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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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  • China's Credit Nightmare - Paging Minsky 6 comments
    Mar 23, 2014 1:50 AM | about stocks: MCHI

    Is this time different in China?

    Every investment boom coupled with excessive credit expansion has ended in a hard landing sooner or later.

    Just a few charts without further ado:

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Source

    Connect the dots and duck for cover. It could look like Mark Hart was just a few years early (bubbles are always hard to time), this article was from late 2010:

    Hedge fund manager Mark Hart bets on China as the next 'enormous credit bubble' to burst
    Mark Hart, an American hedge fund manager who has made millions predicting the crises in US sub-prime market and European debt, has launched a fund to bet on the imminent implosion of China.

    www.telegraph.co.uk/finance/newsbysector...

    Once it's all over in a few months or years the bottomed out Chinese/Asian stock markets could be an interesting buy.

    But then, China's neighbor and important economic partner Japan has an equally dangerous long-term problem (public debt/GDP) that may pop up next - or a coming crisis in China could act as an accelerator exposing Japan's public debt problem.

    Themes: China, credit bubbles Stocks: MCHI
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Comments (6)
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  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » To discuss a counter-argument before it is brought up:

     

    Speaking of total indebtedness, UK and Japan have numbers close to 500% of GDP, srill much higher than China's total debt numbers. But both the UK and Japan are mature economies, China is not (yet).

     

    A lot of shadow banking debt also is outside of official statistics in China and therefore international comparisons.

     

    In addition, the absolute debt number is just one factor, the other is the sequential fast rise of debt since 2008 in China which is unprecedented.
    23 Mar, 11:29 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » A quick overview on the Chinese shadow banking system threats can be found in this article:

     

    http://bit.ly/NS6df7

     

    It's a good first introduction to the topic for readers who want a quick overview or starting point.
    26 Mar, 02:09 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » And once more:

     

    China's Credit Pipeline Slams Shut: Companies Scramble For The Last Drops Of Liquidity

     

    http://bit.ly/1gskAm8
    27 Mar, 12:14 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » Another general article on China's challenges in 2014:

     

    http://ti.me/1m7snWV
    27 Mar, 01:23 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » I would also like to point out new metrics to measure a nation's debt level, such as Debt/CF:

     

    The purpose of this research is to explore how the
    Debt to Cash Flow ratio (“Debt/CF”) can be applied to
    a nation as a monitor of its fiscal health. Debt/CF is known to be an effective predictor of corporate loan
    covenant violations and bankruptcy. Ending Over
    -­‐ Lending examines the merits of this tool in measuring the indebtedness of nations, the debt-­‐
    carry ing capacity of nations, and the early warning signals to avert financial crises of nations.

     

    http://bit.ly/1fFeivd

     

    (PDF file, homepage here: http://bit.ly/1fFeivj )
    31 Mar, 04:48 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5020) | Send Message
     
    Author’s reply » A few updated articles on the topic...

     

    http://bit.ly/1kJJj9K

     

    http://bit.ly/1pDmJOP

     

    Chart: http://bit.ly/1pDmJOQ

     

    Also see the BIS reports:

     

    "The BIS tracks the financial cycle with gauges of private sector debt as a percentage of gross domestic product, and measures of national property price gains. While the U.S. is in the healing phase of the financial cycle and Europe is in the correction phase, the BIS debt metric for China is now flashing red. The measure of private sector debt to GDP is running 23.6% above its long-run norm in China, the highest level among the countries it tracked."

     

    http://on.wsj.com/1pDo3RX

     

    To read a counter-argument, read for example here:

     

    http://bit.ly/1pDn6cj
    7 Aug, 12:12 AM Reply Like
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