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

[touchring]

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

I see traffic congestion as a bigger threat to long term car sales in China than subsidies or money printing.

Chinese cities may also impose restrictions on cars ownership to encourage people to use trains.

http://www.scmp.com/news/china/artic...-and-pollution

Shenzhen residents were angered last night when authorities imposed a quota on new car number plates without public consultation or advance notice nearly a year after the mayor had ruled out such a move.
The municipal government issued a statement at about 5.45pm announcing that from 6pm, the city would issue 100,000 number plates each year via auctions or lotteries.
Until yesterday, any Shenzhen resident with a valid driver's licence could buy and register a private car. Shenzhen now joins other major cities that have imposed quotas to help curb the growth in private car ownership.
According to the city's transport commission, 60,000 plates will be issued via lottery, including 20,000 for fuel-efficient cars and the remainder for conventional cars. The remaining 40,000 plates, for conventional cars, will be auctioned.

But you get a free license plate if you drive an electric car.

http://www.bloomberg.com/news/2015-0...-for-free.html

Owners of Bayerische Motoren Werke AG (BMW)’s i3 electric car in Shanghai can register their vehicles for free after the city exempted them from paying license plate charges of about $12,000.


The city gave out the first free license plate for an i3 on Jan. 6, the Munich-based carmaker said by e-mail. Owners of Tesla Motors Inc. (TSLA)’s electric cars also enjoy a waiver from license plate fees in Shanghai, which is among Chinese cities that are restricting new vehicles and providing incentives for alternative-energy autos to curb worsening pollution.

[jk]

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

I see traffic congestion as a bigger threat to long term car sales in China than subsidies or money printing.

Chinese cities may also impose restrictions on cars ownership to encourage people to use trains.

http://www.scmp.com/news/china/artic...-and-pollution



But you get a free license plate if you drive an electric car.

http://www.bloomberg.com/news/2015-0...-for-free.html

the chinese market is a big deal for many global automobile manufacturers. this will really push them all in their development of plug-ins, which will also have spill over effects increasing the availability, and sophistication of such vehicles outside of china, as well as lowering costs because of the increased volume.

[GRG55]

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

...But you get a free license plate if you drive an electric car.

http://www.bloomberg.com/news/2015-0...-for-free.html

The Ultimate Driving Machine becomes the ultimate jelly bean

[santafe2]

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

The Ultimate Driving Machine becomes the ultimate jelly bean

Oh oh. The Ultimate jelly bean just inspired the Chevy jelly bean imitator....the new Chevy Bolt. You can't make this up. Nice arcade lighting on the rear view mirrors...step right up folks.

[GRG55]

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

Oh oh. The Ultimate jelly bean just inspired the Chevy jelly bean imitator....the new Chevy Bolt. You can't make this up. Nice arcade lighting on the rear view mirrors...step right up folks.

Bolt? As in Bolt of lightning? They should have named it the Chevy Ben, after Franklin and his famous kite.
Looks like it might appeal to the young urban set. Has that non-offensive androgynous look that GM (and others) have fallen in love with; less masculine than the BMW i3, but not as "cute" as a BMW Mini.

And I notice the Volt 2 styling is slightly less plain vanilla GM than v.1, but nothing that is going to get anyone excited. What is with the General Motors design studio these days? They need to fire half of them, send the other half out to dealerships to try to flog their bland cars for a few months and maybe they'll smarten up. Doesn't matter if it is all-electric, hybrid or hoary monster ICE powered...people want to buy something they can be proud to own and show off just like #2, the trophy spouse.

Every now and then there's a flicker of design talent trying to break out at GM. It is usually displayed in their concept cars, never the variants that make it to production unfortunately. Here's this week's example from the Detroit Motor Show...a Buick concept evocative of the very best of the Rivieras that ever rolled out of a GM plant in the 1960s (and a nod to a few of the styling themes from the '66 Olds Toronado). Now if they set up to offer this in a hybrid version I think they would smoke the miserable sales results of the Volt.

[santafe2]

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

Bolt? As in Bolt of lightning? They should have named it the Chevy Ben, after Franklin and his famous kite.

The new Chevy Dolt cannot be far behind. Looks like a wheelchair but we'll march on Washington if anyone disrespects it.

And I notice the Volt 2 styling is slightly less plain vanilla GM than v.1, but nothing that is going to get anyone excited. What is with the General Motors design studio these days? They need to fire half of them, send the other half out to dealerships to try to flog their bland cars for a few months and maybe they'll smarten up....

It's a bit disappointing but at least they understood they had to increase electric mileage. The new one will go 50 miles on solar panels. It's a sorry state that this is the best high mileage electric vehicle anyone can offer.

[LazyBoy]

Kaisa on Brink of Dollar Default Spooks World’s Money Managers

http://www.bloomberg.com/news/2015-0...-managers.html

A missed $23 million interest payment by Kaisa Group Holdings Ltd. (1638) earlier this month puts it at risk of being the first Chinese real estate company to default on its dollar-denominated bonds. That may signal deeper risks for China’s already fragile and corruption-prone property market, ...

[Southernguy]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

"The liquidity environment, however, is likely to turn against the bubble soon. The killer is inflation driven by a surge in money printing. The average lag between currency creation and inflation is 18 months in the United States. China's lag could be two years since the government uses subsidies to suppress inflation. By 2012, China could experience 1990s-like inflation. And that's when the property bubble will probably burst."
That's from an article by Andy Xie in 2010. Intersting read in the first page of this long thread...
So far China is growing at >7% clip. No bursting of real estate bubble.
But maybe sometime economists shall be right. Just as the famous not running clock.

[GRG55]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

"The liquidity environment, however, is likely to turn against the bubble soon. The killer is inflation driven by a surge in money printing. The average lag between currency creation and inflation is 18 months in the United States. China's lag could be two years since the government uses subsidies to suppress inflation. By 2012, China could experience 1990s-like inflation. And that's when the property bubble will probably burst."
That's from an article by Andy Xie in 2010. Intersting read in the first page of this long thread...
So far China is growing at >7% clip. No bursting of real estate bubble.
But maybe sometime economists shall be right. Just as the famous not running clock.

Yes indeed. That is why I prefer to try to track these themes on a single thread or I will sometime resurrect an old, dormant thread and update. Whether it is China, the crisis in Europe, housing in California or, now, Canada, or most other macro economic situations, they all tend to last longer and inflate much larger than any of us could have imagined. It's useful to be able to look back at the discussions and see what we can learn that will help us profit from greater understanding and investing appropriately.

As for China growing >7% at this moment...I have my doubts, and there is some evidence that number too is now inflated.

[don]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

Who Benefits When Bubbles Burst? (January 19, 2015)


Blowing speculative bubbles cannot possibly lead to organic growth because speculative bubbles fatally undermine the real economy.An astute reader recently posed an insightful question: we all know who benefits from asset bubbles in stocks, bonds and real estate--owners of assets, banks, the government (all those luscious capital gains and rising property taxes), pension funds, brokers and so on. But who benefits from the inevitable collapse of these asset bubbles?

If asset bubbles end badly for virtually every participant, then why does the system go to extremes to inflate them? This is an excellent question, as it goes right to the heart of our dysfunctional Status Quo.

Broadly speaking, there are three possible answers:

1. The system has no choice left but to blow serial bubbles.

2. Bubbles are domestic opportunities for Shock Doctrine-type crises that enable further consolidation of power.

3. Those in charge of the Status Quo believe the fantasy that the next bubble will usher in the long-awaited return to organic growth, i.e. expansion that isn't dependent on central bank stimulus, enormous fiscal deficit spending, ginned-up statistics, etc.
Let's consider each possible answer more closely.

1. The system has no choice left but to blow serial bubbles. The financial/fiscal Powers That Be have reluctantly accepted that the era of organic expansion driven by rising public/private debt is over for structural reasons, but they have no alternative to maintaining the current power arrangement (i.e. vested interests operate the system to their own benefit) other than serial bubbles.

In other words, it's not that the vested interests benefit so much from the collapse of the bubble-du-jour; blowing speculative bubbles is the only tool left for maintaining the illusion that the current arrangement is permanent and sustainable.

In this scenario, the Status Quo has no Plan B should the next speculative bubble fail to inflate.

2. Bubbles are domestic opportunities for Shock Doctrine-type crises that enable further consolidation of power. Naomi Klein's landmark study of how manufactured crises are used to justify further consolidation of power in the hands of the few, The Shock Doctrine: The Rise of Disaster Capitalism, provides a blueprint for how the easily predictable crises of financial bubbles popping can be used to extend the power of central and private banks and various government agencies.

In this scenario, the state (government) and the vested interests that control the state are largely immune to the losses generated by the deflation of speculative bubbles, thanks to the state's ability to borrow essentially unlimited sums of money to cover the losses incurred by private speculators.

Profits are privatized, losses are socialized. Banks and other financier speculators reap outsized gains during the bubble's inflation, and the state covers their losses when the bubble pops.

The central banks are able to extend their already vast powers with ease during the financial crisis of a bubble popping, and this expansion of financial power is symptomatic of the general dominance of financialization over the economy's productive assets.

The problem with this scenario is there are limits on the system's ability to inflate speculative bubbles. Eventually the economy is so hollowed out by debt and speculative excess that bubbles can no longer be inflated. The end result is power has been fully consolidated in the hands of a few, who are then responsible for fixing the post-bubble economy they created to further their own power and wealth.

Post-bubble economies cannot be fixed if the current power structure remains intact, so the Powers That Be face an impossible task.

3. Those in charge of the Status Quo believe the fantasy that the next bubble will usher in the long-awaited return to organic growth. As absurd as this may seem, I don't think we should discount the naivete, real-world inexperience and credulity of those in power--not just in the state, but in think-tanks, academia and central banks.

Keep in mind that these organizations ruthlessly select out dissenters and those with real-world experience. Those who question the Status Quo arrangement in academia, think-tanks, state agencies, central banks, etc., are weeded out: passed over for advancement, sent to Siberia, marginalized or fired. Those left in charge have little real-world experience outside the cloistered halls of power, and little willingness to risk their own rise to power by questioning the Keynesian Cargo Cult's serial bubble-blowing as the magic that will spark organic growth.

This quasi-religious faith cannot be questioned, for the simple reason there is no Plan B. There is no official policy alternative to the Keynesian Cargo Cult's serial bubble-blowing, because any alternative would necessarily disrupt the existing power structure.

It doesn't really matter which answer we choose; blowing speculative bubbles cannot possibly lead to organic growth because speculative bubbles fatally undermine the real economy.

http://www.oftwominds.com/blogjan15/bubbles1-15.html

tiny? don't we wish . . .

(and yes, those are true believers joining in)

[GRG55]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

"Given the current state of our economy, the only thing worse than a new bubble would be its absence."

Eric Janszen, "The Next Bubble"; Harper's Magazine, February 2008.

I would venture that statement can now fairly safely be extended to a good portion of the rest of the world's national economies, including Europe, North Asia, SE Asia including China, Latin America, South America, Australia...

[touchring]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

Yes indeed. That is why I prefer to try to track these themes on a single thread or I will sometime resurrect an old, dormant thread and update. Whether it is China, the crisis in Europe, housing in California or, now, Canada, or most other macro economic situations, they all tend to last longer and inflate much larger than any of us could have imagined. It's useful to be able to look back at the discussions and see what we can learn that will help us profit from greater understanding and investing appropriately.

As for China growing >7% at this moment...I have my doubts, and there is some evidence that number too is now inflated.

I agree that official statistics are not reliable. I would examine data from the private sector.

Have you considered that China's internal consumption may actually be growing fast enough to extend the real estate bubble?

Just to show an example. According to data from e-commerce companies, China's ecommerce market is already larger, if not, twice the size of the US ecommerce market.

How could this be possible if the World Bank says that US GDP (nominal) is almost twice of China? Which one is true?


http://www.slate.com/blogs/moneybox/...rfs_black.html

[santafe2]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

Just to show an example. According to data from e-commerce companies, China's ecommerce market is already larger, if not, twice the size of the US ecommerce market.

How could this be possible if the World Bank says that US GDP (nominal) is almost twice of China? Which one is true?

No Walmart on every corner in China + 4 times as many people. Check out cell phones, same issue.

http://en.wikipedia.org/wiki/List_of..._phones_in_use

[GRG55]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

I agree that official statistics are not reliable. I would examine data from the private sector.

Have you considered that China's internal consumption may actually be growing fast enough to extend the real estate bubble?

Just to show an example. According to data from e-commerce companies, China's ecommerce market is already larger, if not, twice the size of the US ecommerce market.

How could this be possible if the World Bank says that US GDP (nominal) is almost twice of China? Which one is true?

The real estate bubble in China is already extended (just like every other real estate bubble we've witnessed in recent times). Given the dearth of alternatives for private investment by Chinese citizens within China (property, the stock market or a small family business pretty well covers the entire spectrum for all but the few well connected) it is entirely conceivable that the property bubble could continue to inflate for some time to come. These things never end until they exhaust themselves. Who knows how much longer and how much bigger this monster will become before that happens. However, the idea that there will be some sort of minimally-disruptive end to this mass insanity, courtesy of the mandarins in Beijing, seems improbable.

As for eCommerce there's many factors that support that outcome. Just one example, like the USA, China is a vast country. But it is more difficult to move about in China for a variety of reasons, including the fact that the government still deliberately restricts the movement of citizens...probably more than it restricts the movement of goods.

When the USA was at the stage of comparative development as China today it gave rise to the catalog retailers and deliver of goods by the then rapidly developing railroad network. One could even order an entire home in prepackaged kit form for "flatpack" delivery, ready to be assembled (I am not joking). That was the precursor to today's ecommerce.

[touchring]

Re: Kaisa on Brink of Dollar Default Spooks World’s Money Managers

The real estate bubble in China is already extended (just like every other real estate bubble we've witnessed in recent times).

Not exactly, the luxury segment of the Singapore real estate market has been bear for almost 3 years due to severe curb measures such as 18% stamp duty tax on foreign buyers. There's another 16% stamp duty tax for selling within 1 year, and 12% within 2 years and so forth.

So a buyer of a $1 million property would have paid $300k tax in total if he buys and sells within 2 years.

http://www.straitstimes.com/news/bus...among-33-citie

And yes, there are

Given the dearth of alternatives for private investment by Chinese citizens within China (property, the stock market or a small family business pretty well covers the entire spectrum for all but the few well connected) it is entirely conceivable that the property bubble could continue to inflate for some time to come. These things never end until they exhaust themselves. Who knows how much longer and how much bigger this monster will become before that happens. However, the idea that there will be some sort of minimally-disruptive end to this mass insanity, courtesy of the mandarins in Beijing, seems improbable.

It appears that they want to delay it for as long as possible, perhaps in hope that the rise in income catches up with the cost of mortgages.

While at the same time reduce interest rates - http://www.bloombergview.com/article...-mortgage-bomb

As for eCommerce there's many factors that support that outcome. Just one example, like the USA, China is a vast country. But it is more difficult to move about in China for a variety of reasons, including the fact that the government still deliberately restricts the movement of citizens...probably more than it restricts the movement of goods.

When the USA was at the stage of comparative development as China today it gave rise to the catalog retailers and deliver of goods by the then rapidly developing railroad network. One could even order an entire home in prepackaged kit form for "flatpack" delivery, ready to be assembled (I am not joking). That was the precursor to today's ecommerce.

This is news to me.