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  • Affects Of A China Real Estate Crash  [View article]
    "The "average" Chinese person is now earning somewhere between $5k and $10k per year (depending on how you calculate it)"

    I would put the number between $3000-5000. According to the government's stats, the average household earns less than $3000 per person in the cities. It's much less in the countryside (under $1000) http://bit.ly/I7pkLg Then again, the government is known to fabricate these stats, so maybe these numbers should be taken with a grain of salt. According to the World Bank, over 200 million Chinese (the size of Brasil) live on less than $2 a day. What foreign visitors see in the metropolitan cities doesn't tell the whole story.

    I agree with most of what you said in the rest of your post. However, I wouldn't be surprised to see oil prices collapse like they did in 2008. I see a black swan just around the corner.
    Apr 24, 2012. 05:39 PM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    The average Chinese is earning 3rd world wages, but millions of vacant apartment units are being sold for 1st world prices. The factory workers earning $2000/year are not going to become home buyers any time soon, even if their wages are rising 10% annually. Real estate prices would need to crash in order for this to happen, which would mean tens of thousands of developers will be unable to pay back the loans that are due within the next few years. If we had a 30 year time frame and the Chinese economy was guaranteed to grow unimpeded at a 10% clip, your argument might hold sway. I don't see this happening. Instead, I see GDP growth slowing to around 4% over the next decade as the government tries to reform the economy and increase consumption. It's not going to be easy. There are just too many 'ifs' involved with China's current social, political, economic situation to be optimistic about the country's future.
    Apr 21, 2012. 12:38 AM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    Just because China hasn't reached developed market status doesn't mean that it can continue to grow unimpeded until it does. There will be huge hiccups along the way. China's housing bubble has already surpassed Japan's, yet it still lacks the social structure and income stability that Japan possessed at the peak of its bubble. That's a huge issue. When the bubble bursts, it's going to be a lot more painful.


    Apr 20, 2012. 04:45 PM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    1) Someone else made the point that incomes are rising much faster in China than in the US.

    Well, they need to grow much faster. Real estate prices have risen 150% over the past 7 years. Wages haven't kept up. The price to income gap just keeps getting larger. With an average salary of $4-5000, it's going to be very difficult for these workers to buy the millions of vacant luxury apartments in the cities. The property developers need to sell these units in order to pay back the loans, which I believe are due some time this year. I guess the government can lend them more money, but this can't last forever.

    "You can use the same argument for San Francisco and New York"

    At the peak of the real estate bubble in the US, the price to income ratio in San Francisco was 7.5:1. Right now, the price to income ratio in cities like Shanghai and Beijing is 27:1. This huge imbalance is not due to wealthy expats; it's mainly due to rampant speculation.

    "In the US, there's more land than the people can use. In east Asia, you generally have the opposite problem"

    Japan's real estate crash in 1990 shows that this argument can only go so far. Japan had a much more stable distribution of income and social structure than China. In addition, Japan's population density per square kilometer was much larger than China's. Regardless, this didn't stop the imbalances from catching up to them. The size of China's real estate bubble has already surpassed anything Japan experienced in the late 80s.

    "In both the US and in China (and indeed any other country in the world), governments tell their people what they want them to hear."

    There's one BIG difference. In the US we have the right to report or investigate any discrepancies in those numbers. Independent firms can launch their own investigation without having to worry about being locked up or put under house arrest by the authorities. We have freedom of press and speech in this country. Unfortunately, almost all of the critics of the Chinese government's "man-made" numbers are coming from outside the Mainland. The government ultimately controls what the media reports. If you challenge them, they will shut you down. It's all about "face" and portraying a positive image no matter what. There aren't any Mainland Chinese versions of Muddy Waters Research, although it looks like they're in desperate need of a few.

    Apr 17, 2012. 07:10 PM | Likes Like |Link to Comment
  • With a 51-45 vote, Senate Republicans block the "Buffett Rule's" raised federal taxes on millionaires (30% on income for those making $2M annually).   [View news story]
    Clinton actually borrowed hundreds of billion$ from the Social Security Trust Fund to pay down the public debt. This inter-government lending actually led to an increase in the deficit. Essentially, he just borrowed money from the trust fund and replaced it with IOUs. The so-called "surplus" was wiped out before Bush II even took office in January 2001. By the time he passed his first budget in October 2001, we had already accumulated a $133 billion deficit. Since the last budget was passed by Clinton, I would argue that it's his deficit. I would also argue that the economic growth we experienced in the 1990s was stimulated - in large part - by the policies implemented during Bush I's term in office.
    Apr 17, 2012. 12:49 AM | 2 Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    At the peak of the US housing bubble, the price to income ratio was 5:1. In Las Vegas it reached 5.6:1. Right now, the price to income ratio for China is 10:1. That's according to government stats, which, as we all know, are dubious to say the least. In Beijing and Shanghai the price to income ratio has reached 30:1. China's housing bubble dwarfs anything we saw in the US.
    Apr 16, 2012. 03:59 PM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    I could have bought a 1800 sq. ft. home 20 minutes outside of Miami in 2005 (height of the real estate bubble) for $60,000. It doesn't mean anything. With an average annual salary of $4000, it would be a stretch for the average Chinese to even buy a $30,000 home, let alone $300,000. There are millions of empty apartment units in the coastal cities selling for $250,000-300,000 with no buyers in sight. That's the big issue.
    Apr 15, 2012. 04:10 PM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash  [View article]
    It doesn't matter how much the buyers put down. Only 1% of the entire population can actually afford a $300,000 apartment in Shanghai. The price to income ratio is around 27:1. There simply aren't enough rich Chinese to fill the glut. Obviously, the main problem is oversupply and a lack of affordable housing. Unless the developers can sell the millions of empty apartments and homes they've built, they'll be in deep "you know what." In the end, someone has to foot the bill.
    Apr 14, 2012. 05:08 PM | 1 Like Like |Link to Comment
  • Slowing GDP growth doesn't make the top of the list of China's worries, writes John Foley. At the head of the pack is political shenanigans - as exemplified by the Bo Xilai saga - surrounding next year's leadership change. Next is the banking system - "built on distortions that promote misallocation of capital" - reporting a spurious 1% of loans as non-performing.   [View news story]
    The emperor has no clothes!
    Apr 13, 2012. 04:40 PM | Likes Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share  [View article]
    You need to think bigger!!! The best long term option is space-based solar power. NASA is funding a bunch of projects. http://bit.ly/I9G2cF The biggest wild card is whether they can reduce the cost of launching stuff into space. This is where the private industry comes into play.
    Apr 13, 2012. 04:37 PM | Likes Like |Link to Comment
  • A rumor China's Q1 GDP is going to print 9% tonight is being give some credit for today's rally in risk assets. Putting aside suspicions about Chinese data, we forget - is it bullish or bearish for the number to come in fast? Wouldn't strong Q1 GDP lessen the need for monetary ease - rumors of which are also getting credit for today's rally.   [View news story]
    Government stats are unreliable, especially when they come from autocratic dictatorship like China. Even the Vice Premier, Li Keqiang, admitted that China's GDP is "man-made" http://reut.rs/qp5sgQ. The Soviet Union fabricated economic figures for decades before it all came crashing down. Electrical output/consumption and cargo shipments are the best way to gauge how healthy the Chinese economy is. The numbers regarding electrical consumption indicate that the economy is growing in the low single digits, which would mean that things are worse than what's being reported. http://bit.ly/HECAID
    Apr 12, 2012. 07:37 PM | 1 Like Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share  [View article]
    It's no use, JohnLocke. Just hit the ignore button. Some people can't accept the truth, even when it's staring them in the face.

    Apr 11, 2012. 10:54 PM | Likes Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share  [View article]
    Chinese solar companies are propped up by the government and are, for the most part, unprofitable. They've received $30 billion in state subsidized loans. They also have credit lines with state-backed banks. It's like Solyndra X 100! The Chinese government's policies are creating artificial demand. When the loans and credit lines dry up, so will they. http://onforb.es/HY8JJs
    Apr 9, 2012. 05:55 PM | 2 Likes Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share  [View article]
    "Gee it tuns out we have one of the LOWER EFFECTIVE TAX RATES IN THE WORLD."

    When you take into account inventory allowances, interest deductions, depreciating deductions, America's effective corporate tax rate is 35%, which is still way higher than the international average. http://bit.ly/Hm40Pw Other OECD companies have cut their corporate tax rate by an average of 7% since 2000. We haven't lowered ours at all. We are overtaxed and overregulated!

    It's actually forcing our most productive companies to move overseas. Many Fortune 500 companies save billions every year by moving their operations to countries where they are exempt from paying taxes. The profits these companies make overseas stay there. We're talking tens of billion$ of dollars. When they lose money on overseas investments, those losses are netted against their gains at home. Either way, it's a win-win for them. The real losers are the American workers. With unemployment at 8.2%, we need these companies to invest more at home, and we need to incentivize them to do so! Lowering the corporate tax rate would help.

    Even Obama wants to lower the corporate tax rate!
    Apr 7, 2012. 04:13 PM | 4 Likes Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share  [View article]
    "the top tax rate in the 1950's was 91%"

    The middle class was paying a much larger % of the overall tax burden back then. In addition, you failed to mention that the share of income taxes that the richest 1% pay has actually risen, even as the top rates decreased. For example, in the 1970s, when the marginal tax rate was 60-70%, the richest 1% were paying 30% of all income taxes. Right now, with the marginal rate at 35% (roughly half of what it was in 1970s), the richest 1% are paying over 40%. See graph: http://bit.ly/HlaliO
    Apr 6, 2012. 11:48 PM | 4 Likes Like |Link to Comment
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