Das Shanghai Syndrom

Das ist alles was dahintersteckt mit dem China Jitter, viel Rauch um nichts, Rohstoffe und Edelmetalle werden weiter gekauft, erst recht mit Fiat Dollars.

http://www.321gold.com/editorials/gerbino/gerbino022807.html

Conclusion:

Excessive speculation in China by retail customers and a market correction have little to do with the Chinese economy's forward progress. The plans to build 120 airports a year for the next 10 years and tens of thousands of other projects will not be affected because some gamblers and speculators overdid it.

Gold and gold mining shares, despite a short term disappointment will surely recover as the investing world has been given a wake up call on the frailty of paper assets owned by global investors. Base metal stocks will also recover as the China and India growth story has many years to go.

---------------------------------------------------------------

Yesterday the Shanghai Stock Exchange Composite suffered its biggest loss in a decade -- down about 9%. The Chinese government has been warning that it would slow China's furious rate of growth. Bank reserves were contracted a few times, the Chinese central bank stepped on the brakes. The result -- a major smash in Chinese stocks. It was a crash heard 'round the world.

If China slows down, China's enormous export of goods will slow down. China's huge use of commodities will slow down. The activities of 1.3 billion Chinese people will slow down. How much of a change the nine percent drop in Chinese stocks will bring on, remains to be seen. Some see it as merely a temporary warning, a "gut-check." Others take it more seriously. My opinion -- major bull moves don't tend to end this way. Major tops entail weeks, more often months, of distribution. I haven't seen the signs of steady distribution yet. I've seen overvaluation, over-speculation, over-optimism, ignoring of risk -- but I have not yet [seen] the signs of distribution.

It used to be said that when the US sneezed, the rest of the world caught a cold. And I wonder, has that changed? Is it China that has now taken the US's place? When China coughs, is the rest of the world in trouble. Hard to believe, but that may well be the case today. Below, a daily chart of FXI, the "China 25 Index Fund."

http://www.321gold.com/editorials/russell/russell022807.html

Sorry, Edelman, ich habe versehentlich einen neuen thread aufgemacht, bitte verschieben oder schliessen.

Gruss

XEX

Gut, also besteht interesse an den thread, Marc Faber sagte mal falls eine Rezession in US und Europa kommen sollte dann waechst China immer noch mit der halben Geschwindigkeit was ca. 6% Wachstum oder GDP ist. Der Crash hat Vorteile, die Rohstoffe wurden preiswerter.
Weg mit dem Fiat Dollar, nun steigt man in Sachwerte ein.
Fuer mich haben ein paar grosse Investoren den Crash verursacht und laden nun mit anderen Werten auf die man immer benutzen wird.
Das Geld das rausgezogen wurde geht wieder wo anders rein.
Bernanke sitz in der Falle, die Zinsen erhoehen kann er nicht ohne den Housing Market zu gefaehrden, nun spricht er das sich die Wirtschaft bald wieder beschleunigen wird.....aber eher nach unten wenn ich mich fragt.

Gruss

Eldo

Ich hoere gerade ein Interview von Marc Faber vom 18.Maerz.

http://silverinvestor.blogspot…ith-dr-marc-faber_18.html

Er sagt das spaetestens ab mitte des Jahres die Zinsen Weltweit raufgehen und speziell in der US die T- Bonds fallen, der Carry trade vorbei sein wird und eine Phase der Stagflation beginnen wird.
Wie immer ist er positiv was Gold angeht, Bernanke wird weiter drucken muessen, die Bombe wird und muss dann platzen da es auf ewig nicht so weiter geht.
Er ratet man soll aus allen Assets Class fuer die naechsten 3- 6 Monate rausgehen.
Taiwan, Malaysia, India, Thailand sind noch einigermassen sicher, die anderen Maerkte die zu schnell gestiegen sind werden eine grosse Korrektur mitmachen und jedes Geld wird immer weniger wert da wir jetzt schon eine Inflation von 10% allgemein haben.
Er sagt unter anderen man muss diversifizieren und mehere Bankplaetze haben, z.B. Schweiz und in Asien ueber einen Custodian.
Er befuerchtet das die amerikanische Regierung den Handel mit US Dollar sowie ihre Goldminen und ihre Oilfirmen besteuern und einschraenken koennten wenn sich der POG zu schnell nach oben bewegt oder der Dollar faellt.
Was in Venezuela und Bolivien passiert ist kann auch in USA passieren.
Man sollte sich immer gefasst machen das alles um 20% faellt bevor es wieder steigt. Nichts auf margin sonst kann man den Fall nicht aussitzen.

China verbraucht z.Zt 24m Barrel Oil am Tag und in 10 Jahren ca. 40m barrel. Amerika verbraucht z.Zt. ebenso 24 m barrel aber der Weltsupply wird die 84m Barrel am Tag nicht ueberschreiten eher fallen.China importiert 35% Oil, Indien 75%, Amerika 60%. es werden auf alle Faelle min. 20m Barrel fehlen wenn man nur mit China rechnet.
Er meint die Amis bombardieren bald Iran, einmarschieren werden sie jedoch nicht.
Finger weg von USD Assets, Asianstocks und Immobilen dort werden sicher die amerikanischen Assets outperformen.

THIS YEAR WILL BE A BIG CORRECTION, MAYBE A HUGE CRASH.
Bernanke wird dann bis zum Himmel drucken bis das Kartenhaus dann komplett zusammenbricht.

MfG

XEX

Bourse Blowout Shouldn't Brake China

On Feb. 27 the biggest drop in Chinese stock prices in well over a decade started in Shanghai and Shenzhen, then spread like a miasma from Wall Street to Europe and other bourses in Asia. It didn't much matter that China is still on track for double-digit growth in 2007—or that the real impact of the market meltdown elsewhere was primarily psychological.

It still fed into worries in the U.S. that have nothing much to do with China.
http://www.businessweek.com/gl…4266.htm?campaign_id=yhoo

China's Engineered Drop

With Tuesday's market correction being the single biggest decline in the U.S. markets since 9/11, all eyes are focused on figuring out what exactly happened as well as what is going to happen next. This week's Special Edition of Outside the Box will feature a unique perspective on the recent events as Stratfor President George Friedman explains what took place in China and how this was an "engineered drop."

Stratfor is an intelligence company that provides in-depth research and analysis on global affairs and geopolitical events. George has been kind enough to present my readers with a couple of free articles each month in addition to a 50% discount to his service, which you can get by clicking the following link:

https://www.stratfor.com/offer…50OFFb/?ref=061130-50OFFa

I trust that you will find George's insights on the market correction to be an "outside of the box" explanation.

John Mauldin, Editor

Global Market Brief: China's Engineered Drop

By George Friedman

China's Shanghai Composite Index tumbled 8.84 percent Feb. 27, its largest fall in a decade. Its sister index, the Shenzhen Composite Index, fell 8.54 percent. The size of the drop in China is not significant in and of itself. On a number of occasions during the past year, the Shanghai Stock Exchange has experienced 5 percent plus daily reductions, and it has already boomed and busted once this decade.

But that hardly means the development is insignificant. The fall is important both for how it happened and what it triggered.

How it Happened

This was an engineered drop.

The Chinese government has become increasingly concerned about levels of investment in its economy or, more accurately, the sheer amount of money that is chasing projects. State firms with limitless access to subsidized capital from state banks have used that access to launch thousands of nonprofitable firms. This glut in "investment" money drives up the cost of commodities and adds industrial capacity without actually producing anything of much use, making life more difficult for the average Chinese and unduly harming relations with foreign powers that face a glut of otherwise noncompetitive Chinese goods.

This penchant for overinvestment has now spread to the stock market in two ways. First, the same politically connected government officials who started dud companies are taking out loans to buy shares, or are using shares they already hold as collateral for new loans. Second, ordinary Chinese citizens have started borrowing -- sometimes against their homes -- in order to play the market. In January, the number of total traders on the Chinese exchanges grew by 1.38 million, an increase of 134 percent from a month earlier, while stock turnover was up 700 percent from a year earlier.

The net result is an absurd stock surge with no basis in fundamentals. At present, some Chinese banks now have price-to-earnings ratios higher than financial behemoths such as Deutsche Bank and Chase, despite deplorable management and a history of highly questionable lending policies.

For the past few months, the government has been working to drive down this speculative investing. On Feb. 26, China's State Council launched a new "special task force" that accurately could be referred to as the "get-those-idiots-to-stop-borrowing-to-gamble-on-the-stock-exchanges" team. Its express goal is to get the Chinese domestic security brokers to lay off such speculative decision-making, while also putting a crimp in the source of the subsidized capital.

Day one started by the script, and Beijing is likely quite pleased with the way things are going (or at least it was until its actions unintentionally triggered a global meltdown). Also, since the Shanghai exchange is actually still up 3 percent for the past week despite suffering its largest drop in a decade, the State Council probably hopes for more drops in the days ahead.

What it Triggered

But the rest of the world took a different lesson. Why the Chinese stock crash occurred was unimportant to the outside world, only that it did -- and that it affected everyone else.

For the first time, China has become the trendsetter in the global stock community. Normally, the U.S. exchanges -- especially the S&P 500 index and the Dow Jones Industrial Average -- set the tone for global trading patterns. Not on Feb. 27. This time, China led Asia to a wretched day. The wider the contagion spread, the more margin calls were forced to be called in. (If an account's value falls below a minimum required level, the broker will issue a margin call for the account holder to either deposit more cash or sell securities to fix the problem.)

As the drops snowballed, Europe filed in dutifully behind, mixing the China malaise with its own nervousness about overextended markets in Central Europe and the former Soviet Union. By the time markets opened in the United States -- where investors already were fretting about the subprime mortgage markets -- the only question remaining was how far U.S. markets would descend. In the end, the Dow dropped by the most since the fall triggered by the 9/11 attacks.

So why has this not happened before now? As China's market capitalization has increased, its links to the global system have increased apace. These links have developed very quickly, and with few controls. The Shanghai exchange, for example, more than tripled in total value in 2006 to more than $900 billion -- and much of the rapid-fire initial public offerings (IPOs) of Chinese banks on the Hong Kong and other international exchanges are not included in that little factoid. Indeed, China's mainland exchanges are only the tip of the iceberg -- and they certainly do not include foreign firms that are heavily invested in the mainland.

Two years ago, China's market capitalization was too small for its problems to impact the global system. Now, between ridiculous foreign subscriptions to IPOs, irresponsible corporate policies and irrational valuations all around, that capitalization is to a level -- around $1.3 trillion -- where its integration with the global system via funds and margins makes China a sizable chunk of the international financial landscape. The insulation that once protected international exchanges from Chinese policies is gone, which makes the international system more vulnerable to Chinese crashes.

Feb. 28 and Beyond

Follow-on crashes can come from one of three places.

First, the Chinese believe their exchanges are massively overvalued (hence the engineered crash). They will do this again, and are not (yet) particularly concerned with the international consequences. China planned to dampen its own stock market, not the world's markets. Along with the rest of the world, Beijing did not expect the contagion effect to be so extreme. Yet, for now at least, China's own exchanges are its primary concern, and it will act according to that belief.

Second, everyone else now is going to chew on the fact that Beijing did this intentionally. They will either agree with the Chinese that the exchanges are overvalued and that additional measures are needed, or they will be terrified that Beijing did this intentionally and not care about the reasons. Whether what is sold is a domestic Chinese firm or a foreign firm invested in China does not matter much. Neither does it matter if the stock is on an exchange in China or abroad. Either way, the reaction will be the same: Sell.

Third, trading in 800 of the 1,400 stocks on the Shanghai exchange was suspended during the sudden drops Feb. 27; they have a lot farther to fall, even without any engineered drops caused by panicky selling.

Considering the flaws on which the Chinese system is based, this certainly will not be the last engineered drop. In theory, the move will make foreign investors far more cautious before diving into the Chinese system, but as longtime Stratfor readers know, we have been wrong on the timing of that particular development before.

Your thinking the markets have been long overdue for a correction analyst,

John F. Mauldin
johnmauldin@investorsinsight.com

More About the China Correction :

Talking Heads Shoot the Dog

There were numerous reasons for the large drop in China, some of it was due to former Fed head Alan Greenspan who stated he thought the U.S. economy would go into recession next year. Of course that opinion and 8 dollars will buy him a cup of coffee in Tokyo.

Gold took an over 20-dollar hit on news of the Chinese sell off. We heard a talking head say it was because of reduced demand for commodities. Now of course if a big bad bear market started, yes-gold stocks could get slammed, as they are equities. But if the Chinese market were to fall faster than a 100 pound weight from a 300 story building there would a HUGE flocking to gold which would send prices much higher.

The basic conclusion, is until we see more signs of confirmation, this is nothing more than a short term sell off where everyone decided to sell everything. Note that almost every stock on our list has a stop/loss and please follow them.
The fact of the matter is we do not want to give back everything we have made in this current gold bull market.

http://www.321gold.com/editorials/skarica/skarica030107.html

The Jolt Felt 'Round the World

The Daily Reckoning - Weekend Edition
March 3-4, 2007
Baltimore, Maryland
by Kate "Short Fuse" Incontrera

VIEWS FROM THE FUSE: THE JOLT FELT 'ROUND THE WORLD

Finally. On Tuesday, something - albeit briefly - took the place of Anna
Nicole coverage on MSNBC and CNN...

The Dow fell more than 500 points at one time during the day, the biggest
drop since the markets reopened in the days following the 9/11 attacks.

As with most events in the market, there is no one clear-cut reason why
the tumble occurred - just a collection of speculations. After all, no one
ever said the markets act rationally.

You could look to the Far East for a clue: Tuesday saw the highest daily
slump to smack the Chinese stock markets in ten years...and the rest of
the global economy certainly felt the jolt.

China's People Daily Online reports: "If the Chinese markets catch a cold,
the major markets around the world will sneeze," Teng Yin, an analyst with
Everbright Securities, quipped.

"This is the first time that Chinese stock markets have affected global
markets significantly, but it won't be the last," Teng said. "The reason
is China's growing economic power."

Of course, this isn't the only reason U.S. stocks had their worst week in
four years. February's revised U.S. Consumer Sentiment fell to 91.3 from
the originally reported 93.9. Weak durable goods orders sent some
'worrisome' signals to the market. And, oh yes, Big Al dropped the big
"R": recession.

In "private" speeches on both Monday and Thursday, the former Fed chairman
flexed his economic muscles and showed that he still has the power to move
the markets simply by uttering the dreaded word.

"By the end of the year, there is a possibility, but not a probability, of
the U.S. moving into a recession," Mr. Greenspan was quoted as saying by
Bloomberg News, which based its report on interviews with people who
attended the CLSA Japan Forum in Tokyo, where Greenspan was speaking.

However, the New York Times points out: "To be clear: Mr. Greenspan did
not, as some analysts incorrectly inferred, predict that a recession was
imminent. In fact, he said few forecasters anticipated one. But he did
caution that the United States appears to be at the end of an expansion
and that such times usually bring with them the seeds of a recession."

Of course, Bernanke disagrees - and probably feels a little perturbed by
his predecessor's continuing power over the markets. He, along with St.
Louis Fedhead William Poole, asserts that there is NOT a recession in the
future, perhaps just a bit of economic "slowdown".

Most analysts don't predict that the sky is falling, and - surprise! -
neither do we here at The Daily Reckoning. After an eight month high for
stocks, a correction is not only unsurprising, but also inevitable.

And to further ease your fears, take this to heart: On Friday, whilst
eating lunch at our local favorite, Mick O'Shea's, Anna Nicole coverage
was back in full swing on all of the televisions in the bar. In fact, it
was the only thing CNN reported on during our meal.

So clearly, all is right with the world.

Short Fuse
The Daily Reckoning

Paul van Eeden

--------------------------------------------------------------------------------

China

--------------------------------------------------------------------------------

On Tuesday for the first time in modern history China became a world financial trendsetter. The Chinese stock markets declined (the Shanghai Composite Index fell 8.84% and the Shenzhen Composite Index fell 8.54%) and stock markets around the world fell like dominos.

That China is important to the world's economies and financial well-being should not have caught anyone by surprise. China has been credited, or accused, depending on your point of view, with the increase in commodity prices for several years now and the ascent of its vast population to middle class is supposedly going to convert hundreds of millions of investors all over the world into millionaires. So when China's stock markets fell, the world took notice.

The reason for the markets' fall was China's government's announcement the previous day of a top-level task force to clamp down on illegal activities in the securities markets. Chinese investors have been flocking to stocks hoping to get rich, just as North American and European investors have been snapping up anything to do with China hoping not to get left behind. Chinese capitalism is today's Wild Wild West where just about anything can and will happen, where for every greedy investor there is an appropriately constructed plan to part him from his money and now the government wants to put an end to it.

The Chinese banking system is rife with bad loans made to well-connected people who set up unprofitable businesses. Corporations borrowed money to build factories, offices and apartments, many of which are empty or operating at a loss. The boom in China's stock markets was, to some extent, also driven by debt, although I suspect it would be near impossible to figure out just how much of the speculation had been undertaken with borrowed money. When markets are debt-driven they are massively volatile both during the upswing, as an inordinate amount of money chases limited stocks, and during the down-cycle, as investors panic and fret about losing all they have and more, so it is not really surprising that China's stock markets took a plunge.

The only explanation for the contagion caused by China this week is that investors across the globe have entrusted their money to mutual fund and hedge fund managers that are gambling on the greater fool theory with their clients' capital. When the markets around the world fell in sympathy with China it illustrated loud and clear that many investors have no interest or faith in the companies they own; they are merely holding them in the hope of trading the stocks to another fool in the future.

According to the World Bank approximately one third of all of China's production is exported, and if you consider the flow through effect then perhaps more than half of China's economy is export dependent. As a bellwether, the USA being the world's largest economy and largest consumer is therefore far more indicative.

Unfortunately the United States is not in good shape. The latest from the Commerce Department is that durable goods orders fell 7.8% in January; the National Association of Realtors reported that January new home sales were down 4.3% from last year and the median sales price was down 3.1%; the Commerce Department revised gross domestic production for the last quarter of 2006 down to 2.2% from an earlier estimate of 3.5%; business spending fell 2.4% in the last quarter although consumers did their part by increasing their spending by 4.2% yet residential fixed investment fell 19.1%.

Consumer spending accounts for more than 75% of US economic activity and the US accounts for more than a third of all the economic activity in the world. The US consumer accounts for about 25% to 30% of global economic activity, meaning that if US consumer spending fell by only 5% there would be a 1.25% to 1.5% reduction in world-wide economic activity. There is no other single more important economic factor than the US consumer. Because the US consumer has been financing his spending with borrowed money generated mostly due to rising real estate values, we should look at the US real estate market for future guidance - not to the Chinese stock market.

Existing home sales fell 8.4% in 2006, the sharpest decline in home sales in 24 years. 30-year mortgage rates are still only at 6.14%, and so homes should be very affordable, but because of rising real estate values home buyers are battling to meet mortgage payments. Falling real estate prices have reduced some home values below their outstanding mortgages, making the homeowners prone to default on their mortgage payments. Nearly 6% of all sub-prime home loans were more than two months in arrears by the end of last year and first-year delinquency rates are up about 200% in little over two years.

Approximately 16% of all mortgages issued last year were to sub-prime borrowers and with falling real estate prices the money available to these borrowers is drying up. That will reduce demand for homes.

There is an index (part of the ABX family of indices) that tracks how much it costs to insure BBB-minus rated bonds backed by mortgages to sub-prime borrowers. When the index falls it means such mortgages cost more to insure, which in turn is a proxy for the risk and value of these mortgages (as risk increases, insurance increases and value decreases). The index is down almost 30% since the beginning of the year. More than 20 sub-prime lenders have closed shop after having to repurchase bad loans they originated.

Mortgage defaults are now the highest in five years and rising with many of the problems tracing back to adjustable rate mortgages - what a surprise! Mortgage lenders such as Bank of America and Citigroup are now trying to get borrowers with adjustable rate mortgage to switch to fixed rate mortgages. That's a smart move for both parties: the US budget deficit will eventually cause interest rates to rise to much higher levels. Some banks are now also allowing borrowers to sell their homes for less than the outstanding mortgage and then forgive the shortfall since it is often less costly and time consuming than foreclosing on the homes. The catch is that borrowers may find they have to pay income tax on the forgiven debt. Sales of homes for less than their outstanding mortgage debt increased by 25% during 2006 according to Bank of America.

Keep in mind that the increase in bad loans is broad based and is occurring during exceptionally strong economic conditions, at least if you believe the authorities and talking heads. US consumer confidence is still at a five year high indicating that the collapse of the US real estate market has not had a major effect on consumer spending yet. What is going to happen when consumer confidence finally does fade and economic growth does stall?

As more and more home owners get into financial trouble and more and more homes go on sale it puts downward pressure on house prices. Home prices fell in about half of all metropolitan areas during the fourth quarter of 2006. For the first time since the National Association of Realtors started recording home prices in 1979 home prices fell in the majority of the cities surveyed.

Home construction has fallen to its lowest level in ten years. Housing starts in January fell 14.3% and building permits fell 2.8%. Luxury home builder, Toll Brothers, reported a 67% decline in its last quarter's profit as it wrote down inventory. The company also lowered its earnings outlook for 2007 based on fewer orders and rising cancellations. The company's net orders are down 33% from a year earlier as it struggles with a 30% cancellation rate.

It's not just real estate loans that are going sour. Wells Fargo, the 4th largest bank in the US by market value, reported $726 million in net credit losses for the fourth quarter and most of these were concentrated in its auto-lending portfolio. Consumers are increasingly unable to pay for all those new cars they bought when the car companies were running specials to get rid of inventory. US Bancorp, the 6th largest bank, saw a 25% increase in charge-offs and predicted that writing off retail loans will continue to increase during 2007. These are by no means the only banks seeing an increase in loan defaults, merely an example of what is happening.

The problems don't end with autos and homes either - the economy is integrated. Home Depot expects earnings during 2007 to fall between 4% and 9% as it doesn't expect the residential and housing markets to improve during the year. Manufacturing output fell 0.7% in January with manufacturing capacity utilization at only 79.6%. Manufacturing of automobiles fell 6% in January and excluding autos, industrial production was still down 0.2% for the month.

Is this all not more worrisome than the pullback of an over-bought Chinese stock market?

The dollar lost about 2.5% against the yen during the week. I wrote about the yen carry trade and how, when it unwinds, it will cause the dollar to fall. Last month Japan raised its overnight interest rate from 0.25% to 0.5% and this is potentially far more significant than what happened in China this week. Higher Japanese interest rates will cause the yen to appreciate on foreign exchange markets and will put pressure on the yen carry trade. On Tuesday of this week the dollar recorded its largest decline versus the yen in over a year as investors sold dollars to buy yen.

It is somewhat incorrect to say that the dollar is falling since it is actually the yen that is rising. The dollar has been reasonably steady against most major currencies this week but the yen rose against almost all of them. I suspect that over time the yen will rise against most currencies and the dollar will fall against most currencies because much of the yen carry trade involves being long dollars and the US still has an enormous trade deficit that has to be addressed.

From my perspective as an investor primarily interested in gold, the events of the week were very interesting because the gold price in US dollars fell even though the dollar was down sharply against the yen.

Unlike the investors who panicked and sold this week, I was happy to see falling gold stocks. Share certificates are certificates of fractional ownership in a business and I only buy stocks of companies that I really want to own, so I don't mind if the share prices fall because it means that I can increase my ownership at a lower cost than before the decline. When I look at my portfolio and see a stock that I would not like to see fall in price I sell it immediately, before it has a chance to decline.

With gold and gold shares falling I am quite content to wait and see what happens. Nobody can predict the future so to sit and debate whether this is going to be a big decline, a long decline, a short decline, a non-event, is pointless. The markets are so emotionally driven and far removed from any sense of value that there is no telling what will happen or how long it will take. Fortunately, if the carnage is short lived then stock prices will soon recover and everyone will be happy. If the declines continue then we will find much better buying opportunities going forward and I'll be very happy.

At some point I think the US dollar is going to come under serious pressure and when that happens the dollar and the gold price will decouple, with the gold price rising and the dollar falling. I am actually hoping that the gold price continues to fall in the interim as it only means there will be more money to be made in the longer term.

Paul van Eeden