Jim Sinclair is Downright Scared

[Chris]

Re: Jim Sinclair is Downright Scared

So how high will it go?

A better question may be "how low will it go?" ;)

[GRG55]

Re: Jim Sinclair is Downright Scared

Just got back. Spend most of my time in China and some time in Thailand.

China continues to amaze me, it's definitely the place where the action is. The middle class is growing like crazy and everybody wants to have a car. I did notice excesses though. People from simple families getting very rich and changing their behavior in a bad way. They seem to equate the possession of money with status and social entitlements and a wild card for asocial and obnoxious behavior. Enter China's nouveau riche.

Tulpen: What was your sense about how much the new Chinese middle class growth rate is likely to be influenced by the USA economic recession?

Do you think the Jim Rogers/Don Coxe scenario whereby China keeps powering ahead in spite of what is happening in the US economy is most likely?

Or is "no decoupling" argument going to prove correct and drag China (and the rest of Asia) down the toilet with the US/UK/Spain/Ireland/etc.??

[Tulpen]

Re: Jim Sinclair is Downright Scared

Tulpen: What was your sense about how much the new Chinese middle class growth rate is likely to be influenced by the USA economic recession?

Do you think the Jim Rogers/Don Coxe scenario whereby China keeps powering ahead in spite of what is happening in the US economy is most likely?

Or is "no decoupling" argument going to prove correct and drag China (and the rest of Asia) down the toilet with the US/UK/Spain/Ireland/etc.??

I am not sure.

On the one hand I think China's dependency on exports is grossly exaggerated. China obviously has a rapidly growing domestic market for the products it produces and is spending much effort for improving its well needed infrastructure. But on the other hand the financial crisis is obviously impacting China as well. For instance real estate prices are dropping in China as well and there I think we just see the beginning. There is simply too much construction in too short a time span.

[c1ue]

Re: Jim Sinclair is Downright Scared

Tulpen,

The issue I've always pondered about China is this: Massive amounts of money are required to buy and build this infrastructure.

China's average income has been growing, but this expenditure has been massive as well.

While some parts of building can be internally sourced, clearly copper, steel, and various other commodities are not.

Therefore where does China get the foreign exchange in order to buy said commodities?

Don't forget also that the newly enriched Chinese - while many are buying locally made washing machines and what not, a large number are buying international brands. Thus it is even less clear to me that 'domestic consumption' can itself power the many hundreds of billions that China is spending on infrastructure.

I've read reports of China projecting to spend $400B on infrastructure through to 2010; with 2006 per capita income being all of $2025, this is a pretty significant chunk.

To put this in perspective, it would be the equivalent of over one trillion dollars in the US over the span of 2 years - and the US has far more disposable income.

http://seekingalpha.com/article/1846...ics-and-beyond

Since the average Chinese still spends around half of income on food, that doesn't leave much for anything else especially with the infrastructure spending.

Note that with the intertwining of state and capitalist operations there - I would expect a much more efficient transfer of trade income to government income, but still a gigantic relative ratio.

[Supercilious]

Re: Jim Sinclair is Downright Scared

Ladies and Gentlemen, i present to you the CDO^3.

I always had the impression that the total CDO^n (2, 3 and higher) volume was much smaller than that of CDOs.

I rather suspect the "innovation" is some form of synthetic structured instrument, more problematic than a normal CDS (probably it generates some insane leverage), which, like SIV's, is financed by short term commercial paper (hence the Bernanke's discount window extended as a life line for refinancing).

[touchring]

Re: Jim Sinclair is Downright Scared

As i understand, China is now forcing its low end industries to go bankrupt so that high end industries can get more resources. They don't really care about unemployment. Some food for thought.

Tulpen,

The issue I've always pondered about China is this: Massive amounts of money are required to buy and build this infrastructure.

China's average income has been growing, but this expenditure has been massive as well.

While some parts of building can be internally sourced, clearly copper, steel, and various other commodities are not.

Therefore where does China get the foreign exchange in order to buy said commodities?

Don't forget also that the newly enriched Chinese - while many are buying locally made washing machines and what not, a large number are buying international brands. Thus it is even less clear to me that 'domestic consumption' can itself power the many hundreds of billions that China is spending on infrastructure.

I've read reports of China projecting to spend $400B on infrastructure through to 2010; with 2006 per capita income being all of $2025, this is a pretty significant chunk.

To put this in perspective, it would be the equivalent of over one trillion dollars in the US over the span of 2 years - and the US has far more disposable income.

http://seekingalpha.com/article/1846...ics-and-beyond

Since the average Chinese still spends around half of income on food, that doesn't leave much for anything else especially with the infrastructure spending.

Note that with the intertwining of state and capitalist operations there - I would expect a much more efficient transfer of trade income to government income, but still a gigantic relative ratio.

[c1ue]

Re: Jim Sinclair is Downright Scared

As i understand, China is now forcing its low end industries to go bankrupt so that high end industries can get more resources. They don't really care about unemployment. Some food for thought.

Please provide some examples of this.

I can see China allowing some industries which are unprofitable to go bankrupt, but to say that China is redirecting efforts away from exploiting their low cost labor is a very strong statement indeed.

There are plenty of industries which will never regain profitability with the advent of high energy prices, but that is a far cry from all 'low end'.

And what would these new high end industries be? Biotech? Semiconductors?

[GRG55]

Re: Jim Sinclair is Downright Scared

Please provide some examples of this.

I can see China allowing some industries which are unprofitable to go bankrupt, but to say that China is redirecting efforts away from exploiting their low cost labor is a very strong statement indeed.

There are plenty of industries which will never regain profitability with the advent of high energy prices, but that is a far cry from all 'low end'.

And what would these new high end industries be? Biotech? Semiconductors?

I would think that "high end" in Chinese terms are things like motorcycles, automobiles & white goods, compared to plastic toys shipped to WalMart. The Chinese own the light motorcycle market in Africa and increasing parts of the Middle East/Central Asia [the notable exception is India]. They have also made major inroads into the light commercial vehicle market (small pickups, delivery vans, trucks) that the Japanese and Koreans have dominated in those regions for a very long time. Exact same pattern is now happening in air conditioners and appliances.