Yes Virginia...It's a Bubble...

[Polish_Silver]

zero real bound

I seriously doubt it. I don't think they have any intention of taking away the punchbowl, despite AEP's assertions otherwise. EVERY single time the Chinese have the smallest indication of a slowdown after they half heartedly "tighten", they blink. They take the still open money spigot and crank the valve wide.

I haven't seen numbers, but people claim China has a lot of inflation. Therefore, although nominal interest rates may seem high, they may be low to negative real rates. What I am thinking is that they cannot lower much without risking even worse inflation. They probably understand that, but the committee could be split along hard /soft currency lines or something. Likewise, if debt levels are high, they cannot raise nominal or real rates.

Scylla or Charybdis?

[GRG55]

Re: Yes Virginia...It's a Bubble...

4.5 on the Richter scale?

"The next default will be likely to happen in overcapacity industries..."
Hoocuddaknown...

Chaori Can’t Make Payment in China’s First Onshore Default

By Bloomberg NewsMar 7, 2014 4:06 AM MT

A Chinese solar-cell maker failed to pay full interest on its bonds, leading to the country’s first onshore default and signaling the government will back off its practice of bailing out companies with bad debt.

Shanghai Chaori Solar Energy Science & Technology Co. (002506) is trying to sell some of its overseas plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters. The company said March 4 it will only be able to pay 4 million yuan ($653,990) of an 89.8 million yuan coupon due today.

The number of Chinese companies whose debt is double their equity has surged since the global financial crisis, suggesting this first onshore bond default won’t be the nation’s last. Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent since 2007, and Chaori Solar may become China’s own “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, according to Bank of America Corp.

“There will be more defaults in China’s onshore bond market,” said Qiu Xinhong, a bond fund manager in Guangzhou at Golden Eagle Asset Management Co., which oversees 13.9 billion yuan in assets. “The next default will be likely to happen in overcapacity industries, such as steel, nonferrous metals and coal. Bond investors will shun private companies with heavy debt burdens because they’re the most at risk.”...

...China Citic Bank won’t help Chaori Solar make any interest payment on its bonds because they weren’t guaranteed, the 21st Century Business Herald reported March 6 on its website, citing an unidentified person from the lender. An earlier liquidity support agreement between the bank and the company can’t be interpreted as a bond guarantee, the report said...

...Companies in China have postponed or delayed at least 6.6 billion yuan of bond sales over the past three days, according to data collected from ChinaBond, China Money and Shanghai Clearing House websites.Four pulled domestic notes sales on the Chaori Solar news. Suining Chuanzhong Economic Technology Development Co. will delay a 1 billion yuan offering due to “serious fluctuations in the bond market,” it said on ChinaBond’s website March 5. Taizhou Kouan Shipbuilding Co., Xining Special Steel Group and Qunsheng Group Co. scrapped offerings for similar reasons...

[GRG55]

Re: Yes Virginia...It's a Bubble...

4.5 on the Richter scale?

"The next default will be likely to happen in overcapacity industries..."
Hoocuddaknown...

Chaori Can’t Make Payment in China’s First Onshore Default

By Bloomberg NewsMar 7, 2014 4:06 AM MT

A Chinese solar-cell maker failed to pay full interest on its bonds, leading to the country’s first onshore default and signaling the government will back off its practice of bailing out companies with bad debt.

Shanghai Chaori Solar Energy Science & Technology Co. (002506) is trying to sell some of its overseas plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters. The company said March 4 it will only be able to pay 4 million yuan ($653,990) of an 89.8 million yuan coupon due today...

Zombies Spreading Shows Chaori Default Just Start: China Credit

By Bloomberg NewsMar 6, 2014 11:07 PM MT

The number of Chinese companies with debt double equity has surged since the global financial crisis, suggesting the first onshore bond default won’t be the last.

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates...

...Total debt of publicly traded non-financial companies in China and Hong Kong has surged to $1.98 trillion from $607 billion at the end of 2007. Some 63 companies have a debt-to-equity ratio exceeding 400 percent, compared to the average of 73 percent. In latest filings, 351 have negative ratios of earnings before interest, taxes, depreciation and amortization to interest expenses, while 409 have coverage of less than 1. Renewable energy, materials, household appliances and software companies dominate the rankings...

[vinoveri]

Re: Yes Virginia...It's a Bubble...

Zombies Spreading Shows Chaori Default Just Start: China Credit

By Bloomberg NewsMar 6, 2014 11:07 PM MT

The number of Chinese companies with debt double equity has surged since the global financial crisis, suggesting the first onshore bond default won’t be the last.

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates...

...Total debt of publicly traded non-financial companies in China and Hong Kong has surged to $1.98 trillion from $607 billion at the end of 2007. Some 63 companies have a debt-to-equity ratio exceeding 400 percent, compared to the average of 73 percent. In latest filings, 351 have negative ratios of earnings before interest, taxes, depreciation and amortization to interest expenses, while 409 have coverage of less than 1. Renewable energy, materials, household appliances and software companies dominate the rankings...

But debt doesn't matter!!!

The fact is that while debt does in fact matter in the long run (e.g., real wealth, real claims etc) , in a world of carefully managed fiat capital/money, where liquidity can be provided in a technically unlimitedly amount (think CBs) - all debt can in principle be rolled over indefinitely. This is the insanity of the current system - and it does not need to collapse unless and until CONfidence in fiat money collapses. The economists and C bankers control the world! Get on the runaway freight train of "growth" and leverage up or you will be run-over. Insanity.

[ProdigyofZen]

Re: Yes Virginia...It's a Bubble...

There has been plenty of liquidity in the system as the SHIBOR rate shows. The problem is no one is lending..........

[vinoveri]

Re: Yes Virginia...It's a Bubble...

I assume you mean "not as much as they used to"; lending is in fact occuring just not in the amounts that allow the rate of growth to approach pre-crash levels - and remember that we always have the "lenders of last resort" if private capital becomes too Spartan.

Whether one makes $10k or $1MM per year, one now depends on the status quo of infinite liquidity and that is why their is muted objection to the insanity that one day will end in reset; keep the music going and worry about it later (b/c we'll all be dead) - Bastards!

[jpetr48]

Re: Yes Virginia...It's a Bubble...

I assume you mean "not as much as they used to"; lending is in fact occuring just not in the amounts that allow the rate of growth to approach pre-crash levels - and remember that we always have the "lenders of last resort" if private capital becomes too Spartan.

Whether one makes $10k or $1MM per year, one now depends on the status quo of infinite liquidity and that is why their is muted objection to the insanity that one day will end in reset; keep the music going and worry about it later (b/c we'll all be dead) - Bastards!

Here is some Friday humor on the bastards. I love this guy perhaps because i am originally from NYC. Dry sarcasm at its best.

http://www.thereformedbroker.com

[jpetr48]

Re: Yes Virginia...It's a Bubble...

There has been plenty of liquidity in the system as the SHIBOR rate shows. The problem is no one is lending..........

Puplava has been speculating that Janet will move the show from Wall St to Main Street- she is losing sleep on all the unemployed so she wants those nasty banks to start lending

i dont know much about the inside of the bank regulations but even if she does make it more attractive to loan to main street, the amount of reserves banks are required to keep on hand and documentation requirements will not all of a sudden loosen the spigots.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Puplava has been speculating that Janet will move the show from Wall St to Main Street- she is losing sleep on all the unemployed so she wants those nasty banks to start lending

i dont know much about the inside of the bank regulations but even if she does make it more attractive to loan to main street, the amount of reserves banks are required to keep on hand and documentation requirements will not all of a sudden loosen the spigots.

Difficult to understand what the Main Street "problem" is when one looks at the Fed's own data. If "banks aren't lending" then where is the credit coming from to drive this???



Although a little more granular look shows a very definite roll-over:

[Slimprofits]

Re: Yes Virginia...It's a Bubble...

They're lending. I receive unsolicated credit card and auto financing offers through the USPS on a monthly basis.

[Southernguy]

Re: Yes Virginia...It's a Bubble...

difficult to understand what the main street "problem" is when one looks at the fed's own data. If "banks aren't lending" then where is the credit coming from to drive this???



although a little more granular look shows a very definite roll-over:

recession?

[mkeplinger]

Re: Yes Virginia...It's a Bubble...

recession?

I think that this is completely explained by the wealth effects of QE. The pullback in spending coincided nearly exactly with the market pullback in January. A reversal and uptick in spending when the february numbers come out would reinforce that opinion.

[coolhand]

Re: Yes Virginia...It's a Bubble...

Of course the US Dollar is a problem. The good thing, to paraphrase the late John Connolly, is that it's their problem. The manipulated currency of a corrupt kleptocracy is hardly part of the solution...unless of course one is part of the manipulation, the corruption and the kleptocracy. Unfortunately China and USA are hardly different in that regard any longer...

This is my whole point. It has been their problem. That is why they are buying gold hand over fist & why foreign official purchases of UST's collapsed in 2013...b/c per EJ's export/import charts, they don't need the US on a net basis for any physical goods anymore. All they need the US for is for the USD trade clearing system...which the US has been using as a political weapon (see QE2, QE3, QE taper, Iran, threats of Russian sanctions.)

So their problem is easy to fix - ditch the dollar. They are doing it. Then it won't be their problem any longer. How can they do that without dollars? Well, it turns out that other Eastern nations understand money better than Westerners. They will accept gold as payment. Here is a list of nations that have established physical gold exchanges: Moscow (oil/food), Dubai (oil), South Korea (electronics/cars/mfg), Singapore (financial), Thailand (mfg) & Shanghai (mfg/electronics).

Ignore what is going on at your own peril. The " 'Merika, hell yeah!" crowd is in for a big surprise...

[Slimprofits]

Re: Yes Virginia...It's a Bubble...

I think that this is completely explained by the wealth effects of QE. The pullback in spending coincided nearly exactly with the market pullback in January. A reversal and uptick in spending when the february numbers come out would reinforce that opinion.

Doesn't the graph end with January 1?

[mkeplinger]

Re: Yes Virginia...It's a Bubble...

Doesn't the graph end with January 1?

It does, but the data was released on Feb 13, and I assumed that it was inclusive of the month of january considering it was an Advance Estimate, and it remained unclear so looked it up. Looking closer at the data and the specific calculation method, I retract my opinion about it being explained by the negative wealth effects from a january downturn, as that data does come from the december numbers. I love this site, it keeps you on your toes.