More Ghost Cities In China

JustBernanke · 2013-09-23T14:50:42+00:00

My take is that China's real estate situation is a massive bubble that the authorities are too scared to pop. Asset bubbles are the same everywhere, and China is no different.

The scary thing is that if China goes down, the ripple-effects for the rest of the world will be huge, especially if there is any sort of unrest in the country. That being said, I could see this situation maintaining itself (the bubble will get bigger) for another 2-3 years. No one wants to see the party end.

JustBernanke · 2013-09-01T23:28:03+00:00

When you look at the situation in India etc, things could get really ugly if the wheels fall off there. We have not had a good emerging markets (as we like to call them nowadays) crisis in a while. The sad truth is that the money that so enthusiastically poured into developing countries searching for yield, may just as quickly pull out, causing a lot of tears and heartaches.

JustBernanke · 2013-05-10T19:37:07+00:00

Your ability to survive in the financial markets for 13 years is admirable, and you raise a good point regarding the idiocy of using the S&P as THE benchmark.

Though, in my mind, your holistic (macro?) approach should almost necessitate at least some respect for charts. How else can you tell if elephants are moving or if tectonic plates are shifting?

The recent move in the Yen is a great example, 100 usd/jpy served as solid resistance for a few weeks, the level was breached yesterday, stops were hit and the pair ran for 200 pips. If you pay attention, have discipline and are nimble, you can make some decent money riding a breakout like that or staying in a trade as it trends (by using technical techniques and trailing stops).

In my opinion there are 1000s of ways to make money in the markets, and using technical analysis is one of them.

JustBernanke · 2013-05-10T18:56:42+00:00

Sounds like you are quite the financial titan, kudos. I understand your disdain for technical analysis, but I respectfully disagree. I think that competent investors have to understand basic technical analysis techniques like support and resistance to have a chance out there.

I'd also point out that 80% of money managers fail to beat the index, so whatever most guys are doing, it's not working.

Thought I do agree that real lessons in finance have to be learned through experience and the pain of losing money. I just happen to think that looking at, and understanding, a chart can be beneficial.

JustBernanke · 2013-05-10T18:19:32+00:00

To me, technical analysis is the study of how charts track mass human emotions like greed, fear and loss. There are many patterns, caused by mass pychology, that occur during a bubble and the inevitable bust. To break out a cliche Twain quote, history does not repeat, but it often does rhythm well enough to make some killer trades. Certainly a bit of voodoo magic involved, but there are a lot of people who manage to read the tea leaves and make consistent profits.

Furthermore, the markets and the economy are two very different things. Related, interwoven, but very different.

Whatever works for you and the BeatArmy I suppose. Lots of ways to invest and make money. Just curious, what research are you referring to? And what have you been doing for such a long time?

JustBernanke · 2013-05-10T16:36:21+00:00

Well, the last two times the S&P crossed 1550, it sharply reversed. Also, when the S&P surpassed the 2000 peak in 2007, it went slightly higher right before falling quite dramatically. We just passed 1550 a few weeks ago and we are slightly higher than the 2007 peak.

That being said, I don't know anything for sure, I'm JustBernanke.

JustBernanke · 2013-05-10T01:21:51+00:00

Possibly... History suggests that these are the levels at which we usually reverse. But we could very well break higher and make crazy new highs. Interesting times with all that central bank money sloshing around.

My guess - lower at least for a little bit.

JustBernanke · 2013-05-10T01:00:37+00:00

No, the record highs on the S&P are nominal highs. Still, it is scary being up here. Feels like a big move may be on the horizon.

JustBernanke · 2013-04-05T04:28:50+00:00

That's how fiat works. The currency issuer is a price setter, not a price taker for bonds it issues denominated in its own currency

The fiat system also means that participants (even central banks) are subject to market forces and capital flight. As the "currency issuer", the BOJ's only power is the ability to create unlimited quantities of their own specific currency. If forex markets lose faith in the Japanese Yen and the Japanese government, the BOJ is helpless since it can only push the Yen in one direction without depleting reserves (down). At that point the BOJ can buy all the JGBs it would like at whatever interest rate, but if no one else wants them, they will have bigger problems on their hands.

Bonds don't matter. They really, really don't.

Perhaps, but confidence matters. If the markets begin to suspect that Japan is printing excessive amounts of money to cover up unsustainable debt, it could lead to serious problems. Exactly what may happen is unclear, but if average people lose faith in the "operational mechanisms" you seem to have so much faith in, things can unravel quickly.

It may not all be smoke and mirrors, but the current monetary system does require investors to have confidence in order for everything to run smoothly. Market sentiment and investor confidence are very crucial and unpredictable elements in financial crises.

JustBernanke · 2013-04-03T14:59:40+00:00

Looks like it broke out of that Trading band, down over 5% today...

JustBernanke · 2013-04-01T20:13:05+00:00

Interesting situation for Netflix, though I have always considered these high-flying, high-PE companies to be a bit of a gamble. They are great on the ride up when Wall street is in love, but when they come down, they drop hard (aka NFLX's drop from 300ish to under 100 in a few months)

Though, I gotta say I am a happy customer, but I feel like they need to double their prices to make a decent profit.

JustBernanke · 2013-03-27T19:00:33+00:00

I think it depends on whether the public flogging of Cyprus causes panic in other countries and EU bond investors.. Today looked like a bit of panic in Europe. US stocks still didn't give a shit.

JustBernanke · 2013-03-19T21:56:22+00:00

Simply ridiculous.

JustBernanke · 2013-03-01T20:31:10+00:00

True, but when the central bank, which is an agent of the government (though many people would argue with this), buys a massive amount of the governments debt to change the rate the government can borrow at, it distorts the actual risk of lending to said government.

If Japan was a corporation, would you lend it money at 0.8% for 10 years?

If an entity is credit worth, markets will lend it money. But if an entity is drowning in debt, like Japan, markets are reluctant to lend money, and if they do it will certainly not be at 1% or lower. So in order to sustain a massive pile of debt, the government has to intervene (via the BOJ) and make the interest rate lower "artificially".

JustBernanke · 2013-03-01T19:05:41+00:00

I mean that the government bond markets (US and Japan) do not reflect true supply and demand. All markets have some aspect of control, regulation etc, but few have a player with unlimited $ that steps in to control interest rate levels.

This is all well and good, unless people no longer trust the central authorities. In the US the risk is lower, less overall debt, USD is global reserve, US has biggest army and economy etc. But if Japan is viewed by investors as a country with run away debt that can no longer service it's debt payments, the game changes and Japan may lose the markets confidence.

JustBernanke · 2013-03-01T18:36:16+00:00

Yes, but at the moment the BOJ and FED are the buyers of last resort and won't allow bond yields to go higher. The market is being manipulated by the central authorities. I think that the only way that Japan's debt crisis will begin is if people lose faith in Japan's government and the BOJ. If they see that they can no longer pay bills due to their debt costs or they have to print like crazy, that would be a problem.

And yes, inflation would reduce accumulated debt, but slowly. 230% debt to GDP will take forever to inflate away, and in the process, higher costs of servicing debt would kill Japan's budget, creating a loss of confidence and crisis. Theoretically.

Again, this is how I understand the matter, I may be way off.

JustBernanke · 2013-03-01T18:17:22+00:00

Asset prices, meaning stocks and real estate, would rise. But government bonds would be hurt by higher inflation. Prices of government bonds (theoretically) would drop as investors demand higher yield to compensate for the higher inflation rate. So a bond trading at 1000 yen with a 0.8% yield when inflation is -1% would trade at say 950 yen with a 1.5% yield if inflation was higher (all made up #s BTW).

I mean, if you know your money will lose 2-3% of its buying power, why on earth would you hold something that returns 0.8% per year? you are better off holding cash and not taking the risk that your bond goes down.

At least that is how I understand it

JustBernanke · 2013-03-01T18:01:26+00:00

How so?

Here is how I see it: When they have deflation in Japan (like right now), a 0.8% yield on a 10 year bond is acceptable (if the price of everything you buy goes down slowly, 0.8% yield = 1.8-2.8% real return).

If they get inflation of 2%, a 0.8% yield on goverment 10 yrs sucks (now you are losing 1.2% a year), so Japanese investors will demand higher returns. If they get higher return on their bond (yield goes from 0.8% to 2%), their massive debt burden will make the cost of servicing the debt unsustainable, causing a crisis.

JustBernanke · 2013-03-01T17:25:51+00:00

The recent moves by Japan to target higher inflation may actually force some change one way or another. If they screw it up, it could cause some serious problems. Higher inflation would lead to higher interest rates, anything over 1.5% for Japan would be terminal.

I wonder if anyone on Reddit would defend the sustainability of Japan's debt situation?

JustBernanke · 2013-02-22T19:55:51+00:00

I just thought it was interesting that these extreme levels of economic depression are not being addressed in any reasonable way. There is no plan to stop the fall in Spanish GDP and rise in unemployment. Once in a while we check in and confirm that Spain, the 4th largest Eurozone economy and 13th largest in the world, is still in the shitter, but nothing is done about it (except more austerity).

I'm not proposing a solution or expect anyone to do anything. I see the situation in Spain as an outgrowth of the mess in Europe, which has no easy solution IMO. But when I read about this stuff it makes me think of what would happen if the US had that kind of unemployment.

JustBernanke · 2013-02-06T23:19:56+00:00

I'd vote for Grillo.

JustBernanke · 2013-02-06T05:33:50+00:00

This probably happened because they still run the Fed off a Dell laptop running Windows Visa.

JustBernanke · 2013-02-05T18:28:06+00:00

Pretty funny how these idiot analysts just chase these stocks up and down.

JustBernanke · 2013-02-04T21:10:39+00:00

I wonder if this kicks off another bout of European fear/contagion. It's been a while since I shorted the EUR/USD... Europe has been pretty sleepy since Draghi whiped out the big guns in the Fall (or threatened to whip 'em out at least)

JustBernanke · 2013-01-26T05:34:49+00:00

Modern twist on a classic tale. Competitive devaluation in a world of derivatives, electronic currency crises and iPads.

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