Shanghai real estate in HUGE HUGE HUGE bubble

March 15, 2010, 11:37 AM GMT

China Miracle or Bubble Waiting to Burst?

By Martin Essex

Nervousness is growing in the financial markets about China, which might seem odd when there are so many other places to worry about.


There’s still Greece, for example, which is likely to be the focus of this week’s meetings of European finance ministers. There’s Germany, and its trade surplus. And there’s the U.S., the U.K. and all the other places with triple-A-rated debt that may not be rated triple-A for much longer.

So why the focus on China, where shares closed Monday at their lowest in five weeks, with the benchmark Shanghai Composite ending below 3000 at its weakest since Feb. 9? Well, as one bank put it on Monday: “Are we facing a ‘growth miracle’ or will China be the next bubble to burst?”

So far, it’s been widely assumed that the strength of the Chinese economy is a plus for the global economy as a whole. But fears of over-heating are growing and, after China’s failure to raise interest rates over the weekend, there’s inevitable concern that it might wait too long before tightening the screws.

What’s more, the rhetoric from China seems increasingly confrontational. Premier Wen Jiabao warned other countries not to pressure China over its exchange-rate policy during his news conference at the end of the country’s annual legislative session Sunday.

“First of all, I do not think the renminbi is undervalued,” Wen said, adding in a clear reference to the U.S. “We are opposed to the practice of mutual finger-pointing among countries or taking strong measures to force other countries to appreciate their currencies.”

This combination of politics and economics is a nasty one for the financial markets, and shares fell back across Europe on Monday, while bond prices climbed and the dollar rallied –- all classic signs of money being moved to places regarded as less risky. With the U.S. and Japan both deciding on interest rates later this week, and the oil exporters meeting, too, China is unlikely to dominate sentiment.

But investors would be well advised not to forget about it –- particularly if the anti-Western rhetoric grows louder or the authorities continue to keep interest rates on hold, making a bubble that much more likely.

 

China's property bubble is worse than it looks

By Takatoshi Ito

Published: March 17 2010 02:00 | Last updated: March 17 2010 02:00

The Chinese official statistics say that the average rise in property prices was 10.7 per cent in February. The increase is accelerating from a year-on-year rise of 9.5 per cent in January. However, the data may significantly underestimate what is going on for prime properties in China. My friends in Shanghai and Beijing say the rate of price increases of typical housing units is above 50 per cent a year and may reach 100 per cent, and that new property developments are spreading fast from first to second-tier suburbs, with less convenient transportation.



Full Article below,

http://www.ft.com/cms/s/0/9b09f824-3163-11df-9741-00144feabdc0.html

 

you have been saying this for months now

 

Interesting. Any instruments that one can use to short Chinese RE? Aside from shorting the entire market that is.

 

I know and I will continue to say it for months, these bubbles take time you know. I can recall many times years back people saying the same thing, "there is no bubble in the US housing market", "US housing prices continue to surge", "what bubble" even bubble Ben bernanke said sub prime was contained, he fucking lied over and over again and many fools believed him, anyone telling you there isn't an asset bubble in china, US or any where else around the globe growing at this very second is fucking lying. I will keep posting and keep my opinion that asset bubbles are spreading throughout the world. As long as bubble Ben bernanke keeps his easy money policies in place and continues to print money asset bubbles will keep growing here and everywhere.

 

I would have to agree with S2007

 

My uncle had cancer and he told me one day that he was pretty sure he knew what he would die from but he really had no firm grasp on when he would die. He said that until he had some better indication as to the when he was simply going to live his normal routine which he seemed content with.

Four and a half years later he started to fade and knowing the end was approaching he was forced to change his life in ways he clearly did not like. A few months later he was dead. But he had better than four years of pretty damn good living.

Seems to me if we are talking about public policy we need to consider the millions who are ill and the impact on the health care system, the economy etc. But, if we are talking about making money then we need to ride the waves that are building and be damn glad they are building. We also need to realize that the best of the ride is frequently right before it ends.

Bubbles do not end in an hour, a day or a month. They generally give out some pretty clear signals by rolling over in ways that allow you to stay late to the party -- regurgitate say 20 or even 25% of the punch -- and leave having had a damn good time.

It is simply insane to try to develop and hone the skill of predicting/anticipating/catching or otherwise profiting from the moment or even month a move turns. The money is made by those who can do that which is doable. Recognize that a bubble has burst and that the rout has just begun. The money is made once the old trend HAS BROKEN DOWN. And that is generally fairly obvious on the chart. And, if it has been a true bubble, you can afford to miss the early stages of the reversal so you can be getting into an established trend.

I am not suggesting that doing this successfully is easy but it sure as hell beats trying to pick tops and bottoms.

 

Agree.

Also, I have never seen a bubble that topped and went straight down. They usually give at least one sucker rally to enter on. E.g. oil fell from $147 to $130, then rallied back to the high 130s. Nasdaq fell from 5000 to the mid 3000s, then back up above 4000. S&P in 08 had 2 rallies in Jan-Feb and March-May where it was still only 10% off the all-time highs. Even housing and CDS markets rallied strong in spring 07 after their initial rout.

So, unless your top-timing skills are exceptional, it's probably better to wait for the trend to break decisively, then enter on a 50-60% retracement back up. That way if it makes new highs by 5% or more, you know you are probably wrong. And if you are right, you catch near the peak of the move with relatively small drawdown before going into profit.

 

Best post ever!

 

Ghost,

Except for the word "probably" in the first sentence of your second paragraph (I would say definitely) I agree word for word with the tactics you describe for capturing most of the break.

It is not enough to be right that it is a bubble. You also need to, as you rightly say, limit the drawdown. You have described that process in straightforward terms.

The insanity that is now everyday reality in the political capitals of the world's industrial nations is setting up truly incredible speculative opportunities that will unfold in coming years. Many fairly good traders will go broke fading that insanity near the extremes. They will pick points that "must" be very near the top (or bottom) and be wrong. Their capital will impaired and they will end up frustrated and play the real move timidly.

Go back and study the turning points that "The Ghost" speaks of. Then study a dozen more. Once you do you will realize that the real risk is in fading the move. Let the wave break. Let the energy that builds up over years be spent. Don't worry about being late. Catch the new trend rather fade the current one.

Better yet ride the current bubble and then catch the collapse later. When it is time to reverse ...

BE LATE BUT BE SURE.

TAKE LESS BUT STILL TAKE 70% OF THE PIE.

WATCH YOUR LEVERAGE. BE AGGRESSIVE BUT SANE.

And, as one of Cutten's contemporaries, the great Livermore, pointed out, remember you are not seeking wages. You seek opportunities to capitalize on. If you are hunting for bear you will not be pulling the trigger very often. If you have decided to try to capture real moves as opposed to trading short term setups you must accept that you are not in it for $500 today and $1,000 tomorrow.

You are seeking opportunities to be short 50 or more years of insanity. Some of these collapses will be spectacular and some of the runs in hard assets will be mind boggling.

I know I will be told I am crazy, but $10,000 gold and $1,000 oil would not shock me within the next ten years ... maybe five. And I do not believe there is a shortage of either. The coming fireworks are likely to revolve less around shortage than surplus. If they continue to "print" it, fiat will become less valuable and the rate at which its value will fall will be breathtaking.

I wish it were not so but the American Empire is riddled with corruption and incapable of wiping its own ass. We try to contain health care costs but do not even want to mention that doctors and hospitals are robbing us blind. Politicians have discovered that it pays to pick enemies without faces so they ONLY fight the insurers. Well those with faces are thieving bastards as well. We talk about immigration reform but can't control our own borders. We set up what appear to be "insurance" schemes -- Social Security, Medicare, Medicaid, Drugs for The Aged -- and then ignore ALL actuarial reality. We slap the wrists of military contractors who deliver substandard items that cost lives yet put none of them in jail.

There is fraud everywhere. There are deals that stink at every level of government.

This Empire is collapsing before our eyes. And every elixir that is being prescribed to return it to good health is poison. Poison to society but immensely profitable for the interest group that promotes it. The unthinkable is reality. We are down 48 to 7 with three minutes left on the clock. Those that think we can turn it around think the game is like baseball where hope should spring eternal. Their paradigm is wrong. It is a game controlled by the clock and the reality is we are well past the point of no return.

The Catholic Church has turned out to be a worldwide gay cult that protects child abusers. The political class of every Western country is corrupt and incompetent. The medical profession is riddled with whores. Teachers fight for a status quo that is horrid. Budget deficits are about to swallow up entire societies. Aging populations are about to discover that the paper that they are about to be paid in every month for their retirement is becoming worthless. Most of the American public watches reality TV in which every other joke is a veiled reference to a blow job.

And, in the collapse, steady traders will get rich. We might rather have a well run country/world with fewer home run opportunities but we must play the hand we are dealt.