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Tales From The Future. I picked my nickname because many advisors and investors claim they can predict the future of the (stock) markets and somehow pick the winners. I don't. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at the big... More
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  • Bubble Watch: China And Shadow Banking (Reminder) 7 comments
    Jan 17, 2014 9:13 AM | about stocks: PEK, FXI

    I wrote about shadow banking cracks in China before, so I will keep this entry short.

    While Japan (and to a lesser extent the U.S. and Europe) has a giant public debt problem, China has a nasty shadow banking problem that won't go away, expect more bad news in 2014 and beyond on this...

    (click to enlarge)

    "There is an unresolved self-contradiction in China's current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years."

    Source

    Themes: china, shadow banking Stocks: PEK, FXI
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Comments (7)
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  • Sellinpanic
    , contributor
    Comments (691) | Send Message
     
    Good blog tftf, right on every metrics.

     

    I'm getting also growingly worried on the next financial crisis, as things stand now China's bank system collapse seems approaching us alarmingly fast. Bad debt is growing quickly while at the same time China's growth is slowing down even faster than predicted and as things stand I see something similar like Lehman Brothers happening in the next 8-15 months. Also reliable information from China is hard to get by as every negative news on the banking system is very well censored by the Chinese authorities. Needless to say what the effects are on the global economy when a "Made in China" financial crisis hits us.
    17 Jan 2014, 01:21 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5782) | Send Message
     
    Author’s reply » Thanks for your comment. China's shadow banking and credit bubble is one of the key risks I try to watch closely short- to mid-term.

     

    Two things make this difficult:

     

    - I don't speak the language, English news is often filtered
    - Many of the public/economic figures can't be taken for granted (to put it politely)

     

    Longer-term Japan (public debt/GDP) is even more worrying to me, but that's probably 5-10 years off, maybe longer because their own central bank and most debt (still) held domestically.

     

    I also compared a Japan currency implosion to a Lehman event given Japan's vast overseas assets in earlier blog entries.

     

    In short, there's a good chance the next global financial crisis might erupt in Asia.
    17 Jan 2014, 02:51 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5782) | Send Message
     
    Author’s reply » Here's the direct link on my Lehman-Japan Instablog for anyone interested:

     

    http://bit.ly/1hEi1fq

     

    Disclosure: Since publication I sold out of Softbank, still hold SNE.
    19 Jan 2014, 07:21 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5782) | Send Message
     
    Author’s reply » First shadow defaults coming in China:

     

    http://bit.ly/1eUUmEN
    23 Jan 2014, 07:38 AM Reply Like
  • Sellinpanic
    , contributor
    Comments (691) | Send Message
     
    Here we go tftf,

     

    China meltdown starting now and much sooner than 8-15 months as I wrote earlier. Going 70% cash on my portfolio even selling core TSLA positions acquired at $55 and $66. Only keeping my very long-term dividend value stock positions that I've held for 15+ years in which dividends have already paid up my initial investment through the years. Also I'll go short on few selected stocks and short SPY for a while. Otherwise a great buying opportunity emerging in the next 3-4 months due to China financial crisis. Any thoughts on my strategy tftf?
    24 Jan 2014, 10:45 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5782) | Send Message
     
    Author’s reply » Contagion and timing is hard to predict (as always).

     

    I see two separate issues this year (apart from additional unexpected challenges of course):

     

    1. The Shadow Banking Issue in China to me looks a bit more contained domestically for the moment, (Western) foreign banks are less involved directly.
    But there are might be domino risks within Asia.

     

    2. Emerging markets in general: Forex volatility due to FED tapering (Argentina, Turkey...more cracks might occur).This might become an emerging market crisis in the worst case, but I don't see this coming yet.

     

    As for stocks, I'm already out of most long positions since late summer/autum 2013 with most of my stocks. I'm just holding short-term and looking into shorting. So, a similar strategy.

     

    I don't know about the 3-4 months, I think a lot depends on the course and communication from the FED (after the transition to Yellen).

     

    Very short-term (intra-day or holding for just a few days) vehicles like the VXX can also help.
    27 Jan 2014, 08:51 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5782) | Send Message
     
    Author’s reply » A good update on the bubbles in China:

     

    "China's prosperity has been simply the result of an exponentially increasing amount of loan and liquidity creation..."

     

    "The only problem is that it is becoming increasingly difficult to hide all the pieces of funny money, most of which result in bad and otherwise impaired loans, under the rug. And just to show the problem in its context, here is how China's banks created some 50% more in bank loans in January [2014] than the QE credit money created by both the Fed and the BOJ combined."

     

    http://bit.ly/1dYVmWG
    17 Feb 2014, 12:41 AM Reply Like
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