Seeking Alpha

If you watch the renminbi, you can easily see that the wheels are coming off the bus in China,...

If you watch the renminbi, you can easily see that the wheels are coming off the bus in China, says Simon Black. It's traded down to the lower limit of its strictly-controlled trading band for the past seven trading sessions in a row as investors flee. After decades of placating the masses with state sponsored hyper-growth, official GDP numbers are now slowing, real estate prices are falling, and inflation is quickening - meaning the day of reckoning is drawing ever closer.
Comments (29)
  • spald_fr
    , contributor
    Comments (2803) | Send Message
     
    General Zhang is trying to distract the masses. He stated that China would protect Iran to the extent of world war III.
    9 Dec 2011, 07:51 PM Reply Like
  • User 371810
    , contributor
    Comments (2) | Send Message
     
    Sounds like a tough chess move. WW III if we take out Iran before they finish bomb, or WW III when Iran uses bomb it makes!
    10 Dec 2011, 07:11 AM Reply Like
  • jstratt
    , contributor
    Comments (2867) | Send Message
     
    Jim Chanos had similar comments on CNBC this morning.

     

    I think there is enough merit to reduce exposure to China. Here are the risks investors face in my mind.

     

    1) Metals, Mining and Oil stocks would all be affected by a Chinese drop in demand

     

    2) I have stayed out of Chinese stocks. However my International growth funds have been scaled back

     

    3) Stocks whose entire future growth is predicated on China
    9 Dec 2011, 08:32 PM Reply Like
  • wyostocks
    , contributor
    Comments (9013) | Send Message
     
    We are F**ked.
    Good news is so is O.
    9 Dec 2011, 09:28 PM Reply Like
  • mike8599
    , contributor
    Comments (593) | Send Message
     
    Really ?

     

    We are basing investing advice on this kind information rather than common sense ?

     

    A US slowdown is bound to ripple to China so the comments are predicting basically what already has happened.... so I expect we can expect the same kind of stagnation now. If your not out it might make sense to ride it out.
    9 Dec 2011, 09:31 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    China is a joke. Nothing but massive fraud and rampant corruption.
    9 Dec 2011, 09:47 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (7007) | Send Message
     
    uh, inflation was negative last month. What is this guy smoking?
    9 Dec 2011, 10:02 PM Reply Like
  • Husky Financial
    , contributor
    Comments (212) | Send Message
     
    that is true if you 100% believe every economical statistic that comes out of China...
    10 Dec 2011, 12:09 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    Why bother with economic statistics then? Why bother with any attempt at objectivity when dealing with China? Why not just let fears, biases and subjectivity reign?

     

    The answer is that you then get bullshit analysis a la Simon Black that only has value as propaganda. Apparently he has found the secret to success, as it seems many are receptive to this kind of fear-mongering.
    10 Dec 2011, 04:25 PM Reply Like
  • Husky Financial
    , contributor
    Comments (212) | Send Message
     
    Do you know how China calculates their GDP numbers? How about CPI? The fact of the matter is, they do things MUCH differently than the rest of the world, thus you need to take whatever BS numbers they publish with a grain of salt. I feel the biggest measure of China's current and future economic situation is through observation and actual measurement. The only people who know whats going on in China is those that actually live there, and even then they are shielded from any sort of real data and must rely on what they observe and record.
    11 Dec 2011, 01:31 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    There are many in America that question American CPI and GDP numbers with similar disdain. In the end, a number is a number, and it can be changed like any other number. There has to be a limit to suspicion, otherwise, it does not stop.

     

    " I feel the biggest measure of China's current and future economic situation is through observation and actual measurement. "

     

    Feeling should be absent from actual analysis, even if the analysis moves you to action. If your analysis was objective, then you will know you are taking the right course of action.
    11 Dec 2011, 01:39 PM Reply Like
  • Husky Financial
    , contributor
    Comments (212) | Send Message
     
    http://tgr.ph/szqunW

     

    You can stick with your thesis, and I can stick with mine.
    11 Dec 2011, 01:41 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    The article you cited lends even more credence that China will come off this "crisis" relatively unharmed, and that official numbers are too conservative.

     

    Regardless, good luck with your investments.
    11 Dec 2011, 01:51 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
     
    HF,
    Good link. Another article from same source.
    http://tgr.ph/vOZlN3
    11 Dec 2011, 03:05 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    The article is interesting, but still generally unfounded.

     

    Of course China will suffer if it experiences a 50% decline in GDP growth, but the article only mentions the ramifications of such an event, and none of the causes or why such an event is even likely.

     

    I also find it highly unlikely that nominal GDP growth will halve if inflation is such a risk as the article is insinuating. If prices AND wages are increasing, so will nominal GDP. And make no mistake, it is pure insinuation:

     

    "Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month."

     

    Please, listeners, throw any and all objectivity out the window. Like I said, the fear-mongering is rampant.
    11 Dec 2011, 03:14 PM Reply Like
  • Tack
    , contributor
    Comments (14391) | Send Message
     
    I guess the heat's off in Europe for the moment, so we need some new hysteria cranked up about something else. The world will end in China, now, not Europe, apparently. Please!

     

    Just a few months ago, the press was littered with articles claiming that China's growth had entered a runaway bubble stage that would suffer a huge implosion. Chinese leaders wisely reacted to this concern and tightened economic policies. At first, this did little, but now, finally, there's been some calming effect, as they (and presumably everybody else, a few months ago, at least) desired. Now, the very end that was expressed to be needed has occurred, and this news is greeted with apocalyptic exclamations.

     

    Are there any grown-ups around, anymore?
    9 Dec 2011, 10:25 PM Reply Like
  • mike8599
    , contributor
    Comments (593) | Send Message
     
    I hear ya.... we get continuous tabloid news.

     

    Writers / bloggers in search of advertising pennies. I don't mind folks making money but I'm gettin numb here...
    9 Dec 2011, 10:31 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
     
    Tack,
    World doesn't have to end, it just has to slow down ... which it is doing. If so, risk asset prices will decline. How much, who knows, but decline they will.
    9 Dec 2011, 11:03 PM Reply Like
  • XTigerX
    , contributor
    Comments (286) | Send Message
     
    Agreed Tack.

     

    Peter Lynch identified the phenomenon as "Weekend Worrying". back in the 1980s.
    http://bit.ly/vBnxoS

     

    Real investors do real analysis on their weekend time, they do not wallow in the crisis de'joure.
    10 Dec 2011, 01:18 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    The article is a joke. No substance, mainly fear-mongering.

     

    "Put simply, every year since 2005, more than 50% of China’s GDP has consisted of construction-related spending. The law of diminishing marginal returns says this simply cannot continue."

     

    Of course construction spending cannot continue. I wonder if the author has ever heard of the concept of transitioning from a developing to a developed economy.

     

    "An increasing number of mainland Chinese are establishing permanent residency and sending their child(ren) to school and university in Australia. And Simon recently reported that from an offshore strategies conference in Shanghai that the room was packed full of Chinese people learning how to diversify abroad.
    They all want to have their options open when China’s economy and political system hits turbulence."

     

    Regarding foreign education, think Europe. How many kids from Europe go to schools that are not within their national boundaries? How much do you wish for your kids to go to schools in Europe? This is generally seen as a huge positive, but when China does it...? There is a disconnect here and some obviously unreasonable bias.

     

    "Judging by the poor economic numbers coming out of China, this day of reckoning is drawing ever closer. One alarming indicator is that the Chinese renminbi has traded down to the lower limit of its strictly controlled trading band for SEVEN TRADING SESSIONS IN A ROW."

     

    Ok, this reads like either extremely bad analysis or just extremely poor humor. Let's all base our medium to long term projections of the Chinese economy on SEVEN TRADING SESSIONS IN A ROW.

     

    "Personally, I’d rather have the bulk of my savings in real wealth: things like gold and silver bullion, productive real estate, and strong cash-generative businesses."

     

    I'm sorry, but you sound extremely Chinese here in every single investment class - gold, silver, real estate, and stocks.

     

    "Judging by the poor economic numbers coming out of China, this day of reckoning is drawing ever closer. "

     

    The numbers I have seen are indicating a soft landing. Perhaps the "day of reckoning" for your shoddy analysis is what is drawing ever closer.

     

    Bottom line, the analysis in this article is unbelievably bad. Please do some time to actually dig for real data, instead of anecdotal evidence that signifies nothing.
    9 Dec 2011, 11:53 PM Reply Like
  • Venerability
    , contributor
    Comments (3048) | Send Message
     
    Mr. Chanos backed off in Uber-backoff fashion today!

     

    One wonders, in fact, if he is secretly switching direction, a la Mr. Soros, the World's Cleverest - if most Evil - Scamp.
    10 Dec 2011, 01:09 AM Reply Like
  • raech22
    , contributor
    Comments (13) | Send Message
     
    China is dominating the American consumer market and is going to continue to do so because the American consumers more than ever are going to be looking for the low priced items that will fulfill there needs. Just go to the stores and look around. And I don't invest in China anything.
    10 Dec 2011, 05:31 AM Reply Like
  • DOGS THAT BARK
    , contributor
    Comments (143) | Send Message
     
    real estate prices falling--is bad????
    They've been trying to curtail runaway prices for past 2 years and finally found the key as prices have dropped past 3 months.

     

    The key---In China you only pay property taxes one time--when you purchase property (imagine that)
    --to curb escalating prices- China will soon implement "yearly" property tax on 2nd homes and property-primary residence still, one time only.
    10 Dec 2011, 06:08 AM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    American austerity will only help China. As medicare tightens affecting the consumer in America and as our demographics gray, those on fixed income will look for lower prices and better deals(Costco, Family Dollar and Wally World). Who manufacturers products for those stores?

     

    I bought two small tactical flashlights at Home Depot yesterday, made of aircraft grade aluminum(cheesy cliche, sure), each with 88 lumens and decent, long range focus. They also had nasty self defense ridges in front for secondary blunt force use if necessary. They were small. They came two in a pack. They were FIVE BUCKS... for two! Now, walk around Home Depot. Its the same thing on all the shelves. Price deflation is everywhere. And the American consumer will be increasingly(not less) dependency-tethered to China's cheap production.

     

    Even if China doesn't convert to a domestic economy right away, they have a lot of room to run in continuing to front run cheap crap. Price deflation on all products Americans consume is still the name of the game for the foreseeable future. In fact even moreso as our demographics age combined with the mandatory pared entitlements aka Paul Ryan's common sense or increasing rates on t bills for future failed government auctions which are coming due to debt overhang.

     

    Cheap crap.

     

    And America doesn't make cheap crap anymore. We're too spoiled and have too many regulations to make it possible.
    10 Dec 2011, 10:20 AM Reply Like
  • wyostocks
    , contributor
    Comments (9013) | Send Message
     
    Wyatt
    Your last eight words say it all. And that is way we have the unemployment that we do.
    10 Dec 2011, 10:50 AM Reply Like
  • Tack
    , contributor
    Comments (14391) | Send Message
     
    wyo:

     

    Even more important:

     

    1) Education in America has become political indoctrination, not education or technical training.
    2) People have been trained to embrace an entitlment mentality, without any requisite need for earning it.
    3) It's become politically advatangeous for the left to subsidize unemployment and endless dependency as a vote-assuring mechanism.
    4) Boundless taxation and growing regulations, fees and bureacratic idiocy are fostering robust growth in an underground balck-market economy.

     

    All these rank far higher in effect than what kind of stuff we make.
    10 Dec 2011, 11:07 AM Reply Like
  • wyostocks
    , contributor
    Comments (9013) | Send Message
     
    Tack
    Agree, the progressives have sunk the ship.
    Point one is well taken. Talk to a college student about the useless "electives" they must take to graduate. It is a joke.
    10 Dec 2011, 11:12 AM Reply Like
  • Joe Dirnfeld
    , contributor
    Comments (1128) | Send Message
     
    China is doing fine, and will continue to do fine.
    10 Dec 2011, 12:12 PM Reply Like
  • digitalpeter
    , contributor
    Comments (5) | Send Message
     
    CHINA trample BEARS.
    10 Dec 2011, 01:47 PM Reply Like
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