.blogspot.ca/2012/11/chart-of-day-is_21.html)

    ReplyDelete

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