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JC51

JC51
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  • China's Giant Catch-22 [View article]
    Great article! Probably one of the best I've read on this topic. You covered all of the major points.

    People seem to forget that the US economy kept churning along after Japan's economy imploded back in 1989-90. Back then, people were predicting Japan would take over the world, or that their foreign currency holdings would shield them from an economic catastrophe. They couldn't have been further from the truth. It won't be any different this time around, except China will be lucky if it experiences a Japan-like "Lost Decade." China's economic imbalances are far larger than anything we saw in Japan. Not to mention, Japan was already developed by the time it hit the "brick wall." They also never had close to 1 billion people living in poverty, unlike China. They can ill-afford to to let this kind of collapse occur. The necessary reforms China will be forced to undertake could take a decade or longer to implement and the transition will be very painful. It looks like they'll kick the can down the road as long as they can, at least until after the 5th generation leadership transition. Eventually, they'll have to face the music.
    Jul 27 05:52 PM | 10 Likes Like |Link to Comment
  • The Solar Bubble Has Officially Burst - Survivors Will Ultimately Capture More Market Share [View article]
    You can tax the rich at a 99% clip and you'd still only reduce our $16 trillion deficit by $600 billion. Not to mention, the top 1% pay over 40% of all taxes. America has the highest corporate tax rate in the world at 39%. Are you suggesting that we raise these rates? This kind if socialist mentality is going to bankrupt the country, if we haven't already reached that point. Any society that taxes productive citizens and rewards unproductive ones is bound to collapse. Every single plan that the government has implemented since the start of the recession, under Bush and Obama, has failed. If anything, government regulation is slowing the "recovery." We are blowing trillions of dollars on a broken educated system, wasteful entitlement programs, and a war with no end. On average, it costs more to send a child to public school than a private one, even when they score far lower on tests. Why do we continue to invest money in failed social programs and experiments, especially when the private sector has proven to be more efficient at running things? Competition is a good thing! Even when we try to reform the system, the unions impede the process. Increasing taxes to fund more Solyndras isn't going to get us out of this mess. It's obvious that wind power and solar are not near-term solutions. We have plenty of untapped natural resources that we should be exploiting here.
    Apr 6 11:10 PM | 9 Likes Like |Link to Comment
  • China: Understanding The Nature Of The Bubble [View article]
    This article provides very little substance at all. It's mostly just the authors opinion, nothing else. We'll see who's right after the bubble bursts. When 60% of your economy relies on fixed asset investment, you can't just turn that hose of without feeling some major ramifications. It didn't work for Japan and it won't for China.
    Oct 21 03:57 AM | 7 Likes Like |Link to Comment
  • Next Up: Spanish Bailout? [View article]
    So, according to you, the US needs to spend profligately in order to grow. What you're advocating is what got Europe into trouble in the first place. They have now been forced to cut spending because they're faced with economic disaster. The US is just a bit behind the curb. I suggest you research the Weimar Republic. Even if you took all of our billionaires' money, you'd still only reduce the deficit by $600 billion ($13 trillion - $600 billion). That would barely put a dent in the deficit. When America experienced its most dramatic economic growth, the government made up only 5% of our gross domestic product. Right now, it's over 20%! The government obviously needs to cut spending, cut taxes, and get out of the way. The bigger the government becomes, the more imbalances they create.
    Apr 1 05:07 PM | 5 Likes Like |Link to Comment
  • Jim Rogers says the hit that stocks took today over concerns of an economic slowdown in China is actually a good thing. “I’m delighted to see it,” Rogers says. “They need to do that. It’ll be good for China, it’ll be good for the world, and it will present opportunities for all of us. I hope that the Chinese market collapses so I can buy Chinese shares.”  [View news story]
    Not necessarily. When Japan's economy hit a brick wall back in 1989-90, the US kept churning along. I don't see why this time around would be any different. Countries that rely on exports to China, particularly commodity exporters, will get hit the worst. Australia, Brazil, Canada, Russia, Saudi Arabia, and Iran should be worried. I would argue that a decline in commodity prices would actually be beneficial to the US economy. I would be much more fearful of what's happening in Europe.
    Mar 22 11:01 PM | 5 Likes Like |Link to Comment
  • Turkey Is Not A Good Investment [View article]
    Over the next 30 years, I expect Turkey (the country) to be one of the better performing emerging markets. There will probably be hiccups along the way. There isn't another country in that region of the world that can challenge them economically, militarily, or economically.
    Feb 14 10:28 PM | 5 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 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 11:48 PM | 4 Likes Like |Link to Comment
  • Next Up: Spanish Bailout? [View article]
    "China's Q1 growth is estimated to be around 8.2%"

    Government stats are unreliable, especially when they come from autocratic dictatorship like China. Even the Vice Premier, Li Keqiang, admitted this http://reut.rs/qp5sgQ. I've posted this link a few times, but it's not sinking in due to your "selective reading." China could already be in hard landing territory, but the government certainly won't admit this. They will hide and distort any numbers to fool the public. 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. Electrical output shows that the economy is growing in the low single digits, which would mean that the economy is far worse than what is being reported.

    "China is in talk with Ireland in helping with its infrastructure."

    Ireland is broke! http://bit.ly/H77aH1

    "China is buying resources everywhere."

    Once again, this goes back to what I mentioned before: The government could be fabricating economic figures. In a global economic slump, they cannot continue to report rosy trade surpluses as they have in the past. Europe and the US have been placing too much pressure on them to end their mercantilistic trade policies. Hence, in order to quell their critics, the Chinese government has been hoarding commodities to create an "artificial" trade deficit. This cannot go on forever. It's partly why I believe commodity prices (oil, gold, copper, etc) are in bubble territory and will fall when the Chinese economy implodes. The law of supply and demand will catch up to them. Any stimulus measures taken by the government will only prop up the bubble, create more imbalances, and delay the inevitable collapse.
    Apr 1 06:55 PM | 4 Likes Like |Link to Comment
  • Is The Chinese Yuan 300% Undervalued Against The Dollar? [View article]
    The Googles, Microsofts, Apples, and Facebooks will continue to spring up in America. China's political and educational system is holding its citizens back. They can pass a test with flying colors, but they don't have a creative bone in their bodies. In order to change things, they need to undergo major reforms. I just don't see this happening.

    The world's brightest are certainly not flocking to China. China is having trouble keeping its own phenoms at home. The most intelligent Chinese have their eyes set on Stanford, Harvard, Columbia, Yale, etc for that Ivy League piece of paper. Most of them do not return to China, especially if Google or Facebook come knocking on their door. Of all the Chinese with a net worth of at least $15 million, over 47% of them are considering emigrating. Free societies prosper, while authoritarian ones wither.
    Sep 19 05:55 PM | 4 Likes Like |Link to Comment
  • Next Up: Spanish Bailout? [View article]
    "Growth in Spain was fuelled by an oversupply of cheap capital that found its way mostly into real estate. Once that bubble popped, it left behind a gaping hole that will require many years to fill."

    Sounds like China
    Mar 31 02:35 PM | 3 Likes Like |Link to Comment
  • Gold Confirms Investments In China Will Eventually Be Worthless [View article]
    First off, according to China's vice premier, Li Keqiang, China's GDP numbers are unreliable. http://reut.rs/qp5sgQ

    Second, a country with an extremely high savings rate but misallocates its capital (China) will not grow any faster than a country with a low savings rate but invests its capital efficiently (US). Japan found this out the hard way in the 1980s. China obviously didn't learn from its neighbor's mistake. Building high speed trains that crash, 60-70 million vacant apartment units, empty highways, and bridges to nowhere are not prudent investments.
    Feb 9 10:14 PM | 3 Likes Like |Link to Comment
  • Is Chinese Real Estate Actually Suggesting A Melt Up...Not Down? [View article]
    Well, if the IMF and World Bank say so, it must be true (sarcasm intended). These same institutions missed the real estate crash in Japan and the US. I guess they really don't know as much as you think.
    Feb 1 06:26 PM | 3 Likes Like |Link to Comment
  • China: Understanding The Nature Of The Bubble [View article]
    "I can't imagine the carrying costs are large and probably have been taken into consideration. The government has planned on supporting hundreds of millions of Chinese peasants migrating to the big cities. Eventually the units will be filled."

    You actually believe that the millions of empty luxury housing units in Beijing and Shanghai selling for $250,000 + are going to be consumed by migrating peasants whose average salary is less than $2,000/year. Good luck with that argument!
    Oct 21 04:28 PM | 3 Likes Like |Link to Comment
  • Is China The Biggest Malinvestment Case Of All Time? [View article]
    "Is China in better shape than US...China has more foreign reserve (though depreciating) than most other countries."

    Japan's foreign currency reserves didn't help stave off a severe recession in the 90s. The US' gold reserves didn't prevent the Great Depression of the 1930s. China won't be any different. As scary as it sounds, the US is the best looking pig in the pen.

    "If US has 5%, they will jump up and down and their president would declare victory for the century"

    It's much easier for a backward 3rd world country to grow 8% than a developed one to grow at 3%. It's common sense. The same analogy can be made when comparing small and large cap stocks. Once again, it's Economics 101.

    You should take social and political factors into consideration when you're trying to determine how healthy an economy actually is. Iraq, Afghanistan, Ghana, and Turkmenistan all grew over 7% back in 2010. Are any of these countries stable? Is there rule of law there? There's a reason they're called "developing" countries. As we witnessed during the purge of Bo Xilai, China's political situation isn't much different than what we see in dictatorial Middle Eastern nations. I don't know about you, but I'm not knocking down doors to invest in any of these developing countries, including China, and I certainly wouldn't call their economies healthier or more stable than the US.

    "If you look at many countries like Japan and Korea which do not have a lot of natural resources/farm land per capita, they all started with exporting cheap consumer products and then developed their internal market and moved up the product chain. China is no difference. The difference is the size and scale"

    What you seem to be ignoring is how painful the transition will be from an industrial to service economy. Every high growth Asian country that has tried to make the transition has experienced a severe economic slowdown. Even now, Japan and South Korea's service sectors are only half as productive as the US'. China can't risk a severe slowdown because of their size, which, contrary to your opinion, is a huge disadvantage. Japan, Taiwan, and South Korea didn't have 1.3 billion people to worry about when they made the transition. If China's factories close or move elsewhere, the Chinese government will have to deal with tens of millions of unemployed and disgruntled workers.

    Another aspect that you failed to take into consideration is the fact that Japan and South Korea both lie under the US security umbrella (economically and militarily), which has helped them to flourish over the past half-century. This relationship cannot be underestimated. The technology transfers and agreements that have been made allow these countries to thrive. They give us bases to station troops, while we provide access to the US market. As long as the US Navy is able to secure the free passage of their goods around the world, the agreements remain in tact.

    "China at this point does NOT have to grow 8%"

    China needs to maintain at least 8% GDP growth just to keep up with the rate of urbanization and maintain stable employment levels.

    Sep 25 05:55 PM | 2 Likes Like |Link to Comment
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